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  • Writer's pictureDonald V. Watkins

Watkins Wins $2 Million Tax Dispute

By: Donald V. Watkins

Copyrighted and Published on March 13, 2022

On March 7, 2022, the general counsel for the Alabama Department of Revenue conceded that I did not owe the state of Alabama $2,004,219 in income tax assessments that were levied against me by the Department on November 15, 2021. This concession was made in a formal pleading filed by the Department in my appeal to the Alabama Tax Tribunal.

The Department's concession effectively ends a state tax audit that began on March 16, 2019 and covered tax years 2007, 2008, 2009, 2010, 2011, 2012, and 2013.

In August of 2019, a state revenue examiner based in the Department's Shelby County office mailed me a notice of the tax audit, which I received after I reported to the Federal Prison Camp in Talladega to serve a 60-month sentence on federal wire, mail, and bank fraud charges that were trumped up by Birmingham federal prosecutors. My efforts to postpone the tax audit were ignored.

In late December of 2020, the examiner mailed me a preliminary draft of the Preliminary Tax Assessments totaling $2,004,219. The mailing was sent to the Holdover Unit at the U.S. Penitentiary in Atlanta, as opposed to my permanent home address on file with the Department of Revenue.

The Preliminary Assessments erroneously claimed that I received $13.4 million in income between 2007 and 2013 that was not reported on my state tax returns. Included in this amount was $3,150,000 in non-taxable loan proceeds. The tax bill also sought $515,000 in "fraud" penalties that were assessed against an employee in the University of Alabama (at Birmingham) Hospital Food and Nutrition Services Department. I am not that employee. The Department claimed that the $2,004,219 represented the state taxes, accrued interest, and penalties due on this $13.4 million in so-called unreported "income".

The Department stated that the audit was based upon unspecified "news articles" and documents from my February-March 2019 federal criminal trial.

I disputed the Preliminary Assessments and objected to the tax audit because it fell outside the applicable statute of limitations for conducting such audits. I also pointed out that every dollar of income my businesses and I earned during the audit period was reported on the appropriate state and federal tax returns of the entities that received the income. My objections were ignored.

On July 13, 2021, the Department sent me a new set of Preliminary Assessments for the same tax years and the same $2,004,219 in taxes allegedly owed. The new Assessments contained the same fatally flawed tax explanations and analyses that were contained in the December 2020 Assessments.

On July 28, 2021, I formally objected to the new Preliminary Assessments and, once again, asserted various affirmative defenses to them. One of my defenses invoked the application of statute of limitations for auditing my taxes for years 2007 to 2013. Simply put, the statute of limitations had expired for (a) conducting the audit and (b) asserting a claim that I owed $2,004,219 in new taxes.

In September of 2021, the Department demanded that I submit all tax records that supported my objections by late October. I retained four million pages of supporting tax documentation, all of which is archived and stored in a secure off-site location in Birmingham, Alabama. The act of retrieving, reviewing, organizing, and submitting the supporting tax records to the Department was physically impossible because of my imprisonment in Texas, and I informed the Department of this fact. The Department also wanted me to attend a conference with tax examiners in October. Again, this request was impossible to accommodate.

On November 8, 2021, the Department made the Preliminary Assessments final, without adjustments. They cited my failure to provide supporting documentation and failure to attend the conference as the reasons for finalizing the Assessment, without adjustments. I timely appealed the $2,004,219 in Final Assessments to the Alabama Tax Tribunal.

On March 7, 2022, the general counsel for the Alabama Department of Revenue notified the Alabama Tax Tribunal that the tax audit fell outside the applicable statute of limitations. As such, the $2,004,219 in Final Tax Assessments were deemed to be null and void. This concession effectively ended a three-year state tax audit that never should have occurred.

Prior Tax Audits Ended in Watkins' Favor

The favorable outcome in the Alabama Tax Tribunal represents the third time I prevailed in tax audits during the eight-year government-sponsored Blitzkrieg campaign against me.

In 2014, the city of Birmingham filed a lawsuit against me claiming that my businesses owed the city $146,000 in business license fees and occupational taxes over a multi-year period. The unexpected lawsuit was filed while I was actively participating in the city's established administrative process to contest and resolve such tax disputes.

I disputed the amount of fees and taxes sought by the city. Later on, an audit conducted by city auditors of my business records for the multi-year period in question showed that I owed the city only $11,769, which is the same amount I offered to pay in the city's administrative dispute resolution process. This $11,769 was based on the amount of revenue that my businesses generated inside the city limits of Birmingham during the audit period. The revenues that were generated outside of the city limits of Birmingham during the audit period were subject to taxation by other jurisdictions. The Commerce Clause of the United States Constitution prohibited the city from taxing me on revenues derived from business transactions that were conducted outside of Birmingham.

After the city's audit was completed, I paid the original $11,769 that I offered to pay during the pre-lawsuit administrative dispute resolution process. With this payment, the city dropped its claims for the balance of the $146,000 sought in its lawsuit.

Shortly after the city's audit was concluded, the Internal Revenue Service (IRS) commenced a separate, but more limited, multi-year tax audit of my federal taxes. After receiving and reviewing copies of the relevant business records, the IRS ended its audit with no additional taxes imposed upon me for the years in question.


The business transactions that served as the basis for the Alabama Department of Revenue's tax audit and the wire and mail fraud charges lodged against me by Birmingham federal prosecutors were first reviewed in 2015 and 2016 by highly qualified federal prosecutors in New Jersey on an objective and unbiased basis. The New Jersey prosecutors, who specialized in major financial crimes, determined that my business conduct and transactions complied with all federal laws at all times.

The Department's tax audit was an ill-fated part of the Blitzkrieg campaign that was launched against me by local federal law enforcement officials and Atlanta-based regulatory agencies. The lead federal prosecutor in my local criminal case was Lloyd Peeples, a failed pizza restaurant operator who benefitted from white male privilege in 2017 when he landed a job as the First Assistant United States Attorney in Birmingham despite his documented history of hostility to African-Americans and women.

The Blitzkrieg campaign was designed to break me emotionally, psychologically, financially, and businesswise. The Department's participation in this modern-day lynching failed. However, the Department's general counsel deserves a lot of credit for doing the right thing in this case. He saved the state of Alabama tens of thousands of dollars in litigation costs and upheld Alabama's Taxpayer Bill of Rights in my case.

Meanwhile, I feel like a lot like Jed Cooper, the fictional character/innocent man who survived a lynching in Clint Eastwood's 1968 classic Western film, "Hang 'Em High." Like Jed Cooper, I am determined to use all lawful means at my disposal to bring to justice all of the public officials who organized my lynching and led the lynch mob in my case.

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Between The Lines
Between The Lines
Mar 19, 2022

Perfect example abuse their power case. Well, by law the IRS has the right to confiscate your property and destroy your business/life and those supposed officials with an axe to grind are doing it with impunity.


Mar 13, 2022


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