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SJC-11807

    GEORGE SCHUSSEL & another1     vs.   COMMISSIONER OF REVENUE.



             Suffolk.       March 3, 2015. - July 1, 2015.

 Present:    Gants, C.J., Spina, Cordy, Botsford, Duffly, Lenk, &
                             Hines, JJ.


Taxation, Appellate Tax Board: findings, Income tax, Gross
     income, Income tax returns. Words, "Tax-related."



     Appeal from a decision of the Appellate Tax Board.

     After review by the Appeals Court, the Supreme Judicial
Court granted leave to obtain further appellate review.


     Francis J. DiMento for the taxpayers.
     John M. Stephan, Assistant Attorney General, for
Commissioner of Revenue.


     LENK, J.    Since the 1970s, George and Sandra Schussel2 have

owned property and business interests in Massachusetts, and have

had other close ties to the Commonwealth.      The Schussels, who

     1
         Sandra Schussel.
     2
       Because they share a last name, we refer to George and
Sandra Schussel by their first names.
                                                                    2


are married, filed no Massachusetts tax returns between 1989 and

2007.   In 2007, George was convicted of Federal conspiracy and

tax evasion charges in the United States District Court for the

District of Massachusetts.   The Commissioner of Revenue

(commissioner) then issued the Schussels a notice of failure to

file Massachusetts income tax returns for the years 1993, 1994,

and 1995.   When the Schussels subsequently filed tax returns for

those years, the returns were determined by the commissioner to

be "false or fraudulent," or to have been filed "with a willful

attempt . . . to defeat or evade the tax."   See G. L. c. 62C,

§ 28.   Accordingly, the commissioner imposed a "double

assessment" against the Schussels.   The Schussels submitted a

request for abatement of the double assessment, which the

commissioner denied.

    The commissioner's decisions were upheld by the Appellate

Tax Board (board), and the Appeals Court affirmed.   See Schussel

v. Commissioner of Revenue, 86 Mass. App. Ct. 419, 431 (2014).

We allowed the Schussels' petition for further appellate review.

Before us, the Schussels claim two errors.   First, they contend

that they were not properly subject to a double assessment.

They note, in this context, that their tax returns were prepared

for them by an attorney, and that they attached a "rider" to

those returns, stating that the sums reported were the subject

of Federal criminal proceedings against George.   The Schussels'
                                                                     3


second claim is that they were entitled to relief from the

double assessment under an amnesty program established by the

commissioner in 2009, pursuant to St. 2008, c. 461 (2009 amnesty

program).     Although the 2009 amnesty program does not apply to

"any taxpayer who . . . was the subject of a tax-related

criminal investigation or prosecution," St. 2008, c. 461, § 1,

the Schussels argue that this exception refers only to

investigations or prosecutions arising from State, not Federal,

tax offenses.

    We affirm, concluding that the board's findings of fact are

supported by substantial evidence and that the Schussels' claim

that the 2009 amnesty program applies to them is not properly

before us.

    1.   Background.     We summarize the facts essential to our

analysis, as found by the board, reserving disputed issues for

later discussion.

    The Schussels settled in Lynnfield in 1971, purchasing a

home there.    They subsequently acquired several additional

Massachusetts properties.     In 1979, George founded a

Massachusetts corporation named Digital Consulting, Inc. (DCI),

which he then ran with Sandra's assistance.     At around the same

time, the Schussels bought a residence in New Hampshire.    They

retained family ties and social relationships in Massachusetts,

remained heavily involved with DCI, renewed their Massachusetts
                                                                         4


driver's licenses, and registered the vehicles they used most

frequently in Massachusetts.    From 1989 through 2007, the

Schussels did not file Massachusetts tax returns, either as

residents or as nonresidents.

     In 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.    The conspiracy charge

concerned the years 1988 to 1998.    One of the tax evasion

charges was based on George's Federal tax return for 1995.3         In

January, 2007, a jury returned guilty verdicts on all three

counts.   George appealed, and the conviction was affirmed.      See

United States v. Schussel, 291 Fed. Appx. 336 (1st Cir. 2008).

     In May, 2007, the commissioner issued the Schussels a

notice of failure to file Massachusetts income tax returns for

the years 1993, 1994, and 1995.     The Schussels subsequently

filed returns for those years.    In those returns, they

classified themselves as nonresidents, and reported income

amounts that, at least for the year 1995, were identical to the

amounts deemed false in George's Federal criminal case.       The

commissioner assessed the amounts of tax due based on the

Schussels' returns, and the Schussels paid the assessed amounts.



     3
       The other count of tax evasion concerned the tax return of
Digital Consulting, Inc., for the same year.
                                                                     5


     In August, 2007, relying on information that emerged in

George's prosecution, the commissioner assessed additional taxes

against the Schussels.     The additional assessment increased the

amount of revenue attributed to the Schussels, classified the

Schussels as Massachusetts residents, and imposed a "double

assessment" pursuant to G. L. c. 62C, § 28.4

     In February, 2009, the commissioner issued a tax amnesty

notice to the Schussels.5    The notice stated that the

commissioner would waive certain penalties and interest -- not

including the double assessment -- if the Schussels paid the

full amount due from them by the end of April, 2009.      The

Schussels paid the balance demanded in the tax amnesty notice

and received the benefit described in it.

     The Schussels submitted to the commissioner a request for

abatement of all of the additional taxes that had been imposed

on them in August, 2007.    The commissioner denied the request.

The Schussels appealed to the board, arguing primarily that,


     4
       Before the Appellate Tax Board (board) and the Appeals
Court, the Schussels argued that the authority of the
Commissioner of Revenue (commissioner) to impose an additional
assessment on them was limited to a seven-year "look-back"
period by force of a written policy issued by the commissioner.
They do not pursue this argument before us.
     5
       The commissioner asserts that this notice was issued
inadvertently, and the board so found. As nothing of substance
turns on this finding, we do not take up the Schussels'
challenge to it.
                                                                     6


during the tax years in question (1993 through 1995), they had

not been residents of Massachusetts.     The board upheld the

commissioner's additional assessment, finding that the Schussels

were Massachusetts residents during the relevant years, that

they filed false tax returns "knowingly" and with an "intent to

evade taxes," and that they were not entitled to relief under

the 2009 amnesty program.

    The Appeals Court affirmed, and we allowed the Schussels'

petition for further appellate review.     In their appellate

proceedings, the Schussels have abandoned the claim that they

were nonresidents during the tax years at issue.

    2.   Standard of review.     Appellate review of a decision of

the board is limited in scope.    By legislative mandate, "[t]he

decision of the board shall be final as to findings of fact."

G. L. c. 58A, § 13.   Nevertheless, a decision of the board, like

that of any administrative agency, see G. L. c. 30A,

§ 14 (7) (e), may be challenged on the ground that it is not

supported by "substantial evidence."     See Capital One Bank v.

Commissioner of Revenue, 453 Mass. 1, 8, cert. denied, 557 U.S.

919 (2009), quoting Boston Professional Hockey Ass'n, Inc. v.

Commissioner of Revenue, 443 Mass. 276, 285 (2005).

"Substantial evidence is 'such evidence as a reasonable mind

might accept as adequate to support a conclusion.'"     Boston Gas

Co. v. Assessors of Boston, 458 Mass. 715, 721 (2011), quoting
                                                                    7


Tennessee Gas Pipeline Co. v. Assessors of Agawam, 428 Mass.

261, 262 (1998).   See G. L. c. 30A, § 1 (6).   Otherwise put, a

conclusion lacks a substantial evidentiary basis if "the

evidence points to no felt or appreciable probability of the

conclusion or points to an overwhelming probability of the

contrary."   Boston Gas Co. v. Assessors of Boston, supra at 721-

722, quoting Tennessee Gas Pipeline Co. v. Assessors of Agawam,

supra.6

     We conduct an independent analysis of the board's rulings

of law, according "some deference" to the board's "expertise in

interpreting the tax laws of the Commonwealth."   See Capital One

Bank v. Commissioner of Revenue, supra; McCarthy v. Commissioner

of Revenue, 391 Mass. 630, 632 (1984), quoting French v.

Assessors of Boston, 383 Mass. 481, 482 (1981).   "[W]e are

precluded," however, "from 'consider[ing] any issue of law which

does not appear to have been raised in the proceedings before

the board.'"   Commissioner of Revenue v. New England Power Co.,

411 Mass. 418, 425 (1991), citing G. L. c. 58A, § 13.

     6
       We have stated on occasion that the board's findings of
fact will stand if they are supported by "sufficient" evidence.
See, e.g., Boston Professional Hockey Ass'n, Inc. v.
Commissioner of Revenue, 443 Mass. 276, 285 (2005); General
Mills, Inc. v. Commissioner of Revenue, 440 Mass. 154, 161
(2003), cert. denied, 541 U.S. 973 (2004), quoting Olympia &
York State St. Co. v. Assessors of Boston, 428 Mass. 236, 240
(1998). In this context, "substantial evidence," as defined by
G. L. c. 30A, § 1 (6), is sufficient to support the board's
findings.
                                                                     8


    3.    Imposition of double assessment.   General Laws c. 62C,

§ 28, authorizes the commissioner to impose an assessment of

"not more than double" the amount of tax he or she determines to

be due in three situations:    (a) where a person, after being

notified of deficiencies in his or her tax return, "refuses or

neglects within thirty days . . . to file a proper return";

(b) where a person "has filed a false or fraudulent return"; or

(c) where a person "has filed a return with a willful attempt in

any manner to defeat or evade the tax."

    There is now no dispute that the Schussels' Massachusetts

tax returns for the years from 1993 to 1995, filed in response

to the commissioner's May, 2007, notice of failure to file, were

incorrect in at least two ways.   First, the returns classified

the Schussels as nonresidents when they were, in fact,

residents.   Second, the amounts of income reported in the

returns were lower than the amounts that the Schussels actually

earned.   For instance, in their 1995 tax return, the Schussels

reported their total income as $1,057,361.    This was essentially

the same amount of income reported to the Internal Revenue

Service (IRS) for that year.   That report culminated in George's

conviction of Federal tax evasion.   The IRS since has determined
                                                                      9


that the Schussels' true income for 1995 was $3,341,868.     The

Schussels do not contest that determination.7

     Not every inaccurate tax return represents a "false or

fraudulent return" within the meaning of G. L. c. 62C, § 28.       As

the board has said, "[f]raud cannot be shown by mere proof that

a party made an error of fact.   Rather, the [commissioner] must

demonstrate 'an actual intent to deceive.'"     Food Serv. Assocs.,

Inc. v. Commissioner of Revenue, 26 Mass. App. Tax Bd. Rep. 438,

444 (2001), quoting Metropolitan Life Ins. Co. v. Burno, 309

Mass. 7, 10 (1941), overruled on other grounds by Pahigian v.

Manufacturers' Life Ins. Co., 349 Mass. 78, 87 (1965).

Likewise, a "willful attempt to defeat or evade [taxation]," in

the board's words, "does not include negligence, carelessness,

misunderstanding or unintentional understatement of income."

Scagel v. Commissioner of Revenue, 13 Mass. App. Tax Bd. Rep.

38, 48 (1990), quoting United States v. Pechenik, 236 F.2d 844,

846 (3d Cir. 1956).   Thus, a double assessment penalty may be


     7
       The Schussels contend that the amounts of income that they
earned in the relevant years were not "finally determined" when
they filed their Massachusetts returns. This argument appears
to be premised on the fact that the Internal Revenue Service
(IRS) adjusted its assessment of the Schussels' income in
January, 2009. But by the time the commissioner imposed a
double assessment on the Schussels, the Federal government
already had determined that the Schussels had substantially
underreported their income. Moreover, the IRS corrected its
assessment quickly enough that the new figures were submitted to
the board and considered in its decision.
                                                                  10


imposed under G. L. c. 62C, § 28, only on taxpayers whose

conduct was knowing and intentional; negligence or carelessness

do not suffice.

     The board found that the Schussels' filing of false returns

was "knowing," and that they made their filings with an "intent

to evade taxes."8   The board based these findings on essentially

the following factors.    First, from 1989 through 2007, the

Schussels did not merely fail to classify themselves in their

returns as Massachusetts residents; rather, they did not file

any Massachusetts returns, either as residents or as

nonresidents, despite their substantial Massachusetts property

and business interests.    Second, during the same period, the

Schussels also abstained from filing any tax returns in New

Hampshire (as to income from interest or dividends; New

Hampshire does not have a general income tax).    Third, the

amounts of income stated in the Schussels' tax returns were the

same sums that, by that time, had resulted in George's

conviction of tax evasion in Federal court.    The board also

stated repeatedly that, having heard the testimony of the

Schussels, the board did not find that testimony credible.

     8
       The board wrote also that the Schussels exhibited, "at a
minimum, reckless indifference to the obligation to file
accurate taxes." The board's decision as a whole leaves no
doubt that, notwithstanding this delicate phraseology, the board
found the Schussels' actions to have been knowing and
intentional, not merely reckless or indifferent.
                                                                  11


     The Schussels present two main arguments against the

board's finding that their false returns were filed knowingly

and intentionally.9   Neither argument persuades us that the

board's determinations were based on an error of law, or that

its findings are not supported by substantial evidence.   See

Capital One Bank v. Commissioner of Revenue, 453 Mass. at 8,

quoting Boston Professional Hockey Ass'n, Inc. v. Commissioner

of Revenue, 443 Mass. at 285.

     First, the Schussels point to a "rider" attached to each of

their three Massachusetts tax returns.   Each rider stated as

follows:

          "Taxpayer is currently a party to a criminal tax case
     brought by the U.S. Attorney's office . . . . Items of
     gross income determined pur[su]ant to said case are the
     subject of a pending appeal regarding amount,
     characterization and source. Income which is the subject
     of said case/appeal has not been reported on this return
     due to the uncertain[]ties described above."

The Schussels contend that this rider undermines the board's

conclusion that they knowingly and intentionally filed false



     9
       The Schussels also argue that it was not necessarily
fraudulent for them to have reused, in their Massachusetts tax
returns, the income figures that the IRS and the United States
District Court jury had found to be false. They suggest, in
essence, that the unreported income absent from their Federal
returns might not have been taxable in Massachusetts in any
event. We need not dwell on this argument, which was not made
below, is not supported by record evidence, and, even if
correct, would not alter our conclusion that the board's
findings were grounded in substantial evidence.
                                                                    12


returns.   This argument lacks merit, as the rider itself was

misleading.

    George's Federal appeal arose from his conviction of

criminal offenses.   The issues presented in the appeal were "(1)

whether documents turned over to the government from [George's]

attorney's files violate[d] the attorney-client privilege;

(2) whether the refusal of the trial court to give certain

requested jury instructions violated [George's] right to a fair

trial; and (3) whether sufficient evidence support[ed]

[George's] conviction for conspiracy."     United States v.

Schussel, 291 Fed. Appx. 336, 337 (1st Cir. 2008).    The appeal

thus did not contend that the figures reported by the Schussels

to the IRS represented their true levels of income.    Nor was it

possible that an appeal from George's criminal conviction, given

its procedural posture, would culminate in an adjustment of the

Schussels' tax liability.     In short, the pendency of George's

criminal appeal provided no good faith basis for the Schussels

to continue to report their income, in their Massachusetts tax

returns, using the false figures originally reported to the IRS.

Their suggestion to the contrary, set forth in their rider, was

itself a misrepresentation.

    Next, the Schussels note that their tax returns were

prepared by a tax attorney.    This fact, the Schussels argue,

"cuts against" a finding that they acted knowingly and
                                                                     13


intentionally in filing the false returns.   We recognize, as the

board previously has, that a taxpayer ordinarily should not be

determined to have filed false returns knowingly and

intentionally if he or she disclosed the relevant facts to an

accountant or an attorney, and relied in good faith on the

advice of that accountant or attorney.   See Scagel v.

Commissioner of Revenue, 13 Mass. App. Tax Bd. Rep. at 48.     See

also United States v. Boyle, 469 U.S. 241, 251 (1985) ("When an

accountant or attorney advises a taxpayer on a matter of tax

law . . . it is reasonable for the taxpayer to rely on that

advice"); McMurray v. Commissioner of Internal Revenue, 985 F.2d

36, 43 (1st Cir. 1993) ("Reasonable reliance on expert opinion,

asserted in good faith, can shield a taxpayer" from penalties

for failure to pay tax).

    In the present case, however, the record contains no

indication that the Schussels provided their attorney with such

a full and accurate disclosure of relevant information

concerning either their ties to Massachusetts or their actual

income.   In these circumstances, the fact that the tax returns

were prepared by an attorney has little, if any, significance

for the question whether the Schussels filed their false returns

knowingly and intentionally.   Cf. Smaland Beach Ass'n, Inc. v.

Genova, 461 Mass. 214, 222 (2012), citing G.S. Enters., Inc. v.

Falmouth Marine, Inc., 410 Mass. 262, 275 (1991) (advice-of-
                                                                     14


counsel defense to suit requires "a showing that the clients

made a full and honest disclosure of material facts to the

attorney and that they followed the attorney's advice");

Commonwealth v. Ballou, 283 Mass. 304, 314 (1933) (approving of

jury instructions, in trial for fraud and corrupt conduct,

stating that, "the fact that the defendants consulted counsel

would have a bearing on their good faith, but they must show

that they made a full and frank disclosure to those whose advice

they sought").

    The short of the matter is that the factors identified by

the board, as described supra, coupled with the board's

assessment of the Schussels' credibility, amounted to "such

evidence as a reasonable mind might accept as adequate" to

support the determination that the Schussels knowingly and

intentionally filed false tax returns.     See Boston Gas Co. v.

Assessors of Boston, 458 Mass. 715, 721 (2011), quoting

Tennessee Gas Pipeline Co. v. Assessors of Agawam, 428 Mass.

261, 262 (1998).

    4.     Amnesty program.   In St. 2008, c. 461, the Legislature

instructed the commissioner to establish a two-month tax amnesty

program.   The program described by the Legislature was to grant

taxpayers relief from penalties for unfiled returns, improper

returns, and failures to make full and timely tax payments.        See

St. 2008, c. 461, § 1.    Taxpayers would gain the privilege of
                                                                       15


amnesty by filing proper returns, making proper payments, and

"otherwise com[ing] into compliance with the tax laws of the

[C]ommonwealth" by a deadline to be established by the

commissioner.   See id.   The Legislature stated, however, that

"[t]he commissioner's authority to waive penalties . . . shall

not apply to any taxpayer who, before the start date of the

amnesty program . . . was the subject of a tax-related criminal

investigation or prosecution."    Id.

    The commissioner complied, administering the 2009 amnesty

program during March and April of that year.      See Technical

Information Release 09–3 (Feb. 19, 2009), 5 Official MassTax

Guide, at PWS-260 (Thomson Reuters 2015).      As directed, the

commissioner announced that amnesty would not be granted to "any

taxpayer who, prior to March 1, 2009, was the subject of a tax-

related criminal investigation or prosecution."      Id. part

III.A.2, at PWS-261.

    The 2009 amnesty program resulted, as mentioned, in the

Schussels being relieved of certain penalties, but not of the

double assessment imposed on them.      The Schussels claim that

they were entitled to amnesty from that penalty as well.        They

argue, to this end, that a criminal investigation or prosecution

excludes a taxpayer from the 2009 amnesty program only if it

concerns "Massachusetts taxes imposed pursuant to Massachusetts

statutes."
                                                                   16


      Because this argument "does not appear to have been raised

in the proceedings before the board," it is not properly before

us.   See G. L. c. 58A, § 13.   We note, nevertheless, that it

would not affect the outcome.   Assuming, without deciding, that

the term "tax" in the context of the 2009 amnesty program refers

to Massachusetts taxes only, a Federal prosecution for

underreporting Federal income taxes would nevertheless be "tax-

related," given that income tax liability in Massachusetts is

calculated on the basis of Federal tax liability.   See G. L.

c. 62, §§ 2, 6F.

                                    Decision of the Appellate
                                      Tax Board affirmed.
