On Feb. 25, President Joe Biden nominated Judge Ketanji Brown Jackson to fill the seat being vacated by Justice Stephen G. Breyer on the Supreme Court. Jackson previously served as a law clerk for Breyer.
Jackson received her undergraduate degree from Harvard-Radcliffe College and her law degree from Harvard Law School, where she was also an editor of the Harvard Law Review. She currently sits as a U.S. circuit judge. Before that, she served as a U.S. district judge and a vice chair and commissioner on the U.S. Sentencing Commission, as well as a stint in the private sector.
This week, Jackson began a series of hearings in front of the Senate Judiciary Committee. The committee will then decide whether to move the nomination to the full Senate for a vote.
Key to the process were rounds of questions on Tuesday and Wednesday of this week. Issues Jackson has fielded included her position on critical race theory, whether she believes in the expansion of the Supreme Court, her views on abortion, and the appropriateness of sentences she has handed down.
Jackson is not expected to be peppered with tax questions. And while cases involving tax questions aren’t routinely heard at the Supreme Court, you only have to look at Wayfair, Obergefell, and King to see the impact of Supreme Court rulings involving tax or tax policy.
However, Jackson did hear some cases involving tax or tax matters. Here are three cases that Jackson decided with a tax focus.
Z Street v. Koskinen (D.D.C. 2014)
In Z Street, the plaintiff was a Pennsylvania nonprofit corporation dedicated to “educating the public about Zionism; about the facts relating to the Middle East and to the existence of Israel as a Jewish State; and about Israel’s right to refuse to negotiate with, make concessions to, or appease terrorists.” About six months after the organization submitted its application for tax-exempt status, an IRS agent requested that Z Street submit additional information, which it did. When Z Street’s counsel subsequently had a conversation to follow-up with the IRS agent, they alleged that the IRS suggested:
- The organization was engaging in “advocacy” activities not permitted under section 501(c)(3); and
- Special concern for organizations whose activities relate to Israel and whose positions on Israel contradicted the policies of the U.S. government.
According to Z Street’s counsel, they were advised that the IRS gave particular scrutiny to tax-exempt applications connected with Israel. They were told that “these cases are being sent to a special unit in the D.C. office to determine whether the organization’s activities contradict the Administration’s public policies.”
With that, Z Street filed a complaint in the Eastern District of Pennsylvania alleging that the IRS maintained an “Israel Special Policy.” This was, they alleged, a violation of the First Amendment.
The case was eventually transferred to U.S District Court in the District of Columbia—which is how it got in front of Jackson. The case was transferred because it was a controversy arising under section 7428, which provides for declaratory judgments in suits related to the classification of of tax-exempt organizations. Only three courts have jurisdiction over these cases: the U.S. Tax Court, the U.S. Court of Federal Claims, and the United States District Court for the District of Columbia.
The IRS moved to dismiss the case. Among other things, the IRS argued that the D.C. court lacked subject-matter jurisdiction over the claim, framing it as a complaint about tax liability, and also that Z Street had an adequate remedy at law, meaning that they could have waited for an official determination and filed suit in tax court. The IRS essentially argued that Z Street was trying to use the court to obtain tax-exempt status.
Jackson denied the IRS’s motion to dismiss. Specifically, she noted that “Z Street alleges not that the IRS unlawfully denied it a preferred tax status, but only that the IRS subjected it to unconstitutional viewpoint discrimination in considering its application for that status.” That means that winning the suit would not necessarily result in the grant of status but that Z Street wanted its application to “be evaluated using the same standards are criteria that apply to other organizations that the IRS reviews.”
The IRS appealed to the U.S. Court of Appeals for the D.C. Circuit, where Jackson’s ruling was affirmed.
Eventually, the underlying matter was resolved. In 2016, the organization received tax-exempt status, and in 2018, the Department of Justice announced they had reached an agreement with Z Street. The settlement included an apology from the IRS to Z Street for the delayed processing of the group’s application for tax-exempt status.
United States v. Greer (No. 18-cv-2497)
The defendant, Douglas Greer, allegedly failed to pay the federal income taxes he owed for the 2007 tax year. In 2018, the government filed an action against him to collect the amounts they claim were due.
The government shutdown slowed things down, and Greer was not served with a summons and complaint until Feb. 25, 2019. When Greer failed to answer the complaint, the government began the process to obtain a default judgment.
Magistrate Judge Robin M. Meriweather was assigned to the case. Meriweather found that the government met its burden, and Greer “failed to answer the Complaint or participate in this litigation in any manner.” As a result, the allegations were deemed admitted.
Next, Meriweather addressed damages. Initially, there was some dispute about the “sum certain” due—that must be stated with certainty. However, the government made clear in a supplemental filing that Greer owed additional interest accruing from June 8, 2019, until payment. Meriweather agreed that the government has demonstrated that it should be awarded the amount it requested since the past penalties, interest, and taxes were known, and the additional interest could be calculated by using the formula codified in the tax code in section 6621.
With that, the magistrate recommended that a default judgment for $512,521.19 plus additional interest be approved. That’s how the case ended up in front of Jackson. Jackson reviewed Meriweather’s report and recommendation and granted the motion for default judgment.
Baisden v. Barr (D.D.C. 2020)
This is a tax case that’s not a tax case. Let me explain.
In 2012, the plaintiff, Lowell Baisden, was sentenced to 37 months in prison after pleading guilty to willfully attempting to evade or defeat federal income tax. Baisden had previously been a licensed CPA who marketed corporations to taxpayers as part of a tax savings “plan” where he touted, among other things, taxpayers’ ability to deduct “cars, going out to eat, trips” as business expenses. Eventually, he was indicted on five criminal counts before pleading guilty to a single charge that he willfully attempted to evade and defeat taxes on taxpayers’ individual and corporate tax returns.
A plea deal results in a conviction. That means that Baisden was convicted of “a crime punishable by imprisonment for a term exceeding one year” and was barred from possessing any firearm or ammunition under federal law.
On Oct. 3, 2019, Baisden filed a lawsuit seeking declaratory and injunctive relief to allow him to possess a firearm, claiming that he met a statutory exemption for “offenses pertaining to antitrust violations, unfair trade practices, restraints of trade, or other similar offenses relating to the regulation of business practices.” 18 U.S.C. § 921(a)(20)(A). In other words, he was arguing that the tax conviction was exempt from the no firearms rule under a business practice exemption.
The government filed a motion to dismiss, arguing that the plaintiff did not have standing and that federal tax evasion does not meet a statutory exception to the no firearms rule. In the legal world, standing is your right to be heard on the matter in court, and typically, no harm equals no legal standing. That is an important part of the case.
The matter went before Jackson, who found that Baisden’s complaint never raised any specific facts concerning whether “he ever owned a firearm or possessed a permit, ever used a firearm or intended to use one, or ever wished or desired to possess one in the future.” In other words, Baisden needed to prove that he suffered actual harm instead of a purely hypothetical one, and he didn’t do that. As a result, Jackson ruled that the “complaint in this case is plainly insufficient to survive the government’s motion to dismiss for lack of subject-matter jurisdiction,” and the case was dismissed.
What Comes Next
Jackson has been a federal judge for nine years but hasn’t seen many tax cases. That’s not surprising, as none of the current Supreme Court justices has a significant tax background.
If the nomination moves to the Senate, Jackson will hope to pick up support from some Republicans. At her confirmation to the U.S. Court of Appeals for the D.C. Circuit, she received support from three: Senators Susan Collins of Maine, Lisa Murkowski of Alaska, and Lindsey Graham of South Carolina.
If she is confirmed, Jackson would be the first Black woman to serve on the Supreme Court.
This is a weekly column from Kelly Phillips Erb, the Taxgirl. Erb offers commentary on the latest in tax news, tax law, and tax policy. Look for Erb’s column every week from Bloomberg Tax and follow her on Twitter at @taxgirl.
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