Bert v. Comptroller of the Treasury
81 A.3d 460
Md. Ct. Spec. App.2013Background
- Colvin I. Bert filed "zero" or amended Maryland returns for tax years 1999, 2000, 2001, 2002 and 2004 that excluded or reported $0 wages despite employer W-2s showing substantial compensation.
- The Comptroller audited, adjusted the returns (including recomputing 2004), and assessed $500 frivolous-return penalties for each year at issue.
- Bert appealed the Comptroller’s Final Determination to the Maryland Tax Court; the Tax Court held de novo hearings, rejected Bert’s tax-protester arguments, and affirmed the assessments and penalties.
- Bert sought judicial review in the Circuit Court for Howard County, which affirmed the Tax Court.
- On appeal to the Maryland Court of Special Appeals, Bert challenged (a) the denial of exclusion of wages and imposition of frivolous-return penalties, (b) the Comptroller employee’s authority to assess, (c) procedural/due-process and Fifth Amendment claims, and (d) burden-of-proof allocation. The court affirmed.
Issues
| Issue | Plaintiff's Argument (Bert) | Defendant's Argument (Comptroller) | Held |
|---|---|---|---|
| 1. Are wages reported on W-2s taxable income and properly includable for 2004? | Wages are not taxable because Bert contends he is not an "employee" under IRC §3401(c) or that Maryland (or some of his work) is outside the U.S. | Wages are compensation and taxable; "employee" and sourcing arguments are meritless; Maryland looks to federal AGI but Comptroller may adjust demonstrably incorrect federal figures. | Court affirmed: wages are taxable, Bert is an employee, Maryland may adjust an incorrect federal AGI. |
| 2. Were $500 frivolous-return penalties for 1999–2002 and 2004 improper? | Bert says his returns mirrored his federal filings and thus were proper; Comptroller’s later adjustments absolve him of culpability. | The zero returns lacked information or showed positions frivolous on their face and evidenced intent to impede; TG §13-705 authorizes penalty. | Court affirmed: zero returns were frivolous under TG §13-705; penalties valid. |
| 3. Did the Comptroller employee lack statutory authority to assess adjustments and penalties? | Bert argued the specific employee’s job description did not show authority to assess, so assessments were unlawful. | Statute and Tax-General definitions include Comptroller employees/agents; auditors who find deficiencies must assess. | Court held the auditor had authority; statutory scheme and job duties authorized assessment. |
| 4. Were Bert’s procedural/due process and Fifth Amendment rights violated by Tax Court procedures (de novo hearing, compelled testimony)? | Bert claimed no proper de novo review, missing administrative record, and that he was forced to testify against Fifth Amendment rights. | Tax Court conducted a de novo hearing, admitted evidence consistent with TG and COMAR, and properly required sworn testimony but preserved Fifth Amendment invocation standards. | Court rejected claims: de novo hearing and procedures were proper; no Fifth Amendment violation shown; Tax Court acted within discretion. |
Key Cases Cited
- Frey v. Comptroller, 184 Md. App. 315 (Md. Ct. Spec. App. 2009) (standards for judicial review of Tax Court decisions)
- Comptroller v. Colonial Farm Credit, ACA, 173 Md. App. 173 (Md. Ct. Spec. App. 2007) (Comptroller not bound by federal figure when demonstrably incorrect)
- United States v. Latham, 754 F.2d 747 (7th Cir. 1985) (definition of "employee" not limited to entities enumerated in statute)
- United States v. Mosel, 738 F.2d 157 (6th Cir. 1984) (zero returns may be non-returns when they lack information to compute tax)
- Beard v. Commissioner, 82 T.C. 766 (Tax Ct. 1984) (four-part test for whether a filing constitutes a tax "return")