The dispute arose from IRS
fraud penalties exceeding $30 million assessed against two couples, the
Hirsches and the Birdmans, tied to alleged misreporting and improper claims of
U.S. Virgin Islands residency between 2003 and 2006. The taxpayers challenged
the penalties in U.S. Tax Court and requested jury trials, arguing that the
penalties were punitive in nature and therefore triggered Seventh Amendment
protections.
The Tax Court rejected that
request, reiterating the longstanding position that taxpayers do not have a
constitutional right to a jury trial in deficiency proceedings against the
federal government.
The taxpayers’ position
gained momentum following the Supreme Court’s 2024 decision in SEC v. Jarkesy,
where the Court held that the SEC violated the Seventh Amendment by imposing
civil penalties through administrative proceedings without a jury. Relying on
that precedent, the taxpayers argued that IRS fraud penalties are similarly
punitive and should entitle them to a jury trial.
They sought a writ of
mandamus from the Eleventh Circuit to compel the Tax Court to grant a jury
trial, asserting that Jarkesy effectively invalidates juryless adjudication of
such penalties.
Eleventh Circuit and Mandamus Standard
The Eleventh Circuit denied
the request, applying the traditional mandamus standard. The court found that:
·
The taxpayers had alternative means of relief, including appealing
a final Tax Court decision.
·
Their right to a jury trial was not “clear and indisputable.”
The taxpayers argued this
approach conflicts with other circuits and deepens an existing split over how
mandamus should be applied in the jury trial context.
On June 22, 2026, the
Supreme Court denied certiorari without comment. While not a ruling on the
merits, the denial effectively preserves the status quo:
·
Tax Court proceedings remain non-jury forums.
·
Taxpayers cannot use mandamus as a shortcut to secure jury trials
in pending tax cases.
·
The broader constitutional question post-Jarkesy remains
unresolved.
For tax practitioners, the
decision reinforces several key points:
·
Jury trials in federal tax disputes remain limited to refund
litigation in district court or the Court of Federal Claims—not Tax Court
deficiency cases.
·
Jarkesy has not (yet) been extended to IRS enforcement or civil
tax penalties.
·
Procedural challenges to Tax Court jurisdiction or structure will
likely need to proceed through full litigation and appeal rather than
interlocutory relief.
Although the Supreme Court declined to take up this case, the underlying issue is far from settled. With continued litigation and support from advocacy groups, the question of whether certain tax penalties are sufficiently punitive to trigger Seventh Amendment protections may return to the Court in a future case with a cleaner procedural posture.
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