Tax Court Rejects Nursing Home's Challenge To Economic Hardship Regulation
The U.S. Tax Court issued a precedential opinion regarding the levy actions of the Internal Revenue Service against Lindsay Manor Nursing Home, located in rural Oklahoma. The nursing home had a history of nonpayment or late payment of employment taxes, primarily due to late or non-payments of Medicare and Medicaid reimbursements by the government. The taxpayer argued that it qualified for a hardship exemption from levy action under IRC §6343, and that Regulation §301-6343-1(b)(4)(i), which limits hardship relief to individuals to allow them to pay for basic living expenses, is invalid since it conflicts with the statute. The Tax Court ruled against Lindsay Manor Nursing Home, and upheld the regulation. The Court held that the IRS’ settlement officer did not abuse her discretion, and the economic hardship exemption does not apply to corporations, despite the fact that the nursing home’s patients would be deprived of adequate care as a result of the IRS levy and seizure of the nursing home’s assets. Lindsay Manor Nursing Home, Inc. v. Commissioner, 148 T.C. No. 9 (March 23, 2017).
Stealing Money from a Bank Account Is “Defrauding a Financial Institution”
Perhaps getting a bit too creative for his own good, Lawrence Shaw argued that his conviction under 18 U.S.C. sec. 1344(1), for “executing a scheme . . . To defraud a financial institution,” should be overturned because what he really did—steal information about a person’s bank account so he could take funds from that person’s account—did not defraud the bank itself, but rather just the person he stole from. The Court, in a unanimous opinion by Justice Breyer, slammed the door shut on that potential loophole, and affirmed the conviction, noting at the outset that the bank did indeed have “property rights” in a depositor’s funds, at minimum like a bailee. Even if the bank itself suffered no loss, the statute’s prohibition still applied. However, the Court granted Shaw a slight victory: he complained that his jury instruction might have led the jury to believe that he could be convicted under the statute without it being proven that his scheme was intended to deprive the bank of “something of value.” The Court vacated and remanded for further proceedings on the instruction, although noting that the Ninth Circuit could find that the error was harmless. Given the facts and the Court’s opinion, harmless error would seem likely.