Willfulness - What Does It Really Mean in Tax Cases? (5/7/10)

The major tax crimes in the Internal Revenue Code require that the defendant act willfully. The standard for acting willfully is usually stated as intentional violation of a known legal duty, a statement drawn from the Supreme Court's cases culminating in Cheek v. United States, 498 U.S. 192 (1991), here, (and for this reason sometimes referred to as Cheek willfulness). In a later case, Bryan v. United States, 524 U.S. 184 (1998) dealing with a requirement in federal firearm licensing statute that the defendant act willfully, the Supreme Court said:

In certain cases [including Cheek] involving willful violations of the tax laws, we have concluded that the jury must find that the defendant was aware of the specific provision of the tax code that he was charged with violating.

Really?

The Ninth Circuit recently concluded that, well, that's not exactly what the Supreme Court meant. United States v. Mousawi, ____ F.3d ___ (9th Cir. 2010). Mousawi involved another criminal statute with a willfulness requirement, but the Ninth Circuit had to deal with this notion of willfulness from Bryan.  Here's the Ninth Circuit's analysis In discussing the cases upon which Bryan relied for the statement (Cheek and Ratzlaf v. United States, 510 U.S. 135 (1994), involving the structuring act then having a tax-like willfulness requirement) (case citations omitted):

Neither of these cases [Cheek and Ratzlaf], however, required the government to prove the defendant's knowledge of a specific provision of law. In Cheek, the Supreme Court held that “willfulness,” as used in the criminal provisions of the tax code, required the government to prove that the defendant knew of the legal duty to file an income tax return and to treat his wages as income. But the Court noted that the “jury would be free to consider any admissible evidence from any source” showing that the defendant was aware of this duty. While Cheek listed “awareness of the relevant provisions of the Code or regulations” as one source of such evidence, it did not identify it as the exclusive source. Similarly, Ratzlaff held that the government could not carry its burden to prove the "willfulness" requirement in a prosecution for illegal structuring of financial transactions merely by proving that the defendant knew of the bank's duty to report cash transactions of more than $ 10,000. Nevertheless, the government did not have to prove that the defendant was aware of the provision of the federal statute that made it illegal to structure his cash deposits to avoid triggering the bank's reporting obligation. It was sufficient if a jury could reasonably conclude that the “defendant knew of his duty to refrain from structuring," a conclusion which could be based on "reasonable inferences from the evidence of defendant's conduct.” Similarly, prior to Cheek and Ratzlaff, we indicated that "willfulness" under a complex anti-exportation statute required proof of "a voluntary, intentional violation of a known legal duty," but we considered this standard satisfied where the government proved “that the defendant [knew] that his conduct . . . is violative of the law.” These cases make clear that even in the context of “highly technical statutes that presented the danger of ensnaring individuals engaged in apparently innocent conduct,” the term “willfulness” requires the government to prove that the defendant was aware of the legal duty at issue, but not that the defendant was aware of a specific statutory or regulatory provision.