Can The Jury Hear About Taxes During Argument?
posted on October 4th, 2009 by clintSuppose the defendant physician or hospital in a wrongful death case wants to argue that the jury should deduct taxes as living expenses in the decedent’s pecuniary value? There is no case on point addressing this issue. However, there is precedent to suggest that this argument is improper. Tennessee has consistently rejected attempts to charge the jury about taxes. In Spencer v. A-1 Crane Service, Inc., 880 S.W.2d 938 (Tenn.1994), the plaintiff filed a wrongful death action against the defendant, who asked the judge to charge the following about income taxes:
I charge you, as a matter of law, that any award made to the plaintiff in this case, if any is made, will not be subject to income taxes, and that you should not consider such taxes in fixing the amount of the award.
This is called a “nontaxability charge.” The trial judge refused to give that charge. The plaintiff secured a judgment in her favor, and the defendant appealed. On appeal, the defendant argued that its special nontaxability charge was necessary to prevent the jury from artificially inflating the award to compensate for the possible effects of taxation. The Court of Appeals disagreed by stating:
Such an instruction would inject into the already difficult and complicated computation of such damages factors which change from time to time, such as the rate of taxation and the number of plaintiff’s exemptions, and allowed juries to indulge in speculation and conjecture in arriving at the amount to be deducted. Id at 749 (quoting Dixie Feed & Seed Co. v. Byrd, 376 S.W.2d 745 (Tenn.Ct.App.1963)).
In Stallcup v. Taylor, 463 S.W.2d 416, 422 (Tenn.Ct.App.1970), the holding in Dixie Feed & Seed Co. was applied to wrongful death actions. The Court of Appeals affirmed the refusal of the trial court to charge the jury that the recovery would not be subject to income tax. Tennessee law is consistent with the majority rule followed in other jurisdictions. See generally, John E. Theuman, Annotation, Propriety of Taking Income Tax Into Consideration in Fixing Damages in Personal Injury or Death Action, 16 A.L.R.4th 589 (1993).
There are three primary reasons advanced to support the majority rule. First, requiring a nontaxability instruction would open a “Pandora’s box,” requiring charges to the jury on a variety of matters. Second, such an instruction requires a court to assume that jurors will not confine themselves to the evidence or the instructions given. Third, a nontaxability charge injects an extraneous, collateral issue into jury deliberations, potentially leading a jury into confusion, speculation, and conjecture over the effect of taxes or lack thereof. Spencer v. A-1 Crane Service, Inc., 880 S.W.2d 938 (Tenn.1994). The Court of Appeals in Spencer declared that the majority view as adopted in Dixie Feed and Stallcup is the more persuasive. Thus, the majority view remains the law in Tennessee. It is also significant to note that the Supreme Court did not find that taxes should be deducted from future lost earnings in wrongful death actions. See Wallace v. Couch, 642 S.W.2d 141 (Tenn.1982) (holding that only “personal expenditures” should be deducted from lost earnings in a wrongful death case; taxes were not included).
The issue of taxes will continue to arise until the appellate courts tackle it. Until then, Spencer should help you defeat an argument that taxes should be deducted from damages.