The opinion of the court was delivered by: CURTIN
This is a civil action brought by the government against defendant Marine Midland Bank to recover payments for withholding and FICA taxes. Marine Midland Bank [Marine] seeks summary judgment on the ground that the government has failed to commence this action within the applicable statutory period of time.
This suit evolves from the bankruptcy of Paper Tubes, Inc. Paper Tubes borrowed money from Marine which the government alleges was used to pay Paper Tube employees. Paper Tubes filed quarterly returns for withholding and FICA taxes for the fourth quarter of 1971 and the first quarter of 1972, but the corporation failed to make the requisite payments due to its subsequent bankruptcy. The government believes that under 26 U.S.C. § 3505(b)
it may look to Marine as lender of the funds to Paper Tubes for Paper Tubes' unpaid employer contributions if the government can prove certain facts concerning Paper Tubes' knowledge and use of the borrowed funds.
The government contends that in order to sue Marine for Paper Tubes' contribution under section 3505(b), the government must first have assessed Paper Tubes for this contribution within the three-year statute of limitations prescribed in Internal Revenue Code § 6501(a).
The parties agree that Paper Tubes was assessed in 1972 within the section 6501(a) statute of limitations. It should be noted here that an assessment of taxes consists of no more than the ascertainment of the amount due and the formal entry of this amount on the books of the Secretary. United States v. Dixieline Financial, Inc., 594 F.2d 1311, 1312 (9th Cir. 1979).
After having made this assessment, the government contends that it has six years of time under Internal Revenue Code § 6502
and Treasury Regulation 26 CFR § 31.3505-1(d)(1)
to bring an "appropriate civil action" to recover the employment taxes from the lender if the lender voluntarily refuses to pay. Since this suit was commenced on August 12, 1977, the government contends that this suit has been timely brought within the six-year statute of limitations.
Marine attacks this argument on several grounds. First, Marine argues that it was never assessed for Paper Tubes' employer contribution. Defendant claims that because the bank was never assessed, the government cannot look to Marine for payment because the three-year statute of limitations under section 6501(a) has expired. Similarly, the bank argues that the six-year statute of limitations under section 6502 cannot be applied here since the bank was never assessed separately from Paper Tubes.
The bank next argues that because it did not receive notice under Internal Revenue Code § 6303
of its alleged section 3505(b) liability, the government cannot use Paper Tubes' assessment as a means to sue the bank under the six-year statute of limitations. In this respect, the bank also contends that Treasury Regulation 31.3505-1(d)(1) is invalid due to the need for a separate assessment against the bank and its prejudicial six-year statute of limitations. Finally, the bank attempts to demonstrate that section 3505(b) is actually a penalty tax, and therefore, the appropriate statute of limitations should be 28 U.S.C. § 2462,
which prescribes a five-year statute of limitations on actions.
Decisional law interpreting whether a separate assessment is necessary for a lender such as the defendant in this type of action does not support Marine's theories. The court in United States v. Dixieland Financial, Inc., supra at 1313, stated in no uncertain terms that once an employer had been assessed within the three-year statute of limitations (§ 6501(a)), no further assessment was necessary against the lender: "Further assessment would accomplish nothing." Most recently in United States v. First National Bank Circle, 652 F.2d 882, 889 (9th Cir. 1981), the court stated that:
the argument that no assessment was made within the three year limitation period against the Bank, the alleged supplier of funds under Section 3505(b), is frivolous inasmuch as the Code requires no separate assessment under Section 3505 against a supplier [ e.g., lender].
Given these clear statements of the law, Marine's contrary arguments are not persuasive.
Marine claims that the bank was required to have notice of the assessment within 60 days after the making of the assessment, as provided by Internal Revenue Code § 6303. The government contends that the notice requirement of section 6303 is used for levy and distraint actions, and this case is distinguishable because it is a "civil action," and therefore, the notice requirement is unnecessary. Since courts have determined that a separate assessment for lenders is unnecessary under section 3505(b), clearly the bank cannot demand notice of this separate assessment.
Concerning the assessment of Paper Tubes, the court in United States v. Carbondale National Bank, 499 F. Supp. 51 (W.D. Pa. 1980), ruled that notice to a lender in a section 3505(b) action was not necessary. In that case, the court noted that the bank had received no notice of the original assessment against the employer and that the bank contended that the government's suit was not validly instituted under Internal Revenue ...