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Tax judge shoots down 'Al Capone' approach

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In a blow to the Indiana attorney general’s office, the state’s tax judge has shot down a legal theory that used jeopardy tax assessments to go after a purported puppy mill in Harrison County.

The ruling came late Friday in the case of Virginia and Kristin Garwood v. Indiana Department of Revenue, No.82T10-0906-TA-29. Tax Judge Martha Wentworth ruled against what the AG has dubbed the “Al Capone” approach to take down what it described as illegal puppy mill operations.

This case goes back to June 2009, when a mother and daughter from Harrison County were charged following a raid on their dairy farm. The state went to the Garwoods’ residence to serve the jeopardy tax assessments and demanded the family pay about $142,368 immediately or their personal property would be seized. When they couldn’t pay, police and animal rescue workers seized 244 dogs and puppies that were confined in squalid enclosures. The seized animals, some of testing positive for disease, were sold by the state to the Humane Society for a total $300.

The Garwoods eventually pleaded guilty to a felony charge of failing to pay 2007 to 2009 sales tax for the puppy-breeding and selling operation in Mauckport, Ind.

Indiana law didn’t offer the state a way to go after the Garwoods or similar tax delinquents, and the AG used the criminal tax evasion tool that had taken down 1930s crime boss Al Capone for not paying taxes on his operations. That method meant utilizing the Department of Revenue and its ability to issue jeopardy tax assessments, if at least one of four statutory circumstances were present.

The state has used this method multiple times in recent years, and the 16 warrants against the Garwoods was the second time that approach had been used. The Garwoods challenged the jeopardy tax assessments and filed an original tax appeal in the summer of 2009, arguing that they were deprived of their constitutional due process rights, thereby voiding the jeopardy assessments. The state disputed those claims, saying they were justified to use the assessments.

Judge Wentworth ruled against the state, finding that it hadn’t proved it had enough justification to issue the jeopardy assessments in this situation.

The state alleged the Garwoods were concealing property (the puppies) to avoid being taxed. The state argued that Virginia Garwood’s refusal to allow the Harrison County Animal Control onto her property at one point following a consumer complaint showed she was hiding the operation.

But Judge Wentworth disagreed, finding it was not reasonable to infer that Garwood’s intent was to conceal property to avoid paying taxes because one would not normally expect an animal control officer to be involved with tax collection matters. She also dismissed the state’s arguments that the Garwoods’ purchase of breeding animals in bulk was speculative as far as a way for them to conceal the individual sales of the dog operation.

While the Garwoods may not have been properly reporting and paying taxes, the evidence doesn’t prove they were intending not to pay or trying to thwart collection in any way, the judge determined.

“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 another act that would jeopardize the collection of taxes,” she wrote.

Citing an Indiana Supreme Court ruling from 2002 about jeopardy assessments, Judge Wentworth noted that those tax tools should be issued as part of the state’s “power of the purse” and not its “power of the sword” in punishing crimes.

“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 government services and conducting the business of the state,” Judge Wentworth wrote. “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 exigent circumstances required by Indiana Code 6-8.1-5-3 and 45 IAC 15-5-8.”

The case is remanded to the state revenue department with instructions to void the Garwoods’ jeopardy assessments. The state now has the option of asking the Indiana Supreme Court to consider the case.
 

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  • Correction
    Also, you refer to squalid conditions. The conditions at the farm were NOT squalid. The dogs had safe outdoor kennels, shade, igloo style shelters, water, food, bedding, there were pallets of food for the dogs and a refrigerator with immunizations to use on puppies. Please consider the actual facts of the case, not the media hype.
  • Correction
    You say in your article that the State did not have "a way to go after the Garwoods or other tax delinquents." That is not true. The State could have pursued this case like any other tax assessment case, sending an assessment, allowing for a hearing if there was an objection, etc. The jeopardy assessment procedure is certainly not the only way to pursue someone who has not paid their taxes.

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  1. All the lawyers involved in this don't add up to a hill of beans; mostly yes-men punching their tickets for future advancement. REMF types. Window dressing. Who in this mess was a real hero? the whistleblower that let the public know about the torture, whom the US sent to Jail. John Kyriakou. http://www.nytimes.com/2013/01/26/us/ex-officer-for-cia-is-sentenced-in-leak-case.html?_r=0 Now, considering that Torture is Illegal, considering that during Vietnam a soldier was court-martialed and imprisoned for waterboarding, why has the whistleblower gone to jail but none of the torturers have been held to account? It's amazing that Uncle Sam's sunk lower than Vietnam. But that's where we're at. An even more unjust and pointless war conducted in an even more bogus manner. this from npr: "On Jan. 21, 1968, The Washington Post ran a front-page photo of a U.S. soldier supervising the waterboarding of a captured North Vietnamese soldier. The caption said the technique induced "a flooding sense of suffocation and drowning, meant to make him talk." The picture led to an Army investigation and, two months later, the court martial of the soldier." Today, the US itself has become lawless.

  2. "Brain Damage" alright.... The lunatic is on the grass/ The lunatic is on the grass/ Remembering games and daisy chains and laughs/ Got to keep the loonies on the path.... The lunatic is in the hall/ The lunatics are in my hall/ The paper holds their folded faces to the floor/ And every day the paper boy brings more/ And if the dam breaks open many years too soon/ And if there is no room upon the hill/ And if your head explodes with dark forbodings too/ I'll see you on the dark side of the moon!!!

  3. It is amazing how selectively courts can read cases and how two very similar factpatterns can result in quite different renderings. I cited this very same argument in Brown v. Bowman, lost. I guess it is panel, panel, panel when one is on appeal. Sad thing is, I had Sykes. Same argument, she went the opposite. Her Rooker-Feldman jurisprudence is now decidedly unintelligible.

  4. November, 2014, I was charged with OWI/Endangering a person. I was not given a Breathalyzer test and the arresting officer did not believe that alcohol was in any way involved. I was self-overmedicated with prescription medications. I was taken to local hospital for blood draw to be sent to State Tox Lab. My attorney gave me a cookie-cutter plea which amounts to an ALCOHOL-related charge. Totally unacceptable!! HOW can I get my TOX report from the state lab???

  5. My mother got temporary guardianship of my children in 2012. my husband and I got divorced 2015 the judge ordered me to have full custody of all my children. Does this mean the temporary guardianship is over? I'm confused because my divorce papers say I have custody and he gets visits and i get to claim the kids every year on my taxes. So just wondered since I have in black and white that I have custody if I can go get my kids from my moms and not go to jail?

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