New 1/30/05

Chief Counsel Notice 2005-003

January 19, 2005

Subject: Administrative Collection of a Partnership’s Employment Taxes from the Partners Cancel

Date: Until incorporated into the CCDM


This Notice confirms that United States v. Galletti, 124 S. Ct. 1548 (2004), does not alter the Service’s longstanding position that it may administratively collect a partnership’s employment taxes from general partners based on their derivative liability under state law. This Notice also discusses the proper wording of Notices of Federal Tax Lien and whether general partners are entitled to Collection Due Process rights.


On March 23, 2004, the Supreme Court in Galletti held that a timely assessment of a partnership’s employment tax liability permits the Service to collect the liability in a bankruptcy case filed by the general partners who were derivatively liable for the taxes under state law. Pursuant to section 6501(a), the Service must assess a tax liability within 3 years from the filing date of the return. If a timely assessment is made, pursuant to section 6502(a), the Service has an additional 10 years to collect by levy or a proceeding in court. In Galletti, the debtor-partners argued that it was too late for the Service to collect the tax in the bankruptcy case, because the Service assessed only the partnership, and not the general partners, within the 3-year period. The Supreme Court rejected the partners’ argument, reasoning that after the Service assessed the employment taxes for the employer-partnership, the Service was not required to separately assess the same tax against the general partners to take advantage of the additional 10-year collection period of section 6502(a) in the partners’ bankruptcy case.