Justia U.S. 1st Circuit Court of Appeals Opinion Summaries

This dispute about the payment of a penalty imposed on them by the IRS arose out of Plaintiffs' underlying joint personal income tax liability for the tax year 1994. After the IRS audited Plaintiffs for that year, the tax court imposed a penalty on Plaintiffs for failing to timely file a return. Plaintiffs completed payment of their agreed 1994 tax liability under a payment plan. Plaintiffs subsequently filed an administrative claims for refused of the 1994 failure-to-pay penalty and the interest they paid on that penalty. The IRS denied the claim. Plaintiffs filed suit in the district court, and the court granted summary judgment in favor of the government. Plaintiffs appealed, arguing there was at least a dispute of material fact as to whether (1) the IRS was equitably estopped from assessing this fee, (2) they had reasonable cause not to pay the relevant taxes with the time provided by statute, and (3) the IRS had ever provided them with proper notice and demand for payment. The First Circuit Court of Appeals affirmed, holding that Plaintiffs failed to raise a genuine issue of material fact as to any of their claims. View "Shafmaster v. United States" on Justia Law

After a jury trial, Defendant was found guilty of having, among other things, engaged in a scheme to conceal and avoid her company's employment tax liability. The district court determined that Defendant was responsible for approximately $1.2 million in tax losses. Defendant was sentenced to eighty-seven months incarceration. The First Circuit Court of Appeals affirmed Defendant's conviction and sentence, holding (1) Defendant waived her argument that the district court erred by submitting a set of summary charts to the jury; (2) the district court did not err by adopting the government's calculation of the tax losses for which Defendant should be held responsible as a result of her fraudulent payroll scheme; and (3) the district court did not plainly err by failing to inquire specifically as to whether Defendant had reviewed the presentence report (PSR) with her attorney because the evidence showed Defendant reviewed the PSR with her sentencing counsel. View "United States v. Deleon" on Justia Law

Taxpayer owned fifteen acres of land in Ludlow, Massachusetts. Taxpayer obtained a commitment from Bank to make a loan to fund development on the land. The commitment stipulated that the loan would be made to Taxpayer or "nominee" and that, if Taxpayer assigned the commitment to a nominee, he would be required to guarantee the loan personally. Taxpayer subsequently transferred title of the property to an LLC he formed. Later, the loan became delinquent, and Bank foreclosed on unsold lots in the development. After selling the lots at auction, Bank filed this interpleader action to determine who had the right to the surplus proceeds. The United States claimed an interest in the fund, as did the town of Ludlow. At issue was who was the "nominee" of Taxpayer for purposes of the federal tax lien that attached to Taxpayer's property. The district court held in favor of the United States, concluding that the LLC was Taxpayer's nominee. The First Circuit Court of Appeals affirmed, holding that the nature of the relationship between Taxpayer pointed to the fact that the LLC was a "legal fiction," and therefore, the district court did not err in concluding that the LLC was Taxpayer's nominee. View "Berkshire Bank v. Town of Ludlow, Mass." on Justia Law

Defendants Michael Powers and John Mahan, who ran an employment agency supplying temporary workers, were convicted after a jury trial of conspiracy to defraud the United States by impeding the functions of the IRS and mail fraud. Powers was also convicted of subscribing false tax returns and Mahan of procuring false tax returns. The tax fraud amounted to $7.5 million. Powers was sentenced to eighty-four months' imprisonment and Mahan to a term of seventy-six months. Defendants' appealed, alleging that the trial court committed errors requiring a new trial. The First Circuit Court of Appeals affirmed Defendants' convictions and sentences, holding (1) there was no prejudice to Defendants in the trial court's failure to give an defense instruction on advice of counsel; (2) various witnesses were not allowed to testify as to the ultimate issues, and thus the role of the jury was not invaded; (3) defense counsel was afforded a reasonable opportunity to impeach adverse witnesses; and (4) the district court did not plainly err in excluding testimony by Defendants' witnesses. View "United States v. Mahan" on Justia Law

Taxpayers bought and renovated a $1,050,000 row house in the South End of Boston, subject to historic preservation restrictions. In 2003, they learned about a tax incentive program for historic preservation, promoted by National Architectural Trust, which advised them that the Trust could help them qualify for a deduction of 10 to 15 percent of fair market value. Internal Revenue Code, 26 U.S.C. 170(h), creates an incentive for donation of property interests to nonprofit organizations and government entities for "conservation purposes," including preservation of "historically important" land or structures. Taxpayers made a $1,000 deposit, executed a Preservation Restriction Agreement, and sent another $15,840. On their 2003 return they claimed a cash contribution of $16,870 to the Trust and a noncash contribution of $220,800 for the easement donation (spread to 2004 return). In 2009, the IRS sent "Notice of Deficiency" and calculated that they owed an additional $39,081.25 for 2003 and an additional $36,340.00 for 2004, plus underpayment penalties. The Tax Court disallowed any deduction for the easement, but held that they were entitled to deduct their $16,840 cash contribution on their 2004 return. The First Circuit vacated and remanded, rejecting the reasoning for disallowing the deduction for the easement. View "Kaufman v. Shulman" on Justia Law

The government sued the Haags to reduce tax liabilities ($1,620,224) to judgment. Mrs Haag asserted entitlement to "innocent spouse" relief 26 U.S.C. 6015(b)(1)-(2),(f)). The Haags brought a separate claimthat they had been denied a collection due-process hearing, 26 U.S.C. 6320. The district court consolidated the actions and entered judgment against the Haags on the collection action. Concerning innocent spouse relief, the court found that the statute required that claims be filed within two years after the first collection action. The IRS discovered evidence that it had sent proper notice of the CDP hearing; the court ruled against the Haags in their separate action. The First Circuit affirmed. The Haags filed another suit, alleging that the government failed to notify their attorney of tax liens. Mrs. Haag sued, claiming that the IRS had failed to consider a request for innocent spouse relief that she raised in 2005. The district court dismissed both as barred by res judicata. The First Circuit affirmed. Mrs. Haag then claimed that in 2009 the Tax Court invalidated a regulation imposing a two-year limitations period on innocent spouse requests. The IRS denied the claim. The Tax Court granted judgment for the government. The First Circuit affirmed. View "Haag v. Shulman" on Justia Law

Taxpayers, who incurred tax liability as a result of a failed business, had transferred real estate to a trust for the benefit of family members. The IRS determined that, with accrued interest, their indebtedness exceeds $400,000 and, in 2004, gave notice of intent to levy, 26 U.S.C. 6330(a). The taxpayers did not dispute the amount, but requested a pre-attachment CDP hearing and offered to settle their debt for $10,000. They denied that they had any ownership interest in the property and asserted that, with their assets and income, they could never come close to satisfying their total tax liability. After gathering information and hearing arguments, the IRS rejected the offer in compromise, finding that the taxpayers were the real owners. The Tax Court reviewed the determination de novo, found that the taxpayers were not the owners of the real estate, directed the IRS to accept the offer in compromise, and ordered the IRS to pay attorneys' fees. The First Circuit reversed, holding that the Tax Court employed an improper standard of review with respect to the IRS's subsidiary determinations. Under a more deferential standard, consistent with the nature and purpose of the CDP process, the IRS acted reasonably. View "Dalton v. Comm'r of Internal Revenue Serv." on Justia Law

Puerto Rico has classified Coors as a large brewer under its beer tax schedule, taxed at a higher rate than small brewers, including local brewer Cervecería India. In 2006, Coors brought suit challenging this differential treatment under the dormant Commerce Clause. The district court originally dismissed the case on comity grounds, but the First Circuit reversed. While remand was pending in 2010, the Supreme Court decided Levin v. Commerce Energy, Inc., which expressly abrogated the First Circuit’s 2009 decision. The district court then dismissed on grounds of comity. The First Circuit affirmed. Puerto Rico’s Secretary of the Treasury did not consent to litigate in federal court and Puerto Rico courts provide an adequate state forum for adjudication of federal constitutional claims. View "Coors Brewing Co. v. Mendez-Torres" on Justia Law

In August 2004, MMC began to look into filing a tax refund claim for reimbursement of FICA made on behalf of its medical residents in 2001. In March 2005, MMC discussed the matter with its accountants. On April 15, 2005, the day the claim was due, MMC completed the form; it has no evidence that it followed its standard practice and took the form to the post office. The IRS asserts that it has no record of receiving the claim. In December 2009, MMC filed a refund suit. The government refused to respond to discovery requests relating to the 2001 claim, arguing that the claim was not timely filed. The district court entered judgment for the government. The First Circuit affirmed, holding that MMC did not make an adequate threshold showing that its refund claim was timely filed, and thus the district court did not have jurisdiction to hear the case. View "ME Med. Ctr. v. United States" on Justia Law

Defendants were convicted of failure to pay federal income tax. Neither attended sentencing. They did not respond to demands to surrender and remained holed up in their secluded home for about nine months. Marshals had information that defendants were armed and making threats, but eventually arrested the couple and found explosives, firearms, and ammunition, including rifles, armor piercing bullets, pipe bombs, and bombs nailed to trees. Convicted of conspiring to prevent federal officers from discharging their duties, 18 U.S.C. 372; conspiring to assault, resist or impede federal officers, 18 U.S.C. 111(a) and (b) and 371; using or carrying a firearm or destructive device during and in relation to a crime of violence; possessing a firearm or destructive device in furtherance of a crime of violence, 18 U.S.C. 924(c)(1)(A) and (B); being a felon in possession of a firearm, 18 U.S.C. 922(g)(1); obstruction of justice, 18 U.S.C. 1503; and failing to appear at sentencing, 18 U.S.C. 3146. They were sentenced to 35 and 37 years. The First Circuit affirmed, rejecting arguments relating to competency, defendants' beliefs that they were not obligated to pay taxes, evidentiary rulings, and jury instructions.