Saturday, February 24, 2018

Congress Amends Tax Whistleblower Section, § 7623, to Clarify Broad Reading of the Award Base (2/24/18)

Earlier this month, Congress amended the mandatory minimum tax Whistleblower award program to make clear that proceeds for purposes of the award base includes non Title 26 collections for fines, forfeitures and reporting violations (such as FBAR penalties).  See § 41108 of the Bipartisan Budget Act of 2018, P.L. 115-123, here.  The change is effected by using the term "proceeds" rather than "collected proceeds and adding § 7623(c) to provide as follows.

(c) Proceeds.—For purposes of this section, the term ‘proceeds’ includes—
   (1) penalties, interest, additions to tax, and additional amounts provided under the internal revenue laws, and
   (2) any proceeds arising from laws for which the Internal Revenue Service is authorized to administer, enforce, or investigate, including—
      (A) criminal fines and civil forfeitures, and
      (B) violations of reporting requirements.

The expanded definition is both for the award base and for the minimum proceeds for § 7623(b).

I have revised my discussion of the Whistleblower Chapter, Chapter 19, in my working draft of my Federal Tax Procedure Book (pending the next publication) to incorporate these changes and attach a red-lined version of it here

Friday, February 2, 2018

Good History Lesson on the Interface of Civil Procedure and Tax Refund Suits (2/2/18)

In United States v. Stein, 2018 U.S. App. LEXIS 2392 (11th Cir. 2018) (en banc), here, the Eleventh Circuit unanimously held that "an affidavit which satisfies Rule 56 of the Federal Rules of Civil Procedure may create an issue of material fact and preclude summary judgment even if it is self-serving and uncorroborated."  For civil trial lawyers, this seems an unexceptional holding, which is why it was a unanimous en banc opinion.  But there is some trial procedure intrigue behind the holding which explains why the panel opinion predicate to the en banc opinion held otherwise.  See United States v. Stein, 840 F.3d 1355 (11th Cir. 2016), here.

The background was Mays v. United States, 763 F.2d 1295 (11th Cir. 1985), here, which was the authority cited in the panel opinion.  In Mays, the court granted summary judgment on the following basis (emphasis supplied by JAT):
In a tax refund suit, the Commissioner's deficiency determinations are presumed correct, and the burden of proof is on the taxpayer to show that the Commissioner's findings were erroneous. Helvering v. Taylor, 293 U.S. 507, 514-15, 55 S.Ct. 287, 290-91, 79 L.Ed. 623 (1935); Anselmo v. Commissioner, 757 F.2d 1208, 1211 (11th Cir.1985). A taxpayer seeking a refund must show not only that the Commissioner erred, but must establish the correct amount of the refund due. King v. United States, 641 F.2d 253, 259 (5th Cir.1981)*; Crosby v. United States, 496 F.2d 1384, 1390 (5th Cir.1974). The claim must be substantiated by something other than tax returns, Lunsford v. Commissioner, 212 F.2d 878, 883 (5th Cir.1954), uncorroborated oral testimony, Griffin v. United States, 588 F.2d 521, 530 (5th Cir.1979), or self-serving statements. See Gibson v. United States, 360 F.2d 457, 462 (5th Cir.1966). 
Mays does not dispute that the computer printout he submitted with his response to the government's interrogatories was prepared after the tax audit; indeed, the "amount allowed by auditor" appeared on the face of the printout. His net worth statements did not refer to any original records, and he presented no contemporaneous documentation of his expenses or other evidence to establish that the Commissioner's tax assessment was wrong or to establish the correct amount due. In sum, Mays did not overcome the presumption of correctness due determinations of the Commissioner. Rather, he has submitted only self-serving documents which do not substantiate his claims. Accordingly, the government was entitled to summary judgment.
The Stein en banc opinion reverses Mays on straight-forward trial civil procedure grounds. Uncorroborated properly submitted affidavit testimony on a key factual issue can avoid summary judgment.  The effect of denying summary judgment is that the party opposing summary judgment can go to trial on that issue.  Trial can be either to a jury (if requested and the type of fact issue triable to a jury) or to a judge.

In tax cases, refund suits may be tried to a jury.  The majority en banc opinion does not get into the particular tax issue, other than to say that there is nothing unique about taxes that would require a different result than compelled by the ordinary civil procedure rules.  But, the tax setting is an entre for Judge William Pryor to talk in a concurring opinion about the unique historical role of taxes, procedure and jury trials.  I want to focus on Judge William's concurring opinion, but first I conclude the discussion of the majority opinion: