United States v. Galletti

PETITIONER:United States
RESPONDENT:Abel C. Galletti, et al.
LOCATION:Guantanamo Bay, Cuba

DOCKET NO.: 02-1389
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 541 US 114 (2004)
GRANTED: Jun 23, 2003
ARGUED: Jan 12, 2004
DECIDED: Mar 23, 2004

David R. Haberbush – argued the cause for Respondents
Kent L. Jones – argued the cause for Petitioner

Facts of the case

Abel Galletti and his wife, along with another couple, the Briguglios, formed a business partnership. The partnership underpaid its federal employment taxes, and the IRS assessed the unpaid taxes against the partnership (meaning the partnership would be forced to pay the taxes). According to the Internal Revenue Code, if a tax debt is assessed within three years after the return was filed, the government has 10 additional years to collected the money.

More than three years later, the Gallettis and the Briguglios separately filed for bankruptcy. The IRS made a claim in bankruptcy court against the two couples for the taxes assessed against the partnership. The couples objected, arguing that because the partners themselves had not been separately assessed, the statute of limitations had not been extended to the partners.

The bankruptcy court ruled against the IRS, holding that the IRS must assess tax claims against individual partners, not just the partnership, in order to later collect on those claims from the individuals. The district court and a Ninth Circuit Court of Appeals panel both affirmed the decision.


To qualify for the 10-year extension in the statute of limitations, does the government need to assess – beyond just the partnership that owes money – each individual partner for the debt?

Media for United States v. Galletti

Audio Transcription for Oral Argument – January 12, 2004 in United States v. Galletti

Audio Transcription for Opinion Announcement – March 23, 2004 in United States v. Galletti

William H. Rehnquist:

The opinion of the Court in No. 02-1389, United States against Galletti will be announced by Justice Thomas.

Clarence Thomas:

This case comes to us on a writ of certiorari to the United States Court of Appeals for the Ninth Circuit.

Respondents were general partners of the Marina Cabrillo Company a partnership.

From 1992 to 1995 the partnership incurred substantial federal employment tax liabilities arising from its failure to withhold the requisite amount of federal income taxes from its employees.

The IRS assessed those taxes against the partnership within the statutory 3-year requirement thereby triggering the 10-year extension to the statute of limitations on a tax collection action.

However, the partnership never satisfied the debt.

Several years later, the respondent filed for bankruptcy.

In the bankruptcy proceedings, the IRS filed proofs of claims for the partnership’s unpaid employment taxes.

Since under California law, respondents were liable generally for the debts of the partnership.

Respondents objected to the claims arguing that the taxes had never been assessed against them and thus, the statute of limitations for collecting the tax debt had expired.

Both the Bankruptcy Court and the District Court agreed and sustained the respondent’s objections to the claims.

A Ninth Circuit panel affirmed.

The Ninth Circuit acknowledged that the IRS had timely assessed the taxes against the partnership which triggered a 10-year extension to the limitations period for collecting the taxes.

The Ninth Circuit held however, that the assessment against the partnership extended the statute of limitation only with respect to the partnership because the partners were separate tax payers under the Internal Revenue Code and thus must me separately assessed.

Since the 3-year statute of limitations were assessing the tax debt against respondent had expired, the Ninth Circuit included that the IRS’ claim against the partners was time barred.

In an opinion filed with the Clerk today, we reverse the judgment of the Court of Appeals.

Respondents argued that a valid assessment triggering the 10-year extension of statute of limitation must name them individually because they are primarily liable for the tax debt.

First, respondents argued that they are primarily liable because 26 U.S.C. Section 6203 requires a Secretary to assess taxes by recording the liability of the tax payer and they are each separate tax payers under the Code.

The statute’s reference to the tax payer’s liability however, indicates that we must look to the underlying liability to identify the relevant tax payer against whom the tax must be assessed.

Here, the tax liability arose from the partnership’s failure to comply with the requirement that employers deduct and withhold certain amounts of employment taxes.

Thus, the relevant tax payer is the employer.

Respondents also argued that they are primarily liable for the tax debt because California law makes them jointly and severally liable for all of the partnership’s debts.

This fact is irrelevant, however.

In order to show that they are primarily liable for the debt, respondents must demonstrate that the employment taxes were imposed directly upon them as the employer.

Respondents have not shown that they are primarily liable for the tax debt and the Code does not require the government to make separate assessments of a single tax debt against secondarily liable parties in order to trigger the extended limitations period, because it is the tax rather than the person that is assessed.

The assessment’s consequence is the extension of the limitation’s period for the collecting of the debt attached to the collection of the debt without reference to the identities of the secondarily liable parties.

In this case, the government’s timely assessment of the partnership was sufficient to extend the limitation’s period for the collection of the taxes from respondents.

The opinion of the Court is unanimous.