UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

No. 22-1091

FAISAL AHMED, Appellant v.

COMMISSIONER OF INTERNAL REVENUE

Appeal from the United States Tax Court (IRS-1: 18-12876) Tax Court Judge: Michael B. Thornton

Argued on November 17, 2022

Before: AMBRO*, KRAUSE, and BIBAS, Circuit Judges

(Opinion Filed: April 7, 2023)

* Honorable Thomas L. Ambro assumed senior status on February 6, 2023. Frank Agostino Phillip Colasanto [Argued] Agostino & Associates 14 Washington Place Hackensack, NJ 07601 Counsel for Appellant David Hubbert Michael J. Haungs Carl D. Wasserman [Argued] Tax Division Department of Justice 950 Pennsylvania Avenue, N.W. Post Office Box 502 Washington, D.C. 20044 Counsel for the Appellee

OPINION OF THE COURT

AMBRO, Circuit Judge.

In 2017, the Internal Revenue Service (IRS) moved to pe- nalize Faisal Ahmed for his company’s delinquent trust fund taxes. It first attempted to notify Ahmed of its proposed pen- alties. Whether he received that notification is unclear. There is no doubt, however, that the IRS went ahead and assessed the penalties anyway. And when it later filed liens against his property to secure the penalties, Ahmed took note and

2 immediately sought Collection Due Process review with the IRS Independent Office of Appeals.

While Ahmed’s petition for review was pending, he sent a large amount of money to the IRS along with instructions that it be treated as a “deposit” to freeze the running of interest on his disputed penalties. But rather than treat Ahmed’s remit- tance as an interest-freezing deposit, the IRS applied it as a di- rect payment to his tax bill. That move, the IRS contends, brought a clean end to the matter. Without any remaining tax liability to dispute, the Tax Court dismissed Ahmed’s petition as moot.

We now turn back the clock. Ahmed’s petition was moot only if the IRS properly treated his remittance as a payment. That, in turn, depends on whether he sent money to the IRS after it validly assessed his penalties. Because we identify am- biguity in the record on this latter issue, we vacate the Tax Court’s ruling and remand to the agency for further factfinding.

I. BACKGROUND

A. Aspen Construction’s tax troubles

Ahmed, a New Jersey resident, was President of Aspen Construction Corporation. Like any employer, Aspen had to pay to the IRS withheld federal income, Social Security, and Medicare taxes from the wages of its employees—also known as “trust fund taxes” because they are “held to be a special fund in trust for the United States.” See 26 U.S.C. § 7501; see also id. §§ 3102(a), 3402(a); United States v. DeMuro, 677 F.3d 550, 555 (3d Cir. 2012).

3 But Aspen did not do so. And it came to owe more than $600,000 in trust fund taxes to the IRS. Without any recourse against Aspen’s individual employees (who were credited with withheld taxes when their net wages were paid), the IRS had two options: (1) pursue Aspen directly, see 26 U.S.C. § 3102(b), or (2) shift liability to Ahmed, who oversaw As- pen’s finances as President. The agency chose the second op- tion, authorized by § 6672 of the Internal Revenue Code.

B. Section 6672 of the Internal Revenue Code

Section 6672’s “basic purpose is the protection of govern- mental revenue.” Thomsen v. United States, 887 F.2d 12, 17 (1st Cir. 1989). It was enacted by Congress to address con- cerns “that corporate employers might collect [trust fund] taxes and fail to pay them over” to the IRS. In re Goldston, 104 F.3d 1198, 1200 (10th Cir. 1997). Guarding against this delin- quency, § 6672 authorizes the IRS to collect trust fund recov- ery penalties (TFRPs) f