TAX APPEALS COMMISSION
TINA M. JACOBSEN n/k/a TINA M. LEMMENS, Docket No. 16-I-293
Petitioner,
vs.
WISCONSIN DEPARTMENT OF REVENUE,
Respondent.
RULING
AND ORDER ON
MOTION
FOR SUMMARY JUDGMENT
DAVID L. COON, COMMISSIONER:
This
case comes before the Commission for decision on the Respondent’s Motion for Summary
Judgment. The Petitioner, Tina M.
Jacobsen n/k/a Tina M. Lemmens, of Neenah, Wisconsin, is pro se. The Respondent,
the Wisconsin Department of Revenue (“the
Department”), is represented by Attorney Sheree
Robertson. For the reasons set forth below, we hold in favor of the Department.
FACTS
Jurisdictional Facts
1.
In tax years 2010 and
2011, Petitioner and Rick E. Jacobsen (“Jacobsen”) were married, but they
divorced in May 2015. (Affidavit of
Alexandria D. Meyer, Revenue Auditor, Wisconsin Department of Revenue (“Meyer
Aff.”) ¶¶ 2 and 6, Exs. 1 and 10.)
2.
In May 2011, a Criminal
Complaint was filed with the State of Wisconsin Circuit Court in Outagamie
County (“Circuit Court”) charging Petitioner with five counts of theft from a
business setting, one count of fraudulent writings, and two counts of
misdemeanor theft. (Affidavit of Sheree
Robertson, Attorney, Wisconsin Department of Revenue (“Robertson Aff.”) ¶ 6,
Exs. 12 and 15.)
3.
In Petitioner's criminal
case, the Circuit Court issued a Judgment of Conviction, sentencing her to
serve five years in prison with extended supervision. (Robertson Aff. ¶¶ 5 and 8, Ex. 13.)
4.
On April 1, 2012,
Petitioner and Jacobsen jointly filed a 2011 Wisconsin income tax return
claiming a refund of $1,940. (Meyer Aff.
¶ 2, Ex. 1; Affidavit of Carrie Kloss, Office Audit Resolution Officer,
Wisconsin Department of Revenue (“Kloss Aff.”) ¶ 6.)
5.
On April 5, 2012, the
Department sent a Notice of Refund Offset to Petitioner, advising that the
$1,940 refund was being applied to an outstanding liability for the 2010 tax
year. (Kloss Aff. ¶5, Ex. 8.)
6.
On August 1, 2012,
Petitioner and Jacobsen jointly amended their 2011 Wisconsin income
tax return by removing $43,007 of car and truck expenses previously
claimed on their original 2011 Wisconsin income tax return. That amended return showed gross tax due of
$6,122. After subtracting the remaining
available withholding of $3,062 (the original $5,002 withheld less the previous
refund of $1,940 that applied toward the 2010 liability), the return showed a
net amount due of $3,060. They did not
remit payment of the tax due. (Meyer
Aff. ¶ 2, Exs. 1-2; Kloss Aff. ¶ 6.)
8.
Because the Petitioner
did not remit payment for the amount due in the Notice of August 17, 2012, it
went delinquent and the Department began actions to collect the debt, including
the issuance of a Notice of Warrant (Lien) Filing (“Notice of Warrant”) dated
January 20, 2017. (Affidavit of Robert
A. Frauchiger, Revenue Agent Supervisor, Wisconsin Department of Revenue
(“Frauchiger Aff.”) ¶ 3, Ex. 20.)
9.
On May 1, 2013, the
Department received electronically a federal audit report from the Internal
Revenue Service (IRS) notifying it of adjustments made to Petitioner
and Jacobsen's 2010 and 2011 federal income tax returns. For tax year 2010, the IRS had corrected
Petitioner's income to include $261,959 of unreported "other income,"
$1,388 of unreported gambling income, and $301 of unreported federal Schedule C
income. The IRS had also disallowed
$40,213 of the car and truck expenses claimed as deductions. For tax year 2011, the IRS had corrected
Petitioner’s and Jacobsen's income to include $62,450 of unreported "other
income" and $415 of unreported federal Schedule C income and disallowed
$46,281 of the car and truck expenses claimed as deductions. (Meyer Aff. ¶ 3.)
10.
After receiving the
federal audit report, the Department reviewed Petitioner and Jacobsen's 2010
and 2011 amended Wisconsin income tax returns and adjusted them to reflect the
corrections the IRS made. Petitioner and
Jacobsen's 2011 amended Wisconsin income tax return was adjusted to include the
unreported "other income" of $62,450.
The amended return was also adjusted to include unreported federal
Schedule C income of $415, and another $3,274 was added to income because the
2011 amended Wisconsin income tax return excluded only $43,007 of the car and
truck expenses despite the fact that the IRS disallowed $46,281 of the car and
truck expenses. (Meyer Aff. ¶ 5.)
11.
On December 16, 2014,
Petitioner filed a bankruptcy petition with the United States Bankruptcy Court
for the Eastern District of Wisconsin, Milwaukee Division (Bankruptcy Court),
attaching a Schedule E to her petition showing Wisconsin income tax liabilities
for tax years 2010 through 2013.
(Affidavit of Bernard Mollet, Revenue Agent, Wisconsin Department of
Revenue (“Mollet Aff.”) ¶ 2, Ex. 17.)
12.
On April 17, 2015, the
Bankruptcy Court issued the Discharge of Debtor in Petitioner's bankruptcy
case. (Mollet Aff. ¶ 3, Ex. 18.)
13.
By a Notice of Amount
Due dated October 13, 2015, the Department issued an income tax assessment,
including interest, to Petitioner for tax years ending December 31, 2010, and
December 31, 2011, in the total amount of $42,534.18, which included $36,361.68
assessed for tax year 2010 and $6,172.50 assessed for tax year 2011. (Meyer Aff. ¶ 6, Ex. 4.)
14.
The Department has not
issued a Notice of Warrant for the amount at issue in the Notice of Amount Due
of October 13, 2015. (Frauchiger Aff. ¶
2.)
15.
Since the Petitioner and
Jacobsen were divorced in May 2015, the October 13, 2015 Notice was addressed
to the Petitioner and mailed to her.
(Meyer Aff. ¶ 6.)
16.
On or about October 22,
2015, Petitioner timely filed an objection—which was considered a Petition for
Redetermination—to the Notice of Amount Due dated October 13, 2015. (Kloss Aff. ¶ 2, Ex. 5.)
17.
By its Notice of Action
dated October 13, 2016, the Department denied Petitioner's Petition for
Redetermination. (Kloss Aff. ¶ 3, Ex.
6.)
18.
Petitioner filed a
Petition for Review with the Commission received on December 5, 2016, via
certified mail date stamped December 1, 2016.
(Commission file.)
19.
The Department
subsequently conceded that the portion of the Notice of Amount Due dated
October 13, 2015, assessing additional tax for tax year ending December 31,
2010, should be cancelled because the tax liability for that year was
discharged in bankruptcy. (Robertson
Aff. ¶ 9.) Thus, only the tax year 2011
remains at issue.
20.
On June 7, 2017, a
briefing order was issued on the Department’s request. On July 31, 2017, the Department filed a
motion for summary judgment, brief, affidavits, and exhibits. On October 4, 2017, Petitioner filed a
response brief, without affidavits or exhibits.
On November 2, 2017, the Department filed a reply brief with an
affidavit and exhibit. (Commission
file.)
APPLICABLE LAW
Summary Judgment
A motion for summary
judgment will be granted if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, show
that there is no genuine issue as to any material fact and that the moving
party is entitled to judgment as a matter of law. Wis. Stat. § 802.08(2). A party opposing a motion for summary judgment “may not
rest upon the mere allegations or denials of the pleadings but the adverse
party's response, by affidavits or as otherwise provided in this section, must
set forth specific facts showing that there is a
genuine issue for trial. If the
adverse party does not so respond, summary judgment, if appropriate, shall be
entered against such party.” Wis. Stat.
§ 802.08(3).
Burden of Proof
Assessments made by the
Department are presumed to be correct, and the burden is on the petitioner to
prove by clear and satisfactory evidence in what respects the Department erred
in its determination. Puissant v. Dep't of Revenue, Wis. Tax
Rptr. (CCH) ¶ 202-401 (WTAC 1984).
Applicable Statutes
Wis. Stat. § 71.01(13)
71.01
Definitions. In this chapter in regard to natural persons and fiduciaries,
except fiduciaries of nuclear decommissioning trust or reserve funds:
…
(13) “Wisconsin
adjusted gross income" means federal adjusted gross income, with the
modifications prescribed in s. 71.05 (6) to (12), (19), (20), (24), (25), and
(26).
Wis. Stats. §71.10(6)(a)
71.10 General provisions.
…
(6) MARRIED PERSONS. (a) Joint
returns. Persons filing a joint return are jointly and severally liable for
the tax, interest, penalties, fees, additions to tax and additional assessments
under this chapter applicable to the return….
Wis.
Stat. § 71.11(2)
71.77 Statutes of limitations, assessments and refunds; when
permitted.
…
(2) With
respect to assessments of a tax or an assessment to recover all or part of any
tax credit under this chapter in any calendar year or corresponding fiscal
year, notice shall be given within 4 years of the date the income tax or
franchise tax return was filed.
11 U.S. Code § 507(a)(8)
11 USC § 507
– Priorities
(a)
The following expenses and claims have priority in the
following order:
…
(8) Eighth, allowed unsecured claims of governmental
units, only to the extent that such claims are for—
(A) a tax on or measured by income or gross
receipts for a taxable year
ending on or before the date of the filing
of the petition—
(i) for which a return, if required, is last
due, including extensions, after three years
before the
date of the filing of the petition…
11 U.S. Code § 523(a)
11 USC § 523
– Exceptions to Discharge
(a)
A discharge under section 727, 1141, 1228(a), 1228(b), or
1328(b) of this title does not discharge an individual debtor from any debt—
(1) for a tax or a customs duty—
(A) of the kind and for the
periods specified in section
507(a)(3) or 507(a)(8) of this title, whether or not a
claim for such tax was filed or allowed.
26 U.S. Code § 61
26 USC § 61. Gross income defined
(a) General
definition Except as otherwise provided in this subtitle, gross
income means all income from whatever source derived…
DECISION
In the current matter, the Petitioner has not filed any
affidavits setting forth “specific facts showing that there is a genuine
issue for trial” and, therefore, has not shown that there is any genuine issue
for trial. Wis. Stat. 802.08(3). That being the case, we will decide this
matter by applying the applicable law to the uncontroverted facts set forth by
the Respondent in its affidavits and exhibits to determine if the Respondent is
entitled to judgment on its motion.
There are three primary issues related to the Petitioner’s
liability for the additional assessment.
First, are monies embezzled by the Petitioner taxable income? Second, was the Department’s
audit and issuance of the October 13, 2015, Notice of Amount Due timely? Third, was the tax liability for the 2011 tax
year discharged in bankruptcy?
Over the course of several years, Petitioner embezzled
nearly one-half million dollars from her employer, Community Blood Center,
Inc. She was convicted of crimes and
imprisoned for her actions. For the 2011
tax year, the IRS determined that her embezzlement, in the amount of $62,450,
was “other income” that should have been reported on her return as taxable
income. Petitioner, in her Petition for
Review, concedes that the Department included the “correct calculations from
the Internal Revenue audit.”
It is somewhat difficult from the Petitioner’s filings to
tell if, before the Commission, she continues her objection to the embezzled
funds being included as taxable income or merely objects to the calculations
made based on that additional income and other unrelated issues. Because, at least in her Petition for
Redetermination, the Petitioner claimed that embezzled income does not meet
“the guidelines for ‘gross income’,” For completeness, we will address this
issue.
Petitioner did embezzle money from her employer and was
convicted of doing so. She did not
report that money as income on her 2011 tax returns.
“Adjusted gross income” in Wisconsin is “federal adjusted
gross income” with some modification.
Wis. Stat. § 71.01(13). Pursuant
to the Sixteenth Amendment to the United States Constitution, “The Congress
shall have power to lay and collect taxes on incomes, from whatever source
derived….” Congress codified this in §
61(a) of the Internal Revenue Code (“IRC”), stating “gross income means all
income from whatever source derived.”
In James v. United
States, 366 U.S. 213, 81 S. Ct. 1052, 6 L.Ed.2d 246 (1961), the Supreme
Court determined that embezzled funds were included as gross income (overruling
Commissioner of Internal Revenue v.
WilcoxCommissioner of Internal Revenue v. Wilcox, 327 U.S. 404, 327
U.S. 404, 66 S. Ct. 54666 S. Ct. 546, 90
L. Ed. 752) stating, “We should
not continue to confound confusion, particularly when the result would be to
perpetuate the injustice of relieving embezzlers of the duty of paying income
taxes on the money they enrich themselves with through theft while honest
people pay their taxes on every conceivable type of income.” James
at 221.
Wisconsin has followed this practice of taxing embezzled
funds. In Lemons v. Dep’t of Revenue, Wis. Tax Rptr. (CCH) ¶ 201-390 (WTAC
1977), the Commission concluded, “The value of the illegal benefit and/or gains
the petitioner received . . . constitute taxable income to him in said year,
under the provisions of Section 61 and Reg. 1.61-14 of the Internal Revenue
Code.” Further, in Opitz v. Dep’t of Revenue, Wis. Tax Rptr. (CCH) ¶ 202-891 (WTAC
1987), the Commission decided that “monies illegally obtained by the petitioner
constituted taxable income” during the applicable tax years. Based upon the broad definition of gross
income, Petitioner’s embezzled funds are taxable income.
In her Petition, the Petitioner alleges that the
Department’s Notice was beyond the statutory four-year period with respect to
her 2011 tax year since the Notice was issued on October 13, 2015. “With respect to assessments of a tax . . . notice shall be given within 4 years of the
date the income tax or franchise tax return was filed.” Wis. Stat. §
71.77(2). Here, Petitioner
filed her joint income tax return for 2011 on April 1, 2012. Four years from that filing date would be
April 1, 2016. Therefore, the
Department’s Notice of October 13, 2015,
was timely.[1]
The Petitioner filed a bankruptcy petition on December 16,
2014, and received an order for Discharge of Debtor on April 15, 2015. Although the Petitioner received her
discharge, there are some debts that, under the bankruptcy code, are not
dischargeable by law.
Exceptions to discharge relevant to this matter are found in 11 USC § 523(a) and 11 USC § 507(a)(8). A tax debt is non-dischargeable, if it is 1) A
tax on or measured by income; 2) for a tax year ending on or before the date of
the filing of the petition; and 3) has a return that is last due to be filed
after three years before the bankruptcy petition is filed. The debt at issue is an income tax and is for
a tax year, 2011, which ended before the filing of the bankruptcy petition on
December 16, 2014. Three years before
the filing date of the bankruptcy petition would be December 16, 2011. The last due date for the filing of the 2011
tax year was April 17, 2012.[2] That filing due date is after December 16,
2011, so the amount due for the 2011 tax year falls clearly within the
statutory exception to discharge.
On mere assertion, without affidavit,
other facts, or law, Petitioner claims that the Department did not object to
discharge, so, apparently, the tax debt must be discharged. As noted, this debt is an exception to
discharge. Additionally, the statute
specifically states that such a debt is excluded from discharge “whether or not
a claim for such tax was filed or allowed.”
11 USC § 523(a). Based upon the statutory exception, the debt
for the 2011 tax assessment was not discharged.
Petitioner makes a number of other
arguments related to the calculation of the debt, responsibility for payment,
and equal protection. None of these are
persuasive, and most are merely assertions in pleadings rather than facts set
forth in an affidavit as required in Wis. Stat. § 802.08(3).
Petitioner claims that she is unable to
find documents or tax tables to verify the Department’s calculations of her
gross tax due. The Commission is not
tasked with doing a petitioner’s work, even if the petitioner is acting pro se.
Petitioner has not provided any affidavit or other information to show
that the Department’s calculations of gross tax are incorrect. She merely alleges that she has not verified
those calculations. Further, the
Department has submitted affidavits which show that the Department did provide
Petitioner with a letter dated May 18, 2017, which included the 2011 tax
computation worksheets showing how the Department calculated the gross
tax. (Kloss Aff. ¶ 4, Ex. 7; Robertson Aff. ¶ 3, Ex. 11.)
Petitioner also asserts that $5,002 of
income withholdings for the 2011 tax year were not credited toward the
calculation of taxes due. Petitioner
additionally disputes that she received a $1,940 refund from her original tax
return. Petitioner is incorrect.
On Petitioner’s original joint return,
Petitioner and Jacobsen claimed a refund of $1,940 from their withholdings,
after tax. By a Notice dated April 5,
2012, Petitioner was advised that the $1,940 refund was being applied to tax
due on an outstanding liability for the 2010 tax year. Petitioner did “receive” the $1,940 refund,
but it was applied to another liability instead of being received as a cash
refund to her.
When Petitioner and Jacobsen filed
their joint amended return in August 2012, they reported tax due of $6,086
($6,122 including a $36 IRA penalty). On
their amended return, they correctly included the whole $5,002 that had been
withheld for the 2011 tax year, and then also correctly subtracted the $1,940
refund received and applied to their 2010 obligation, leaving them with $3,062
of available withholdings to apply toward the tax due. This resulted in $3,060 of tax still due for
2011 based on the amended return, which, along with regular interest and
underpayment interest, was assessed on the Notice of Amount Due issued on
August 17, 2012.
After the Department received the audit
report from the IRS in 2013, the Department issued another Notice of Amount Due
dated October 13, 2015. In that Notice,
the Department calculated net tax due, after adding to “other income”
Petitioner’s income due to embezzlement, of $10,172. The Department then subtracted the original
tax obligation reported on the amended return of $6,086 from the $10,172 total,
to find additional tax due of $4,086 (before interest) for 2011. The $5,002 withholding for 2011 and the
original refund claim of $1,940 in the Notice of Amount Due of April 17, 2012,
were properly accounted for with that subtraction. The Notice of October 13, 2015, only
represents the new tax due after a recalculation that included the embezzlement
income and other minor adjustments.
Petitioner also raises a number of
issues related to her ex-husband. She
claims that he has paid some of the obligations, that he should bear
responsibility for 50% of the obligations, and that he has not been and should
not be granted innocent spouse relief.
In this matter, Petitioner filed a joint return with her then husband
and is jointly and severally liable for the tax due. Wis. Stat. § 71.10(6)(a).
As to her claim that Jacobsen has
already paid some portion of the total amount due from either Notices of April
17, 2012, and October 13, 2015, respectively, we note that Jacobsen is not
before the Commission and Petitioner has provided no affidavit or other proof
of his payment. Further, that issue is a
collections matter and the Commission does not have jurisdiction as to the
Department’s collection of past due, delinquent taxes. See Kaminske
v. Dep’t of Revenue, Wis.
Tax Rptr. (CCH) ¶ 401-638 (WTAC 2012), citing Beck v. Dep't of Revenue, Wis. Tax Rptr. (CCH) ¶ 400-275 (WTAC
1997).
Whether Jacobsen has been or should be
granted innocent spouse relief is immaterial to a determination of Petitioner’s
joint and several liability for the taxes due on their joint tax returns. As noted above, we do not have jurisdiction
over collections. Further, the issue of
innocent spouse relief is not before us, and Petitioner has not developed the
issue via any affidavit to show that this is a material issue of fact.
Petitioner also asserts that her
divorce decree splits the tax liability 50/50, so she should only be liable for
half of the assessment. The divorce
decree is in family court and is not controlling here. Again, it is at best a potential collections
issue. Here, Petitioner is jointly and
severally liable for the full amounts due for her jointly filed tax return. Any issues between her ex-spouse and her
would be addressed in a different forum.
Petitioner also raised an issue
regarding a tax warrant filed against her.
The Department has not issued a tax warrant for the amount in the Notice
of Amount Due of October 13, 2015. The
tax warrant filed on January 30, 2017, is for the delinquent tax from the
Notice of August 17, 2012, which has gone to collections with the Department
and is not before the Commission. The
only amount before the Commission is the additional tax due from the Notice of
October 13, 2015, which at that time was $6,172.50, including tax and interest,
and is above and beyond the amount due in the Notice of August 17, 2012.
Finally, Petitioner appears to raise an
equal protection argument of some sort, primarily in a single line in a
concluding paragraph, stating, in part, “Petitioner would like to see … all
people who have business theft crimes be treated equally according to the legal
system and the Wisconsin Department of Revenue.” This claim is completely undeveloped. Further, there is no factual basis to show
that Petitioner has been treated any differently from any other embezzler who
comes to the attention of the Department.
CONCLUSIONS OF LAW
1.
Petitioner’s
income due to embezzlement is taxable to her.
2.
The
Department’s audit and issuance of the Notice of Amount Due of October 13,
2015, was timely.
3.
Petitioner’s
tax liability for the 2011 tax year was not discharged in bankruptcy.
4.
Petitioner
is jointly and severally liable for the amount due for her jointly filed tax
return.
ORDER
Based on the foregoing, the Commission orders as follows:
1.
The Department’s Motion
for Summary Judgment is granted.
2.
The Department’s action
on Petitioner’s Petition for Redetermination in affirmed.
Dated
at Madison, Wisconsin, this 27th day of March, 2018.
WISCONSIN
TAX APPEALS COMMISSION
Lorna Hemp Boll, Chair
David
D. Wilmoth, Commissioner
David
L. Coon, Commissioner
ATTACHMENT: NOTICE
OF APPEAL INFORMATION