Nonresident Seeks Refund of Tax on Slot Machine Winnings

1. The United States Court of Federal Claims has jurisdiction in this matter pursuant to 26 U.S.C. Section 7421 et seq., Section 7422 of the Internal Revenue Code of 1986 (the "Code"), and 28 U.S.C. Section 1346(a).

2. The TAXPAYER is, and at all times herein mentioned was, a Mexican citizen and resident and nonresident of the United States.

3. Defendant, the United States of America, is and at all time herein mentioned was, acting by and through the United States Internal Revenue Service ("IRS") which is, and at all times herein mentioned, was and is an agency of the United States of America.

4. Previously, Taxpayer brought refund suits against Defendant for THE tax years 2007 - 2010, inclusive, Case No. 12-cv-00121 (Enrique Free Pacheco v. the United States), and for tax year 2011, Case No. 14-cv-00517 (Enrique Free Pacheco v. the United States).

5. The TAXPAYER and the IRS recently entered into a "settlement of offer agreement refunding certain taxes owed to the TAXPAYER" for the tax years 2007 - 2010 and the tax year 2011, which is currently awaiting the necessary government signatures.

6. The IRS just recently published IRS Notice 2015-21, which provides a "safe harbor" method of determining wagering gains or losses for slot machine play, which is not inconsistent with the position taken by the TAXPAYER for the years 2007, 2008, 2009, 2010, 2011 and 2012, when suits for refund were brought by the TAXPAYER against the government. This IRS Notice 2015-21 provides the safe harbor for calculating the wagering gains or losses on a per session approach and further expressly provides that "A nonresident alien who is a non-professional gambler must write "Revenue Procedure 2015-X" on line 10, if a resident of Canada, or on line 11, if not a resident of Canada, on Schedule NEC of the Form 1040NR."

7. On December 15, 2014, the TAXPAYER filed federal income tax return ("2013 Form 1040NR" or the "2013 Formal Claim for Refund") with the United States through the IRS for tax year 2013, requesting a claim for refund of taxes of $720,466 previously withheld and paid over to the IRS for a total tax paid of $828,012. The refund of taxes was to be paid to the TAXPAYER at the location identified in the return. The return was filed with the Internal Revenue Service Center in Austin, Texas. A copy of the 2013 Formal Claim for Refund is attached, under seal, hereto as Exhibit "A".

8. The TAXPAYER'S 2013 Form 1040NR reflected that the TAXPAYER was not engaged in a "trade or business" of gambling.

9. More than six months have passed since the date that the 2013 Formal Claim for Refund was filed by the TAXPAYER. The IRS has issued no resolution authorizing the Formal Claim for Refund or a formal notice of disallowance by which the IRS rejects the 2013 Formal Claim for Refund. As a consequence, the TAXPAYER is apparently not subject to any period of limitation for commencing a refund suit for tax year 2013 (See IRS CCA20104406, November 5, 2010).¹

10. In summary, the amount of income taxes withheld and the amount pending to be refunded to the TAXPAYER for tax year 2013 based on a "per session" approach as set forth in IRS Notice 2015-12 are as follows:

                                                          Amounts

12. The TAXPAYER has performed all obligations required of him under the Internal Revenue Code.

13. The TAXPAYER is due a substantial refund since the amount of income taxes withheld from the TAXPAYER in 2013 was not calculated with reference to his "gains, profits, and income" as set forth in Section 871(a)(1)(A) of the Code. As a consequence, the TAXPAYER respectfully requests that the Court of Federal Claims adopts the commonsense and reasonable rule adopted in the Park decision,² which calculates gains based upon a "per-session" approach, which the IRS themselves have apparently now adopted as reflected in IRS Notice 2015-12.

14. In the Park decision,³ the Court expressly and clearly states that the term wagering gains should have the same meaning for purposes of Section 165(d) of the Internal Revenue Code as it has for purposes of Section 871(a)(1)(A) of the Code. The Park decision states as follows:

16. The IRS's failure and refusal to fully refund taxes owing to the TAXPAYER is without substantial justification. Accordingly, pursuant to the Code, 26 Section 7430 et seq., the TAXPAYER is entitled to attorney's fees and other expenses incurred in relation to and in furtherance of the presentation and prosecution of the claims in this litigation.

WHEREFORE, the TAXPAYER prays for judgment as follows:

²Park v. Commissioner, 722 F.3d 384 (D.C. Cir. 2013).

³Id.

⁴Id.

⁵Id.