Kostelanetz attorneys Andrew Weiner, Todd Welty, and Gray Proctor have filed two friend of the court (amicus) briefs on behalf of the Center for Taxpayer Rights in cases in which taxpayers are seeking jury trials to challenge civil tax fraud penalties issued by the IRS or the U.S. Tax Court.
The U.S. Supreme Court last year issued a landmark decision in SEC v. Jarkesy, holding that the Seventh Amendment entitles a defendant to a jury trial when the U.S. Securities and Exchange Commission (“SEC”) pursues civil penalties for securities fraud. As Kostelanetz posited at the time, “the Court’s opinion will have a significant impact on tax penalties imposed by the Internal Revenue Service.” And now that concept is being tested in cases winding their way through the courts, including in Silver Moss Properties LLC v. Commissioner in the U.S. Tax Court, and in Hirsch v. Commissioner in the U.S. Court of Appeals for the Eleventh Circuit.
In both cases, Kostelanetz submitted amicus briefs on behalf of the Center for Taxpayer Rights in support of taxpayers’ contention based on Jarkesy that the Seventh Amendment right to a jury trial applies to their challenges of civil tax fraud penalties.
As an April 22 Tax Notes article on the Silver Moss amicus brief stated:
“Andrew Weiner of Kostelanetz LLP told Tax Notes that the Seventh Amendment and Article III [of the Constitution] are fundamental protections that apply to taxpayers facing fraud and accuracy-related penalties. The Center for Taxpayer Rights supports Silver Moss Properties LLC’s argument that fraud penalties may not be imposed administratively [by the IRS] or through Tax Court proceedings, Weiner said.”
The U.S. Tax Court is not an Article III court and may not conduct jury trials.
In the Hirsch matter, an April 28 Tax Notes article noted that the dispute between the taxpayer and the government rests on the history of jury trials and the imposition of monetary penalties dating to the founding of the United States and its Constitution.
As the article notes, “The Center for Taxpayer Rights asserts that the suit-at-common-law inquiry turns on whether the action would have been heard at law or in equity at the time of the founding era of the country. This, in turn, depends on how much of the penalty was remedial and how much was a deterrent, it says.”
