The US Court of Appeals for the 7^th Circuit ruled recently in Jefferson v. US, 06-4082 (7^th Cir. 10/8/2008) that the IRS rightfully imposed an Internal Revenue Code of 1986 (IRC) §6672 penalty against a former president of the board of directors of a tax-exempt day care facility since he was a responsible person whose behavior was willful. Charles E. Jefferson was president of the board of directors of New Zion Day Care Center, Inc. (Center) in Rockford, Illinois. Although Jefferson’s position was voluntary and uncompensated, he had check-signing authority and had previously secured loans for, among other things, payment of overdue payroll taxes for the Center. He was aware of the Center’s unpaid payroll tax liabilities from monthly reports and monthly meetings of the directors. Although he was uncompensated, Jefferson did not qualify for relief under IRC §6672(e) since it was determined that he participated in the day-to-day operations of the Center. The court agreed that the Internal Revenue Service (IRS) has failed to comply with §904(b) of Public Law 104-168 (Taxpayer Bill of Rights 2) in that it did not provide the explanatory materials required, but concluded Jefferson did not show “any prejudice from the IRS’s failure”. Finally, even though the IRS may have failed to turn over evidence and lost other documents relevant to the case, the court indicated that the documents would not have had any impact on the outcome of the case. Vision Payroll strongly recommends that all volunteer directors in tax-exempt organizations review the exemption under §6672(e) with their attorney. If the exemption does not apply, directors must ensure themselves all trust fund liabilities are being paid, regardless of their actual involvement with the organization’s daily activities.