Death Penalties and Taxes | Bleader

Thursday, October 28, 2010

Death Penalties and Taxes

Posted By on 10.28.10 at 02:45 PM

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Darby Tillis and Perry Cobb were sentenced to death in 1979 for a 1977 murder they didn't commit. The judge, the late Thomas Maloney, would himself be convicted on federal corruption charges in 1993.

Darby Tillis
  • Darby Tillis

In 1987 Tillis and Cobb were retried and acquitted. In 2001 they were pardoned on the basis of actual innocence and awarded $120,000 in compensation from the state of Illinois.

On Thursday, Rob Warden, executive director of Northwestern Law School's Center on Wrongful Convictions, announced more good news.

The IRS has decided to stop trying to collect more than $70,000 in taxes, interest, and penalties on Tillis's 2001 windfall.

Here's Warden's email:

Dear Friends,

I am delighted to report a wonderful result, not in a criminal case, but rather
in a tax case!

The IRS attempted to collect more than $70,000 in taxes, interest, and penalties
on $120,000 in compensation that Darby Tillis, a client of the Center on
Wrongful Convictions, received from the State of Illinois for nine years of
wrongful imprisonment.

Last week, the IRS relented, agreeing to completely remove the assessment.

The decision is wonderful news not only for Darby Tillis but also for 49 other
former Illinois prisoners who have received more than $6 million from the
Illinois Court of Claims following their exonerations. (The Center,
incidentally, was instrumental in 37 of the 49 exonerations.)

In Darby’s case, CWC founder Larry Marshall obtained the $120,000 award in 2001.
Darby and a co-defendant, Perry Cobb, had been sentenced to death for the murder
of two men on the north side of Chicago in 1977. Their convictions were reversed
and they were acquitted in 1986 after a new witness came forward as a result of
a story I published in Chicago Lawyer, of which I was then the editor.

After Darby received the notice of the IRS levy, Larry and I approached Sam
Tenenbaum, our colleague at the Bluhm Legal Clinic. Sam agreed with us that it
was fundamentally unfair to tax a wrongfully convicted and incarcerated person
on his or her restitution payments. To the IRS, Sam argued first that the award
should be considered an excludable payment under § 104(a) of the code, which
permits exclusion for payments received as compensation for personal physical
injury or sickness. Second, Sam argued that the payment was excludable under the
general welfare doctrine — an official doctrine that does not tax payments made
by the government for the promotion of the general welfare. Third, Sam argued
that it was unfair and cruel to tax this kind of award made to someone who lost
nearly a decade of his life, and, among other things, the ability to earn
income, career opportunities, and social ties because of state error.

Last week, the IRS Appeals Office concluded that Sam was right.

It was a sweet footnote in a long and tragic case.

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