Further appellate review granted. 470 Mass. 1106 (2014).
Argued June 4, 2014.
Suffolk. Appeal from a decision of the Appellate Tax Board.
Francis J. DiMento for the taxpayers.
John M. Stephan, Assistant Attorney General, for Commissioner of Revenue.
Present: Graham, Meade, & Fecteau, JJ.
[16 N.E.3d 1131] Graham, J.
This is an appeal from an Appellate Tax Board (board) decision upholding the denial by the Commissioner of Revenue (commissioner) of a request for an abatement of double taxes assessed to George and Sandra Schussel (Schussels) for filing false or fraudulent income tax returns for the calendar years 1993, 1994, and 1995 (tax years at issue). The case presents three issues: first, whether the board erred as a matter of law in upholding the commissioner's double tax assessment based on the Schussels' false or fraudulent filings; second, whether the
Schussels were entitled to amnesty from the double tax assessment; and third, whether the board erred as a matter of law in ruling that the seven-year look-back period for nonfiling taxpayers does not apply to the Schussels. We affirm.
The facts are taken from the board's findings of fact and report. George received his bachelor's degree from the University of California in 1961. He attended graduate school at Harvard University, where he earned a master's degree and Ph.D. in 1966. Sandra, who was born and raised in Lynn, attended the Peter Brent Brigham Hospital nursing school in Boston and graduated in 1962. She practiced as a registered nurse at The Children's Hospital in Boston for six months before leaving to begin work as a flight attendant for American Airlines.
The Schussels met in 1964 and were married the following year. They lived in Cambridge while George completed his education at Harvard. After George became employed, the couple relocated several times. The couple lived in New Jersey when their first daughter was born in 1970. Later that year, the Schussels moved back to Massachusetts, and George [16 N.E.3d 1132] secured a job at American Mutual Insurance Company. In 1971, the family moved to Lynnfield.
In 1979, George founded his own company, Digital Consulting, Inc. (DCI), which he incorporated in Massachusetts. DCI organized, promoted, and conducted trade shows and conferences that were designed to teach guests how to utilize the latest technological advancements to solve business and government problems. The events were held in several major cities in the United States, as well as in foreign countries. During the tax years at issue, George operated DCI from an office in Andover.
George testified to the board that, during the tax years at issue, he spent approximately 70 days a year in Massachusetts, 80 days a year in Florida, 95 days a year traveling for business, and 120 days a year in New Hampshire. However, he testified at his deposition that he was in Massachusetts for about a third of each year, or nearly 120 days.
On February 26, 2004, George was indicted in the United States District Court for the District of Massachusetts on one
count of conspiracy and two counts of tax evasion, including that he filed a false and fraudulent income tax return for the tax year 1995. The parties agree that, based on Internal Revenue Service (IRS) letter 692 and form 4549-A, the Schussels' adjusted income was determined to be as follows: $1,661,709 for tax year 1993; $2,354,817 for tax year 1994; and $3,341,868 for tax year 1995. These amounts were known as of January 20, 2009, when form 4549-A was issued. George reported his Federal taxable income to be substantially less than these figures. In one instance, the 1995 Federal return reported income of only $1,030,785, a difference of $2,311,083 from the adjusted income for that year. On January 25, 2007, he was found guilty on all three charges. He served a prison sentence until he was granted a supervised release on February 1, 2011.
Although the Schussels owned and maintained a Massachusetts corporation and a residence in Lynnfield, they failed to file any Massachusetts personal income tax returns, whether resident or nonresident, from 1988 to June, 2007. On May 15, 2007, the commissioner issued a notice of failure to file personal income taxes with the Department of Revenue (department). The notice was sent to the Schussels' attorney tax preparers. Only then did the Schussels file State returns for the tax years at issue. However, the returns filed with the department were based on the Federal returns, which had been deemed false or fraudulent and led to George's convictions.
On January 20, 2009, the commissioner applied the immediate assessment, double tax assessment, and jeopardy assessment provisions of G. L. c. 62C, § § 26( d ), 28, and 29, respectively. Approximately one month later, the commissioner inadvertently issued a tax amnesty notice to the Schussels. The amnesty notice indicated that if, by a specified date, they paid the full amount of tax and interest assessed under the immediate assessment provision, [16 N.E.3d 1133] the commissioner would waive the unpaid penalties and the interest associated with those penalties. The Schussels timely paid the amounts due, and the commissioner waived the penalties and related interest. This waiver saved the Schussels $905,215.32. The amount due, as indicated by the amnesty notice, did not include the double tax assessed under § 28. The commissioner did not waive the double tax assessment.
The Schussels appealed the commissioner's double tax assessment to the board, pursuant to G. L. c. 58A, § 7, and G. L. c. 62C, § 39( c ), arguing that the commissioner's refusal to grant an abatement was in error. The board found that the commissioner's application of the double assessment provision in G. L. c. 62C, § 28, was justified by the Schussels' " reckless indifference to the obligation to file accurate taxes."
1. Standard of review.
"Findings of the board are final, see G. L. c. 58A, § 13, and will not be disturbed if they are supported by sufficient evidence." General Mills, Inc. v. Commissioner of Rev., 440 Mass. 154, 161, 795 N.E.2d 552 (2003). " Our review of the sufficiency of the evidence is limited to 'whether a contrary conclusion is not merely a possible but a necessary inference from the findings.'" Olympia & York State St. Co. v. Assessors of Boston, 428 Mass. 236, 240, 700 N.E.2d 533 (1998), quoting from Kennametal, Inc. v. Commissioner of Rev., 426 Mass. 39, 43, 686 N.E.2d 436 (1997), cert. denied, 523 U.S. 1059, 118 S.Ct. 1386, 140 L.Ed.2d 646 (1998). " If supported by sufficient evidence, we will not reverse a decision of the board unless it is based on an incorrect application of the law." Syms Corp. v. Commissioner of Rev., 436 Mass. 505, 511, 765 N.E.2d 758 (2002). " In reviewing mixed questions of fact and law, the board's expertise in tax matters must be recognized, ...