Court holds director personally liable for unpaid taxes
United States of America v. Isaac M. Neuberger, (United States District Court for the District of Maryland 2025)
A corporate director who controls an insolvent company and pays other creditors before the United States is personally liable for the unpaid federal tax debt under 31 U.S.C. §3713(b).
Holding
The District of Maryland held that attorney and sole director Isaac M. Neuberger was personally liable under the Federal Priority Statute for Lehcim Holdings Inc.’s unpaid federal income tax liabilities.
While Lehcim was insolvent, the court found that Neuberger directed and approved transfers of more than $8.8 million to related entities rather than satisfying the IRS debt, satisfying each element of §3713(b) representative liability.
Why It Matters
Confirms that corporate officers and directors can be personally liable when they divert corporate assets of an insolvent taxpayer before satisfying a federal tax debt.
Clarifies that the Federal Priority Statute—not the Federal Tax Lien Act—governs when a company’s assets are transferred before paying the United States.
Demonstrates that repayment of related-party “loans” during insolvency can constitute preferential transfers triggering federal priority.
Reinforces that knowledge of an IRS deficiency and assessment satisfies the notice requirement for representative liability.
Timeline
2001: Lehcim Holdings Inc. incorporated in Maryland; Neuberger named sole director.
2010–2015: Lehcim filed late or inaccurate returns, claiming interest deductions on intercompany loans.
2014–2019: IRS audited six years of Lehcim’s returns; proposed disallowing the interest deductions.
Nov. 2019: IRS issued Notice of Deficiency for $1.43 million in tax and penalties; Lehcim did not petition Tax Court.
2019–2020: While insolvent, Lehcim transferred $8.8 million to Nightingale Ventures under a repayment plan directed by Neuberger.
2020–2022: IRS issued final levy notices and filed this enforcement action.
Aug. 2025: Bench trial held; decision issued Oct. 23, 2025.
Key Facts
Lehcim was a Maryland corporation owned by offshore entities connected to the Konig family.
Neuberger, a Baltimore attorney, served as Lehcim’s sole director, president, and treasurer and managed its operations through his law firm’s trust account.
The company had no independent bank account or cash.
IRS determined that Lehcim’s intercompany “loans” from Nightingale Ventures were not bona fide and disallowed related interest deductions.
After learning of the IRS’s findings, Neuberger approved a 124-step “repayment plan” transferring $8.8 million to Nightingale while the tax debt remained unpaid.
Expert solvency analysis showed that Lehcim’s liabilities exceeded its assets at all times.
Statutory or Regulatory Framework
31 U.S.C. §3713(a)–(b): Gives priority to federal claims when a debtor is insolvent, makes voluntary assignments or preferential transfers, and imposes liability on any representative who pays other creditors first.
The statute applies broadly to corporations and their officers and predates the Tax Lien Act of 1966.
The court found Estate of Romani, 523 U.S. 517 (1998), did not preclude the use of §3713 in tax-debt cases involving transfers to private creditors.
Arguments
Government argued:
Lehcim’s repayment of the Nightingale loans was a preferential transfer made while insolvent and with knowledge of a federal tax debt.
As sole director and officer, Neuberger qualified as a “representative” under §3713(b) and personally facilitated those transfers.
The Federal Priority Statute—not the Tax Lien Act—governs because Nightingale was not a “purchaser” within the meaning of §6323.
Defendant argued:
The Tax Lien Act displaced the Priority Statute in tax-debt cases (Estate of Romani).
Lehcim was solvent due to related-party support.
After disallowing interest deductions, the government judicially stopped treating the Nightingale loans as liabilities.
No “act of bankruptcy” occurred, and §3713 was obsolete after the 1978 Bankruptcy Reform Act.
Court’s Reasoning
Applicability: The Priority Statute still governs; Romani only limits its use against perfected lienholders, not related-party creditors.
Debt element: Taxes owed to the United States qualify as “debts” under §3713.
Insolvency: Expert testimony and contemporaneous balance-sheet analysis proved Lehcim’s liabilities exceeded its assets before and after the transfers.
Triggering event: Repayment of antecedent related-party debt while insolvent constituted a preferential transfer and “act of bankruptcy.”
Judicial estoppel: Rejected; IRS’s disallowance of deductions did not contradict treating the repayment obligation as a liability for solvency analysis.
Representative liability: Neuberger, sole officer and signatory, directed and executed the transfers with full knowledge of the IRS assessment, satisfying all §3713(b) elements.
Policy: The statute ensures federal claims are paid first; allowing officers to drain insolvent entities would frustrate that purpose.
Forward-Looking Implications
Corporate officers should treat unpaid tax liabilities as federal priority debts once insolvency arises.
Repayments to related entities, even if styled as intercompany loans, can trigger personal liability when taxes remain unpaid.
Law-firm trust accounts managing client-entity funds may be subject to IRS scrutiny if used as corporate cash surrogates.
The decision affirms that Estate of Romani does not insulate insiders from §3713 liability.
The government may pursue similar actions against responsible officers in related-party structures.
Result
Judgment for the United States. The court held Isaac M. Neuberger personally liable for Lehcim Holdings Inc.’s unpaid federal tax obligations under 31 U.S.C. §3713(b). Damages proceedings were scheduled for November–December 2025.
The Takeaway
When an insolvent corporation owes federal taxes, officers who control its funds must satisfy the IRS before paying any other creditor. Failure to do so exposes them to personal liability under the Federal Priority Statute.
List of Citations
31 U.S.C. §3713(a)–(b): Federal Priority Statute establishing government claim priority and representative liability.
Estate of Romani v. United States, 523 U.S. 517 (1998): Distinguished; limits secret liens but does not preempt §3713 in unrelated-creditor cases.
United States v. Renda, 709 F.3d 472 (5th Cir. 2013): Defines scope of representative liability under §3713(b).
United States v. Coppola, 85 F.3d 1015 (2d Cir. 1996): Confirms federal taxes qualify as “debts” for priority purposes.
Lakeshore Apartments v. United States, 351 F.2d 349 (9th Cir. 1965): Applied §3713 to corporate officers who paid private creditors before taxes.
United States v. Tendler, 2025 WL 918132 (D. Md. Mar. 26, 2025): Related case applying the same reasoning to Neuberger’s co-officer.