Kent Hovind v Commissioner of IRS (Assistant Attorney General reply)

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IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

KENT E. HOVIND,

Petitioner-Appellant

v.

COMMISSIONER OF IRS,

Respondent-Appellee

ON APPEAL FROM THE DECISION OF THE UNITED STATES TAX COURT

BRIEF FOR THE APPELLEE

KATHRYN KENEALLY

Assistant Attorney General

ROBERT W. METZLER

CAROL BARTHEL

Attorneys, Tax Division

Department of Justice

Post Office Box 502

Washington, D.C. 20044

page 1 Hovind v. Commissioner (11th Cir. – No. 13-12520-FF)

CERTIFICATE OF INTERESTED PERSONS

AND CORPORATE DISCLOSURE STATEMENT

C-1 of 2

Pursuant to Federal Rule of Appellate Procedure 26.1 and Eleventh Circuit Rule 26.1-1, counsel for the Commissioner of Internal Revenue hereby certify that, to the best of their knowledge, information, and belief, the following persons and entities have an interest in the outcome of this appeal:

Barringer, Jerold W., former counsel for petitioner-appellant

Barthel, Carol, attorney, Appellate Section, Tax Division, Department of Justice

Colvin, Hon. John O., Judge, United States Tax Court

Hovind, Kent E., petitioner-appellant

Judson, Victoria, attorney, Internal Revenue Service

Laseter, Jason D., attorney, Internal Revenue Service

Marks, Nancy J., attorney, Internal Revenue Service

Metzler, Robert W., attorney, Appellate Section, Tax Division, Department of Justice Case: 13-12520 Date Filed: 04/25/2014 Page: 2 of 48

Hovind v. Commissioner (11th Cir. – No. 13-12520-FF)

CERTIFICATE OF INTERESTED PERSONS

AND CORPORATE DISCLOSURE STATEMENT

C-2 of 2

Oppenheimer, Joan I., attorney, Appellate Section, Tax Division, Department of Justice

Paris, Elizabeth Crewson, Judge, United States Tax Court

Paxson, Kirk M., attorney, Internal Revenue Service

Thornton, Michael B., Judge, United States Tax Court

Van Dornan, Shelley T., attorney, Internal Revenue Service

Wilkins, William J., Chief Counsel, Internal Revenue Service

Ziegler, Laurence D., attorney, Internal Revenue Service

page 3 -i-

STATEMENT REGARDING ORAL ARGUMENT Pursuant to 11th Cir. R. 28-1(c) and Fed. R. App. P. 34(a), counsel for the Commissioner respectfully inform this Court that they believe that oral argument would not be helpful to the Court, because the facts and law are adequately set forth in this brief.

page 4 -ii-

TABLE OF CONTENTS Page Certificate of interested persons and corporate disclosure statement .................................................... C-1

Statement regarding oral argument .......................................................... i

Table of contents ....................................................................................... ii

Table of citations ...................................................................................... iv

Statement of jurisdiction .......................................................................... xi

1. Jurisdiction in the United States Tax Court ................ xi

2. Jurisdiction in the Court of Appeals............................. xi

3. Timeliness of the appeal .............................................. xii

Statement of the issue ............................................................................... 1

Statement of the case ................................................................................ 2

(i) Course of proceedings and disposition in the court below ............................................................................... 2

(ii) Statement of the facts .................................................. 14

(iii) Statement of the standard or scope of review ............. 16

Summary of argument ............................................................................ 17

Argument ................................................................................................. 18

page 5 -iii-

The Tax Court acted within its discretion in upholding the deficiencies and additions to the tax determined by the Commissioner based on Hovind’s failure to comply with the court’s orders and to prosecute his case ................. 18

A. Introduction .................................................................. 18

B. Hovind failed properly to prosecute this case, justifying entry of a decision against him ................... 23

C. Hovind’s arguments lack merit ................................... 28

Conclusion ............................................................................................... 31

Certificate of compliance ......................................................................... 32

Certificate of service ................................................................................ 33 page 6

-iv-

TABLE OF CITATIONS Cases: Page(s) Access Now, Inc. v. Southwest Airlines Co., 385 F.3d 1324 (11th Cir. 2004) ............................................. 30

Anderson v. Osh Kosh B’Gosh, 255 F. App’x 345 (11th Cir. 2006) ......................................... 21

Arayon-Solorzano v. Government of the Republic of Nicaragua, F. App’x, 2014 WL 1386687 (11th Cir. 2014) .................. 29

Bonner v. City of Prichard, Ala., 661 F.2d 1206 (11th Cir. 1981) ............................................. 16

Broderick v. Commissioner, 63 F. App’x 374 (9th Cir. 2003) ............................................. 27

  • Cargill v. Commissioner, 272 F. App’x 756 (11th Cir. 2008) ......................................... 22

Connolly v. Commissioner, 457 F. App’x 641 (9th Cir. 2011) ........................................... 27

  • Cases or authorities chiefly relied upon are marked with asterisks.

page 7 -v-

Cases (Continued): Page(s) Crandall v. Commissioner, 650 F.2d 659 (5th Cir. 1981) ................................................. 16

Davenport Recycling Associates v. Commissioner, 220 F.3d 1255 (11th Cir. 2000) ............................................. 17

Ducommun v. Commissioner, 732 F.2d 752 (10th Cir. 1983) ............................................... 22

Durham v. Fla. East Coast Ry. Co., 385 F.2d 366 (5th Cir. 1967) ................................................. 20

  • Edelson v. Commissioner, 829 F.2d 828 (9th Cir. 1987) ........................................... 22, 27
  • Eisele v. Commissioner, 580 F.2d 805 (5th Cir. 1978) ........................................... 22, 27

Equity Lifestyle Properties, Inc. v. Florida Mowing and Landscape Service, Inc., 556 F.3d 1232 (11th Cir. 2009) ............................................. 20

  • Cases or authorities chiefly relied upon are marked with asterisks.

page 8 -vi-

Cases (continued): Page(s) Faretta v. Cal., 422 U.S. 806, 95 S. Ct. 2525 (1975) ................................. 21-22

  • Freedson v. Commissioner, 565 F.2d 954 (5th Cir. 1978) ..................................... 16, 22, 27

Gennusa v. Canova, F.3d 2014, WL 1363541 (11th Cir. 2014) ........................................... 30

Harper v. Commissioner, 99 T.C. 533 (1992) ................................................................. 23

In re Mroz, 65 F.3d 1567 (11th Cir. 1995) ............................................... 20

Johnson v. Commissioner, 116 T.C. 111 (2001) ............................................................... 23

L.V. Castle Inv. Group v. Commissioner, 465 F.3d 1243 (11th Cir. 2006) ........................................ 18-19

Link v. Wabash R. Co., 370 U.S. 626, 82 S. Ct. 1386 (1962) ...................................... 20

  • Cases or authorities chiefly relied upon are marked with asterisks.

page 9 -vii-

Cases (continued): Page(s) Long v. Commissioner, 742 F.2d 1141 (8th Cir. 1984) .......................................... 27-28

McNeil v. United States, 508 U.S. 106, 113 S. Ct. 1980 (1993) .................................... 21

Miller v. Commissioner, 300 F.2d 760 (2d Cir. 1962) .............................................. 22-23

Oelze v. Commissioner, 723 F.2d 1162 (5th Cir. 1983) ............................................... 21

Parker v. Commissioner, 57 T.C.M. (CCH) 256 (1989) .................................................. 21

Roadway Express, Inc. v. Piper, 447 U.S. 752, 100 S. Ct. 2455 (1980) .................................... 20

Rollercade, Inc. v. Commissioner, 97 T.C. 113 (1991) ................................................................. 23

Tipton v. Commissioner, 127 T.C. 214 (2006) ............................................................... 23

  • Cases or authorities chiefly relied upon are marked with asterisks.

page 10 -viii-

Cases (continued): Page(s) United States v. Hovind, 305 F. App’x 615 (11th Cir. 2008) ................................... 16, 29

Webb v. Commissioner, 872 F.2d 380 (11th Cir. 1989) ............................................... 19

Welch v. Helvering, 290 U.S. 111, 54 S. Ct. 8 (1933) ............................................ 19

  • Wrubleski v. Commissioner, 170 F. App’x 591 (11th Cir. 2005) ................................... 16, 27

Statutes:

Internal Revenue Code (26 U.S.C.):

§ 6020 ....................................................................................... 4

§ 6201(a)(1) ............................................................................ 18

§ 6212 ...................................................................................... iv

§ 6212(a) ................................................................................ 19

§ 6213 ..................................................................................... 19

§ 6213(a) ........................................................................... iv, 19

  • Cases or authorities chiefly relied upon are marked with asterisks.

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Statutes (continued): Page(s)

Internal Revenue Code (26 U.S.C.):

§ 6214 ................................................................................ iv, 19

§ 6214(a) ................................................................................ 19

§ 6215 ..................................................................................... 19

§ 6214(a) ................................................................................ 19

§ 6651(a)(2) .............................................................................. 2

§ 6651(f) ................................................................................ 2-3

§ 6654 ....................................................................................... 2

§ 6673(a)(1) .............................................................................. 6

§ 6673(a)(2) .............................................................................. 6

§ 7442 ...................................................................................... iv

§ 7453 ..................................................................................... 20

§ 7459(d) ................................................................................ 22

§ 7482(a)(1) ............................................................................. iv

§ 7483 ....................................................................................viii

  • Cases or authorities chiefly relied upon are marked with asterisks.

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Rules and Regulations: Page(s)

Fed. R. App. P.:

Rule 13(a) .............................................................................viii

Rule 26.1 .................................................................................. 1

Rule 34(a) ................................................................................. i

Tax Ct. R:

Rule 37(a) ................................................................................ 4

Rule 37(b) ................................................................................ 5

Rule 37(c) ....................................................................... 4, 6, 11

Rule 53 ............................................................................... 9, 12

  • Rule 104(c)(3) ................................................................. 17, 21
  • Rule 123(a) ........................................................................... 20
  • Rule 123(b) ..................................................................... 17, 20
  • Rule 123(d)........................................................................... 22

Rule 131(b) .............................................................................. 7

Rule 142(a) ............................................................................ 19

  • Cases or authorities chiefly relied upon are marked with asterisks.

page 13 -xi-

STATEMENT OF JURISDICTION

1. Jurisdiction in the United States Tax Court

On November 20, 2009, the Internal Revenue Service (“IRS”) sent Kent E. Hovind (“Hovind”) a notice of deficiency under Section 6212 of the Internal Revenue Code (“I.R.C.” or “Code”), 26 U.S.C., determining deficiencies and additions to the tax for his 1998 through 2006 tax years. (Doc. 3, Ex. A.)[1] On February 18, 2010, Hovind filed a petition with the Tax Court seeking redetermination of the deficiencies and additions to the tax determined by the Commissioner. (Doc. 1.) Because the petition was timely filed within 90 days after issuance of the notice of deficiency, the Tax Court had jurisdiction under I.R.C. §§ 6213(a), 6214, and 7442.

2. Jurisdiction in the Court of Appeals

This is an appeal from a final decision of the United States Tax Court (Hon. John O. Colvin) that decided all claims of the parties. (Doc. 38.) This Court has jurisdiction pursuant to I.R.C. § 7482(a)(1).

page 14 -xii-

3. Timeliness of the appeal

On May 15, 2013, the Tax Court entered its order and decision, determining deficiencies and additions to the tax against Hovind for all years at issue. (Doc. 38.) On May 30, 2013, within 90 days after entry of the decision, Hovind timely appealed. (Doc. 39.) See I.R.C. § 7483; Fed. R. App. P. 13(a).

page 15

IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

No. 13-12520-FF

Kent E. Hovind,

Petitioner-Appellant

v.

Commissioner of IRS,

Respondent-Appellee

ON APPEAL FROM THE DECISION OF THE UNITED STATES TAX COURT

BRIEF FOR THE APPELLEE

STATEMENT OF THE ISSUE

Whether the Tax Court correctly granted the Commissioner’s motion for entry of decision because Hovind did not comply with the court’s orders and showed no intention to prosecute his case.

page 16 -2-

STATEMENT OF THE CASE

(i) Course of proceedings and disposition in the court below

On November 20, 2009, the Commissioner sent Hovind a notice of deficiency, determining deficiencies and additions to the tax against Hovind as follows (Doc. 3, Ex. A)[2]

Year Deficiency I.R.C. § 6651(f) I.R.C. § 6651(a)(2) I.R.C. § 6654
1998 $113,026 $81,943.85 $28,256.50 $5,130.06
1999 $195,708 $141,888.30 $48,927.00 $9,399.26
2000 $197,061 $142,426.98 $49,112.75 $10,562.41
2001 $155,216 $112,531.60 $38,804.00 $6,203.03
2002 $155,238 $111,920.43 $38,593.25 $5,155.49
2003 $136,545 $98,995.13 $34,136.25 $3,525.02
2004 $267,428 $193,885.30 $66,857.00 $7,663.70
2005 $298,640 $216,514.00 $65,700.80 $11,978.91
2006 $147,669 $107,060.03 $23,627.04 $6,988.26

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On February 18, 2010, Hovind filed a petition in the Tax Court seeking redetermination of the tax deficiencies and additions to the tax determined by the Commissioner for the years set forth in the notice of deficiency. (Doc. 1.) In his petition, he alleged that that the notice was not authorized by law and that he was not liable for tax on his income or for the additions to the tax. (Id. at 1.) He asserted that Pensacola, Florida, where he lived during the years at issue, had not been “within any internal revenue district . . . since at least 1999” and that the notice of deficiency had not been issued, as required, by a district director. (Id. at 1-2.) He claimed that he was a minister of Creation Science Evangelism (“CSE”), whose income had been incorrectly attributed to him and which had not been allowed deductions to which it was entitled. (Id. at 1-2.)

The Commissioner answered the petition. (Doc. 3.) In subparagraphs 32(a) through 32(s) of his answer, the Commissioner made affirmative factual allegations to support his imposition of the addition to the tax under I.R.C. § 6651(f) for fraudulent failure to file returns, respecting which he bore the burden of proof. (Id. at 3-10.) The Commissioner alleged that Hovind’s fraudulent intent to evade tax

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was shown by his failure to maintain or to submit for the IRS’s inspection adequate books of accounts of his income-producing activities for 1998 through 2006, as required by I.R.C. § 6020; his failure to file Forms 1040 for the eight years at issue, resulting in understatements of his taxable income and income tax; and his conviction in a criminal tax matter involving CSE, the primary source of his unreported income, for conduct occurring during the years at issue. (Id. at 3-8.) The Commissioner attached to his answer court records related to Hovind’s criminal conviction. (Id., Exs. B, C.)

Hovind did not reply to the affirmative allegations in subparagraphs 32(a) through 32(s) of the Commissioner’s answer within 45 days after service, as required by Tax Ct. R. 37(a). See docket sheet. On July 23, 2010, the Commissioner moved, pursuant to Tax Ct. R. 37(c), for an order that the undenied allegations in those paragraphs be deemed admitted. (Doc. 4.)

Responding to the motion, Hovind asserted that “[e]ach of these purported ‘facts’ are irrelevant to the issues in this case,” which he described as “whether the Secretary of the Treasury can take any actions, in light of the admitted elimination of internal revenue districts

page 19 -5-

and district directors.” (Doc. 8 at 1.) He argued that there had been no district directors since 2000, making IRS actions against him unlawful. (Id. at 2-3.) He further argued that internal revenue districts were necessary to administer the internal revenue laws outside Washington, D.C., and that such districts had been eliminated. (Id. at 3.) Hovind also submitted a “response and objection to further answer” in which he asserted again that the facts alleged by the Commissioner were irrelevant to the issue in the case, which he defined as “whether the Secretary can act at all.” (Doc. 8 at 3.)

After the Tax Court ordered him to file “a proper Reply, i.e., a reply that comports with the requirements of Rule 37(b)” (Doc. 9), Hovind submitted a second reply in which he addressed subparagraphs 32(a) through 32(s) of the Commissioner’s answer individually (Doc. 10). He asserted, inter alia, that he and his wife did not own CSE, that its income was not theirs, and that they were not required to report its income. (Id. at 1.) He admitted that he had been indicted and convicted as stated in the Commissioner’s answer. (Id. at 2.) He stated again that the IRS was not authorized to examine his tax liabilities, “based on the elimination of internal revenue districts and district

page 20 -6-

directors,” and denied that the income and expenses determined by the IRS should be attributed to him rather than to CSE. (Id. at 2-5.) He denied any fraudulent intent in failing to file tax returns and asserted again that the facts alleged by the Commissioner were “irrelevant to the issues in the case,” described as “whether the Secretary of the Treasury can take any actions, in light of the admitted elimination of internal revenue districts and district directors.” (Id. at 4-5.)

Finding “a portion” of Hovind’s revised submission to be sufficient to constitute a reply to the affirmative allegations in the Commissioner’s answer, the Tax Court denied the Commissioner’s Rule 37(c) motion. (Doc. 11.) It noted, however, that “the record in this case is replete with patently frivolous and groundless arguments by petitioner, acting by and through his counsel,” and admonished Hovind and his counsel that, if they continued to advance arguments that were frivolous or primarily for delay, it would consider imposing penalties on them pursuant to I.R.C. § 6673(a)(1) and (2). (Id. at 2.)

The Tax Court set the case for trial on February 28, 2011 (Doc. 12) and issued a pretrial order (Doc. 13) that directed the parties, inter alia, to prepare a stipulation of facts and to identify in writing and exchange

page 21 -7-

any unstipulated documents that they intended to use at trial. (Doc. 13 at 2.) The order warned that “[t]he Court may impose appropriate sanctions, including dismissal, for any unexcused failure to comply with this Order. See Rule 131(b).”[3] (Id. at 1.)

Thereafter, the court ordered the parties to file a joint status report. (Doc. 14.) The Commissioner filed a status report, noting that his counsel had attempted, unsuccessfully, to contact Hovind’s counsel to obtain Hovind’s views on the report. (Doc. 18.) Hovind did not file a status report. See docket sheet.

On November 29, 2010, the Commissioner moved for continuance of trial (Doc. 15) and to consolidate Hovind’s case with a similar Tax Court case involving the tax liabilities of Hovind’s wife (Doc. 16). Each motion averred that Hovind’s counsel stated that Hovind had no objection to its granting. The court ordered the parties to show cause why the cases should not be consolidated (Doc. 17), to which the

page 22 -8-

Commissioner and Hovind’s wife each filed a response (Docs. 19, 20). Hovind filed no response. See docket sheet.

On February 2, 2011, the court continued the case and ordered Hovind to show cause why the case should not be dismissed for his failure to comply with the Court’s order for a status report (Doc. 14) and its order to show cause (Doc. 17) “and otherwise properly to prosecute this case.” (Doc. 22.) Hovind filed a response stating that he had “previously informed the Court” that he “agreed with the consolidation” and that this “position never changed.” (Doc. 23 at 1.) Asserting that he was serving a 10-year sentence and that forfeiture proceedings were pending in connection with his criminal case, he added that, because of his “location, and lack of resources,” and because the Commissioner had “represented [Hovind’s] position previously, no response was filed.” (Id. at 2.) The Tax Court denied the motion to consolidate (Doc. 24), discharged its order to show cause (Doc. 25), and reset the case for trial on March 5, 2012 (Doc. 26). It issued another pretrial order (Doc. 27) that, like the first (Doc. 13), warned the parties of possible sanctions,

page 23 -9-

including dismissal, if they failed to cooperate in the preparation of the case for trial.

On November 11, 2011, Hovind, acting through his counsel, moved to dismiss his petition. (Doc. 29.) The motion stated that Hovind had contacted his counsel to inform him that counsel “has been terminated upon completing one last task: to dismiss the Petition in Tax Court.” (Id. at 1.) It stated that Hovind “has made it clear that he has no intention of proceeding in tax court [sic] at any point in the future.” (Ibid.) It added that his counsel informed Hovind “that the decision to dismiss his action will result in various actions taken by the Commissioner outside of Tax Court” and that Hovind “stated that he understands that certain actions may be taken, and that he still wants his Tax Court Petition to be dismissed.” (Ibid.)

On November 15, 2011, the Tax Court denied Hovind’s motion to dismiss the petition. (Doc. 30.) The court noted that, although Tax Court rules permitted a petition to be “‘dismissed for cause upon motion of a party or upon the Court’s initiative,’” Hovind’s motion to dismiss did not state a cause for dismissal of the case. (Id. at 1, quoting Tax Ct. R. 53). It explained that a taxpayer “may not unilaterally oust the Tax

page 24 -10-

Court from jurisdiction which, once invoked, remains unimpaired until it decides the controversy.” (Ibid.) Recognizing that Hovind was currently in prison and would not be available for trial on March 5, 2012, the court continued the trial of the case and ordered the parties to file a joint status report by December 31, 2012. (Id. at 1-2.)

On December 12, 2012, the Commissioner filed a status report. (Doc. 32.) In the report, the Commissioner stated that, on December 3, 2012, Hovind’s counsel informed him that, since the issuance of the court’s November 15, 2011 order denying Hovind’s motion to dismiss the petition, he had had no contact with his client, despite attempts to reach him. (Id. at 1.) Hovind’s counsel informed the Commissioner that Hovind remained in the custody of the United States Bureau of Prisons. (Id. at 2.) On December 17, 2012, the Tax Court ordered the Commissioner to move for entry of decision. (Doc. 33.) The court based this order “[u]pon due consideration of [the Commissioner’s] Status Report, filed December 12, 2012, and the recitals therein, and of [Hovind’s] statement in his Motion to Dismiss Petition . . . that he ‘has no

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intention of proceeding in tax court [sic] at any point in the future.’” (Ibid.)

On December 26, 2012, the Commissioner moved for entry of a decision reflecting the tax deficiencies and additions to the tax set forth in the notice of deficiency. (Doc. 34.) In the motion, the Commissioner related the events in the case to that date. (Ibid.) He pointed out that, in its order denying the Commissioner’s motion under Tax Court Rule 37(c), the court had noted that “‘the record in this case is replete with patently frivolous and groundless arguments by [Hovind].’” (Id. at 2, quoting Doc. 11.) He stated that, on October 22, 2010, the Commissioner’s counsel had sent an invitation to Hovind’s counsel to meet and exchange information with respect to facts that were not in dispute, attaching informal interrogatories and requests for production to aid in this process. (Id. at 3.) He further stated that, on October 29, 2010, November 12, 2010, and November 29, 2010, the Commissioner’s counsel contacted Hovind’s counsel to discuss the informal interrogatories and requests for production and was informed that the latter was working to produce a response but that more time might be required because of Hovind’s incarceration. (Ibid.) He added that, on

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December 15, 2010, the Commissioner had issued formal interrogatories and requests for production of documents but that Hovind had not responded to these discovery requests. (Ibid.).

Continuing, the Commissioner observed that Hovind had filed a motion to dismiss the petition that stated that Hovind “‘has no intention of proceeding in tax court [sic] at any point in the future.’” (Id. at 4, quoting Doc. 29.) The Commissioner stated that, on December 3, 2012, Hovind’s counsel had informed him that, in the past year, the counsel had no contact with Hovind, despite attempts to reach him. (Id. at 4.) The Commissioner concluded that Hovind’s conduct evinced abandonment of the case, noting that Hovind failed to respond to the Commissioner’s informal and formal requests for documents and information, ended all communication with his own attorney, and moved the court to dismiss the case, stating his clear intention no longer to pursue it. (Ibid.) The Commissioner observed that Tax Ct. R. 53 allowed the court to dismiss the case on motion by the petitioner. (Ibid.) The Commissioner added that he had contacted Hovind’s counsel and been informed that the latter was not authorized to enter into any agreement with respect to the case. (Ibid.)

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On January 9, 2013, the Tax Court ordered Hovind to file an objection or other response to the Commissioner’s motion for entry of decision by January 30, 2013. (Doc. 35.) The court’s order stated that failure to comply would result in the granting of the Commissioner’s motion and entry of a decision sustaining the determinations set forth in the notice of deficiency. (Ibid.) Hovind filed no response by January 30, 2013. See docket sheet.

On February 4, 2013, Hovind filed a “motion to withdraw as counsel” that was signed by Hovind rather than by his attorney. (Doc. 36.) In the motion to withdraw, Hovind stated that “[i]n about Jan. 1, 2010 [sic][4] I instructed [his counsel] to remove himself as ‘representing me.’ He was to pass all documents of the case to me. He apparently failed to do so.” (Ibid.) He stated that “I have received no notices of any kind from the IRS or this court in over 3 years and was unaware anything was being filed by anyone claiming to represent me.” (Ibid.) He requested the court to “send any notices to the address” set forth on the motion. (Ibid.)

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On February 13, 2013, the Tax Court granted Hovind’s motion to withdraw counsel. See docket sheet. The same day, the court issued an order extending to March 6, 2013, the time within which Hovind’s response to the motion for entry of decision was due. (Doc. 37.) It instructed the clerk to attach a copy of that motion to the copy of the order that was served on Hovind. (Ibid.) Hovind filed no response to the motion for entry of decision. See docket sheet.

On May 15, 2013, the Tax Court issued its order and decision. (Doc. 38.) It stated that, “[b]y orders dated January 9 and February 13, 2013, [Hovind] was ordered to file an Objection, if any, to [the Commissioner’s] motion [for entry of decision]. To date, [Hovind] has filed no response to [the Commissioner’s] motion.” (Doc. 38.) Thus, “[i]n view of the foregoing,” it ordered and decided that there were deficiencies and additions to the tax due from Hovind as determined in the notice of deficiency. (Ibid.)

Hovind filed his notice of appeal on May 30, 2013. (Doc. 39.)

(ii) Statement of the facts

During the years 1998 through 2006, Hovind lived in Pensacola, Florida. (Doc. 1 at 1.) In July 2006, he was indicted for tax-related page 29 -15-

crimes stemming from his involvement with CSE during the years 2001 through 2003. (Doc. 3, Ex. B.) The indictment alleged, inter alia, that Hovind owned and operated CSE and, through CSE, operated Dinosaur Adventure Land, an amusement park that included rides, a museum, and a science center. (Id. at 2.) It stated that Hovind, through CSE, also sold literature, videos, CDs, and other materials and provided lecture services and live debates for a fee. (Ibid.) It alleged that Hovind employed salaried and hourly-wage workers at CSE and other entities he controlled and that, as the owner/operator of CSE and its related entities, he was responsible for withholding and paying federal income and employment taxes, which he had failed to do. (Id. at 2-5.) It further alleged that Hovind had structured banking transaction so as to avoid reporting requirements. (Id. at 5-8.) It alleged that he had attempted to impede the administration of the tax laws by, inter alia, destroying records and paying his employees in cash and labeling them “missionaries” rather than employees so as to avoid payroll tax requirements. (Id. at 8-9.)

Hovind was found guilty on all counts of the crimes with which he was charged, including willful failure to collect, account for, and pay

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over payroll and withholding taxes to the IRS, structuring currency transactions to evade currency reporting requirements, and endeavoring to obstruct and impede the IRS in enforcement of the tax laws. (Doc. 3, Ex. C.) In January 2007, he was sentenced to a 10-year term in prison, supervised release, a fine, and restitution. (Id. at 2-8.) This Court affirmed his conviction. See United States v. Hovind, 305 F. App’x 615 (11th Cir. 2008).

(iii) Statement of the standard or scope of review

The Tax Court’s decision to dismiss a case for failure to prosecute is reviewed for abuse of discretion. Wrubleski v. Commissioner, 170 F. App’x 591, 595 (11th Cir. 2005); Crandall v. Commissioner, 650 F.2d 659, 660 (5th Cir. 1981); Freedson v. Commissioner, 565 F.2d 954, 955 (5th Cir. 1978).[5] This Court will reverse the Tax Court for abuse of discretion only if the Court has a definite and firm conviction that the Tax Court committed a clear error of judgment in the conclusion it

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reached. Davenport Recycling Associates v. Commissioner, 220 F.3d 1255, 1258 (11th Cir. 2000).

SUMMARY OF ARGUMENT

Courts have inherent power to dismiss an action or enter a default judgment to ensure the orderly administration of justice and the integrity of their orders. In particular, Tax Court Rule 123(b) provides that the court may dismiss an action and enter a decision against the petitioner for any failure of the petitioner to prosecute his case, to comply with any order of the court, “or for other cause which the Court deems sufficient.” Further, Tax Court Rule 104(c)(3) provides that the court may impose sanctions, including dismissal, against a petitioner who fails to produce documents, answer interrogatories, or enter into a stipulation before trial. The Tax Court did not abuse its discretion in entering decision in favor of the Commissioner in this case. Hovind advanced frivolous arguments, failed to participate in discovery, repeatedly failed to comply with the court’s orders, and indicated his intention to abandon his case. He failed to respond to the motion for entry of decision, though twice ordered by the court to file a response. In these

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circumstances, the court was amply justified in entering decision against him.

Hovind argues on appeal that his attorney did not forward unidentified filings in the case to him. He does not, however, claim that he did not receive the Commissioner’s motion for entry of decision or the Tax Court’s orders directing him to respond to that motion. He also argues that the income set forth in the notice of deficiency was not properly taxable to him. He did not, however, present this argument to the Tax Court and may not raise it for the first time on appeal.

In sum, Hovind has offered no reason for reversing the Tax Court’s decision, which is correct and should be affirmed.

ARGUMENT

The Tax Court acted within its discretion in upholding the deficiencies and additions to the tax determined by the Commissioner based on Hovind’s failure to comply with the court’s orders and to prosecute his case

A. Introduction

“[T]he Commissioner can immediately assess the tax liability that a taxpayer reports on a return,” L.V. Castle Inv. Group v. Commissioner, 465 F.3d 1243, 1247 (11th Cir. 2006); see I.R.C. § 6201(a)(1). The Commissioner generally may not, however, make an page 33 -19-

assessment of income tax beyond the amount reported as due by the taxpayer, without first providing the taxpayer with a written notice of the determination of a deficiency in tax, which the taxpayer may challenge in the Tax Court. See I.R.C. §§ 6212(a), 6213, 6214, 6215. This notice of deficiency is the taxpayer’s “ticket to the Tax Court.” L.V. Castle, 465 F.3d at 1247 (internal quotes omitted). If a taxpayer timely files a petition with the Tax Court, that court has jurisdiction to redetermine the correct amount of the deficiency and any asserted additions to the tax. I.R.C. § 6214(a).

The Commissioner’s determination of a deficiency is presumptively correct, and the taxpayer bears the burden of showing that it is erroneous. See Welch v. Helvering, 290 U.S. 111, 115, 54 S. Ct. 8, 9 (1933); Webb v. Commissioner, 872 F.2d 380-81 (11th Cir. 1989); Tax Ct. R. 142(a) (burden of proof on the petitioner except as provided by statute or determined by the court). The Commissioner is not permitted to make an assessment or pursue any collection activity with respect to the deficiency “until the decision of the Tax Court has become final.” I.R.C. § 6213(a).

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Courts have inherent power to dismiss an action or enter a default judgment to ensure the orderly administration of justice and the integrity of their orders. Roadway Express, Inc. v. Piper, 447 U.S. 752, 764, 100 S.Ct. 2455, 2463 (1980); Link v. Wabash R. Co., 370 U.S. 626, 629-30, 82 S. Ct. 1386, 1388-89 (1962); In re Mroz, 65 F.3d 1567, 1575 n.9 (11th Cir. 1995) (inherent powers of federal courts include dismissal for failure to prosecute). “‘The power to invoke this sanction is necessary in order to prevent undue delays in the disposition of pending cases and to avoid congestion in the calendars of the’” trial court. Equity Lifestyle Properties, Inc. v. Florida Mowing and Landscape Service, Inc., 556 F.3d 1232, 1240 (11th Cir. 2009) (quoting Durham v. Fla. East Coast Ry. Co.¸ 385 F.2d 366, 367 (5th Cir. 1967)).

Under the authority granted by Congress in I.R.C. § 7453, the Tax Court has promulgated Rules of Practice and Procedure governing the conduct of proceedings in that court. These rules provide a Tax Court judge with broad authority to dismiss a case and enter a decision against a party who has “failed to plead or otherwise proceed as provided by these Rules or as required by the Court.” Tax Ct. R. 123(a). Tax Court Rule 123(b) specifically allows the court to dismiss a case for

page 35 -21- 11333216.1 want of proper prosecution, providing that, “[f]or failure of a petitioner properly to prosecute or to comply with these Rules or any order of the Court or for other cause which the Court deems sufficient, the Court may dismiss a case at any time and enter a decision against the petitioner.” Similarly, Tax Court Rule 104(c)(3) provides that the court may impose sanctions, including dismissal, against a petitioner who fails to produce documents, answer interrogatories, or enter into a stipulation before trial. See Oelze v. Commissioner, 723 F.2d 1162, 1163-64 (5th Cir. 1983) (upholding dismissal for failure to comply with discovery orders).

Although pleadings filed by parties proceeding pro se are liberally construed, pro se parties are not absolved of compliance with the rules and requirements of the courts. See Anderson v. Osh Kosh B’Gosh, 255 F. App’x 345, 348 n.4 (11th Cir. 2006) (a party’s “pro se status in civil litigation generally will not excuse mistakes he makes regarding procedural rules”) (citing McNeil v. United States, 508 U.S. 106, 113, 113 S. Ct. 1980, 1984 (1993)); Parker v. Commissioner, 57 T.C.M. (CCH) 256, 259 (1989) (“a taxpayer, notwithstanding his pro se status, is expected to abide by the relevant Rules of this Court”); see also Faretta

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v. Cal., 422 U.S. 806, 834 n.46, 95 S. Ct. 2525, 2541 (1975) (pro se status is not “a license not to comply with relevant rules of procedural and substantive law”).

Under Tax Court Rule 123(d), “[a] decision rendered . . . in consequence of a dismissal, other than a dismissal for lack of jurisdiction, shall operate as an adjudication on the merits.” Therefore, a decision of the Tax Court dismissing a proceeding is considered as its decision that the deficiency is the amount determined by the Commissioner. I.R.C. § 7459(d).

The Tax Court has frequently invoked these rules in dismissing cases brought by taxpayers who failed to appear at trial, failed properly to prosecute their cases, or otherwise hindered the progress of their cases through disobedience of the Tax Court’s rules and orders. See, e.g., Cargill v. Commissioner, 272 F. App’x 756, 757-60 (11th Cir. 2008); Wrubleski v. Commissioner, 170 F. App’x 591, 596 (11th Cir. 2005); Eisele v. Commissioner, 580 F.2d 805, 805 (5th Cir. 1978); Freedson v. Commissioner, 565 F.2d 954, 955 (5th Cir. 1978); Edelson v. Commissioner, 829 F.2d 828, 931 (9th Cir. 1987); Ducommun v. Commissioner, 732 F.2d 752, 754 (10th Cir. 1983); Miller v.

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Commissioner, 300 F.2d 760, 760 (2d Cir. 1962); Tipton v. Commissioner, 127 T.C. 214, 218-19 (2006); Johnson v. Commissioner, 116 T.C. 111, 117-18 (2001); Harper v. Commissioner, 99 T.C. 533, 541 (1992); Rollercade, Inc. v. Commissioner, 97 T.C. 113, 116-17 (1991).

B. Hovind failed properly to prosecute his case, justifying entry of a decision against him

The history of this case shows Hovind’s repeated failure to comply with the Tax Court’s orders and to prosecute the case. Accordingly, the Tax Court did not abuse its discretion in entering judgment for the Commissioner, a dismissal of the petition that was well warranted under the Tax Court’s rules.

As the Tax Court observed, Hovind’s petition (Doc. 1) and his initial response (Doc. 8) to the Commissioner’s answer (Doc. 3) were “replete with patently frivolous and groundless arguments by [Hovind].” (Doc. 11.) Further, contrary to the court’s pretrial orders (Docs. 13, 27), Hovind did not cooperate in preparing the case for trial. Those pretrial orders warned that the court “may impose appropriate sanctions, including dismissal, for any unexcused failure to comply with this Order.” (Docs. 12, 27.) Nevertheless, as the Commissioner informed the court (Doc. 34 at 3), Hovind (acting through his counsel) had not met page 38 -24-

with the Commissioner to exchange information respecting facts not in dispute or responded to either informal or formal discovery requests.

Hovind repeatedly failed to comply with the Tax Court’s orders, including the pretrial orders (Docs. 13, 27) and the orders to file status reports (Doc. 14) and to show cause why the case should not be consolidated with that of his wife (Doc. 17). The court twice continued the trial, from its original date of February 28, 2011 (see Doc. 12) to March 5, 2012 (see Doc. 26) and then indefinitely, in recognition of the difficulties that Hovind’s incarceration imposed (Doc. 30).

Hovind evinced a clear intention to abandon the case. On November 1, 2011, he filed a motion to dismiss his petition (Doc. 29), which stated that he had contacted his counsel to inform him that counsel would be terminated upon dismissal of the petition; that he had “made it clear” to his counsel “that he has no intention of proceeding in [T]ax [C]ourt at any point in the future”; and that, warned by his counsel that dismissing the action “will result in various actions taken by the Commissioner outside of Tax Court,” he had “stated that he understands that certain actions may be taken and that he still wants the Tax Court petition to be dismissed.”

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In his December 12, 2012 status report, the Commissioner informed the Tax Court that Hovind’s counsel had stated that, after the denial of Hovind’s motion to dismiss, the counsel had attempted to contact Hovind, without success. (Doc. 32 at 1.) Thereupon, the Tax Court ordered the Commissioner to move for entry of decision. (Doc. 33.) The court based this order “[u]pon due consideration of [the Commissioner’s] Status report, filed December 12, 2011, and the recitals therein, and of [Hovind’s] statement in his Motion to Dismiss Petition . . . that he ‘has no intention of proceeding in tax court [sic] at any point in the future.” (Ibid.)

In his motion for entry of judgment, the Commissioner set forth the evidence of Hovind’s intention to abandon his case, including his assertion of frivolous arguments, his failure to respond to the Commissioner’s informal and formal requests for documents and information, his ending of all communications with his own attorney, and his motion to dismiss his case, in which he stated his clear intention no longer to pursue it. (Doc. 34.)

On January 9, 2012, the Tax Court ordered Hovind to file an “Objection, Notice of No Objection, or other Response” to the motion for page 40 -26-

entry of decision by January 30, 2013, adding that “[f]ailure to comply with this Order will result in the granting of [the Commissioner’s] motion and entry of decision sustaining the determinations set forth in the notice of deficiency.” (Doc. 35.) Rather than responding to the court’s order, on February 4, 2013, Hovind filed a “motion to withdraw as counsel,” signed by himself rather than his attorney, asserting that he had previously instructed his counsel to withdraw from the case and to pass all documents in the case to Hovind; that the attorney had not done so; and that the court should send “any notices to the address” he set forth. (Doc. 36.)

The Tax Court granted Hovind’s motion to withdraw counsel and extended the time for him to respond to the motion for entry of decision, directing the clerk of the court to send both the motion and the order extending the time to respond to Hovind. (Doc. 37.) In spite of this accommodation, Hovind failed to submit any response to the motion for entry of decision.

In these circumstances, the Tax Court was amply justified in entering decision against Hovind, who had failed properly to prosecute his case for over three years and, indeed, had indicated his intention not

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to prosecute it. See Wrublski, 170 F. App’x 591 (dismissal proper where, inter alia, pretrial order and notice of trial warned taxpayer that his unexcused failure to appear and be ready for trial on trial date might result in sanctions, including dismissal); Eisele, 580 F.2d at 805 (upholding dismissal of petition where taxpayers failed to produce documents sought by the Commissioner); Freedson, 565 F.2d at 955 (dismissal proper where, inter alia, taxpayer had obtained three continuances of trial date and had been uncooperative in providing Commissioner with information necessary for trial); Connolly v. Commissioner, 457 F. App’x 641 (9th Cir. 2011) (dismissal proper where taxpayer was unwilling to enter into stipulation, provide necessary documents to Commissioner, or proceed with case at trial); Broderick v. Commissioner, 63 F. App’x 374 (9th Cir. 2003) (dismissal sustained where taxpayer did not stipulate to facts, and did not identify or prove any deductions to refute the deficiency determination); Edelson, 829 F.2d at 831 (Tax Court did not abuse its discretion in dismissing taxpayer’s petition where taxpayer failed to produce records, failed to enter stipulations, and failed to appear at trial); Long v. Commissioner,

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742 F.2d 1141, 1143 (8th Cir. 1984) (dismissal proper where taxpayers resisted Commissioner’s attempts to reach a stipulation).

C. Hovind’s arguments lack merit

1. On appeal, Hovind argues (Br. 1) that, “due to being frequently transferred,” he had “not received notice of many of the relevant motions, orders and requirements,” and had “no means to attend the trial or its hearings, all of which is a clear violation” of his right to due process. (Br. 1.) This argument lacks merit. Hovind was represented in the Tax Court by counsel from February 18, 2010, when his petition was filed, until February 13, 2013, when his motion to withdraw counsel was granted. According to the statements of that counsel to the court or to the Commissioner’s counsel, Hovind’s counsel was in contact or in attempted contact with Hovind throughout the proceedings. (See Docs. 15, 16, 29, 32.) Hovind does not claim that he lacked the ability to communicate with his attorney. Moreover, the Tax Court made every effort to accommodate Hovind’s situation. The court indefinitely continued the trial date, which had already been extended, in recognition that Hovind would not be available for trial. (Doc. 30.) Further, the court gave Hovind the

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opportunity to set forth the merits of his case and show why it should go to trial when it directed him to respond to the Commissioner’s motion for entry of decision. Hovind does not claim that he did not receive the motion for entry of decision or otherwise explain why he did not file any response to it. We note that he received the Tax Court’s order and decision (Doc. 38) promptly, as he filed his notice of appeal (Doc. 39) just fifteen days after the decision was entered and sent to him.

2. Hovind also argues that he is not liable for the tax set forth in the notice of deficiency and sustained by the Tax Court because he is a “minister” of CSE and thus not liable for tax under various provisions of the Code. (Br. 1-3.) In fact, his arguments largely address the issues in his criminal case and the related asset-forfeiture proceeding. See United States v. Hovind, 305 F. App’x 615 (11th Cir. 2008); United States v. Hovind, No. 3:06cr00083 (N.D. Fla.).

In any event, Hovind failed to present this argument to the Tax Court in response to the Commissioner’s motion for entry of decision. Accordingly, he is precluded from advancing it in this Court on appeal. See Arayon-Solorzano v. Government of the Republic of Nicaragua, F. App’x , 2014 WL 1386687, at *3 n.5 (11th Cir. 2014) (declining to

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address arguments raised for the first time on appeal); Gennusa v. Canova, F.3d , 2014 WL 1363541, at *9 (11th Cir. 2014) (a “passing reference” to an argument in a summary judgment motion, “unaccompanied by any discussion or elaboration,” was insufficient to present it on appeal); Access Now, Inc. v. Southwest Airlines Co., 385 F.3d 1324, 1332-33 (11th Cir. 2004) (declining to address argument raised for the first time on appeal that, inter alia¸ was fact-dependent and that appellant had the opportunity to raise in the court below).

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CONCLUSION

For the reasons stated above, the order and decision of the Tax Court is correct and should be affirmed.

Respectfully submitted,

KATHRYN KENEALLY

Assistant Attorney General

/s/ Carol Barthel

ROBERT W. METZLER

CAROL BARTHEL

Attorneys

Tax Division

Department of Justice

Post Office Box 502

Washington, D.C. 20044

APRIL 2014

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CERTIFICATE OF COMPLIANCE

WITH TYPE-VOLUME LIMITATION, TYPEFACE REQUIREMENTS, AND TYPE STYLE REQUIREMENTS

1. This brief complies with the type-volume limitation of Fed. R. App. P. 32(a)(7)(B) because:

[X] this brief contains 5,870 words, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii), or

[ ] this brief uses a monospaced typeface and contains [state the number of] lines of text, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii).

2. This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because:

[X] this brief has been prepared in a proportionally spaced typeface using Microsoft Word 2010 in 14-point Century Schoolbook, or

[ ] this brief has been prepared in a monospaced typeface using [state name and version of word processing program] with [state number of characters per inch and name of type style].

/s/ Carol Barthel _

Attorney for Commissioner of Internal Revenue _

Dated: April 25, 2014 _ page 47 -33-

CERTIFICATE OF SERVICE

I hereby certify that on this 25th of April, 2014, this brief was filed with the Clerk of the United States Court of Appeals for the Eleventh Circuit by using the appellate CM/ECF system, and seven (7) paper copies were sent to the Clerk by First Class Mail. Service was made on the appellant, who is appearing pro se, on this 25th day of April 2014, by sending him one paper copy by First Class Mail in an envelope properly addressed as follows:

Mr. Kent E. Hovind

  1. 06452-017

Berlin Federal Prison Camp

P.O. Box 9000

Berlin, NH 03570

/s/ Carol Barthel _

CAROL BARTHEL

Attorney page 48

Footnotes[edit]

  1. “Doc.” references are to the documents in the record of this case as numbered by the clerk of the Tax Court and transmitted to this Court.
  2. The additions to the tax asserted against Hovind were for fraudulent failure to file returns (I.R.C. § 6651(f)), failure to pay tax (I.R.C. § 6651(a)(2)), and failure to pay estimated tax (I.R.C. § 6654).
  3. Tax Ct. R. 131(b) provides for the issuance of a pretrial order or other instructions for trial preparation and states that “[u]nexcused failure to comply with any such order may subject a party or a party’s counsel to sanctions.”
  4. The petition in this case was filed on February 18, 2010. (Doc. 1.)
  5. In Bonner v. City of Prichard, Ala., 661 F.2d 1206, 1209 n.15 (11th Cir. 1981) (en banc), this Court adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to October 1, 1981.

See also[edit]

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).