Aloe Vera of America, Inc. v. United States

Aloe Vera of America, Inc., Rex Maughan, Ruth Maughan, Maughan Holdings, Inc., Gene Yamagata, and Yamagata Holdings, Inc. (collectively, Aloe Vera), appeal from the district court’s summary judgment against them on their claims under 26 U.S.C. § 7431 (a)(1). We must determine whether the statute of limitations in 26 U.S.C. § 7431 (d) is jurisdictional. We vacate and remand.

I.

Rex Maughan (Maughan) is the owner of Aloe Vera of America, Inc. (AVA), a United States corporation that processes and sells aloe vera products in the United States, Japan, and other countries. Maughan and Yamagata, indirectly through their respective holding companies, are co-owners of Forever Living Products Japan, Inc. (FLPJ), a Japanese corporation that purchases products from AVA.

In 1991 and 1992, AVA paid commissions and royalty-based income received from FLPJ to Maughan and Yamagata. The Internal Revenue Service (IRS) was concerned about whether this income was properly reported in the United States. Consequently, on April 26, 1996, the IRS sent a letter to the Japanese National Taxing Authority (NTA), proposing that the authorities simultaneously examine the tax reports of AVA, Maughan, Yamagata,…