While the power to issue a jeopardy assessment has been referred to as part of a state’s “power of the purse, not its power of the sword,” state and local taxing authorities have shown a propensity to impose jeopardy assessments. Indiana Dep’t of State Revenue v. Adams, 762 N.E.2d 728, 732-33 (Ind. 2002). Luckily, state courts increasingly are willing to look behind jeopardy assessments to determine whether the statutory requirements for their issuance have been met. In Garwood v. Indiana Dep’t of State Revenue, No. 82T10-0906-TA-29 (Ind. Tax Ct. Aug.19, 2011), the Indiana Tax Court invalidated 16 jeopardy assessments issued by the Indiana Department of Revenue as a result of the Department’s abuse of its jeopardy assessment authority.

The Garwoods supplemented their dairy farm income by breeding and selling dogs.  Prompted by a series of consumer complaints, the Indiana Attorney General investigated the Garwoods. Undercover Attorney General agents purchased dogs and found that the Garwoods had failed to pay Indiana income tax and to collect and remit sales tax. In addition, the Garwoods did not register as retail merchants or file sales tax returns. The Department served jeopardy assessments on the Garwoods at their home and demanded immediate payment of the tax, interest, and penalties alleged to be owed. When the Garwoods informed a Department official that they could not pay immediately, the Department served them with jeopardy tax warrants and, on that same morning, state officials, police, and 60 volunteers from various humane societies raided the farm and seized all 240 of the Garwoods’ dogs, including their house pets and farm dogs. Later that day, the seizures were made public in a television press conference and newspaper interview (which the court described as a “media circus”). A day later, state officials sold all of the Garwoods’ dogs for a total of $300.Continue Reading Indiana Jeopardy Assessments (and Taxpayer) Turn Out to be a Dog