Gray Proctor Quoted in Law360 Article on Jarkesy Ruling and Tax Controversy

Gray Proctor was quoted in a Law360 article titled “4 Ways Justices' Jarkesy Ruling Could Affect Tax Controversy.”

Jarkesy v. SEC will reshape tax disputes in the near future, as lower courts interpret it.

Jarkesy is that enforcement targets have a right to a jury trial prior to the imposition of many (if not most) administrative penalties. Historically, taxes have been described as matters of “public rights,” which are an exception to the Seventh Amendment.  Now that Jarkesy challenges are making their way through the lower courts, courts will have to decide whether the public rights exception for taxation extends to tax penalties as well.

Jarkesy itself does not foreclose the argument that it's OK to have the jury trial after the taxes are paid, in a refund suit.”  It is the Fifth Amendment’s due process clause, he told Law360, that guarantees that taxpayers a jury trial before the penalty is assessed, not after.  This argument was not raised the recent case HDH Group v. United States, leading the district court to rule that there was no problem with post-deprivation review of § 6700 penalties.  Fortunately for future litigants, the court specifically mentioned that the argument was not raised, making it easier to distinguish the case.

Jarkesy to date have had mixed results, indicating that the Seventh Amendment argument in tax controversy cases continues to evolve. Subsequently, the IRS may change how it assesses and defends penalties going forward.

Jarkesy landscape:

• FBAR penalties and fines related to foreign asset disclosures
• Due process protections under the Fifth Amendment
• Civil fraud penalty settlements
• The IRS penalty process altogether

<About Gray Gray is an experienced and accomplished appellate advocate who represents clients facing both civil and criminal tax penalties. He also maintains a trial support practice focusing on dispositive motions and other key issues upon which an appeal might follow.