## Facts

- William M. Lea, an accountant, was convicted in August 1987 of seven counts of aiding and abetting the filing of false tax returns.
- The misconduct caused more than $160,000 in tax losses to the United States, and the government incurred substantial investigation and prosecution costs.
- Lea received a prison sentence and criminal fines totaling $7,000 ($1,000 per count).
- In March 1990, the IRS assessed a civil penalty against Lea under 26 U.S.C. § 6701 for aiding and assisting in preparing or presenting tax-related documents knowing they would understate tax liability.
- The IRS initially assessed $34,000 and later reduced the § 6701 penalty to $22,000.
- Lea filed a refund action under 28 U.S.C. § 1346(a)(1), challenging the assessment and collection of the § 6701 penalty.
- The United States moved for summary judgment, arguing the assessment was not time-barred and that the penalty was civil and remedial rather than criminal punishment.

## Issues

1. Whether a civil penalty assessment under 26 U.S.C. § 6701 is barred by a statute of limitations on initial assessment.
2. Whether imposing a § 6701 penalty after a criminal conviction for related conduct violates the Double Jeopardy Clause because the penalty is punitive.

## Decision

- The court granted the United States’ motion for summary judgment.
- The court held that the § 6701 penalty assessment was not barred by any statute of limitations applicable to the initial assessment.
- The court held that the § 6701 penalty was a civil, remedial sanction and did not constitute criminal punishment for Double Jeopardy purposes.
- Lea’s refund claim was dismissed, leaving the assessed § 6701 penalty in place.

## Legal Principles

- Absent an express statutory limitations period, courts will not infer a time limit on the IRS’s initial assessment of a civil penalty under 26 U.S.C. § 6701.
- For Double Jeopardy analysis, the classification of a sanction turns first on congressional intent (civil vs. criminal), and a civil label will control unless the sanction is so punitive in purpose or effect that it functions as criminal punishment.
- A tax-related civil penalty that is reasonably related to government losses and enforcement costs may be treated as remedial rather than punitive, permitting its imposition in addition to criminal sanctions arising from the same conduct.

## Conclusion

The court upheld the IRS’s § 6701 assessment, concluding that no statute of limitations barred the initial penalty assessment and that the penalty operated as a civil, remedial measure rather than a second criminal punishment prohibited by Double Jeopardy.


Lea v. United States, 882 F. Supp. 687 (W.D. Tenn. 1995)