The United States District Court for the District of Maryland recently issued a Memorandum of Decision in United States of America v. Isaac M. Neuberger, Civil Action No. EA-22-2977 (D. Md. Oct. 23, 2025), addressing the personal liability of a corporate officer and director for a corporation’s outstanding tax debt under the Federal Priority Statute (FPS), specifically 31 U.S.C. § 3713(b). This analysis details the facts leading to the imposition of liability and the court’s technical application of the three core elements required for the United States’ claim.

Factual Background of Lehcim Holdings, Inc.

The taxpayer in question, Lehcim Holdings, Inc. (Lehcim), is a Maryland corporation and an investment company designed to hold investments in partnerships and make investments in the United States. Lehcim was economically owned by the Konig family. Isaac M. Neuberger, an attorney specializing in general business and family planning, served as Lehcim’s sole director, president, and treasurer. In these roles, Mr. Neuberger had the authority to act on Lehcim’s behalf, manage its property and business, and sign and execute obligations. Lehcim did not maintain its own cash account but instead used the law firm NQGRG’s client trust account (IOLTA) for recording financial transactions, which Leshkowitz and Company, Lehcim’s accounting firm, utilized to prepare balance sheets for its tax returns.

Lehcim’s primary liabilities consisted of loans from related entities, notably Nightingale Ventures, Ltd. (Nightingale), a British Virgin Islands company. Lehcim borrowed $850,000 from Nightingale in 2002 at an 18% interest rate. For tax years 2010 through 2020, Lehcim claimed substantial annual tax deductions based on the interest accruing on this 2002 Nightingale loan, with the reported liabilities primarily comprising the Nightingale loans.

IRS Examination and Proposed Deficiency

In 2014 or 2015, the Internal Revenue Service (IRS) began examining Lehcim’s returns for tax years 2010 through 2015. By June 2018, the IRS preliminarily concluded that the loan interest deductions were improper. The IRS formalized its position in a March 14, 2019, letter, stating that the Nightingale loans were not bona fide and proposing the disallowance of the associated interest expenses. The IRS also proposed penalties for failure to timely file and a 20% negligence penalty. Mr. Neuberger was aware of the IRS’s findings by July 2018. Lehcim did not agree to the proposed changes, appeal, or pay the proposed tax.

On November 20, 2019, the IRS mailed a Statutory Notice of Deficiency identifying $1,435,245 in unpaid taxes and penalties (exclusive of interest). The notice advised Lehcim of its right to challenge the assessment in United States Tax Court, but Lehcim failed to do so. The tax deficiencies were subsequently assessed on July 13, 2020.

The Repayment Plan and Asset Transfer

Following notification of the proposed deficiency, Mr. Neuberger, Mr. Tendler, and the accountant, Mr. Leshkowitz, developed a complex repayment plan. This plan involved collecting Lehcim’s receivables and securing a $2.6 million capital contribution from Beauville (Lehcim’s sole shareholder, also directed by Mr. Neuberger) to repay the Nightingale loans. The plan required 124 steps transferring money among various Konig-related entities. The stated primary purpose of the plan was to "clean up the books" and demonstrate to the government that the Nightingale loans "were real".

Between June 25, 2019, and March 5, 2020, Lehcim transferred $8,816,813 to Nightingale, fully repaying the liabilities by the end of 2020. Mr. Neuberger was actively involved in the conceptual development, monitoring the progress, and execution of the plan, including arranging the $2.6 million wire from Beauville. Crucially, Mr. Neuberger overruled outside counsel’s advice to put the repayment plan on hold, directing the continuance of the transfers.

Taxpayer Defenses and Court’s Legal Analysis

Mr. Neuberger contested liability by arguing that the Federal Priority Statute (FPS), 31 U.S.C. § 3713, should not apply, and that, even if it did, the required elements were not met.

Federal Priority Statute Applicability

Mr. Neuberger argued that the Federal Tax Lien Act of 1966, 26 U.S.C. § 6321 et seq., should control the United States’ claim, relying on United States v. Estate of Romani, 523 U.S. 517 (1998). The court rejected this position, finding that Neuberger’s characterization of Estate of Romani was "far too broad". Estate of Romani prohibits the government from using the FPS to assert a secret lien to gain priority over perfected liens defined in the Tax Lien Act (TLTA).

The court affirmed that the FPS was properly asserted because the transfers to Nightingale (repayment of alleged loans) involved a category of creditors not specifically covered by the TLTA, thus allowing the broad application of the FPS.

Judicial Estoppel Regarding Loan Status

A central point of contention was Mr. Neuberger’s assertion that the government was equitably barred by judicial estoppel from arguing that the Nightingale loans were not bona fide (for tax assessment purposes) while simultaneously arguing they were liabilities (for solvency calculation purposes).

The court rejected the application of judicial estoppel. The court noted that the United States was not taking contradictory positions. The IRS’s disallowance of interest deductions for tax purposes is not the standard test for valuation in a solvency analysis. Ms. Hollobough, the government’s solvency expert, explained that because Lehcim executed the repayment plan and transferred $8.8 million, that amount constituted a financial obligation regardless of whether the original loans were deemed debt or equity for income tax purposes. Furthermore, judicial estoppel requires evidence that the estopped party intentionally misled the court and that the prior inconsistent position was accepted by a tribunal; neither condition was met, as Lehcim chose not to challenge the IRS findings in Tax Court.

The Elements of the Federal Priority Statute Claim

The United States was required to prove three elements under 31 U.S.C. § 3713(a): (1) a debt due the United States; (2) the debtor’s insolvency; and (3) the occurrence of a triggering event (assignment of property or act of bankruptcy).

Debt Due to the United States

This element was readily satisfied and conceded by the parties. Federal tax debt falls within the broad scope of a “claim of the Government” under 31 U.S.C. § 3701(b)(1), as consistently held by federal courts.

Insolvency of Debtor

Insolvency means the debtor’s liabilities exceed its assets. The court relied on the balance sheet test, utilizing the fair market value of assets. Ms. Hollobough’s analysis calculated Lehcim’s solvency on seven dates corresponding to the transfers to Nightingale.

The analysis incorporated the $8.8 million obligation to Nightingale and added Lehcim’s income tax liability, based on the IRS’s proposed changes, as of March 2019. Notably, Ms. Hollobough assigned a zero fair market value to a $1,253,250 amount listed as “due from escrow” on Lehcim’s tax returns. This adjustment was critical because the asset was omitted from Lehcim’s Form 433-B (Collection Information Statement), was not included in the intricate repayment plan, and its existence and collectibility could not be confirmed by Lehcim’s accountant or Mr. Tendler.

Based on Ms. Hollobough’s solvency balance sheet test, Lehcim’s liabilities consistently exceeded its assets on all testing dates, confirming that Lehcim was insolvent before and after the outgoing transfers. For example, on the first testing date (June 24, 2019), liabilities exceeded assets by $3,505,247.

Triggering Event

The FPS requires a triggering event, such as an act of bankruptcy. The United States argued, and the court agreed, that Lehcim’s transfers to Nightingale constituted preferential transfers, which satisfy the act of bankruptcy element.

A preferential transfer is defined as a transfer of a debtor’s property to a creditor for an antecedent debt, made while the debtor is insolvent. Lehcim was insolvent at the time of the transfers. The transfers totaling $8,816,813 were made to Nightingale (a creditor) to repay the original Nightingale loans (an antecedent debt). The court concluded that these payments satisfied the triggering event element.

Representative Liability and Conclusion

Having established that Lehcim owed the United States, was insolvent, and committed a triggering event (preferential transfer), the court turned to Mr. Neuberger’s personal liability as a representative under 31 U.S.C. § 3713(b). This provision holds a representative liable to the extent of the payment made if they transfer debtor assets before paying a claim of the Government, while the debtor is insolvent, and the representative has knowledge or notice of the claim.

Mr. Neuberger’s status as Lehcim’s sole director, president, and treasurer qualified him as a "representative" under § 3713(b). Furthermore, he had knowledge of the United States’ tax claim. The evidence demonstrated that Mr. Neuberger was "integral to the development and execution" of the repayment plan, including arranging for funds to be transferred and overriding outside counsel’s instruction to hold the plan.

The court concluded that Mr. Neuberger, as the representative, authorized the transfers of Lehcim’s assets to Nightingale before paying the superior claim of the United States, thus meeting all requirements for personal liability under 31 U.S.C. § 3713(b). The court found Mr. Neuberger personally liable under the Federal Priority Statute claim.

Prepared with assistance from NotebookLM.