Friday, July 10, 2015

In Tax Willfulness Crime, Should the Jury Be Instructed that Willfulness Does Not Include Negligence, Inadvertence, Accident, Mistake or Recklessness? (7/10/15)

In United States v. Kupfer, ___ F.3d ___, 2015 U.S. App. LEXIS 11689 (10th Cir. 2015), here, the defendant argued that the Judge had correctly instructed the jury that the willfulness element of Section 7201 required "the voluntary intent to violate a known legal duty."  That formulation of the mens rea element in Section 7201 is virtually straight out of Cheek v. United States, 498 U.S. 192 (1991), here.  The defendant, however, asked for an embellishment that the required intent did not include "negligence, inadvertence, accident, mistake, and recklessness." While the embellishment is a true statement of the law, the Court of Appeals held that the district court had not violated its discretion in instructing the jury because the instruction on intent to violate a known legal duty necessarily informed the jury that "negligence, inadvertence, accident, mistake, and recklessness" would not have met the willfulness intent requirement.  The Court said:
In telling the jury that willfulness was required for guilt and defining the term "willfully," the court implicitly told the jury that any mental state short of willfulness would not have sufficed for a finding of guilt. In similar circumstances, other courts have rejected similar challenges to jury instructions based on a failure to describe mental states falling short of willfulness. E.g., United States v. Collins, 685 F.3d 651, 655-56 (7th Cir. 2012); United States v. Colacurcio, 514 F.2d 1, 8 (9th Cir. 1975).
The Tenth Circuit did not  hold that, had the trial court included the instruction embellishment, it would have erred.  As noted, the embellishment is a correct statement of the law.  All the Tenth Circuit held is that the embellishment is not required.

Obviously, defense counsel will usually want to press for the embellishment in most cases.  And, if requested, I think a trial court should give the instruction because it does properly frame the willfulness element for tax evasion (as well as for most other tax crimes).  How does it hurt to give this correct instruction?

I think it is helpful to consider the willfulness element in the offshore account area.  The FBAR criminal and civil penalties require willfulness, and the definition parallels the definition of willfulness for tax crimes.  See IRM  (07-01-2008), FBAR Willfulness Penalty - Willfulness, here ("The test for willfulness is whether there was a voluntary, intentional violation of a known legal duty").  It is interesting that, in the Streamlined Filing Compliance Procedures for nonwillful actors (both as to income tax and FBAR noncompliance), the IRS includes a variation of the embellishment requested by the defendant in Kupfer.  The taxpayer must thus certify:
My failure to report all income, pay all tax, and submit all required information returns, including FBARs, was due to non-willful conduct. I understand that non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.
Obviously, the IRS thought that in addressing the certification of nonwillfulness to lay people, it was important and helpful to give the embellishment.  I would think that it would be equally important in criminal cases where criminal conviction is being considered by a lay jury.

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