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ARTICLE · 11 OCTOBER 2004

Where the IRS Is Concerned, No Good Deed Goes Unpunished

Holland & Knight LLP
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A case decided last month by the United States District Court for the Southern District of Texas illustrates the potential dangers that can accompany "good acts" and serving on boards for little or no compensation.

United StatesLitigation, Mediation & Arbitration

By Jonathan E. Strouse (Chicago)

Originally published Fall 2004

Volunteer director assessed entire tax liability of tax-exempt organization.

A case decided last month by the United States District Court for the Southern District of Texas illustrates the potential dangers that can accompany "good acts" and serving on boards for little or no compensation.

Michael Holmes volunteered to be a director of Harvest Christian Academy, a parochial school in Pasadena, Texas. The Academy's Board of Directors included parents of students and members of the affiliated church. Mr. Holmes was promoted to chairman of the board. He received no compensation for serving in this capacity.

The Academy ran into financial difficulties and, as a result, failed to pay its employees' withholding taxes for three consecutive quarters, a liability exceeding $117,000. Mr. Holmes suggested various cutbacks to the board to free up cash to pay the taxes, and claimed that the board rejected those suggestions. Mr.

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