Whether, in direct conflict with the Third Circuit, the Ninth Circuit erred in holding that Petitioners' convictions of filing, and aiding and abetting in filing, a false statement on a corporate tax return in violation of 26 U.S.C. §§ 7206(1) and (2) were aggravated felonies involving fraud and deceit under 8 U.S.C. § 1101(a)(43)(M)(i), and Petitioners were therefore removable.The following discussion of the issue is from my Federal Tax Crimes book:
Immigration status may be affected by conviction of an “aggravated felony.” Conviction of an aggravated felony will require deportation. An aggravated felony is defined to include an offense that:
(i) involves fraud or deceit in which the loss to the victim or victims exceeds $10,000; orThe second subpart thus makes clear that a conviction under § 7201 (tax evasion) is an aggravated felony. n2 The question arises, however, whether other tax crimes that, in general parlance, might be viewed to include fraud or deceit are covered in the subpart (i). n3 For example, as we have noted, the Government often charges § 7206(1) (tax perjury) in a case where it could have charged tax evasion. Certainly, the crime of tax evasion facially would constitute a felony involving fraud or deceit within the meaning of subpart (i). Why then did Congress feel it necessary in subpart (ii) to name tax evasion separately, if it was already covered by “fraud or deceit” in subpart (i)? One court, the Third Circuit, pondered this question and concluded that, unless (ii) is surplusage wholly subsumed by (i), then what (ii) must mean is that other tax crimes are not to be treated in (i) even if arguably they may involve some fraud or deceit. n4 Notwithstanding, that case, the trend in the circuits, is to interpret (i) to include other tax crimes that involve fraud or deceit. n5 (These courts are unconcerned that that interpretation of (i) makes (ii) surplusage.) The most prominent such other tax crime affected by this interpretation is § 7206(1) which, as you recall, does not have fraud as an element of the offense. But, in some – indeed virtually all – § 7206(1) cases, fraud is involved because the Government will not prosecute if the taxpayer did not intend to cheat on tax so that the Government can obtain incarceration by proving a significant tax loss (the first and most important step in the Sentencing Guidelines calculation). So in § 7206(1) cases ICE and the Courts will have two objective facts – conviction of a felony and the relation to fraud or deceit – from which to initiate and even prevail in a deportation proceeding. n6
(ii) is described in § 7201 of the Internal Revenue Code of 1986 (related to tax evasion) in which the revenue loss to the Government exceeds $10,000; . . . n1
n1 8 U.S.C. § 1101(a)(43)(M).
n2 A good argument could be made that the first part subsumes the second. See Carty v. Ashcroft, 395 F.3d 1081 (9th Cir. 2005), cert den. sub nom. Carty v. Gonzalez, 546 U.S. 818 (2005) (dealing with whether a state conviction for willful failure to file a return “with intent to evade . . . tax” is a crime of moral turpitude under § 237(a)(2)(A)(ii)). The Carty court concluded that the conviction was a crime of moral turpitude using reasoning that would sweep the second part above (the § 7201 part) under the first part. In doing so, the Court distinguished the troubling case of United States v. Scharton, 285 U.S. 518 (1932), where the Supreme Court held that a statute that then provided a special six year statute of limitations for “defrauding or attempting to defraud the United States” did not apply to a conviction for willfully attempting to evade taxes (under what is now § 7201). In Scharton, the Supreme Court expressly rejected the arguments presented by the government that “fraud is implicit in the concept of evading or defeating” and that “any attempt to defeat or evade a tax is said to be tantamount to and to possess every element of an attempt to defraud the taxing body.” Id. at 520-21. Perhaps Scharton and its progeny were the reason the drafters of the Immigration Act specifically included § 7201 as an aggravated felony.
n3 See Scott A. Schumacher, Criminal Tax and Immigration: A Search for Clarity, 129 Tax Notes 235 (Oct. 11, 2010).
n4 Lee v. Ashcroft, 368 F.3d 218 (3d Cir. 2004) (majority opinion written by Judge Louis Oberdorfer, a D.C. District Judge, sitting by designation; Judge Oberdorfer was formerly AAG in charge of the Tax Division, and thus has considerable background in interpreting and applying the tax laws upon which the immigration issue turned; but the dissent in the case is by Judge, now Supreme Court Justice, Alito). See also United States v. Roselli, 366 F.3d 58 (1st Cir. 2004), where the defendant pled to a § 7206(2) charge but sparred in the sentencing phase over whether the tax loss exceeded $10,000 because of his concern that the § 7206(2) conviction might subject him to deportation under the first subpart. If Lee correctly interprets the law, that concern goes away in § 7206(2) cases, as well as other tax crimes except § 7201; the practitioner must be careful to structure the plea so as to avoid a conviction for a Title 18 related crime, such as wire fraud, or even conspiracy.
n5 Compare Kawashima v. Holder, 593 F.3d 979 (9th Cir. 2010), and Arguelles-Olivares v. Mukasey, 526 F.3d 171 (5th Cir. 2008) (each holding that other tax crimes, specifically §§ 7206(1) and 7206(2) could be aggravated felonies and rejecting the reasoning of Lee v. Ashcroft cited next); Lee v. Ashcroft, 368 F.3d 218 (3d Cir. 2004) (where a divided panel decided that a § 7206(1) crime is not an aggravated felony.
n6 See for example Kawashima v. Gonzales, 593 F.3d 979 (9th Cir. 2010). For more discussion of some of the more esoteric concepts involved in using the conviction and tax loss findings at sentencing, see my blogs (and comments to the blogs) titled “Further on Use of Sentencing Tax Loss Findings in Later Proceedings,” Federal Tax Crimes Blog (1/30/10).