Hovinds Owe $3 Million to IRS


The saga of Kent and Jo Hovind with the IRS has taken another turn for the worse (for them, at least). Kent, perhaps the most dishonest and ridiculous of all the young earth creationists, is still in federal prison for not paying taxes. And now a court has ruled that they owe $3 million to the IRS.

Mr. and Mrs. Hovind did not file returns. They were both involved in the financial transactions of the enterprises and they lived together. That makes it hard for the IRS to sort out which of them should be taxed on the unreported income. They are married, but filing a joint return is an election. The solution is for the IRS to send a deficiency notice to each of them for 100% of the tax. With interest and penalties the balance for the years 1998 to 2006 is over $3,000,000.

That probably isn’t fair. If you can’t figure out which one of them to assign the income too, why not split it in half and charge half to each of them? Actually, in this case, it should probably all be charged to Kent because he was the one who made all the decisions, according to the court that sentenced him:

Mr. Hovind, as I’ve already indicated, was the decision-making authority for the operation, and based on the degree of control and influence that he exercised over others, including those involved in the financial transactions at issue here, I believe I can find and do find that the adjustment for being an organizer and a leader of an otherwise extensive operation is appropriate.

If the trial court in his case found that he was the decision maker, it seems to me that the full tax bill should be assigned to him. But if they have jointly owned assets, they should be fair game for seizure.

Comments

  1. dingojack says

    All the Feds have gotta do is plant a garbage bag full of low-grade dope in the basement and – bingo! They’re in the asset seizure business. (Almost) no questions asked.
    :/ Dingo

  2. Trebuchet says

    Of course, this is just the evil commie/nazi/socialist Muslim/Atheist/Kenyan Obama government out to get them as part of their war on Christianity.

  3. erichoug says

    OOOH This is going to be fun.

    I have actually had tax problems in the past and so I am familiar with the IRS.

    One thing I can tell you is that, as long as they believe you are making a good faith effort to resolve the issues with them, there is no more professional, courteous or helpful agency in the government.

    But, as soon as you start trying to play games, as soon as they hear the first 3 words of a tax protester argument, in other words as soon as they think you are not keeping faith, they will come down on you like the hammer of GOD! There is nothing they won’t find, nowhere they won’t go, no penalty they won’t impose and no loophole that will save you.

    Good luck, Kent.

    P.S. How’s prison?

  4. says

    I think I read that if the Hovinds had cooperated, the tax bill would have divvied up according to who owed what. They didn’t cooperate, so the IRS used the full extent of the law to assign each of them the maximum. It’s just one more way in which the Hovinds brought this entirely on themselves. Not that you can ever convince that type to take personal responsibility or anything.

  5. says

    I find the amount itself to be utterly ridiculous. The man is serving his time in prison and this assessment is, effectively, a life sentence. I think a decent justice system should incentivize repaying one’s debt, but not to the extent of making it un-repayable. There is social value in letting people reach a settlement that offers the realistic possibility of genuinely rejoining society as a member in good standing.

    We’ve created a large class of permanent outcasts who will never be socially or economically rehabilitated. I do think there are some kinds of crimes that require for the good of all such a permanent loss of status and even physical freedom, but we’ve overreached to the point that the vital social function of forgiveness and repair have taken a back seat to the social function of revenge. We haven’t merely regressed to an eye for an eye. We’ve regressed to overindulging the sadistic pleasure of the punishers. I don’t think that’s good for any of us.

  6. Ben P says

    That probably isn’t fair. If you can’t figure out which one of them to assign the income too, why not split it in half and charge half to each of them?

    The one problem with this argument is that under, at least my understanding of the way IRS Rules work, that could lead to the following situation.

    The IRS determines that Kent and or Jo Hovind owe $3.0 million in taxes, they split it and send a deficiency notice to Kent Hovind for $1.5 million, and a deficiency notice to Jo Hovind for $1.5 million.

    Suppose Jo Hovind contests the notice and (eventually) shows up in court with solid evidence saying “yes, I was married to Kent Hovind, but I never had any taxable income and was never obligated to file a return. He earned the money but I assumed he was filing his own return.”

    Assuming those facts are true she has at least a plausible defense to any tax liability at all, then the $1.5 million assessed against her goes down the drain.

    If the IRS has already sent a deficiency notice to Kent Hovind for only $1.5 million, then they have to either start the multi-year process over, or settle for only being able to get the $1.5 million assessed against him.

    On the other hand, if, say, they sent $3.0 million notices to both, then the IRS Proves that Kent Hovind is the actual party that owes all those taxes, Jo Hovind can use the charges against him as part of her defense.

  7. Ben P says

    I find the amount itself to be utterly ridiculous. The man is serving his time in prison and this assessment is, effectively, a life sentence. I think a decent justice system should incentivize repaying one’s debt, but not to the extent of making it un-repayable. There is social value in letting people reach a settlement that offers the realistic possibility of genuinely rejoining society as a member in good standing.

    I think you’re mistaken about some facts.

    It is a crime to willfully under-report income (Tax Evasion) or to engage in a willful act with intent to defraud the IRS (Tax Fraud). This is punishable by up to five years in prison or fines of up to $100,000. Making a false statement on a tax return is a crime punishable by up to 3 years in prison and up to $75,000 in fines. Failing to file a return is punisable by up to 1 year in prison or $25,000 in fines for each year.

    Seperately, the IRS can obtain civil judgments against those who owe taxes, and those civil judgments can include substantial penalties (in some cases up to 75% of the amount owed).

    98% of IRS cases are resolved with civil penalties only. They reserve criminal sanctions for particularly eggregious cheaters (if only because it takes a lot of money to criminally prosecute someone)

    If the IRS only pursues a civil judgment, you can’t end up in prison for it except in some very rare circumstances. That doesn’t mean your life is nice. The IRS has powers to collect funds that even other court judgments can’t touch, they can seize property, garnish wages, even garnish retirement accounts and social security whereas civil creditors often can’t touch those. Tax liens often don’t go away in bankruptcy either. So you pay it, or are condemned to living a subsistence lifestyle until you do.

    The only real exception where you can end up in prison relating ot a civil judgment is if the court is convinced you’re hiding assets and finds you in contempt Then you can get stuck until you disclose whatever information they want.

  8. erichoug says

    Dr. X @#9

    I am prone to agree with you. I usually hold that prison should be reserved for violent offenders or repeated offenders in the area of property crimes. I think we are vastly overdue for a reform of our Criminal Justice system. Especially in the area of the war on drugs.

    But, I have a really hard time feeling sorry for Kent Hovind. He largely brought the whole thing on himself. I know he claimed that he got bad legal advice but what kind of a moron do you have to be to be running a commercial venture and not think you had to pay taxes on it?

    If you want to feel bad for someone, feel bad for his employees. Many of them are likely to have tax issues for years to come and none of then raked in the kind of filthy lucre that Hovind did.

  9. Michael Heath says

    Ed writes:

    That probably isn’t fair. If you can’t figure out which one of them to assign the income too, why not split it in half and charge half to each of them?

    Let’s say you and two business partners take out a $10,000,000 commercial loan from a bank. they don’t care how you’ve structured your business relationship, partnership, LLC, or a Corporation. Their default position at the start of negotiations is to have each partner sign a personal guarantee for the full $10 million. They also want spouses to sign as well. They don’t have the right to collect $60,000,000 (three partners where we assume each has a spouse), but only $10,000,000; but they do want the right to collect $10,000,000 by going after whoever is the most capable of paying them back if the loan is called. [One would hope these mythical partners would never agree to such onerous terms, but this is the way the templates for loan commitment contracts read.]

    Given this context I find it entirely fair for the IRS to go after each for the full amount. They’re owed $3,000,000, it’s unclear who effectively owes what, and the IRS has fiduciary to get all $3,000,000 or the most that is feasible. All in an environment where conditions change. For example suppose both are making monthly payments which will never have them coming even close to paying this obligation off. Then the Mrs. divorces Kent and marries a sugar daddy. That might open up the opportunity for the IRS to collect all of it from her if Hovind isn’t doing so swell on the rubber chicken circuit.

  10. says

    There is social value in letting people reach a settlement that offers the realistic possibility of genuinely rejoining society as a member in good standing.

    Uh, these are the Hovinds we’re talking about here. I think it’s safe to say that society would be better off had they never existed, or at least if Kent hadn’t. Although they have provided us with some entertainment, which I guess is worth something, but I doubt it makes up for all the stupidity they have spread.

    And while I agree with your general sentiment, in every single step in this entire process the Hovinds have made things worse for themselves by refusing to accept any responsibility or cooperate in any fashion. What is the law to do? There comes a point at which the authorities have no choice but to crack down as hard as possible. Even now you can bet that they’re doing their best to flout the law. When a search warrant was executed, Jo Hovind claimed they had about $3000 on the premises. The authorities found $42,000. How do you think she made that “mistake” and how do you think the law is ever going to get them to pay up if they get the kid glove treatment?

  11. iknklast says

    “One thing I can tell you is that, as long as they believe you are making a good faith effort to resolve the issues with them, there is no more professional, courteous or helpful agency in the government”

    My father used to work as an appeals officer for the IRS. He would move heaven and earth for a person who was trying to work with him, and make sure the person was getting fair treatment. Of course, he now gives bad advice sometimes, since back when he was working there (he retired in 1992), they rarely went after small to middle-income returns who made honest mistakes for a few (to a few hundred) dollars; they focused on big ticket tax problems(like Hovind)because it didn’t make fiscal sense to go after the others. Now, thanks to the “fiscal conservatives” in the Bush administration, they are often ignoring the big fish and going after the small minnows. Because it makes such sense to pay a person to get back a much smaller amount of money than they are paying him…yeah.

  12. Draken says

    What precisely is the problem? The man must have stashes of money around. Heck, he stuck more cash in the bank each year than I’m going to earn in my entire career- gross salary.

    Simple jailbirds end up on the streets after a prison term without a job, without cash and probably without friends. I somehow doubt this will be the case with Canned Hovind.

  13. says

    I was in the same situation a couple of years ago. The year before my ex and I split up, we ended up owing the IRS – not much, a bit over $300 (which still looked huge to me at the time). They sent the bill for the total amount to each of us.

    I paid my half, to the penny, and then when the ex continued to stonewall, applied for what they call “Innocent Spouse Relief” on the other half. They granted it within a month, released me from that debt, and continued to go after the ex for the other half.

    If Jo Hovind is in such straits, and if she can prove she had nothing to do with the creation of that debt, she can do the same.

  14. Ben P says

    One would hope these mythical partners would never agree to such onerous terms, but this is the way the templates for loan commitment contracts read.]

    OT, but from my experience doing lien and performance bond work in the construction industry, you bet your ass the partners usually end up agreeing to it because every bank demands the same thing.

    The reason they do this is because, particularly for certain businesses like contractors, it is very easy to structure the business so that it owns almost no assets. You’d be surpised (or maybe you wouldn’t) how often I see contractors or developers that are doing tens of millions in business every year, yet when the house of cards collapses, the only assets owned by the company itself are a three year old pickup truck and $5000 worth of office equipment. Everything else is leased or contracted. Yet the owners have been living high on the hog for years and very much with a straight face will tell creditors of the company “no, this is my money, you’re a creditor of the company.”

    That’s why banks insist on personal guarantees. However, the only real effect of this is that if the company folds, all the guarantors declare personal bankruptcy.

    That’s where you end up with some pretty high dollar personal bankrupticies. The University of Arkansas’ Football Coach John L. Smith is going through one now. Granted he has his coaching salary, but you often see people that claim to have $60,000 a year in income reporting say, $15 million in debt. If you’re not familiar with how that comes to be it doesn’t make much sense.

  15. yoav says

    With Kent being currently indisposed isn’t Eric the biblicaly mandated head of the family, and should therefore be the one getting the bills.

  16. says

    @Eric:

    Uh, these are the Hovinds we’re talking about here. I think it’s safe to say that society would be better off had they never existed, or at least if Kent hadn’t.

    I know who they are. That I dislike the Hovinds based upon what I know about them doesn’t affect my views of people actually being able to settle up with society and have something remotely resembling a fresh start, comparable to Chapter 11, 7 or 13, (which is which, I don’t feel like looking it up now, but you get the idea). I know this about interest and penalties arising from fraud rather than default on a contract, but I still see our ability to let people settle as civilizing to us all.

    @Ben P:

    I think you’re mistaken about some facts.

    No I’m not mistaken about any facts. I wasn’t arguing about what the law provides any more than my opposition to three strikes or the death penalty is an argument about legal facts. I’m expressing a value judgment about our culture of punishments and penalties.

  17. Ben P says

    No I’m not mistaken about any facts. I wasn’t arguing about what the law provides any more than my opposition to three strikes or the death penalty is an argument about legal facts. I’m expressing a value judgment about our culture of punishments and penalties.

    Your’re expressing a value judgment, but your value judgment was premised on the statement that, and I quote

    “The man is serving his time in prison and this assessment is, effectively, a life sentence.I think a decent justice system should incentivize repaying one’s debt, but not to the extent of making it un-repayable.”

    Hovind was charged with 12 counts of tax evasion, 45 counts of violating federal financial laws and an obstruction of justice count. The jury found him guilty on all counts and the Court sentenced him to 10 years in prison.

    This is a separate IRS civil judgment against him for the amount of the taxes he failed to pay plus relevant civil penalties. It will not increase his time in jail. Your comment pretty clearly seems to state otherwise.

  18. says

    I think the Hovind case deserves a lot more publicity than it has gotten, but some of y’all could have been kind enough to visit the Forbes site referenced by Ed and post your comments there.

    Peter and I did a lot of hard work to get that column posted!

    Hopefully, the ruling the Jo Hovind case will make the ruling in the Kent Hovind case a little easier on the Court.

    Kent’s case has yet to be set for trial in the Tax Court (his original trial date was postponed when, among other things, Jo complained she didn’t want his case associated with hers for trial).

    A joint status report is due by the end of the year in Kent’s case.

    I figure if Jo had been more cooperated and “flipped” on Kent, all or most of the income might have been attributed to Kent. The 50-50 deal is consistent with the facts and circumstances.

    One might have to figure that, after all this time, there’s been plenty of posturing by the Hovinds in order to keep the feds from finding much, if any, money to satisfy the liabilities.

    Stay tuned for further developments.

  19. says

    That I dislike the Hovinds based upon what I know about them doesn’t affect my views of people actually being able to settle up with society and have something remotely resembling a fresh start…

    As I and several others have pointed out, if the Hovinds had made the slightest effort to cooperate and accept responsibility, there’s no way they’d have a $3 mil judgement against them right now. This is the result of their refusal to recognize the legitimacy of the law or exercise any good faith when dealing with the authorities. As best as I can tell, the system is not designed to permanently ensnare or ruin people, nor does the IRS typically behave vindictively. This system is designed to increase penalties and damages when you keep refusing to abide by court orders, and if you’re obstinate enough, you can dig yourself a very deep hole. I really don’t know what you can do with these people other than to keep tacking on more fines and damages.

    And never mind personal dislike of Mr. Hovind, the man has some serious character flaws. His tax problems and his delusional creationist beliefs are not unrelated. They both stem from an extreme degree of arrogance and self-righteousness, and a complete lack of honor or sense of civic duty. He is a bad person. He’s had his chance to correct his mistakes and he refused. There comes a point at which society is better served by not trying to rehabilitate such people.

  20. says

    Ben P,

    Forgive me if I wasn’t clear about what I meant by a life sentence. I was speaking metaphorically when I said “effectively a life sentence.” I wasn’t referring to adding time to Hovind’s actual prison sentence. I was referring to the idea of effectively sentencing him to a lifetime of unrepayable debt. I thought that was evident from the context. I guess not.

    I’m not confused about the law. I know this is a civil judgment rather than the criminal conviction that sent him to jail. I know that the IRS is on solid legal ground in obtaining the civil judgment. I’m just talking about a judgment that can and will not ever be satisfied barring some freak event. This is most certainly about my value judgment as it pertains to a lifetime of unrecoverable financial ruin after 10 years in prison and lasting until his dying day. I’d also assume the meter is still running on that debt, and that the number will be even more astronomical when Hovind leaves prison.

  21. says

    I remember back when he thought he was going to be able to buy back his property after federal forfeiture.

    His friends allegedly got up about $400,000.00 within a couple of weeks or so.

    Don’t know where all of that went!

    The deal fell through.

    I guess maybe all of that went to pay tax free housing allowances to the ministers working for Eric Hovind’s re-constituted “Hovind Ministries”.

    So, if Kent and Jo still think they’ve got the mo-jo, they could raise the money to pay off the liabilities that are going to stick.

    No problem with it being a “life sentence”. They got themselves into the problem, with a lot of help from enablers, and they are more than welcome to go to their graves with unpaid tax liabilities.

    The feds can get what can be got and if the Hovinds want it that way, they can spend the rest of their lives dealing with it.

    Actions have consequences, and that may be a consequence of the Hovind tax evasion machine that had free reign for about 20 years.

    So, any of you going to show up at Forbes to add to the discussion there? It would be nice if you would share your opinions with the Forbes’ readers. Some of you might even want to show up at my place to discuss radiometric dating with Zuma Musa (who posted at Forbes and then showed up at my place today).

    Here’s my address: http://groups.yahoo.com/group/Maury_and_Baty/

  22. Draken says

    I was referring to the idea of effectively sentencing him to a lifetime of unrepayable debt

    Which I sincerely doubt he’ll have. Read those numbers on his wikipedia page. This is a professional con man who thinks God has a Kent-shaped hole in his heart.

    Once he gets out he’ll be multimillionaire again in a whiffy, if he isn’t already.

  23. says

    A related article from last Sunday’s paper, regarding the on-going litigation involving “ministers” and their income tax free income benefits, can be found at:

    http://www.tennessean.com/apps/pbcs.dll/article?AID=2012310060074

    I am quoted in the article (one of my claims to fame).

    That issue has also been featured in some of Peter J. Reilly’s Forbes’ columns and is an on-going subject of special interest at my place.

    I’ve still got this fantasy that within the next month someone will press Obama and/or Romney to speak to the issue as to what the future of IRC 107 will be under the next administration.

  24. d.f.manno says

    From the Tax Court opinion:

    The [IRS] Commissioner “may, in notices of deficiency present alternative claims for deficiencies when there is a basis for doing so. He may assert, in the alternative, that the same income was received by different taxpayers”. [Doggett v. Commissioner, 66 T.C. 101, 103 (1976)]…

    Respondent [i.e. the IRS] issued the notices of deficiency following an examination during which petitioner and Mr. Hovind failed to cooperate with respondent. Because neither petitioner nor Mr. Hovind cooperated during the examination, respondent did not determine how much of the total net income was attributable to petitioner and Mr. Hovind, respectively.

    Although petitioner argues otherwise, we find that respondent acted in good faith in issuing the notices of deficiency to both petitioner and Mr. Hovind. On the basis of petitioner and Mr. Hovind’s bank records alone, respondent could not determine whether and to what extent petitioner and Mr. Hovind individually were liable for the unreported net income of CSE. The actions of petitioner and Mr. Hovind in withholding information resulted in respondent’s determination to assign the same income to each of petitioner and Mr. Hovind.

    When taxpayers have so commingled their finances that the IRS can’t untangle them, the burden of proving who is responsible for the liabilities falls to the taxpayers. To hold otherwise would be to reward delinquent taxpayers for their obfuscation. Tax law has always required taxpayers to keep sufficient records to support the positions taken on their returns.

  25. Childermass says

    I just checked his website for the first time in a few years by going to drdino.com. It forwarded to a new domain. For a second I though that Ken Ham bought the domain as his picture what is shown. But no, it is Eric Hovind’s site. Ham is speaking at a conference of his. Eric seems to learned to have learned from daddy’s mistake and lists “Creation Today” as a 501(c)(3) organization.

  26. says

    Childermass,

    Kent has his own blog as well, including a page for legal updates at:

    http://www.kenthovindblog.com/?page_id=391

    Despite having numerous motions in his criminal case denied over the course of the last year and the decision from the Tax Court last week in his wife’s case, Kent hasn’t updated his “legal updates” page in over a year. We just can’t trust Kent to keep us informed on what is happening with his, and his wife’s, legal problems.

    As to Eric’s attempt to transform Kent’s ministry into a subsidiary of Ken Ham’s AIG, time will maybe tell how well he accomplished that. Perhaps you have also noticed that one of Ken Ham’s men, Paul Taylor, has moved out of AIG and into Eric’s CT in order to try and help the kid make the transformation to legitimacy.

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