| 05/10/2012 09:00:00 AM | Supreme | Indiana Department of State Revenue v. Virginia Garwood, et al. |  | n/a |  | n/a |
Watch the Oral Argument on-line here:
The Tax Court opinion at issue held:
The Court
holds that the Department did not show the presence of the statutorily
prescribed exigent circumstances that the Garwoods’ intended to quickly leave
the state, remove their property from the state, conceal their property in the
state, or do any other act that would jeopardize the collection of taxes. The
Court’s holding is consistent with the Indiana Supreme Court’s explanation of
the contours of jeopardy assessments. See generally, e.g., Indiana Dep’t of
State Revenue v. Adams, 762 N.E.2d 728, 730-33 (Ind. 2002); Adams, 762 N.E.2d
at 740-46; Bryant v. State, 660 N.E.2d 290, 295-300 (Ind. 1995); Clifft, 660
N.E.2d at 313-19. Indeed, in distinguishing the State’s power to tax from its
power to punish crimes, Indiana’s Supreme Court explained that the power to
issue jeopardy assessments “is part of the State’s power of the purse, not its
power of the sword[.]” See Adams, 762 N.E.2d at 732-33.
It cannot
reasonably be inferred that the jeopardy assessment procedure was used in this
case to protect the State’s fiscal interests. For example, the day after the
Garwoods’ 240 dogs were seized, the Department sold them all to the Humane
Society for a total of $300.00, yet logic dictates that the dogs had a value
far greater than just over $1.00 each. The Department’s sale of the dogs for
this nominal price is in stark contrast to the Department’s previous purchase
of two dogs from the Garwoods for a total of $550.00 as well as its estimate
that each dog’s value was $300.00 in calculating the BIA assessments. (See Resp’t
Des’g Evid. Ex. BB ¶¶ 15-16, Mar. 3, 2011; Resp’t Des’g Evid. Ex. E ¶¶ 13-17,
Jan. 31, 2011; Resp’t Des’g Evid. Ex. 11 ¶ 8, Dec. 20, 2010.) Moreover, a media
circus roiled on the very day the Department and the OAG served the jeopardy
assessments, jeopardy tax warrants, and seized the Garwoods’ assets. Within
hours of the raid, individuals from the OAG were interviewed on television and
by newspapers about shutting down a “puppy mill.” (See Petrs’ Des’g Evid. Vol.
1, Ex. A ¶¶ 14-15.) (See also, e.g., Resp’t Des’g Evid. Ex. L at 1-3, Jan. 31,
2011.) The unusual occurrence of this media hype in conjunction with the
Department’s sale of the Garwoods’ property for a nominal sum demonstrate that
the Department wielded the power of jeopardy assessments as a sword to
eliminate a socially undesirable activity and close down a suspected “puppy
mill,” not to fill the State’s coffers with the tax liabilities the Garwoods
purportedly owed.
Jeopardy
assessments are a powerful collection tool that, when properly used, further
the important state interest of collecting state tax revenue needed to pay for
critical governmental services and conducting the business of the state. The
designated evidence shows that the Garwoods did not remit the proper amount of
tax due to the state on their sales, a fact the Garwoods have repeatedly
acknowledged. Nonetheless, the Department overstepped its authority in this
case by issuing jeopardy assessments without having shown the exigent
circumstances required by Indiana Code § 6-8.1-5-3 and 45 IAC 15-5-8.
Consequently, the Court holds that the sixteen jeopardy assessments issued to
the Garwoods for all or part of the 2007 though 2009 tax years are void as a
matter of law.
