and the first is numbers ten days forty one eighty nine and eleven dash fourteen sixty two birdmen v obvious of the governor here of the internal revenue noted states of america mr and perhaps some of that well looks like some of that may have been of to the vi all that or all of that so the question is yours use saying well there's a sort of damocles tend to be i says it's own to them but is the vi ever come after any of the appellant's we're told them that they owe this in any way it's a minor setting yes they have sent them actual let's say doesn't include a check with with their pay with their payment with your tax return get a notice a computer generated notice from the tax authority it says you will with certain amount and in addition because you have underpaid you failed to pay your records joint appendix two fifty one two fifty two three two fifty six thank you and what does it say  for example on page two fifty five this is the lack of a better term the the bill to mr hersh where it shows the amount that he reported on his income tax return and the amount that he reported as a credit on his income tax return but then there is a mathematical adjustment because that credit the money that was no is this i'm but is that the letter from the v i i to any of the appellant saying you  was money for two thousand and six you haven't paid it and you owe it to us now yes specifically on two fifty five on the bottom right hand side the amount you owe to mr hersh two point this informal agreement that they may never attempt to collect that is a correct that's that's what it looks like i would say that's the natural conclusion that one makes based on the sworn testimony of the current director  and the chief legal officer so if they never attempt to collect it how is this case right for a decision at this point in time while your honor just because the emergency never comes to collect it doesn't mean that statu mr hersh or mr berman is not occurring additional penalties for failure to pay additional interest it's my understanding that when you have a self assessment which is what you have when you have a ten forty one yourself report the government you know what is the time period they have within which to do that in ten years and of course is they haven't done that yet no they haven't attempted to do that yet you are not to my knowledge no all they've done is issue this bill and then sat back on the sidelines as the i r s and my clients are proceeding to duke it out so now tell me if i'm correct that normally if you're living outside the v a or you have a certain percentage of income in the v a and a certain percentage of income do you think is not vi related you're supposed to pay what you perceive you owe to the vi to the v i b e i r and what you perceive you owe to the islands and that the actual tax itself is computer nine thirty two b and typically for individuals you file form six eighty nine obviously now that leads to the the you know sort of the dumb question is why wasn't that done here why didn't you pay the eighty percent i think that was claimed to be owed to the vi to the b and the twenty percent to the government why would they all of it to the government i would say it was a simple mistake on behalf of c p a s that were particularly well versed in the clients need to send the money to the i r s so it's a matter professional negligence it's a certain stand i would say yeah exactly why can't your client get a full recovery through that avenue  even if it was once you've got damage i mean at this point they may claim that there's no damage even done because you don't know and haven't had to pay a dime yet to the beyond well i would say that the damages are continuing to accrue and if answered your question judge i would say that at a minimum a party has the obligation to mitigate those damages i can't go and reach any type of her freshened all malpractise against the c p a until i try to mitigate those damages and a half minute get in the first instance by trying to get them recoup the money from the iris or you just make the duplicate tax payment then file an action for refund and then you get the money back and then you hand a bill to the professionally negligent c p a for your transaction costs and getting your money that if you don't get your money back i guess that that's a possibility however that is that assumes one that my clients just haven't and additional two nine dollars plus back in interest and failure to pay penalties if they can just pay the virgin islands then at that point seek to get the money back from the iraqis and depending on what may or may not happen to the course of litigation with the i r s then at that point sometime down the road seek some type of recourse compensation back from the c p s who has demand been made on the negligent party to advance those funds to my knowledge no we have not made demands on the c p a s to advance that fun so it would be premature to do that right now right and that's my position we have to mitigate or damages and i would say that we need to get the money back from the i r s or the i r s they can cover the money over they can remain the money to the virgin islands or the virgin indications that's not going to happen with the ira i mean you know i guess maybe they're busy but i mean you have any inkling as to why they wouldn't do that eventually when your file visually gets to the top of the pile but they wouldn't  you know send the money over to the b i r well it's my it's my understanding that the reason that they're not sending money down to virgin islands is because the i r s contests that my clients were bona fide residents that their income was the source even the the hundred eighty three day residency requirement as required by the code by nine thirty seven and the regulations that the treasury department issued now was standing fact they spent more than one hundred eighty three days on st thomas r s still claims that mr bergman mr hersh are not residents and they're forcing us to litigate these core issues of version's taxation residency source effectively connected income waterfront and then i remembered that i forgot my wapa bill now it's up to me who have lived on st thomas and to judge a gomez who lives on st thomas into it at virgin islands jury that makes perfect sense you know your red hook is you know the french if you went to this it was southern florida and the judge there said send it back so the claim now is what well under judge gomez's view and his opinion he's still of the in the merits case there were there were you filed a motion to file a supplemental appendix to put into evidence  informal agreement between the i r s and the idea is that correct that is correct and you believe that the informal agreement is what i believe the informal agreement is this i believe the iris came down and said you were going to play ball for highlands and in order for you and your own play ball you're to let us do whatever ever we want and as a result we'll let you keep any money that you already got you're not going to have to refund a single dime but the  they'll do whatever they do and you just stay out of it now is and the fact that if the i r s determines that individual was not a bona fide resident their income was not source or that we connected in the virgin islands they never should have in the first place and they never should have paid tax but that so let's assume that agreement does exist how does that play into this case how does it harm your client i mean clients that they paid what a total of five point seven million dollars to the i r s correct and reportedly eighty percent of that's owed to the vi the vi hasn't been back to where we started the i haven't come back after you and the agreement is  the u s government let us go forward you stay out of this ok if the vi is staying out of this that's probably good you've paid in effect one hundred percent of the monies that you perceive were due in two thousand and six it's just that you paid them to someone that you're hoping will remit the fortune of it to the b i but maybe they have an agreement with the vi that the vi is not going to get any part of it because they're already getting to keep what they previously had from other taxpayers what is that of of interest to you well your i'll put it this way my clients through the e c program happy contract repeated questions about what cause of action that you have so any claim that you might have relating to contract or quasi contract arguments are those wait i would say no your honor and i say no because  and negative injunction what is that and you go well it's a cause of action and a remedy with that that can't be well i would submit your honor based on the limited information that we had because by definition  is not available to the public if i had no you're saying you have an agreement with the b i and somehow you want a you that's a contract but if you don't mention it in your complaint and in response to a number of questions by judge gomez you say it's a cause of action and a remedy which you can't be how are we to conclude other than you've waive those have pled and at the time i was not aware of what the improper dealings were i actually i knew there was something going on and i put that on page two of the complaint i actually quote improper dealings i i knew what was going on i heard it on the street say thomas but i couldn't i just can't plead that because what i heard from a friend of a friend you know i didn't have the goods so to speak but once i had the goods like i have now i can rationally or to you later but at that point  decision but i mean before you would move to amend i mean i perceive them or judge gomez was attempting to do was trying to clarify with you so that perhaps you could set the stage for a possible amendment but it looks like you didn't you didn't take that offer up or that opportunity up i would say the i want say that the timeline is judge gomez's opinion came out before i took the deposition i did the deposition about this time last year breach let's do breach of what and how are your clients harmed ok there is a contract between four points you see approved beneficiary under virgil's law with the virgin eyes government in order to provide it that in the end what gives you the right as a third party to try to enforce that informal agreement but we are not a third party i would say we are the intended beneficiaries and that's because  are you suggesting that some portion of the five point seven million you believe should come back to your clients big by virtue of a credit under the nine thirty four program or what do you think should be remitted it should corporations file and pay taxes for the virgin islands and they because they are residents of the virgin islands also are entitled to the ninety percent credit then you have mr urban and mr hurst who own those  need to retitle to the ninety percent credit the irises attacking the tires and archer but is there any amount do you believe that should come back to your clients as a credit against the five point seven million that they have was going as you so our can you make an unjust enrichment claims means that somebody has money in their pocket more than they should have and therefore they should have restitution to you for the monies that they have in their pocket that otherwise belong to you that party would be the v i would it not you that yes so what in is the vi doesn't have the money in his pocket how can you conceivably have an unjust enrichment plant but they do have the money in the pocket and they do have the money because the i r s has given them some portion of the five point seven million back to the saying are we talking here today about the five point seven million or is there additional monies that barclays and kings ridge put paid out that is also involved in this is that additional to the five point seven million yes it is however the of those two and do so how is that unjust enrichment because the agreement between the iraq and the virgin islands is stating that for the money that the virgin islands agrees with the iris is not sourced in or effectively connected with the virgin islands trade or business that money instead of being sent to the ira the set of being tests with the i r s that is being improperly capped by diversion islands in this case that the money that arc lee and tangs bridge paid directly to the virgin islands as for john c corporations so what's that got to do with unjust enrichment they pay too much of the virgin islands if if direst is correct that none of the taxpayer you're right well then i want to know you're right but if you're not right well then fine we're not right that you should have had the money in the first place in the iris what gets ripped iris you're like we were put in a a proverbial bits of between these two governments who seem to have some type of  back to our remit and the person that's caught in the middle are the taxpayers there and used to move to the virgin islands in order to take advantage of of this development program credits and the document you set on pages two fifty one to fifty two to fifty five to fifty six what's the date of that document it will thirtieth two thousand and eight and they've made no attempts since in the last three years and nine months to follow up on that that's at this point your honor no and why is that my understanding is that because of the lawsuits going on they haven't made any attempts to to collect the money but you know where the money is right maining you know that the monies were paid  nicer where you are than where we are that is true your honor there's a couple things that i think we need to kind take a step backward and understand i guess the process number one they've admitted that they're not bona fide residents of the u s virgin islands for the tax year two thousand and six at this point the cover over provision which they are attempting to say that the i r s should turn over monies to the virgin islands bureau of internal revenue and some portion of that should have come to the vi why don't you just settle up with the i r s what am i missing here what iris will decide that this really agrees that some point it does and then the trouble is they get website because they paid the wrong party a portion of the five point seven and you're saying at some point in time there's no be all kinds of penalties and assessments of interest because they pay their own party i mean that sounds like the classic catch twenty two doesn't it's a challenging  position you're on it to be and the the problem is at this point is that the obligations are from that of the taxpayer to pay us as the court said earlier and i am complete agreement with what the court said in that it appears that there could have  checks written we would even be here to start with the and we hope everybody understands that but there is an easy out and no one seems to want to take the easy out and i swear i can't understand why that wasn't done what law your honor i appreciate whatever whatever you want to saying and perhaps that is something that that could happen it hasn't happened but was i your honor i can't i can't answer that question other than to say it hasn't happened  take a step back in that what we're here for is a twenty six motion essentially there's been evidence presented to this court that was not considered by the the district court judge they filed supplemental appendix which we objected to we f motion to strike they had depositions after the fact in a completely different is there is i would just stop you for a minute i understand what you're saying is there anything stopping them from refiling with with maybe more specific allegations this lawsuit and that would be their choice i mean as a court also said which again i was surprised to see they could have amended their complaint during the time period on that the motion to dismiss was filed but nothing was done  we have a situation here where we have to since we look at the four corners of the document they have an alleged cause of action against the virgin islands government they owe us the money i appreciate everything that the court is saying at this point the problem that i have is we have all th after the fact evidence that wasn't considered by the district court by judge gomez and that's the problem your position is you want to win the case and forget solving the problem your honor i mean we  do have to apply facts the law you're quite correct and it will be six there's a standard that we plied of the documents but i think you can appreciate why the panel is is scratching its collective head as to why there's not some fairly ready solution at hand if people would just get together and talk about we can find you conference room in this building while you're all here if you like i or we just going to create make work for everybody and have this go on for the next three years i personally speaking for myself i don't understand why why don't we do that why any of us in this room would do that i completely appreciate and respect what the court is saying unfortunately right now for what we have but normally what happens under the nine thirty four program you would give to the taxpayer a determination of how much you think is owed to the vi or is v i sourced excuse me and how much is not that's normally done right when you normally do that two thousand and seven for the two thousand and six axis i mean they are in order for them to pay the two thousand and six taxes as they should when you make that determination in most cases you're right i don't think there's a particular time period in which the for that how do they know how much to pay the vi how much they the government has in effect if they don't know how much to pay that i guess they could make it their own determination and see if that flies b the determination as to what is owed hasn't been challenged by the government of the virgin islands in that we've accepted their their assessment and nobody in the virgin islands has challenge that was official you just haven't done it yet officially in what sense is that going to be easy i can see that is an issue for all time that the dollar amount is good nobody has to worry about that well that's something that is it appears from the documentation that the virgin islands agrees that there are two point seven million collectively is owed by both the hearses and the verdant and that hasn't been that has been challenge at any point and that's the real point is is not really a whole lot of communication so they don't they don't really realise that that's the  final mout maybe they're waiting for the shoe to drop it seems as if they're waiting for something formal to tell him that what you know your honour's that that's not correct because there was a and i notice issued where there was a recalculation a mathematical recalculation that government if i'm a taxpayer and i'm a participant in the nine thirty four program and i also have been coming out of states in order to know what i owe you the b i don't i need to have a agreed as to the source determination that they've come up with we're not challenging what they owe to us as virgin islands as income derived from virgin islands businesses ok and you know where the money is if you made any request of the government for that your honor i don't have any formal documentation you have any you know of any informal agreement with the government as to if you made any informal request of the government for that your honor not not to my a year honors its minder standing that there's more to the equation than that with regard to the internal revenue as to what the internal revenue is holding that you think belongs to you have you made in a formal request of the government to give that money to  your honor at this point i do believe that there has not been a formal request informal requesting informal requests that that is my understanding my understanding in addition to that is that there are other issues that the internal revenue service has with the why i'm getting more and more loss as we come in here you'd say that you don't believe that there's been an informal request made by the yard to the government to give you back the two point seven million that you think is owed to you based on the source of germination that you agree with that the other parties fall when they file their tax returns correct that's correct and do you anticipate that ever happening in our lifetimes i would hope so and if to be very candid with the court  i think that this is a probably a real good case for mediation and that's something that i think that we need to consider in this matter usually what happens when cases come here the it's a request to the parties to mediate was that quest made no your honor not not at this juncture  so it sounds like the reason if i had to take a guess that your opponent posing council would say the reason hasn't been a formal request made or informal requests made or any requests made is because there's this informal agreement between the i r s and the vi just stays out of all this stuff completely period that's it is that right that is that the allegations being made that that's the allegation being made but but again your honor we're going and again i don't mean to be disrespectful but i'm about to say we keep going beyond the record and i appreciate everything between a rock and a hard place and that they need to find a way out they've paid by the mistake they're saying of their accountants they paid the right amount to the to the wrong party to the i r s deserves sounds like three million of the five point seven million you deserve two point seven million and they've given it to the government and they are now saying and then they get this letter from you saying you owe us this money you haven't paid us and they said yes we did we paid we paid the government have them get to give it back to you that rather not pay two point seven million dollars plus interest and penalties to you and then be out i mean you can understand where they are if you were in their position it's just dollars and cents and that's a lot of money for an individual i understand that your honor but they did have was granted we were there was no discovery nothing had occurred we were dealing with the four corners of the docket which is is there cause of action against the government the virgin islands in the answer's no and that's really what the case is about so you've that's not my reading at all my reading is they want your declaration that the income question is derived from the vi they want to source determination but it sounds like what you're saying here on the record at least twice is that you accept their divvying up and therefore you accept their source determination correct that that's what the documents that's what the documents suggest that have been transmitted to the  court my name is jennifer rubin and i represent the united states in this case and before i turn to the mandamus issue i think i can clarify the questions that you're asking and the short answer is the i millions of dollars so i'm so good mike just cut to the chase are you saying that yes they pay according to their calculate their calculations they overpaid but in reality they owe us that money and probably some more hearses asked for iris appeals to take a look at the questions and to take consideration of things so you know right now my hands are tied anyway but certainly while it is the case of so if you were mid the money you would even be deeper in the hole is what you're saying that's right and so while it's certainly knowledge that both the virgin islands and burma's and hearses say that we have money that belongs to the virgin islands we don't agree with that so that  past looking at the big picture is that there has been some concern by the federal government i was involved in one of the other cases where people are claiming that they are have income source in the v i i when in fact it does not appear that that's i mentioned and you're saying it is the basic claim of the i r s that the amounts that they believe are sourced in the be i are in fact not sourced in the be that's right the deal with real estate transactions in the united states and others matters on hold while in the tax court they are there is a motion to dismiss pending in the district court of the virgin islands as to the deficiency proceeding brought there again the to force you know to well there's several reasons why it was the first thing is as easy as the taxpayers even acknowledge it would implicitly repeal fourteen zero two a and there's no indication that congress wanted to do that and that's inconsistent with many cases including ruckelshaus and regional rail the organization cases but there's a reading here that that reads all of the language of the the statute that takes all the into account leaves nothing and is completely harmonious the section four fourteen of ca which is that the exclusive jurisdiction deals with the sort of properly quote in the first and islands and quote by doing this reading it is consistent with lane language it's it goes with the plain language and it manages to avoid either rendering the in the virgin islands language perfectly us or implicitly repealing section fourteen zero two a we also know that this is over all criminal and civil proceedings in the virgin islands with respect to the income tax laws applicable to the virgin islands really is a demarcation between the territorial court and the district court is that correct absolutely and nothing else and nothing else and you know that that's very consistent with the language says consistent while we believe that the the district courts cracked up to look at legislative history given the plain language legislative history also supports that but the concern was that given what was going on in hundred four where the virgin islands legislature is going to be given the ability to the vest the district or the virgin islands of jurisdiction over local matters and given this court's decision and dudley concluding that the mayor coat territorial income tax was a local tax that was being heard in the district for the first island under local legislation there was concern that this this that the mayor koch cases would end up being heard only in the territorial what we know is that the virgin islands is taking the position in these residency cases that it should get to keep or get money that they they say with was from these residents worst obviously the i r s has taken different position saying that these people were not eligible for federal tax exemptions in some cases or were trying to pay taxes to another body that should have gone to the ira there is a definite dispute here a legal dispute with the usual dispute comes up where they pay the i don't pay you and you say hey you should've paid us here they paid you they claim they paid you more than you were owed you're saying nope they paid you less than you were owed and we're doing this ring around the rosey you know five years later  now two thousand and twelve for taxes that were paid in two thousand and seven supposedly for two thousand and six right you know but i would say first as this because these are complex cases you know and they are you know you have a lot of things look at and you know one of the jobs act is many things look at me it was time to our problem here sitting here is yes it's complex now but maybe it shouldn't have been so complex in being resolved long ago and far away they pay five point seven million and you're there's v i said some portion of that goes to us you say no in fact it all goes to us and because normally in refund cases you have to pay one hundred percent of the taxes road before you can get into district court instead of the tax court and know that's how it works either you challenge your deficiency proceeding knows a deficiency in the tax court or you pay everything and you get a refund claim because of the way all of this went down in the timing because the refund action was filed before the news that deficiency came out in the procedures if it's strange and i think arguably what would really happen in this case is that you know be dismissed because of the full payment role under flora united states versus florida but you know if the court were to and not i also not entirely certain how it worked with the venue problem we're relying on one set of numbers or two could be completely off and we were asked rule on that wouldn't make sense to let the administrative in any of the tax process take it's it's it's it's normal course we do tend to think that the  deficiency process is where all of this should be decided i'm just not sure how that operates in connection with this case because that this case is currently about is the procedural problem the case having been brought where it was brought and when it was brought you know right now we're dealing with where it was brought that this mechanisms to get the issue of transfer of venue up to this court one of which was the mandamus action one of which was also a certificate of appeal ability for in a walk tory appeal that was filed after the case the transfer the southern district florida to florida says i can't decide that i need to transfer back to limited purpose your point is that other courts with respect to the mandamus appeal courts other than the v i i can hear this case is that correct that's right ok let me go back to the the case on the merits for a second is that is there an informal agreement between the i r s and if the i b i are with respect to the payment  effect i don't know of any mechanism by which the i r s can force the virgin islands to pay over funds to the taxpayer nor do i know of any mechanism by which i miss the informal agreement as i understand it that's alleged is that the i i will step aside and allow matters to be determined or the federal government will in effect take over and decide how much taxes are owed to the federal government or to fighting us on as well the tax but there's at least eight but it sounds like this case that you know it sounds like you're co counsel or whatever misstep or is coming up i get the impression she perceives that she's  moment that you think that more money is wrote to you than it currently been paid but the first thing you have to do before you even get to that is don't you need a source determination as to how much of it's be i sourced and how much of it's not be i sourced i would say that the i what the virgin islands has on that they don't have to accept it it would not be binding on the i r s in any way it should never be a determination as a predicate matter for getting who does it as to how much of this is vi sourced and how much of it is non b i sourced what do you can so that one can at least begin to determine ok this is the of whatever this amount x is x percent of this is vi x percent of this is the government and then afterwards you just figure out what x is you're saying that x is not five point seven million it should be more than that right and there has been such a source terminations made by the million this i'm taking from the complaint that was filed by my opponent in the district court i'm talking about percentages roughly it doesn't actually have a percentage but i believe  i don't have the percentage in front of me but i know throughout the complaint there's references to sources terminations having been made in the notice of deficiency so there actually has been that source determination made by the i r s the is the same source germination that's been agreed to by the vi not that i know of you know the virgin islands has certainly taken a more aggressive position on virgin island source than the i r s is to believe that but i don't know as i said i don't know of any food makes the determination as to source initially challenging it you are we are and you've done that formally we have and there are deficiency proceed and that's what's holding up being being part of what's being litigated in the tax court that is exactly what's being litigated in the tax force just stayed while just your core provide an opportunity for the united states commissioner internal revenue to voluntarily intervene or be brought in by one or both of the current parties if a commissioner joins or is joined all interested parties can have the coffee to the fourth as in mchenry just yesterday i argued with miss ruben before the fourth circuit court of appeal on an issue very similar to appleton the judge sat on the panel we're going to have numerous take whatever happened the task or and if we don't like it will go up to the to the eleventh doesn't matter with the third circuit says they've already expressed that what they've done in coffee what they're doing in mchenry what they're doing and the intervention cases before the eleventh circuit we're going to have a scattershot approach on core issues of virgina taxation and by implication vergence budgetary and fiscal matters the power to tax the power to destroy for the taxpayers but for a government the power honor the d opinion probably fairly and did not talk about sixteen fourteen be sixteen fourteen be the only case i've seen that talks about six hundred fourteen b is the walker versus a version as it came out of building and twenty two fifty four but they did not answer questions one is it inappropriate to to apply title twenty eight we submit that is that you have to look to the legislative history of where it's inappropriate and i'm going to quote here from the legislative history that was attached to the mandamus as exhibit ten on page two three seven nine zero i'm looking at through three seven eight nine the statement of senator weicker this provision is basic consideration that since the income tax laws after all to the virgin islands of the provisions of internal revenue code uniformity of interpretation requires the questions involving that trip they should these laws be litigated only in the federal courts i would submit all territorial courts it is intended that in the virgin islands the only exception to this extension will be those provisions which are in conflict i mean with specific legislation a political to the virgin discussing the it sets the bounds of jurisdictions for territorial courts right we're going to levy it didn't and sixteen eleven be addressed in conjunction with six hundred twelve b and it addressed whether they're basically set up the eighty eight eighty four inactions or revisions to revise it sixteen eleven b basically has the same words a sixteenth well they have right no i don't believe so the sixteenth when the virgin islands exclusive jurisdiction of the same words that is correct however i would take that in and that would seem to mean exclusive of the territorial court's not exclusive of all other federal courts whatever it seems like from from my perspective what's happening here is that on the merits there's a battle going on that we've spent a lot of time on and it seems like what's happening is the vi i said have a muzzle on the vi in effect is quietly in your corner i would just understand but they're not saying much and i just rolling over and playing that and that the there really is a tension between the vi and the government but that aside the question is who decides it and under the normal venue statute it can be decided in the southern florida district court normally yes and you're saying that there's a special statute and i'm saying that ryle seems to indicate that what we really should do is say no you don't read the statute as you do you just send this case and let the east is not necessarily have to be decided in the selfish police office point of view it's a great way to take fifteen steps back in punjab you're the third circuit