Issue Preclusion (Collateral Estoppel) in FBAR Civil Willful Penalty Suit After Criminal Conviction (3/3/21)

In United States v. Kerr (D. Ariz. 2:19-cv-05432-DJH dkt. 26 Order dated 3/1/21), TN here, the court granted the U.S. partial summary judgment in the FBAR civil willful penalty collection suit based on collateral estoppel (issue preclusion) from Kerr’s prior conviction for willfully failing to file FBARs.  The court held that the issue of Kerr’s willfulness had been determined in the criminal proceeding at a higher standard that included the lesser civil standard.  However, the court denied summary judgment with respect to one account, called a placeholder account, that was not among the accounts mentioned in the indictment for the counts of conviction.  The opinion is short, so I will not discuss further.

JAT Notes:

1.  Issue preclusion is term now generally used rather than collateral estoppel.  See Revised Terminology: Issue Preclusion Rather than Collateral Estoppel and Claim Preclusion Rather than Res Judicata (Federal Tax Procedure Blog 11/29/16), here.

2.  I have written before on issue preclusion on the FBAR willful penalty from the criminal conviction.  FBAR Collection Suit Against Person Convicted of Willfully Failing to File FBAR (Federal Tax Crimes Blog 12/11/18), here.

3. I have discussed tax crimes settings for issue preclusion (collateral estoppel) as to the civil fraud penalty from the criminal conviction.  Some of the posts are (reverse chronological order):

• Tax Court Again Rejects Collateral Estoppel For Some Deficiency and Civil Fraud Penalty Where No Tax is Due (Federal Tax Crimes Blog 7/24/16), here.
• Tax Evasion Conviction Does Not Compel a Finding of Deficiency Where There is No Deficiency (Federal Tax Crimes Blog 4/2/16), here.
• Civil Collateral Estoppel Following Tax Evasion Conviction (Federal Tax Crimes Blog 12/3/13), here.
• Hapless Mr. Williams Loses Again (Federal Tax Crimes Blog 12/5/12), here.

Taxpayers with Failed Bullshit Tax Shelters Use FOIA to Try to Get Whistleblower, if any, Information (2/24/18).

In Montgomery v. IRS, 2018 U.S. Dist. LEXIS 26313 (D. D.C. 2/20/18), here, taxpayers were caught using partnerships to claim large tax benefits based on bullshit tax shelters.  "In fact, both partnerships were structured in such a way that they were able to report tax losses without the partnerships (and, by extension, the partners) experiencing any real economic loss." After the FPAA proceedings and resulting and related litigation resolved those cases, the taxpayers made FOIA requests and, upon denial, brought this suit for the requested information and documents.  Their goal is "to deduce who, if anyone, tipped off the" IRS as to their raid on the fisc.  In this FOIA suit, the Government moved for summary judgment, alleging that the earlier resolutions of the cases they brought over the bullshit tax shelters foreclosed their FOIA claims.  The Court denied the Government's motion for summary judgment, so the case will proceed to further proceedings.  The Court ordered the parties to submit a new proposed briefing schedule.

Basically, the issue resolved by the Court was whether the prior resolutions in the cases dealing with the merits of their claims for tax benefits foreclosed their right to pursue FOIA requests.  The Court held that the neither the settlement agreements in the merits litigation nor principles of law (collateral estoppel and res judicata) foreclosed their right to pursue FOIA requests.  The settlement agreements merely presented a contract issue, and the Court held that the contracts did not foreclose the suits.  And the merits resolutions did not invoke principles of claim or issue preclusion because the FOIA claims or anything like them were not resolved in the earlier case.

The resolution is not particularly noteworthy.  Rather, what I thought was noteworthy is the taxpayers' pursuit of the whistleblower, if any, role, probably at some significant additional expense.  Maybe they are just curious, maybe they seek revenge, maybe they want to make some type of claim against the whistleblower, if any.  Who knows?  But maybe the further proceedings, if public, will shed light on that.

The docket entries are here.

Tax Court Again Rejects Collateral Estoppel For Some Deficiency and Civil Fraud Penalty Where No Tax is Due (7/24/16)

I recently blogged on the case of Senyszyn v. Commissioner, 146 T.C. ___, No. 9 (2016), here, referred to as Senyszyn II to distinguish from the first opinion in the case in 2013, where the Tax Court declined the IRS's invitation to apply the doctrine of equitable estoppel arising from the taxpayer's conviction for tax evasion.  See Tax Evasion Conviction Does Not Compel a Finding of Deficiency Where There is No Deficiency (Federal Tax Crimes Blog 4/2/16), here.  An element fo the crime of tax evasion to which the taxpayer pled is tax evaded (some courts say it must only be some tax evaded; others say substantial tax evaded, although the substantial modifier is not a textual element of the crime).  Accordingly, the taxpayer's plea to tax evasion included a stipulation that he willfully failed to report income of $252,726 which, in most cases would mean a tax evaded, indeed a substantial tax evaded.  In the ensuing tax case involving the year, however, the evidence demonstrated that there was no evaded tax.  The IRS nevertheless urged that the Tax Court should find some minimal amount of tax evaded pursuant to the plea agreement as to that element of the crime.  The Tax Court declined to imposed collateral estoppel against the evidence it had before it.

The IRS was not pleased.  Conjuring the horrors that might result, the IRS asked for reconsideration, urging that collateral estoppel was mandatory rather than equitable subject to the court's discretion. The Tax Court (Judge Halpern) again rejected the position.  Senyszyn v. Commissioner, T.C. Memo. 2016-137, here.  The Court has a good history of the proceedings before the Tax Court, with the first opinion in 2013 and not, apparently, the last just last week.

Judge Halpern then explained the IRS' motion for reconsideration:

In that motion, respondent alleges that, in Senyszyn II, we "did not properly apply the standard for collateral estoppel." In particular, respondent argues that our claim of "broad discretion in the application of collateral  estoppel" was a substantial error of law because it "contradicts previous holdings of the Court of Appeals for the Third Circuit, the court to which any appeal in this case would lie." Finally, respondent alleges that proper application of the standard for collateral estoppel would result in "a substantial tax deficiency for petitioners." According to respondent, that Court of Appeals allows trial courts discretion in the application of collateral estoppel only when the doctrine is asserted by a claimant who was not a party to the prior litigation (i.e., cases of "non-mutual" collateral estoppel). By contrast, in cases involving "mutual" collateral estoppel, in which the doctrine is asserted by a party to the prior litigation, courts must apply the doctrine whenever the legal conditions to its application are met.

The Tax Court noted that the IRS' argument that collateral estoppel does not permit judicial discretion in its application was based on thin authority (Jean Alexander Cosmetics, Inc. v. L'Oreal USA Inc., 458 F.3d 244 (3d Cir. 2006), and in the discussion section of the opinion demonstrates that that case is not sufficient authority on the facts in the case.  Moreover,

Respondent also suggests we "consider the breadth of * * * [our] opinion." He worries that the discretion we have claimed in the application of collateral estoppel might encourage "many more challenges to clear-cut cases" that will "waste judicial resources and the resources of the parties, thereby frustrating the entire purpose of collateral estoppel." He also professes concern that our Opinion "might be used to challenge prior criminal convictions." Finally, respondent suggests that applying collateral estoppel would "save[] the Court from having to confront the question of a requirement to arbitrarily determine some 'substantial tax deficiency' in order to afford the District Court the comity to which it is due, in a case where this Court's factual analysis shows there really is no deficiency at all." "The better course", respondent recommends, "is to accept via collateral estoppel the liability to which Mr. Senyszyn stipulated in his guilty plea as a minimum deficiency."

Tax Evasion Conviction Does Not Compel a Finding of Deficiency Where There is No Deficiency (4/2/16)

In Senyszyn v. Commissioner, 146 T.C. ___, No. 9 (2016), here, the Tax Court determined that the taxpayers owed no tax for the year involved (2003), despite the husband's earlier tax evasion plea agreement in which he admitted that significant taxable income and tax existed.  Tax evaded (sometimes referred to as tax deficiency and tax due and owing) is an element of the crime of tax evasion, § 7201, here, although the precise amount of the tax evaded is not.  Despite the taxpayers in fact owing no income tax for the year, the IRS sought to bind the husband to the plea agreement.  The Tax Court's summary of the case sets up my discussion below very well (with certain additions that I make in brackets):

Between 2002 and 2004, PH misappropriated funds from a business associate, DH. As part of a criminal investigation of PH, a revenue agent examined records of accounts belonging to Ps, DH, or related entities and determined that, during 2003, PH received from DH's accounts $252,726 more than he paid back to DH during that year. PH later pleaded guilty to and was convicted of criminal charges, including tax evasion in violation of I.R.C. sec. 7201. Under a plea agreement, PH agreed to a stipulation that he knowingly and willfully failed to report $252,726 of taxable income for 2003. [JAT Note: the admission was seems to be gross income which was taxable.]

Held: The evidence presented shows that, contrary to the revenue agent's analysis, PH repaid to DH during 2003 more than the amount the revenue agent determined PH to have misappropriated from DH in that year.  [Legally this had the effect of eliminating the taxable income.

Held, further, the purposes of the doctrine of collateral estoppel do not support its application to uphold whatever minimum deficiency would be consistent with PH's conviction for tax evasion.  

Held, further, because Ps are not liable for any deficiency in their Federal income tax for 2003, the fraud penalty R asserts against PH and the accuracy-related penalty R asserts against PW are not sustained.

I focus here, as did the Tax Court, on the plea agreement to the count of tax evasion for the 2003 year.  As I note toward the end of this blog entry, the criminal information to which the plea was entered had a "a separate count under section 7214(a)(7) (making or signing of fraudulent return by officer or employee of United States), that Mr. Senyszyn prepared and filed a fraudulent return on behalf of Mr. Hook's corporation, Modern Method Development, Inc. (MMDI)."  The Tax Court's opinion does not mention that count further and, instead, focuses on only the tax evasion count.  So, for the main discussion in the case and in this blog, § 7214(a)(7) appears irrelevant.

Judicial Estoppel of Tax Liability Based on Plea Agreement (9/20/14)

Guilty pleas and the resulting admissions in guilty plea allocutions do have collateral consequences.  Most immediately, guilty pleas and allocutions can be preclusive or or evidence in later civil proceedings.  In the current draft of my Federal Tax Crimes book, I caution as follows (footnotes omitted):

K. Collateral Consequences of Plea Agreements and Allocutions. 

Defense attorneys should always keep in mind that the criminal trial and particularly convictions can have collateral consequences to defendants.  Most immediately in a tax setting, a conviction can be proof or, at least, evidence of fraud so as to open up tax years otherwise closed by the statute of limitations and support the 75% civil fraud penalty.  I discuss elsewhere the collateral estoppel consequences of convictions for tax evasion.  Other tax crimes – most prominently tax perjury, § 7206(1) – do not per se have such preclusive collateral estoppel effects.  However, particularly in the plea agreement and in allocutions, there is some context for the bare, general count(s) of conviction.  That context may offer specific admissions of fraud or conduct from which a fair inference of fraud can be made.  If defense counsel wants to hold open the defendant’s opportunity to avoid civil fraud, the defense attorney must be careful to shape the admissions and other evidence to mitigate the risk of it being conclusive or persuasive as to fraud.

In this blog, I discussed the damaging effect of allocutions in an earlier case, the now infamous Williams case holding the hapless J. Bryan Williams liable for the willful FBAR penalty.  United States v. Williams, 489 Fed. Appx. 655 (4th Cir. 2012), here.  As I said in my blog on Williams (Fourth Circuit Reverses Williams on Willfulness (Federal Tax Crimes Blog 7/20/12; revised 7/24/12), here).

13.  The second aspect, which I think is inseparable from the first, is the particular plea allocution Williams made at his sentencing for the crime.  Essentially, the majority reads the plea allocution as an admission of willfulness in failing to file the 2000 FBAR in question.  The dissent reads the allocution differently, so we have a Clintonian situation as to the conclusion depending upon what the definition of is is.  Then, of course, as noted by the dissent, questions of collateral and judicial estoppel may apply.  I won't go into this further because, if indeed (as the majority read the tea leaves), the defendant admitted willfulness, then, of course, the district court was wrong in finding that the Government had not proved willfulness.

The majority opinion in Williams said this about the allocution (two footnotes omitted):

Civil Collateral Estoppel Following Tax Evasion Conviction (12/3/13)

In Senyszyn v. Commissioner, T.C. Memo. 2013-274, here, the taxpayer, a former IRS agent, had earlier been convicted by plea of tax evasion.  The evasion count to which he pled was:

COUNT TWO

TAX EVASION

1. The allegations contained in paragraphs 1 through 10 of Count One of this Superseding Information are repeated, realleged, and incorporated by reference as though fully set forth herein.
2. During the calendar year 2003, defendant BOHDAN SENYSZYN embezzled taxable income from the sale of real estate owned by DH that was in addition to the income paid to him as salary and wages by the IRS. Specifically, defendant BOHDAN SENYSZYN embezzled approximately $252,726.00 from the November 19, 2003 sale of DH-owned property in Andover Township identified as Lot 72, which was sold for $351,000.00.
3. On or about January 29, 2004, defendant BOHDAN SENYSZYN prepared, co-signed, and filed a United States Individual Income Tax Return, Form 1040, for himself and his wife, who also signed the return. That joint return declared $78,115.80 in wages and salaries as their only income, and stated that the amount of tax due and owing was $0.
4. The return did not include about $252,726.00 in additional taxable income that defendant BOHDAN SENYSZYN embezzled in 2003 from the sale of Lot 72. Upon this additional income, an additional tax of about $85,016.27 was due and owing to the United States.
5. On or about January 29, 2004, in the District of New Jersey, and elsewhere, defendant BOHDAN SENYSZYN knowingly and willfully did attempt to evade and defeat a substantial part of the income tax due and owing by him to the United States for the calendar year 2003 in that he signed, filed and caused to be filed a false and [*6] fraudulent United States Individual Income Tax Return, Form 1040, as described in paragraph 3, knowing it to be false and fraudulent as described in paragraph 4. In violation of Title 26, United States Code, Section 7201.

In the ensuing civil proceeding, the IRS urged that the conviction was collateral estoppel as to the issue of fraud for purposes of the civil fraud penalty and for purposes of the statute of limitations.

As a result of the case, I have slightly revised the working draft of my Federal Tax crimes book discussion of collateral estoppel as it relates to the civil fraud penalty.  Here is the discussion (footnotes omitted):

Taxpayer Judicially Estopped from Refund For Taxes Admitted in Plea Agreement (9/25/13)

In Mirando v. United States, 2013 U.S. Dist. LEXIS 135659 (ND OH 2013), the taxpayer pled guilty to conspiracy and tax evasion.  The plea agreement stated that the parties:

agree and stipulate that the following facts would have been established beyond a reasonable doubt at a trial in this matter: . . . after Mirando's release from the custody of the Bureau of Prisons, the IRS assessed tax, interest and penalties for Mirando's taxes due for the 1995 and 1996 tax years as well as for unpaid liabilities for the 2000 and 2004 tax years. As of June 29, 2007, the total tax liability, including interest and penalties, amounted to $448,776.13.

The taxpayer paid and sued for refund.

As I note in the comments below, there was no basis in the normal judicial doctrines of res judicata and collateral estoppel to prevent the taxpayer from asserting that the tax was less than stipulated in the plea agreement.  And, apparently this plea agreement was not specific that it was intended to contractually bind the taxpayer to the amounts -- even as minimum amounts -- in any subsequent civil tax case.  So something else would have to apply if the taxpayer were going to be bound.

The Court applied judicial estoppel.  Here is the reasoning (footnotes omitted):

The Court finds judicial estoppel prevents Plaintiff Mirando from bringing his refund claim. First, Mirando's position that he is entitled to a refund for overpaid taxes for the years 1995, 1996, and 2000 is directly contrary to his plea agreement in his 2007 criminal case. Recall Mirando's 2007 plea agreement states that the parties: 

agree and stipulate that the following facts would have been established beyond a reasonable doubt at a trial in this matter: . . . after Mirando's release from the custody of the Bureau of Prisons, the IRS assessed tax, interest and penalties for Mirando's taxes due for the 1995 and 1996 tax years as well as for unpaid liabilities for the 2000 and 2004 tax years. As of June 29, 2007, the total tax liability, including interest and penalties, amounted to $448,776.13. 

Because Mirando initialed the page on which the total tax liability was determined and signed the entire document, Mirando specifically agreed he owed $448,776.13. Mirando cannot now dispute these figures and demand a refund from the IRS after the court accepted his plea agreement. 

Moreover if Mirando was allowed to proceed in this action, he would gain an unfair advantage. By pleading guilty to tax evasion and specifically agreeing to a total tax liability of $448,776.13, Mirando avoided the possibility of a longer sentence and the United States agreed not to prosecute Mirando's ex-wife or two children. After obtaining this benefit from the United States, Mirando cannot turn around and sue the United States for a refund. 

Plaintiff Mirando relies on United States v. Hammon [277 F. App'x 560 (6th Cir. 2008)] for its position that his refund claim is not barred by estoppel. In Hammon, the Sixth Circuit held that the defendant was not collaterally or judicially estopped from denying the accuracy of the government's assessments despite pleading guilty to tax evasion and agreeing to pay $2.39 million in restitution. However, the present case can be distinguished from Hammon. In Hammon, the plea agreement only stipulated that the defendant willfully attempted to evade taxes assessed by the government in "the amount of approximately $2.39 million." Since the plea agreement was ambiguous as to whether the defendant admitted that the $2.39 million assessment was correct, the defendant was not estopped from challenging the accuracy of the tax assessment. In contrast, Plaintiff Mirando specifically agreed in his 2007 plea agreement that "beyond a reasonable doubt ... [a]s of June 29, 2007, the total tax liability, including interest and penalties, amounted to $448,776.13." Consequently, Hammon is not controlling, and judicial estoppel prevents Mirando from bringing his refund claim.

What Can Be Done If Tax Restitution Exceeds the Tax Due (9/2/13)

I previously expressed concern as to whether tax restitution ordered incident to sentencing could be fine-tuned in subsequent IRS administrative proceedings if it appeared to the amount of the tax restitution were too high.  See Tax Restitution and Doubt As to Amount (Federal Tax Crimes Blog 7/10/13), here. I was concerned that the new statute permitting immediate assessment of tax restitution and precluding contesting same would foreclose adjustments downward.  As a consequence, I urged, in imposing tax restitution the sentencing court should err on the side of caution to insure that the tax restitution amount is not too high.  In the case discussed, the IRS agent had indicated during the sentencing phase that adjustments might be made later in the civil phases.

In PMTA 2012-027 (10/22/12), here, reprinted at 2013 TNT 168-24, the author concluded:

A taxpayer cannot challenge the amount of court-ordered restitution at a CDP [Collection Due Process] hearing. A district court's final order cannot be modified by challenging the amount of ordered restitution at a CDP hearing. Also, I.R.C. § 6201(a)(4) prohibits collateral attacks on a restitution order in a subsequent legal and administrative proceeding under the Internal Revenue Code, of which a CDP hearing is an example. Furthermore, a challenge to the amount of restitution in a CDP hearing is prohibited under I.R.C. § 6330(c)(4) because the criminal tax case itself is considered a prior judicial hearing on that issue in which a taxpayer meaningfully participated.

I won't attempt now to dissect the reasoning of the author.  I just note that the conclusion is a major warning about dangers that may lurk in restitution proceedings.  I would hope that counsel -- both government and defense -- and the courts will be sensitive to the issue and do the work necessary to insure that tax restitution does not overstate the tax liability.

The IRS is not hurt by caution in the restitution amount at the sentencing proceeding because the IRS can assert any additional amounts due through the regular tax determination and assessment procedures.  The author of the PMTA thus reasons:

The Service's assessment of the amount of restitution ordered by a federal district court does not, however, prevent the Service from assessing civil penalties and tax liabilities on top of the criminally ordered restitution if the amount of restitution is less than the defendant's total tax liabilities for that same period. See Helvering v. Mitchell, 303 U.S. 391(1938) (holding that Congress may impose both a criminal and a civil sanction in respect to the same act or omission); Morse v. Commissioner, 419 F.3d 829, 833-35 (8th Cir. 2005) (holding that despite a federal criminal case against the same taxpayer resulting in a sentence the taxpayer pay a fine and make restitution to the Service, the doctrine of res judicata did not apply to preclude a civil fraud penalty assessment on a tax deficiency because criminal prosecution for filing false income tax returns did not involve same cause of action as civil tax deficiency case). Cf. United States v. Helmsley, 941 F.2d 71, 102 (2d Cir. 1991) ("It is true that the government may pursue a tax evader for unpaid taxes, penalties and interest in a civil proceeding. However, we believe it is self-evident that any amount paid as restitution for taxes owed must be deducted from any judgment entered for unpaid taxes in such a civil proceeding."). In other words, the restitution amount is a floor and not a ceiling with respect to the tax period at issue. n4 Although the amount of a restitution may not be the actual amount of the taxpayer's full tax liability for that tax period under Title 26, the Service will effectively treat the amount of restitution as the minimum tax liability for the relevant tax period by assessing it "as if such amount were such tax" for that period. Section 6201(a)(4)(A).
   n4 The tax or penalty liabilities determined by the Service in excess of the amount ordered as restitution are not an assessment of the restitution ordered by a federal district court. Accordingly, section 6201(a)(4)(C) does not prohibit a taxpayer from challenging in any judicial or administrative proceeding under the Code those tax or penalty determinations that are in excess of the amount ordered as restitution. For example, if a taxpayer is ordered to pay $100,000 in restitution for the tax period ending 20XX and the Service determines pursuant to a subsequent examination that the taxpayer has an additional unpaid tax liability of $20,000 and is subject to a section 6663 fraud penalty of $90,000 for that same period, section 6201(a)(4)(C) does not prohibit the taxpayer from challenging the $20,000 additional tax liability and the $90,000 fraud penalty, but does prohibit the taxpayer from challenging the $100,000 amount of restitution determined by the federal district court and assessed by the Service.

On Res Judicata in Criminal Case from Prior Civil Case and On Criminal Statute of Limitations (5/15/13)

In United States v. Wanland, 2013 U.S. Dist. LEXIS 64598 (ED CA 5/6/13), here, the Court denied three defense motions to dismiss.  I don't think there is anything particularly important about the holdings, but one of the issues permits me to digress on related concepts and another issue offers a good analysis of the law.  So, I offer the case and further discussion here.

1.  Res Judicata.

Prior to indictment, the defendant had received a bankruptcy court "final judgment discharging the Defendant's debts and liabilities to the Internal Revenue Service ('IRS')."  As quoted in footnote one, 11 U.S.C. § 523(a) (1) (C) provides that

[a] discharge . . . of this title does not discharge an individual debtor from any debt . . . with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax.

The defendant was not entitled to an order of discharge of his tax liabilities that he attempted to evade.  He did get the discharge.  Presumably the IRS was represented in the proceeding.  The case does not state whether the IRS asserted nondischargeability because of evasion and lost the assertion in the bankruptcy court.

The defendant argued that, based on principles of res judicata or claim preclusion, the bankruptcy discharge precluded the IRS from asserting any crime related to the taxes discharge which required that the defendant have evaded tax, an issue that the defendant urged had already been resolved against the Government in the bankruptcy case.  The Court held that the criminal prosecution could not have occurred in the bankruptcy proceeding and therefore that the Government was not precluded from bringing the counts based on evasion of the taxes discharged.  The Court reasoned:

Hapless Mr. Williams Loses Again (12/5/12)

I have blogged on Joseph B. Williams III before.  He is the gentleman subject to the FBAR willful penalty that drew such a problematic opinion from the Fourth Circuit imposing the penalty.  See Fourth Circuit Reverses Williams on Willfulness (Federal Tax Crimes Blog 7/20/12; revised 7/24/12), here.  There was a related civil proceeding regarding his income taxes.  I  reported the Tax Court decision in that case earlier.  The Williams Offshore Account Saga Continues - You Win Some, You Lose Some (4/28/11), here.  The Fourth Circuit has now decided the appeal in the Tax Court case, Williams v. Commissioner (4th Cir. - No. No. 11-1804 12/3/12), here, an unpublished opinion, holding against Mr. Williams on the points he raised on appeal.

The Fourth Circuit unpublished decision plows no new ground (which is probably why it is unpublished).  Hence all it does is remind practitioners of settled propositions in the particular fact situation before the court.  The key propositions (with some fleshing out by me for context matters not addressed in the opinion) are:

1.  A guilty plea to income tax evasion for one or more years will be collateral estoppel in an ensuing civil case involving the same years.  Collateral estoppel after a guilty plea for income tax evasion will govern the unlimited statute of limitations in Section 6501(c)(1), here, and the civil fraud penalty in Section 6663, here.  Depending upon the plea and the allocution, It may not determine anything other than a minimum number for the tax liability itself.

2. Tax evasion under Section 7201, here, encompasses evasion of assessment or evasion of payment, or both (it is fair to say that evasion of assessment involves evasion of payment).

Render Unto Caesar -- Another Intersection of Alleged Religion and Tax (10/9/12)

In Hovind v. Commissioner, T.C. Memo. 2012-281, here, the Tax Court decided decided that (i) the taxpayer had "had unreported Schedule C income and expenses (collectively, net profit) attributable to Creation Science Evangelism (CSE) and Dinosaur Adventure Land (DAL) for each of the years at issue; " (ii) that the taxpayer was liable for additions to tax under section 6651(a)(1) for failing to timely file her income tax return for each of the years at issue; and (iii) and that the taxpayer is liable for the fraud penalty under section 6663(a) for each of the years at issue.

The following is from the opinion and gives a good introduction (footnotes omitted):\

Mr. Hovind established CSE in 1989. CSE purported to be a nondenominational religious organization that advocated the message of creation science and opposed the theory of evolution. CSE promoted its message through live lectures by Mr. Hovind and Eric Hovind. Mr. Hovind frequently traveled, domestically and internationally, for speaking engagements, and petitioner occasionally accompanied Mr. Hovind on these trips.

The Ministry then somehow developed, with various revenue generating projects.  The Court then continued (some footnotes omitted):

Walter Anderson Re-Appears But Unsuccessfully (9/9/12)

Walter Anderson has occupied the attention of the IRS and the courts for some time now.  (See his Wikipedia entry, here, appropriately titled "Walter Anderson (tax evader)."  I have previously blogged on him -- Walter Anderson -- The Fight Continues (2/2/11), here.

Mr. Anderson just lost an appeal regarding his civil tax liability for the years for which he was convicted.  See Anderson v. Commissioner, 698 F.3d 160 (3d Cir. 2012), here.  The gravamen of the holding on appeal is the well settled proposition that a tax evasion conviction is collateral estoppel for the year(s) of conviction as to tax fraud for purposes of the civil fraud penalty and the unlimited statute of limitations.  The amount can still be in issue, but Mr. Anderson ultimately stipulated the amount in the Tax Court.  Thus the court said early in the opinion that "we agree with the numerous courts that have held that, under the doctrine of collateral estoppel, a conviction for criminal tax evasion conclusively establishes the defendant's civil liability for tax fraud for the same year."  (Citations omitted.)  In reaching the conclusion, the court analyzed the basis for his plea agreement and determined that it necessarily included as admission that certain income was taxable to him and that the admission was necessary to the conviction.

Mr. Anderson also argued that the IRS's concession in the Tax Court as to three years for which Mr. Anderson had not been convicted was necessarily a concession as to the two years for which he was convicted, arguing that the fact patterns were the same.  The IRS's concession for the nonconviction years, however, was a strategic one because most of the income was in the years of conviction and thus having to mount the substantial burden of proving fraud and the tax involved for the nonconviction years was not justified.  But, that concession was not a concession that the taxpayer had not committed fraud in those years.