« Ind. Courts - At least one Indiana county will end courthouse weddings | Main | Ind. Courts - More on "Clarksville may scrap its town court" »

Saturday, December 25, 2010

Ind. Decisions - More on Tax Court opinion in puppy mill tax case

This Dec. 22, 2010 ILB entry involved a Tax Court decision, Judge Fisher's most recent and probably last opinion, relating to an investigation by the IDOR and the Attorney General of "Virginia and Kristin Garwood' business activities to determine whether they were conducting sales of puppies and not remitting the Indiana sales and income tax due on the sales." The result was the issuance of jeopardy tax assessments and an immediate forced sale of assets to pay the taxes. The question in the case involved procedural issues and the jurisdiction of the Tax Court. The Tax Court last week denied the State's motion to dismiss.

Here is the ILB entry from the time of the raid, in early June 2009.

There have been several similar puppy mills raids based on suspected tax evasion by the property owners since the Garwoods, the most recent being in Bloomfield on Dec. 1, 2010. Here is a long story from WTHI at that time. Some quotes from the lengthy story:

BLOOMFIELD, Ind. (WTHI) - More than 120 puppies and dogs were seized Wednesday from a commercial dog breeder in Bloomfield, Ind., after the Indiana Attorney General’s Office filed a jeopardy tax assessment in Greene County court. * * *

By law, a jeopardy tax assessment filed in court is immediately considered a civil judgment against the delinquent taxpayer; and if the taxes cannot be paid immediately, then the state has the legal authority to seize the inventory of the business to satisfy the civil judgment.

In the case of Clark’s business Love My Pets , located at 10203 East Dobson Road in rural Bloomfield, the business’ inventory consisted of approximately 120 puppies and dogs.

On Wednesday, the Attorney General’s Office served Clark with the jeopardy assessment after it was filed in court. Then volunteers from several animal-rescue groups began the process of removing the puppies and dogs from their enclosures in a building on the property. * * *

This is the third time in the past two years that the Indiana Attorney General’s Office has taken legal action against commercial dog breeding operations for tax evasion offenses.

  • In December 2008, under former Attorney General Steve Carter, 74 dogs and puppies were seized from a dog breeding business owned and operated by Tammy Gilchrist in Cloverdale, Ind. Gilchrist and two accomplices later pleaded guilty to failure to collect or remit sales taxes and were sentenced to probation.
  • In June 2009, under current Attorney General Zoeller, 244 dogs and puppies were seized from a dog-breeding business operated by Virginia Garwood and Kristin Garwood in Mauckport, Ind. Both Garwoods later pleaded guilty to failure to collect or remit sales taxes and also were sentenced to probation.
Although the Attorney General’s Office normally does not have legal jurisdiction to file criminal charges, sales tax and income tax evasion are the exceptions, and the Attorney General can file such charges directly. In today’s tax enforcement action in Greene County, however, Clark has not been charged with any crime while the investigation continues into the delinquent taxes.

The filing of the jeopardy assessment in civil court triggers a legal process where the Attorney General, representing the Department of Revenue, seeks to collect the delinquent taxes. Clark, like any delinquent taxpayer, has the legal right to challenge the state’s action in civil court.

Today the Logansport Pharos Tribune has a story by Maureen Hayden of the CNHI Statehouse Bureau, headed "AG pledges to keep eye on breeders: State using tax laws to target puppy mills." Some quotes:
[A]n innovative use of a tax law has put the state in the forefront of a fight to crack down on inhumane dog-breeding operations known as “puppy mills.”

The approach has been likened to the tax-evasion case that brought down Chicago crime boss Al Capone in the 1930s. It’s also won accolades from animal lovers who contend Indiana’s animal protection laws are weak.

“These operations are inhumane and awful and need to be shut down,” said Indiana State Rep. Linda Lawson, a Democrat from Hammond who has taken the lead on toughening Indiana’s animal cruelty laws.

She describes the approach taken by the Republican Zoeller’s tax chief as “genius.”

The tax chief to whom she refers is Andrew Swain, now head of the attorney general’s revenue division.

When working for Zoeller’s predecessor, Swain came up with the idea of using the state’s tax evasion laws to shut down unlicensed, commercial dog-breeding operations that put profits before animal welfare. What he’d discovered was that the suspected puppy mill operators dealt in cash-and-carry transactions on which they they failed to pay income and sales taxes.

When Zoeller took office last year, he approved the continued use of the law.

The squalid conditions of puppy mills concerned him, he said. But the motivation was going after tax cheats.

“They’re scam artists,” Zoeller said.

The latest puppy mill crackdown occurred in early December, when Zoeller’s office shut down an unlicensed, commercial dog-breeding operation in Bloomfield.

After filing what’s called a “jeopardy tax assessment” in state court, claiming the Bloomfield breeder owes more than $311,000 in delinquent sales and income taxes, Zoeller’s office seized the breeders’ taxable assets: 120 puppies and dogs.

Two similar cases filed in the last two years, charging breeders with failing to pay hundreds of thousands of dollars in back taxes, resulted in guilty pleas to various tax charges and the seizure of more than 300 dogs.

The Humane Society has worked with Zoeller’s office to place the dogs for adoption.

Posted by Marcia Oddi on December 25, 2010 04:43 PM
Posted to Ind. Tax Ct. Decisions