                         United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                   ___________

                               Nos. 96-1021/96-1302
                                   ___________

Floyd E. Riley,                        *
                                       *
             Appellee/Cross-Appellant, *
                                       *      Appeal and Cross-Appeal from the
      v.                               *      United States District Court for the
                                       *      Eastern District of Missouri.
United States of America,              *
                                       *
             Appellant/Cross-Appellee. *

                                   ___________

                                 Submitted: April 14, 1997
                                     Filed: July 7, 1997
                                   ___________

Before McMILLIAN, Circuit Judge, HENLEY, Senior Circuit Judge, and BEAM,
      Circuit Judge.
                              ___________

BEAM, Circuit Judge.

      The United States appeals the district court's summary judgment order
concluding that Floyd E. Riley is entitled to a $2,000 tax refund. Riley cross-appeals
the court's denial of his motion for attorney fees. We reverse the court's summary
judgment order and remand for further proceedings.
I.     BACKGROUND

      Through 1990, Floyd E. Riley was associated, in various capacities, with Ferco
Fabricators, Inc., a company in Moberly, Missouri. During this time Riley was
majority shareholder and at one point served as chairman of the board of directors. The
government alleges that in 1990, while Riley was still involved with Ferco, the
company failed to remit to the government more than $680,000 it had withheld from
employees for social security and income taxes.

       Riley filed for Chapter 7 bankruptcy in September of 1991, and received his
discharge in June of 1992. During this time, the Bankruptcy Code's automatic stay was
in effect, entitling Riley to protection from all actions to recover claims against him that
arose before he filed his bankruptcy petition. See 11 U.S.C. § 362(a)(6).

       On May 18, 1992, during the period of the automatic stay, the Internal Revenue
Service issued to Riley a notice of proposed assessment of a penalty for Ferco's unpaid
taxes, pursuant to I.R.C. § 6672. The notice informed Riley that he could either agree
to pay the proposed assessment or could file an appeal with the agency within thirty
days. Riley protested the proposed assessment, claiming that it violated the automatic
stay and that, in any event, he was not responsible. In August of 1993, more than a
year after the stay expired, the IRS issued the assessment. Riley paid $2,000,
representing a portion of the assessment, and made a claim for a refund. After the IRS
denied his claim, Riley brought this refund action in the district court.

       On Riley's motion for summary judgment, the district court found that the notice
of proposed assessment violated the automatic stay. The district court concluded that
this rendered the assessment void and granted Riley's request for a refund. Riley v.
United States, 192 B.R. 727, 730 (E.D. Mo. 1995). In a later order, the court denied
Riley's request for attorney fees and costs, concluding that the IRS's position, though


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erroneous in the court's view, was substantially justified. The government appeals the
court's grant of summary judgment, and Riley appeals the denial of his motion for fees.

II.   DISCUSSION

       When a corporation fails to pay withheld employee "trust fund" taxes, the IRS
may impose a penalty equal to one hundred percent of the deficiency on any individual
who is a "responsible person" and who willfully failed to pay the taxes. I.R.C. § 6672.
Olsen v. United States, 952 F.2d 236, 239 (8th Cir. 1991). A section 6672 assessment
is presumed correct, and it is the individual's burden to show, in a refund action, that
he or she was not a responsible person or did not willfully fail to pay over the taxes.
Id.

       Under the version of the Bankruptcy Code applicable to this case, a notice of
deficiency from the IRS to a taxpayer is specifically exempted from the automatic stay
provision. See 11 U.S.C. § 362 (b)(9) (1988). The district court rejected the agency's
argument that a notice of proposed assessment under section 6672 is the same as a
"notice of deficiency" for purposes of the stay, and therefore concluded that the IRS's
actions were not exempted from the stay requirements. The agency apparently
concedes this issue on appeal. Indeed, assuming that a notice of proposed assessment
was not exempted from the stay requirements of the applicable version of the
Bankruptcy Code, it is apparent that the agency's proposed assessment to Riley violated
the stay. The notice forced Riley to either submit to the assessment, pursue appeals
within the agency, or (as Riley did) make a partial payment and then bring a refund
action. The proposed assessment thus intruded on the period of repose that the
automatic stay provides the bankruptcy petitioner.

       The actual assessment, however, was issued long after the automatic stay
expired. Riley argues, and the district court concluded, that the agency's issuance of
the notice of proposed assessment during the stay renders the subsequent assessment

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"void ab initio."1 Riley suggests two ways that the improper issuance of the notice
might render the later assessment void. We find neither theory persuasive.

       First, the assessment might be invalid if the improperly issued notice means that
the IRS failed to follow required procedures, and so failed to perfect its claim. The
problem for Riley is that at the time of the events in question, the Internal Revenue
Code did not require the agency to issue any notice before assessing a penalty under
section 6672. Not until 1996 did Congress amend section 6672 to require the agency
to issue a preliminary notice to the taxpayer before imposing an assessment. See
Taxpayer Bill of Rights 2, Pub. L. No. 104-168, § 901(a), 110 Stat. 1452, 1465 (1996)
(codifying notice requirement at 26 U.S.C. § 6672 (b)). Riley argues that Revenue
Procedure 84-78, 1984-2 C.B. 754 (1984), imposed such a requirement. Revenue
Procedures that involve distinctly procedural matters not otherwise controlled by
statute, however, are not binding on the agency. See, e.g., Estate of Jones v.
Commissioner, 795 F.2d 566, 571-72 (6th Cir. 1986). Neither the Bankruptcy Code
nor the Internal Revenue Code requires that we render "void ab initio" an assessment
for $680,000 in unpaid taxes because that assessment was issued after a "void" notice
that the agency was under no obligation to issue in the first place.

       Second, Riley suggests, it is proper to void the assessment because this would
be a proper remedy for the agency's earlier violation of the stay. Any damages Riley
incurred from responding to the agency's proposed assessment, however, were a matter
for the bankruptcy court. Whatever remedy Riley might be entitled to for the IRS's stay
violation is irrelevant to his burden in bringing this refund action: to show that he was
not a responsible person or that he did not act willfully in failing to pay Ferco's trust
fund taxes.


      1
         The district court held that the stay violation rendered the assessment void ab
initio, rather than merely "voidable." Riley, 192 B.R. at 729. We find this theoretical
question beside the point in this case, and so decline to address it.

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       Because we hold that the IRS should have prevailed below on Riley's motion for
summary judgment, we affirm on that basis the district court's denial of Riley's motion
for attorney fees.

III.   CONCLUSION

       The district court's grant of summary judgment to Riley is reversed, and the
denial of Riley's motion for attorney fees is affirmed. The case is remanded for further
proceedings not inconsistent with this opinion.

       A true copy.

             ATTEST:

                      CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




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