Opinion ID: 749421
Heading Depth: 2
Heading Rank: 1

Heading: Additions to Tax for Fraud and the Double Jeopardy Clause

Text: 8 Title 26 U.S.C. § 6653(b) allowed the IRS to increase Ward's tax because he engaged in fraud. Under the version of that statute that was effective for the years at issue, the IRS added to Ward's tax 50 percent of his underpayment plus 50 percent of the interest on that underpayment. Ward contends that the imposition of an addition to his tax for fraud is punishment. And, because he had already endured criminal prosecution and punishment for the same behavior, he argues that the tax addition violates the Double Jeopardy Clause. See United States v. Halper, 490 U.S. 435, 440, 109 S.Ct. 1892, 1897, 104 L.Ed.2d 487 (1989) (Double Jeopardy Clause protects against multiple punishments for same offense). Ward's argument fails because the addition to his tax was not punishment. 9 In Helvering v. Mitchell, 303 U.S. 391, 58 S.Ct. 630, 82 L.Ed. 917 (1938), the Supreme Court held that a 50% addition to tax for fraud did not violate the Double Jeopardy Clause because it was not punishment. The Court stated: 10 The remedial character of sanctions imposing additions to a tax has been made clear by this Court.... They are provided primarily as a safeguard for the protection of the revenue and to reimburse the government for the heavy expense of investigation and the loss resulting from the taxpayer's fraud. 11 Id. at 401, 58 S.Ct. at 634. Thus, Ward's argument fails under Mitchell, as the Tax Court concluded. 12 Ward, however, argues that the Supreme Court modified the Mitchell rule in some of its more recent decisions. See United States v. Halper, 490 U.S. 435, 109 S.Ct. 1892, 104 L.Ed.2d 487 (1989); Austin v. United States, 509 U.S. 602, 113 S.Ct. 2801, 125 L.Ed.2d 488 (1993); Department of Revenue v. Kurth Ranch, 511 U.S. 767, 114 S.Ct. 1937, 128 L.Ed.2d 767 (1994). Other circuits, however, and by implication our circuit, have rejected that argument. 13 In United States v. Alt, 83 F.3d 779, 781 (6th Cir.1996), the Sixth Circuit held that an addition to tax under section 6653(b) did not violate the Double Jeopardy Clause. The court relied on Mitchell, and concluded that a tax addition for fraud under section 6653(b) was not punishment. Id. The court noted that the Supreme Court's recent double jeopardy cases do not modify Mitchell: 14 Together, [Halper, Austin and Kurth Ranch ] clearly suggest that some civil tax additions can be punishment. However, the three cases address extraordinary circumstances where a civil penalty either (i) had no remedial purpose, or (ii) was several times greater than necessary to achieve a remedial purpose.... In fact, the flagship of the three, Halper, cites Mitchell as an example of a perfectly acceptable type of civil sanction. 15 Id. at 782 (citations omitted); accord Thomas v. Commissioner, 62 F.3d 97 (4th Cir.1995). 16 In Grimes v. Commissioner, 82 F.3d 286 (9th Cir.1996), this court clearly indicated that the imposition of fraud penalties under section 6653(b) is not punishment and that the Mitchell rule survives. There, we held that an addition to tax under section 6653(b) did not render the Tax Court proceeding quasi-criminal so that illegally seized evidence should be suppressed. Id. at 289. We said: 17 Grimes argues that the imposition of fraud penalties renders the proceeding quasi-criminal. Two recent Supreme Court cases [Kurth Ranch and Halper ] addressing the definition of punishment for the purposes of the Double Jeopardy Clause give this argument a superficial appeal. 18 Both of these decisions, however, cite with approval Helvering v. Mitchell, where the Court found the Tax Code's civil fraud penalties remedial in nature and not punitive for double jeopardy purposes. 19 Id. at 289-90 (citations omitted). 20 In the same vein, we held in Little v. Commissioner, 106 F.3d 1445 (9th Cir.1997), that the imposition of a tax addition under 26 U.S.C. § 6653(a) for negligence did not violate the Excessive Fines Clause of the Eighth Amendment. We stated: 21 The additions to tax ... are purely revenue raising because they serve only to deter noncompliance with the tax laws by imposing a financial risk on those who fail to do so. Moreover, in rejecting a contention that a 50% addition to tax was not a tax but a criminal penalty, the Supreme Court held that the 50% addition was remedial.... 22 Id. at 1454 (citing with approval Mitchell, 303 U.S. at 401, 58 S.Ct. at 634) (citations omitted). Thus, we conclude that Mitchell is alive and well in this circuit, as in others. We reject Ward's contrary argument.II. Jurisdiction to Review Jeopardy Assessments 23 The United States District Court normally has exclusive jurisdiction to review an IRS jeopardy assessment. 26 U.S.C. § 7429(b)(2)(A) (Supp.1997). The Tax Court has concurrent jurisdiction only if the IRS made the jeopardy assessment after the taxpayer filed a petition in Tax Court for a redetermination of his tax deficiency. Id. § 7429(b)(2)(B). Here, Ward filed his petition in Tax Court in October 1991, and the IRS made the jeopardy assessments in April and May 1991. The Tax Court therefore lacked jurisdiction to review the jeopardy assessments. See id.; accord Friko Corp. v. Commissioner, 26 F.3d 1139, 1140-41 (D.C.Cir.1994) This court lacks jurisdiction to decide an issue that was not the subject of the Tax Court proceeding or to grant relief that is beyond the powers of the Tax Court itself. Commissioner v. McCoy, 484 U.S. 3, 6, 108 S.Ct. 217, 218, 98 L.Ed.2d 2 (1987). Accordingly, we do not consider Ward's challenges to the jeopardy assessments.