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Can a Volunteer Chair be Held Financially Responsible?

A recent case once again demonstrates the perils faced by anyone who becomes involved in running a financially distressed organization.

The federal district court concluded that the volunteer chairman of the board of a tax-exempt organization was personally liable for the penalty imposed on a responsible person who fails to cause an employer to pay federal withholding taxes. (Bunch v. U.S., 109 AFTR 2d 2012-572, March 8, 2012)

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The tax law may provide relief in certain cases. It provides that unpaid volunteer board members of tax-exempt organizations are exempt from the penalty if they:

  • Are solely serving in an honorary capacity,
  • Are not involved in day-to-day financial activities, and
  • Do not know about the penalized failure.

If all of these provisions are met, volunteers are exempt – unless that exemption results in no one being liable for the penalty.

In this case, Don Bunch was actively involved in the organization’s affairs. In various documents, he was listed as chairman of the board, president, CFO, principal and registered agent. When Bunch learned that the third quarter 2006 withholding taxes were unpaid, he lent the organization money to pay the taxes.

The court agreed with the IRS that Bunch was a responsible person for purposes of the 100 percent penalty for failure to pay withholding taxes.


We are now finishing our third audit with GRF.  In particular, Andreas Alexandrou and Dino Karamalikis have kept us on a track of continuous improvement in our financial processes and office management.

Wendy Gilbert |  Director
MarylandOnline