Taxes in your practice: District court holds lawyer personally liable for client investment corporation’s tax debt

Scott E. Vincent is the founding member of Vincent Law, LLC in Kansas City.

The U.S. District Court for the District of Maryland recently found that a lawyer acting as director, president, and treasurer of a client’s investment corporation was personally liable for the corporation’s tax liabilities,¹ showcasing the significant risk lawyers should consider when acting as a director and officer of a client business entity. 

Background 

Isaac Neuberger was a principal in a Baltimore law firm and represented Michael Konig and other Konig family members for many years. In 2001, Neuberger formed Lehcim Holdings, Inc. for the family to utilize as an investment company. Neuberger was Lehcim’s sole director, president, and treasurer. 

Lehcim engaged in a variety of lending transactions with other Konig family business entities, including a series of loans of more than $8 million from Nightingale Ventures, Ltd. Neuberger was also the director of Nightingale from 2002-2009. Lehcim claimed substantial tax deductions for 2010-2020 for interest accruing on these loans from Nightingale. 

The IRS determined on audit that the Nightingale loans were not bona fide debt and disallowed the Lehcim interest expense deductions. In 2019, the IRS issued a Notice of Deficiency for more than $1.4 million in unpaid taxes and penalties, and it followed in November 2020 with the issuance of a Final Notice of Intent to Levy for more than $2 million. 

Neuberger and his firm outlined a complex plan for collection of Lehcim receivables and repayment of the Nightingale loans that was to involve money transfers among multiple companies. Konig was tasked with implementing the plan. This plan was completed in 2019 and 2020, resulting in more than $8.8 million in payments from Lehcim to Nightingale. 

In 2020, Neuberger, as Lehcim’s president, submitted a Form 433-B, Collection Information Statement for Businesses, to the IRS for Lehcim, showing assets substantially less than its liabilities. The IRS pursued collection efforts against Lehcim and issued Notices of Levy to Neuberger’s firm and related Konig entities, but the IRS did not receive funds from those sources. 

In 2022, the United States sued Neuberger under the Federal Priority Statute,² seeking a judgment that Neuberger was personally liable for Lehcim’s tax liabilities. An IRS expert determined that Lehcim was insolvent at the time each of the payments in question was made from Lehcim to Nightingale. 

District court decisions 

The district court issued decisions in 2025 and 2026 in this case. In the 2025 decision, the court addressed the elements for applicability of the Federal Priority Statute: (1) a debt due the United States, (2) the debtor’s insolvency, and (3) a triggering event under the statute such as a bankruptcy or assignment for the benefit of creditors. The court also addressed Neuberger’s representative liability.

First the court cited prior authority for the conclusion that a federal tax debt is clearly a claim of the United States under the statute. The court agreed with the IRS expert that Lehcim was insolvent before each of the transfers to Nightingale. The court rejected Neuberger's argument that the government could not take the position that the Nightingale loans were not bona fide liabilities for tax assessment purposes, but alternatively treat the loans as liabilities for purposes of Lehcim’s solvency. The court noted that IRS disallowance of the Nightingale loan interest deductions was not the applicable test for whether to include this debt for insolvency purposes. 

The court then found that the transfers of more than $8.8 million by Nightingale, regardless of character, were preferential transfers akin to bankruptcy and were made when Lehcim was insolvent, satisfying the triggering event requirement for purposes of the Federal Priority Statute. 

The district court then turned to Neuberger’s potential representative liability. Under 31 U.S.C. § 3713(b) a “representative … paying any part of a debt … before paying a claim of the Government is liable to the extent of the payment for unpaid claims of the Government.” In this context, the court found that Neuberger was Lehcim’s representative who had knowledge of the government’s claim at the time of the transfers to Nightingale. 

Noting that Neuberger was Lehcim’s sole director, president, and treasurer, the court found that Neuberger had authority to act on behalf of Lehcim and was integral in the development and execution of the plan to pay Nightingale before paying the tax liabilities — even though Lehcim’s owner, Konig, was ultimately responsible for implementing the plan. Based on these determinations, the court held that Neuberger was responsible for asset transfers under the Federal Priority Statute. 

Following the court’s 2025 decision, the parties further disputed damages. The government argued that Neuberger was responsible for all Lehcim’s tax liabilities, including continuing accruals of penalties and interest under the Internal Revenue Code, for a total of more than $3.3 million by the end of October 2025. The court found no support for tax law computations under the Federal Priority Statute. Instead, the court found that damages under the Federal Priority Statute should be determined based on the amount of the government claim for which Neuberger had notice, and not the ongoing accruals of penalties and interest.

Therefore, the court held that Neuberger was liable for approximately $1.88 million of taxes, penalties, and interest identified in the IRS’ 30-day letter issued in 2019. 

Conclusion 

The Neuberger case demonstrates the significant risk for a lawyer acting as a director and officer of a client business entity. The lawyer in this case appears to have outlined a plan for repayment of loans and possible resolution of tax liabilities as counsel, but when the client did not follow through and pay the business entity tax liabilities, the lawyer was left with substantial financial exposure.

Endnotes 
1 U.S. v. Neuberger, 2025 PTC 358 (D. Md. 2025); 2026 PTC 24 (D. Md. 2026). 
2 31 U.S.C. Section 3713.