A federal court has barred a Jackson Hewitt franchise from preparing federal income tax returns claiming an improper federal income tax exemption for casino proceeds paid to Native Americans.

The owner of the Miami-area tax preparation franchise, Ahmad Labib Baltagi, along with two of his employees, were disciplined under the injunction, after the Justice Department filed a complaint in April. Labib Baltagi operates approximately 20 Jackson Hewitt offices and employs about 150 tax preparers in the Miami area.

The franchise and individuals agreed to the injunctions and admitted that the firm prepared the tax returns improperly. The Miami court ordered the firm to notify all customers for whom it had made such a false claim and to provide the Justice Department with a list of the name, address, Social Security number and telephone number of each of the Seminole Tribe members for whom they prepared returns with the improper deductions.

The franchise and the individual defendants are also barred from taking any unrealistic position in tax returns prepared for customers in the future.

Native Americans must pay federal income taxes on income they earn or receive unless the express language of a statute or treaty exempts it from taxation. The federal Indian Gaming Regulatory Act, which regulates tribes' operation of casinos, allows tribes to distribute gaming proceeds to tribe members only if the tribes treat the income as taxable and advise tribe members that the income is taxable.

The suit did not allege any wrongdoing by the New Jersey-based franchiser Jackson Hewitt Tax Services Inc.

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