Gray Proctor was quoted in a recent Tax Notes article titled “Court Finds Promoter Penalties Don’t Deprive Right to Jury Trial.”
The article addresses HDH Group v. United States as the next landmark case pursuant to the 2024 decision SEC v. Jarkesy (603 U.S. 109) concerning taxpayers’ rights to a jury trial. Judge William S. Stickman IV of the U.S. District Court for the Western District of Pennsylvania issued an opinion September 23, 2025, holding that civil fraud tax penalties under §6700 assessed against HDH Group Inc. didn’t violate the Seventh Amendment.
HDH, an insurance brokerage service corporation that operated a captive insurance program, was assessed $6.6 million in promoter penalties by the IRS for the tax years 2013-2018. Under §6703(c)(1), taxpayers must pay at least 15% of the penalty amount within 30 days of the notice date then submit an administrative claim for a refund. Despite paying the 15% then filing a claim for a refund, the IRS disallowed HDH’s claim in June 2024 and followed up with a notice of intent to levy.
HDH appealed the levy, then filed a lawsuit against the government in July 2024, citing Jarkesy to argue that §6700 penalties were improperly imposed and the Seventh Amendment was violated. The U.S. District Court sided with the government, saying that HDH was not deprived of its right to a jury trial because the judicial review afforded to it was not limited to the appellate court with a deferential standard of review.
“Here, the taxpayer only raised the Seventh Amendment issue and lost because the Seventh Amendment does not directly address the timing of the hearing. Had the taxpayer raised a due process challenge to post-deprivation adjudication as well, the results might have been different,” Gray said, noting that the court’s opinion includes a footnote stating that the decision didn’t address whether there were additional legal implications due to the statutory requirement to pay 15% of the assessed penalty under §6700.
Gray referred to the court’s decision not to address this as a “ray of hope” as it leaves open to interpretation whether §6700 violates due process.
You can learn more about the HDH decision by reading the complete article here.
About Gray
Gray is an experienced and accomplished appellate advocate who represents clients facing both civil and criminal penalties. He also maintains a trial support practice focusing on dispositive motions and other key issues upon which an appeal might follow.
