Facts

Operating Engineers Local Union No. 3 is the largest construction local union in the United States with over 37,000 members. In May 2015, Angela Rose was promoted from Accounting Manager to Finance Director/Controller of OE3. Lillian Morata was hired for the Accounting Manager position, and she took over responsibility for OE3's payroll tax liabilities. In 2018, however, Morata resigned from OE3. Before she left, Rose asked her to train another employee on the payroll tax responsibilities, but that training was never completed. Accordingly, once Morata left, Rose believed the other employee would take over OE3's payroll, but the other employee believed Rose was handling the taxes. As a result, OE3 withheld funds from its employees' wages to fulfill its federal tax obligations, but in the last two quarters of 2018 and the first quarter of 2019, OE3 failed to fulfill these obligations with respect to those funds: No one filed its taxes and deposited the funds in a timely manner. This failure resulted in the assessment of substantial penalties by the Internal Revenue Service, which OE3 paid in full. After paying the penalties, however, OE3 sought reimbursement from the IRS, but it was unsuccessful. Accordingly, OE3 filed suit against the United States.

PLAINTIFF'S CONTENTIONS: Plaintiff contended that its failure to file, pay, and deposit payroll taxes during 2018 and 2019 were due to reasonable cause, not willful neglect. Specifically, OE3 contended it was incapacitated regarding its tax obligations due to mental disability on the part of the employee who handled its payroll tax duties. Accordingly, the plaintiff contended, it should not have been assessed a tax penalty, so it should be entitled to recover the amounts it paid to the IRS for the penalties resulting from the 2018 and 2019 taxes.

DEFENDANT'S CONTENTIONS: Defendant contended that OE3 had not demonstrated any mitigating circumstance; that the fact an employee failed to handle OE3's tax matters was irrelevant because it was responsible for its payroll tax duties and someone else's failure did not remedy OE3's failure; and that OE3 was not entitled to a refund of the penalties for failing to file and pay its payroll taxes.

Result

The district court granted summary judgment in favor of the United States.