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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. From back in the day before secularism got a stranglehold on Hoosier jurists comes this great excerpt via Indiana federal court judge Allan Sharp, dedicated to those many Indiana government attorneys (with whom I have dealt) who count the law as a mere tool, an optional tool that is not to be used when political correctness compels a more acceptable result than merely following the path that the law directs: ALLEN SHARP, District Judge. I. In a scene following a visit by Henry VIII to the home of Sir Thomas More, playwriter Robert Bolt puts the following words into the mouths of his characters: Margaret: Father, that man's bad. MORE: There is no law against that. ROPER: There is! God's law! MORE: Then God can arrest him. ROPER: Sophistication upon sophistication! MORE: No, sheer simplicity. The law, Roper, the law. I know what's legal not what's right. And I'll stick to what's legal. ROPER: Then you set man's law above God's! MORE: No, far below; but let me draw your attention to a fact I'm not God. The currents and eddies of right and wrong, which you find such plain sailing, I can't navigate. I'm no voyager. But in the thickets of law, oh, there I'm a forester. I doubt if there's a man alive who could follow me there, thank God... ALICE: (Exasperated, pointing after Rich) While you talk, he's gone! MORE: And go he should, if he was the Devil himself, until he broke the law! ROPER: So now you'd give the Devil benefit of law! MORE: Yes. What would you do? Cut a great road through the law to get after the Devil? ROPER: I'd cut down every law in England to do that! MORE: (Roused and excited) Oh? (Advances on Roper) And when the last law was down, and the Devil turned round on you where would you hide, Roper, the laws being flat? (He leaves *1257 him) This country's planted thick with laws from coast to coast man's laws, not God's and if you cut them down and you're just the man to do it d'you really think you would stand upright in the winds that would blow then? (Quietly) Yes, I'd give the Devil benefit of law, for my own safety's sake. ROPER: I have long suspected this; this is the golden calf; the law's your god. MORE: (Wearily) Oh, Roper, you're a fool, God's my god... (Rather bitterly) But I find him rather too (Very bitterly) subtle... I don't know where he is nor what he wants. ROPER: My God wants service, to the end and unremitting; nothing else! MORE: (Dryly) Are you sure that's God! He sounds like Moloch. But indeed it may be God And whoever hunts for me, Roper, God or Devil, will find me hiding in the thickets of the law! And I'll hide my daughter with me! Not hoist her up the mainmast of your seagoing principles! They put about too nimbly! (Exit More. They all look after him). Pgs. 65-67, A MAN FOR ALL SEASONS A Play in Two Acts, Robert Bolt, Random House, New York, 1960. Linley E. Pearson, Atty. Gen. of Indiana, Indianapolis, for defendants. Childs v. Duckworth, 509 F. Supp. 1254, 1256 (N.D. Ind. 1981) aff'd, 705 F.2d 915 (7th Cir. 1983)

  2. "Meanwhile small- and mid-size firms are getting squeezed and likely will not survive unless they become a boutique firm." I've been a business attorney in small, and now mid-size firm for over 30 years, and for over 30 years legal consultants have been preaching this exact same mantra of impending doom for small and mid-sized firms -- verbatim. This claim apparently helps them gin up merger opportunities from smaller firms who become convinced that they need to become larger overnight. The claim that large corporations are interested in cost-saving and efficiency has likewise been preached for decades, and is likewise bunk. If large corporations had any real interest in saving money they wouldn't use large law firms whose rates are substantially higher than those of high-quality mid-sized firms.

  3. The family is the foundation of all human government. That is the Grand Design. Modern governments throw off this Design and make bureaucratic war against the family, as does Hollywood and cultural elitists such as third wave feminists. Since WWII we have been on a ship of fools that way, with both the elite and government and their social engineering hacks relentlessly attacking the very foundation of social order. And their success? See it in the streets of Fergusson, on the food stamp doles (mostly broken families)and in the above article. Reject the Grand Design for true social function, enter the Glorious State to manage social dysfunction. Our Brave New World will be a prison camp, and we will welcome it as the only way to manage given the anarchy without it.

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  5. Some in the Hoosier legal elite consider this prayer recommended by the AG seditious, not to mention the Saint who pledged loyalty to God over King and went to the axe for so doing: "Thomas More, counselor of law and statesman of integrity, merry martyr and most human of saints: Pray that, for the glory of God and in the pursuit of His justice, I may be trustworthy with confidences, keen in study, accurate in analysis, correct in conclusion, able in argument, loyal to clients, honest with all, courteous to adversaries, ever attentive to conscience. Sit with me at my desk and listen with me to my clients' tales. Read with me in my library and stand always beside me so that today I shall not, to win a point, lose my soul. Pray that my family may find in me what yours found in you: friendship and courage, cheerfulness and charity, diligence in duties, counsel in adversity, patience in pain—their good servant, and God's first. Amen."

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