Kostelanetz counsel Gray Proctor wrote an article for the Florida Bar Journal titled “Twelve Angry Taxpayers: Why the Constitution Might Guarantee a Jury Trial for Accuracy and Fraud Penalties in Tax Cases after SEC v. Jarkesy.”
Gray examines the U.S. Supreme Court’s June 2024 decision in SEC v. Jarkesy, et al., which held 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. The article traces the Court’s attention to separation of powers principles and shows why, contrary to the conventional wisdom, the “public rights” doctrine, as informed by Jarkesy, does not extend to tax penalties, and therefore, Jarkesy’s effects could portend more jury trials in tax penalty cases.
As the Supreme Court laid out in its decision, monetary penalties are presumptively “suits at common law” subject to the guarantees of Article III (a life-appointed judge with salary protection) and the Seventh Amendment (jury trial). Historical analysis reveals that, from colonial times through the Civil War, tax penalties on American soil were collected in common-law courts, and the Crown’s attempts to remove juries from the process helped spark the Revolutionary War. Without an unbroken historical tradition of nonjudicial penalty collection, tax penalties do not fit within the post-Jarkesy definition of a public right and so must be heard in an Article III forum that offers a jury trial, Gray reasons.
As Gray explains, “The historical record is damning, and nothing shows that tax penalties themselves need to be collected administratively to promote compliance,” even if other related judicial precedents remain law.
“Striking down the penalty assessment statutes would be a huge change, but the consequence flows directly from Jarkesy,” Gray writes.
Read the full 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. He is qualified as a board-certified appellate specialist by the Florida Bar Association.
