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High Court Asked to Review Constitutional Challenges in FBAR Case

JUL. 5, 2019

Donald Dewees v. United States

DATED JUL. 5, 2019
DOCUMENT ATTRIBUTES

Donald Dewees v. United States

DONALD DEWEES,
Petitioner,
v.
UNITED STATES OF AMERICA,
Respondent.

IN THE
Supreme Court of the United States

On Petition for a Writ of Certiorari to the United States Court of Appeals for the District of Columbia Circuit

PETITION FOR A WRIT OF CERTIORARI

Mark A. Feigenbaum
Counsel of Record
1137 Centre Street, Suite 201
Thornhill, ON Canada L4J 3M6
(905) 695-1269
mark@feigenbaumlaw.com

Attorney for Petitioner

QUESTIONS PRESENTED

The Convention between Canada and the United States of America with Respect to Taxes on Income and Capital (“the Convention”) allows no meaningful review prior to the assessment and collection of a non-resident U.S. citizen's tax liability. The Petitioner Donald Dewees, a Canadian resident, was forced to pay his contested U.S. tax debt due to Canadian withholding and collection activity pursuant to Article 26A of the Convention. Also, while the D.C. Circuit Court below acknowledged that Dewees has standing to claim an equal protection violation, it upheld the IRS' refusal to allow him enter its Streamlined Filing Compliance Procedures (SFCP). Lack of access to the SFCP arbitrarily cost Dewees $120,000 in assessed maximum tax penalties for late filings of Form 5471, even where the IRS admitted Dewees' owed no tax.

Therefore, the Questions Presented are:

1. Did the lack of a meaningful review of the assessment and collection of a tax under the Convention violate Dewees' right to due process?

2. Did the IRS' arbitrary refusal to allow Dewees' to enter the SFCP violate his equal protection rights, where other non-resident taxpayers allowed into the program avoid late-filing penalties?

3. Were the civil fines assessed and collected against Dewees for late filings of Form 5471 excessive under the Eighth Amendment, especially where the IRS acknowledged Dewees owed no tax?

PARTIES TO THIS PROCEEDING

Plaintiff-Petitioner: Donald Dewees

Defendant-Respondent: United States


TABLE OF CONTENTS

QUESTIONS PRESENTED

PARTIES TO THIS PROCEEDING

TABLE OF CONTENTS

TABLE OF APPENDICES

TABLE OF AUTHORITIES

CITATION TO OFFICIAL REPORTS OF OPINIONS BELOW

STATEMENT OF BASIS FOR JURISDICTION

CONSTITUTIONAL AND STATUTORY PROVISIONS INVOLVED

STATEMENT OF THE CASE

A. Basis for Federal Jurisdiction

B. Statement of Facts

REASONS FOR GRANTING THE PETITION

A. No Court Has Decided Whether a United States Tax Treaty with a Foreign Nation Such as the Convention Satisfies a Taxpayer Citizen's Right to Procedural Due Process as to the Assessment and Collection of a Tax or Penalty, Where No Meaningful Review is Allowed to the Taxpayer Prior to Collection and Enforcement

B. In Accordance With Equal Protection Rights, the IRS May Not Deny a Citizen Taxpayer the Right to Enter the SFCP Who Was Not a Participant in the OVDP at the Time of SFCP's Creation, Where Similarly Situated Taxpayers With Cases Arising After the SFCP's Origin Face No Such Barrier

C. While the Supreme Court Has Held that The Excessive Fines Clause May Apply to Civil Penalties or Fines with a Partly Punitive Purpose, the Lower Courts Have Wrongly Construed This Precedent to Not Apply to Civil Fines Under 26 U.S.C. § 6038 and Other Tax Statutes Imposing Similar Penalties

CONCLUSION

TABLE OF APPENDICES

APPENDIX A — JUDGMENT OF THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT, FILED APRIL 9, 2019

APPENDIX B — ORDER AND MEMORANDUM OPINION OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA, FILED AUGUST 8, 2017

TABLE OF CITED AUTHORITIES

CASES

Adarand Constructors, Inc. v. Pena, 515 U.S. 200 (1995)

Allegheny Pittsburgh Coal Co. v. County Commission of Webster County, W. Va., 488U.S.336 (1989)

Armour v. City of Indianapolis, 566 U.S. 673 (2012)

Austin v. United States, 509 U.S. 602 (1993)

Bell v. Burson, 402 U.S. 535 (1971)

Board of Regents v. Roth, 408 U.S. 564 (1972)

Bob Jones University v. Simon, 416 U.S. 725 (1974)

Browning-Ferris Industries of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S. 257 (1989)

Commissioner v. Shapiro, 424 U.S. 614 (1976)

Dewees v. United States, 272 F. Supp. 3d 96 (D.D.C. 2017)

Dewees v. United States, 767 Fed. Appx. 4 (D.C. Cir. 2019)

Hillsborough Township, Somerset County, N.J., v. Cromwell, 326 U.S. 620 (1946)

Logan v. Zimmerman Brush Co.,  455 U.S. 4229 Mathews v. Eldridge,  424 U.S. 319 (1976)

Maze v. IRS, 206 F. Supp. 3d 1 (D.D.C. 2016), aff'd, 862 F.3d 1087 (D.C. Cir. 2017)

McDonald v. Chicago, 561 U.S. 742, 130 S. Ct. 3020, 177 L. Ed. 2d 894 (2010)

Montana National Bank of Billings v. Yellowstone County, Montana, 276 U.S. 499 (1928)

Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950)

Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1 (2000)

Sibbach v. Wilson & Co., 312 U.S.1 (1941)

Timbs v. Indiana,  __ U.S. __, 139 S. Ct. 682 (2019)

United States v. Bajakajian, 524 U.S. 321 (1998)

United States v. Ovalle, 136 F.3d. 1092 (6th Cir. 1988)

Z Street, Inc. v. Koskinen, 44 F. Supp. 3d 48 (D. D.C. 2014)

STATUTES AND OTHER AUTHORITIES

U.S. Const., amend. V

U.S. Const., amend. VIII

26 U.S.C.§ 6038

28 U.S.C.§ 1254(1)

28 U.S.C. § 1346(a)

Fed. Civ. R. 12(b)(6)

Taxpayer Advocacy Service — “Fiscal Year 2017 Objectives Report to Congress,” Vol. One

The Canada-United States Tax Convention, Article XXVI A

Matthew A. Melone, Penalties for the Failure to Report Foreign Financial Accounts and the Excessive Fines Clause of the Eighth Amendment, 22 Geo. Mason L. Rev. 337 (2015)


CITATION TO OFFICIAL REPORTS OF OPINIONS BELOW

The opinion of the United States Court of Appeals for the District of Columbia Circuit is reported in Dewees v. United States, 767 Fed. Appx. 4 (D.C. Cir. 2019). The opinion of the United States District Court for the District of Columbia is reported in Dewees v. United States, 272 F.Supp.3d 96 (D. D.C. 2017).

STATEMENT OF BASIS FOR JURISDICTION

The D.C. Circuit entered judgment on April 9, 2019 and affirmed the order of the District Court granting the United States R. 12(b)(6) motion against Dewees. This Court has jurisdiction to review this Petition for Certiorari pursuant to 28 U.S.C. § 1254(1).

CONSTITUTIONAL AND STATUTORY PROVISIONS INVOLVED

1. Fifth Amendment:

 No person shall be . . . deprived of life, liberty, or property, without due process of law.

2. Eighth Amendment:

Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.

3. The Canada-United States Tax Convention, Article XXVI A (See Appendix to Petition).

STATEMENT OF THE CASE

A. Basis for Federal Jurisdiction

Dewees brought an action in the District Court pursuant to 28 U.S.C. § 1346(a) for a refund of the tax penalties assessed and collected under the Convention for his late filings of Form 5471. 28 U.S.C. § 1346(a) gives the District Court jurisdiction in “[a]ny civil action against the United States for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected under the internal-revenue laws.”

B. Statement of Facts

Dewees is a United States citizen born in Los Angeles, California, and he moved to Canada in 1971 for work reasons and has remained there as a resident since. Dewees became aware of potential penalties in relation to not filing U.S. tax returns as a non-resident American citizen, so he immediately sought the assistance of a U.S. tax specialist, who advised Dewees to join the then applicable 2009 Offshore Voluntary Disclosure Program (OVDP).

Dewees' OVDP submission was completed and sent to the IRS on October 14, 2009. At the same time, Mr. Dewees sent his U.S. Forms 1040, 90-22.1, and 5471 to the IRS for the tax years 2003 through 2008.

On November 23, 2009, the IRS notified Mr. Dewees that he had been preliminarily accepted into the OVDP. After he sent in all of the required information, on October 28, 2010 the IRS assessed penalties in the amount of $252,480 against Dewees, all of which related to past non-compliance with filing an annual Report of Foreign Bank and Financial Accounts (FBAR). The assessed penalties were reduced to $185,862, as the IRS had double counted some accounts.

On January 13, 2011 the IRS notified Dewees that he was at risk of being terminated from the OVDP for failure to pay the assessed penalty, and on

June 16, 2011 Dewees confirmed his withdrawal from the OVDP because of the excessive amounts of penalties assessed, at which time the IRS removed the penalties from his account.

After Dewees' withdrawal from the OVDP, the IRS assessed new penalties against him in the amount of $120,000 for the late filings of Form 5471, an information return concerning a non-resident U.S. citizen's ownership of and financial information about a foreign corporation. Dewees requested an abatement of these penalties for “reasonable cause” on September 27, 2011 based on an absence of willful noncompliance and a lack of any further taxes owed. Instead, the IRS assessed an additional $10,000 penalty, $5,000 per year for 2007 and 2008.

Dewees paid this additional $10,000, but the IRS rejected Dewees' request for abatement of civil penalties on February 25, 2014 without elaboration. Six months later, the IRS Appeals Office held that Dewees had failed to show reasonable cause for his failure to file Form 5471, again without elaboration. The IRS did not issue a notice of deficiency for the penalty assessment, so the U.S. Tax Court had no jurisdiction to hear any appeal of the penalty assessment, and Dewees had no avenue for a meaningful appeal of the assessed penalty.

After the IRS had rejected Dewees' appeal, it first introduced the SFCP to encourage taxpayers to voluntarily disclose offshore assets more readily. Meanwhile, in May 2015, the Canadian Revenue Agency (the “CRA”) notified Dewees that it was holding his Canadian tax refund in abeyance due to his outstanding $120,000 debt to the IRS, under Article XXVI(A) of the Convention. Dewees promptly sent the Canadian Revenue Agency a check for $134,116.34, representing the $120,000 penalty assessed, plus interest. In September 2015 he filed his claim in the District Court seeking a refund of that amount, as well as a declaration that the relevant provisions of the Convention are unconstitutional.

In granting the United States' R. 12(b)(6) motion to dismiss, the District Court held that Dewees failed to state a claim for relief on his claims regarding excessive fines and due process. 272 F.Supp.3d at 100-02.1 With respect to the equal protection claim, the District Court held that Dewees did not have standing because he had not applied to enter the SFCP, although the IRS admits that under existing rules he was ineligible for entry because he had left the OVDP previously. Id. at 102.

On appeal, the D.C. Circuit affirmed the District Court's denial of Dewees' due process claim, 767 Fed. Appx. at 7, but the D.C. Circuit reversed the lower court on the standing issue, holding that Dewees' application to enter the SFCP would have been futile under IRS rules. Id. at 7-8. Nonetheless, the D.C. Circuit affirmed the dismissal of Dewees' equal protection claims on the grounds that the restriction on Dewees' participation in the SFCP had a rational relationship to a legitimate government purpose. Id. at 8.

REASONS FOR GRANTING THE PETITION

A. No Court Has Decided Whether a United States Tax Treaty with a Foreign Nation Such as the Convention Satisfies a Taxpayer Citizen's Right to Procedural Due Process as to the Assessment and Collection of a Tax or Penalty, Where No Meaningful Review is Allowed to the Taxpayer Prior to Collection and Enforcement.

The IRS afforded perfunctory administrative review concerning Dewees' appeal from the assessment and collection of the civil penalties against him for late filings of Form 5471. Under the pertinent provisions of Article XXVI A of the Convention, Dewees had no right to a meaningful review of the procedural and substantive propriety of the penalties assessed prior to Canada's withholding of his tax refund:

3. A revenue claim of the applicant State that has been finally determined may be accepted for collection by the competent authority of the requested State and, subject to the provisions of paragraph 7, if accepted shall be collected by the requested State as though such revenue claim were the requested State's own revenue claim finally determined in accordance with the laws applicable to the collection of the requested State's own taxes.

4. Where an application for collection of a revenue claim in respect of a taxpayer is accepted

(a) by the United States, the revenue claim shall be treated by the United States as an assessment under United States laws against the taxpayer as of the time the application is received; and

(b) by Canada, the revenue claim shall be treated by Canada as an amount payable under the Income Tax Act, the collection of which is not subject to any restriction.

5. Nothing in this Article shall be construed as creating or providing any rights of administrative or judicial review of the applicant State's finally determined revenue claim by the requested State, based on any such rights that may be available under the laws of either Contracting State. If, at any time pending execution of a request for assistance under this Article, the applicant State loses the right under its internal law to collect the revenue claim, the competent authority of the applicant State shall promptly withdraw the request for assistance in collection.

(Emphasis added).

The IRS and the lower courts rely upon the post-payment administrative appeals afforded Dewees through the IRS as satisfying any due process requirements. See 767 Fed. Appx. at 7. The IRS Appeals Office gave no written, material explanation for the denial of Dewees' appeals based on an alleged lack of “reasonable cause.” The District Court concluded that the right to sue for a post-payment refund under 28 U.S.C. § 1346(a) alone is sufficient due process. See 272 F.Supp.3d at 101-02.

Meanwhile, the Canadian authorities seized Dewees' assets while he was awaiting the opportunity to sue for a refund after the rubber-stamp IRS appeal process was completed, with no meaningful hearing or deliberation on the part of the Service on the merits of his claim.

“Many controversies have raged about the cryptic and abstract words of the Due Process Clause but there can be no doubt that at a minimum they require that deprivation of life, liberty or property by adjudication be preceded by notice and opportunity for hearing appropriate to the nature of the case.” Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306,313 (1950) (emphasis added)

Due process is flexible and calls for such procedural protections as the particular situation demands. Accordingly, resolution of the issue whether the administrative procedures provided here are constitutionally sufficient requires analysis of the governmental and private interests that are affected. More precisely, our prior decisions indicate that identification of the specific dictates of due process generally requires consideration of three distinct factors: First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.

Mathews v. Eldridge, 424 U.S. 319, 334-35 (1976) (citations omitted).

This Court has repeatedly held that due process ordinarily requires a hearing and a consideration of the merits, something that the Convention did not afford Dewees prior to the CRA's confiscation of his property:

The Due Process Clause grants the aggrieved party the opportunity to present his case and have its merits fairly judged. Thus it has become a truism that some form of hearing is required before the owner is finally deprived of a protected property interest. And that is why the Court has stressed that, when a statutory scheme makes liability an important factor in the State's determination, the State may not, consistent with due process, eliminate consideration of that factor in its prior hearing. To put it as plainly as possible, the State may not finally destroy a property interest without first giving the putative owner an opportunity to present his claim of entitlement.

Logan v. Zimmerman Brush Co., 455 U.S. 422, 433-34 (emphasis added) (citing Board of Regents v. Roth, 408 U.S. 564, 570–571, n.8 (1972); Bell v. Burson, 402 U.S. 535, 541 (1971).

Here, the availability of a refund suit does not satisfy the violation of Dewees' due process rights when the Convention expressly allows the deprivation of his property by the Canadian government to collect U.S. taxes without any hearing or other proceeding on the merits. This Court's holding in Bob Jones University v. Simon, 416 U.S. 725 (1974), relied upon below, does not address Dewees' claim about the unconstitutionality of the process under the Convention, rather than a due process claim about the amount of the tax subject to the Anti-Injunction Act. Cf. Z Street, Inc. v. Koskinen, 44 F.Supp.3d 48, 67-68 (D. D.C. 2014) (non-profit corporation's core contention was about constitutionality of process that IRS employed in evaluating § 501(c)(3) applications, rather than tax liability, and suit was not even tangentially related to any refund).

Furthermore, “where irreparable injury may result from a deprivation of property pending final adjudication of the rights of the parties, the Due Process Clause requires that the party whose property is taken be given an opportunity for some kind of predeprivation or prompt post-deprivation hearing at which some showing of the probable validity of the deprivation must be made.” Commissioner v. Shapiro, 424 U.S. 614, 629 (1976).

B. In Accordance With Equal Protection Rights, the IRS May Not Deny a Citizen Taxpayer the Right to Enter the SFCP Who Was Not a Participant in the OVDP at the Time of SFCP's Creation, Where Similarly Situated Taxpayers With Cases Arising After the SFCP's Origin Face No Such Barrier.

This case presents a matter of substantial importance under the Fifth Amendment as it pertains to the construction and enforcement of the Convention in light of a nonresident-U.S. citizen taxpayer's right to equal protection.

The Fifth Amendment provides that “No person shall . . . be deprived of life, liberty, or property, without due process of law . . .” The Due Process Clause of the Fifth Amendment includes a guarantee of equal protection equivalent to that expressly provided for under the Equal Protection Clause of the Fourteenth Amendment. “An equal protection claim against the federal government is analyzed under the Due Process Clause of the Fifth Amendment.” Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 217 (1995); United States v. Ovalle, 136 F.3d. 1092, 1095 (6th Cir. 1988).

At the time of the assessment, collection, and enforcement of the civil penalties for his late filings of Form 5471, Dewees was enrolled in the OVDP. Since he owed no past-due tax but had been assessed civil penalties under 26 U.S.C. § 6038, way in excess of any reasonable purpose of enforcement, Dewees opted out of the OVDP. Within the time period of his administrative proceedings against the IRS and the CRA's seizure of his property, the IRS created the SFCP and began to phase out the OVDP, until its eventual elimination in 2018.

The SFCP differs from the OVDP by involving less paperwork and imposing lower or zero penalties upon late-filing non-resident U.S. taxpayers and usually involves a three-year limits, as opposed to the exorbitant 12 years of penalties the IRS inexplicably imposed on Dewees in this matter. See Maze v. IRS), 206 F.Supp.3d 1, 5–6 (D.D.C. 2016), aff'd, 862 F.3d 1087, 1089 (D.C. Cir. 2017). Transferring between the two programs is generally disfavored, but taxpayers who are otherwise eligible for the SFCP and who made their OVDP submissions before July 1, 2014 may remain in the OVDP while requesting the more favorable terms available under the SFCP. See Maze, supra, 206 F.Supp.3d at 7–8.

Dewees became aware that under existing IRS rules he was precluded from entering the SFCP because he had been a past participant in the OVDP. An application to the SFCP would have been legally futile, an act which he no obligation to perform in order to maintain standing. See generally Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1, 13 (2000); Montana National Bank of Billings v. Yellowstone County, Montana, 276 U.S. 499, 505 (1928).

The D.C. Circuit recognized the District Court's error and held that Dewees had standing to raise his equal protection claim against the IRS' discrimination allowing other non-resident taxpayers to enter the SFCP and avoid penalties but assessing exorbitant penalties against Dewees for like violations because he had exited the OVDP:

Dewees' equal protection claim fits that bill. His obligation to pay a higher penalty than other taxpayers, whom Dewees considers to be similarly situated, amounts to a concrete and particularized legal injury. That injury is plainly caused by the IRS and redressable by court decree. Article III requires no more.

The district court reasoned that standing was contingent on Dewees' first applying for the more favorable governmental program. Dewees, 272 F.Supp.3d at 102 & n.1. But there is no dispute that Dewees was categorically ineligible for the Streamlined Program. Under these circumstances, Article III standing does not hinge upon Dewees' failure to undertake a futile act.

767 Fed. Appx. At 8.

The D.C. Circuit, however, held that the purely economic injury did not support his equal protection claim because the IRS' rules were rationally related to a legitimate governmental purpose. Id. The D.C. Cir. stated:

The difference in treatment here is rational. The purpose of the Streamlined Program was '[t]o encourage * * * taxpayers to come forward.' See Statement of IRS Commissioner John Koskinen, Internal Revenue Service (June 18, 2014). For Dewees and other taxpayers who had already voluntarily come forward years earlier, no such incentive was needed. It was therefore rational for the government, which had already assessed Dewees' liability though the Disclosure Program, to decline to devote further resources to reassess his liability under the Streamlined Program's revised penalty structure.

Id. (citation omitted).

While “whe[n] 'ordinary commercial transactions' are at issue, rational basis review requires deference to reasonable underlying legislative judgments[.],” and even though “[l]egislatures have especially broad latitude in creating classifications and distinctions in tax statutes,” see Armour v. City of Indianapolis, 566 U.S. 673, 680 (2012), this case involves more than mere tax classifications.

Here, the IRS has consciously created a situation where, at all pertinent times in this case, a non-resident U.S. citizen taxpayer who is not a participant in the OVDP could be denied access to the SFCP, but other similarly situated non-resident U.S. citizen taxpayers who were never a part of the OVDP can apply for and receive the SCFP's lower or excused penalties under 26 U.S.C. § 6038. Such a distinction has no rational basis to further tax collection. See generally Taxpayer Advocacy Service — “Fiscal Year 2017 Objectives Report to Congress,” Vol. One at pp. 164-76, https://taxpayeradvocate.irs.gov/Media/Default/Documents/2017-JRC/Area_of_Focus_12.pdf.2

Contrary to the reasoning of the D.C. Circuit, Dewees, and others like him, would have been more likely to come forward and settle their disputes with the IRS if afforded the opportunity to enter the SFCP.

Where a taxing authority creates unreasonable distinctions between similarly situated taxpayers to the detriment of a taxpayer or taxpayers, then the equal protection rights under the Fifth Amendment preclude such discrimination. Cf. Allegheny Pittsburgh Coal Co. v. County Commission of Webster County, W. Va., 488 U.S. 336, 344-45 (1989) (“The equal protection clause protects the individual from state action which selects him out for discriminatory treatment by subjecting him to taxes not imposed on others of the same class”) (citing Hillsborough Township, Somerset County, N.J., v. Cromwell, 326 U.S. 620, 623 (1946)).

C. While the Supreme Court Has Held that The Excessive Fines Clause May Apply to Civil Penalties or Fines with a Partly Punitive Purpose, the Lower Courts Have Wrongly Construed This Precedent to Not Apply to Civil Fines Under 26 U.S.C. § 6038 and Other Tax Statutes Imposing Similar Penalties.

“Like the Eighth Amendment's proscriptions of “cruel and unusual punishment” and “[e]xcessive bail,” the protection against excessive fines guards against abuses of government's punitive or criminal-law-enforcement authority. This safeguard, we hold, is fundamental to our scheme of ordered liberty, with deep roots in our history and tradition.” Timbs v. Indiana, __ U.S. __, 139 S.Ct. 682, 686-87 (2019) (citing McDonald v. Chicago, 561 U.S. 742, 767, 130 S.Ct. 3020, 177 L.Ed.2d 894 (2010).

Under the Eighth Amendment, “[e]xcessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.” “Taken together, these Clauses place parallel limitations on “the power of those entrusted with the criminal-law function of government. Directly at issue here is the phrase nor excessive fines imposed, which limits the government's power to extract payments, whether in cash or in kind, as punishment for some offense. Timbs, supra, 139 S.Ct. at 687.

This Court has repeatedly held that the Excessive Fines clause applies to both criminal and civil penalties. See, e.g., United States v. Bajakajian, 524 U.S. 321 (1998); Austin v. United States, 509 U.S. 602 (1993); Browning-Ferris Industries of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S. 257 (1989); see generally Matthew A. Melone, Penalties for the Failure to Report Foreign Financial Accounts and the Excessive Fines Clause of the Eighth Amendment, 22 Geo. Mason L. Rev. 337, 361-70 (2015). This Court in Austin, stated:

Some provisions of the Bill of Rights are expressly limited to criminal cases. The Fifth Amendment's Self-Incrimination Clause, for example, provides: 'No person . . . shall be compelled in any criminal case to be a witness against himself.' The protections provided by the Sixth Amendment are explicitly confined to 'criminal prosecutions.' See generally Ward, 448 U.S., at 248, 100 S.Ct., at 2641.4 The text of the Eighth Amendment includes no similar limitation. See n. 2, supra.

Nor does the history of the Eighth Amendment require such a limitation. Justice O'CONNOR noted in Browning-Ferris: 'Consideration of the Eighth Amendment immediately followed consideration of the Fifth Amendment. After deciding to confine the benefits of the Self-Incrimination Clause of the Fifth Amendment to criminal proceedings, the Framers turned their attention to the Eighth Amendment. There were no proposals to limit that Amendment to criminal proceedings. . . .' 492 U.S., at 294, 109 S.Ct., at 2930. Section 10 of the English Bill of Rights of 1689 is not expressly limited to criminal cases either. The original draft of § 10 as introduced in the House of Commons did contain such a restriction, but only with respect to the bail clause: 'The requiring excessive Bail of Persons committed in criminal Cases, and imposing excessive Fines, and illegal Punishments, to be prevented.' 10 H.C.Jour. 17 (1688). The absence of any similar restriction in the other two clauses suggests that they were not limited to criminal cases.

509 U.S at 608-09 (emphasis added).

Nonetheless, the lower courts and the District Court in this case have taken the position that civil penalties under 26 U.S.C. § 6038 are “remedial” and “compensatory” in nature and do not invoke the Excessive Fines clause. See 272 F.Supp.3d at 100-01 (and cases cited). However, a civil fine may pose both a remedial purpose and a punitive purpose, thus making it subject to the Eighth Amendment. Bajakajian, 524 U.S at 329; Melone, supra, 22 Geo. Mason L. Rev. at 367-68.

In the present case, the IRS has fined Dewees $120,000 plus interest for the late filings of Form 5471, even though it is conceded that Dewees owes no further underlying tax. The fine is grossly disproportional to any so-called remedial or compensatory purpose in the collection of taxes in this case under the Convention. The Court should specifically address the issue in this context, since the lower courts continue to disregard the import of this Court's jurisprudence on the Excessive Fines clause's applicability to civil fines which are based on, at last partly, a punitive motive.

CONCLUSION

The Court should grant this Petition and decide these constitutional issues related to the assessment and collection of a non-resident U.S. citizen pursuant to the Convention.

Dated: July 5, 2019.

Respectfully submitted,
Mark A. Feigenbaum
Counsel of Record
1137 Centre Street, Suite 201
Thornhill, ON Canada L4J 3M6
(905) 695-1269
mark@feigenbaumlaw.com

Attorney for Petitioner

FOOTNOTES

1While Dewees made an excessive fine claim before the District Court, which ruled against him on the issue, he did not argue it before the D.C. Circuit. However, this Court may in its discretion address the excessive issue for a fundamental or plain error, as raised in this Petition for Certiorari. See, e.g., Sibbach v. Wilson & Co., 312 U.S. 1 (1941).

2As noted in Taxpayer Advocacy Service — “Fiscal Year 2017 Objectives Report to Congress,” Vol. One at p. 169:

[T]he IRS is currently being sued because of its failure to adhere to the Administrative Procedure Act (APA) in promulgating the rules governing taxpayers seeking to 'transition' into a streamlined program from an OVD program. Unlike taxpayers who apply directly to a streamlined program, these taxpayers are denied access if the IRS does not agree that their violations were not willful. The IRS does not provide taxpayers with any substantive basis or explanation for a denial or with the right to an appeal. Regardless of what the APA requires, an agency should explain why it has decided to adopt a rule — particularly one viewed as unfair — and address suggestions to improve it, as would be the case with formal guidance. It should also provide taxpayers with explanations for any adverse determinations it makes in their cases. The IRS's failure to take these simple steps violates most of the recently-enacted taxpayer rights [See Id at FN 24: “IRC § 7803 (a). For example, it violates the Rights to Be Informed, Quality Service, Pay No More Than the Correct Amount of Tax, Challenge the IRS's Position and Be Heard, Appeal an IRS Decision in an Independent Forum, Finality, Privacy, and A Fair and Just Tax System”].

END FOOTNOTES

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