The taxpayer, an airline pilot on disability, sought to avoid including certain airline disability payments in his income and paying tax on those payments. Prior to 2003, he apparently made the claim on the notion that the tax was unconstitutional, leading the Court of Appeals to call him a "tax protestor." In 2003, however, he lost the issue in the Tax Court and in the Third Circuit Court of Appeals. Tuka v. Commissioner, 120 T.C. 1, aff’d 85 F. App’x 875 (3d Cir. 2003). He persisted, leaving in place instructions to the plan administrator not to withhold and then, in 2005, filing new instructions with the new plan administrator. That persistence after 2003 led to his criminal indictment, conviction and sentencing.
The Court of Appeals held first that the evidence was sufficient to support the convictions for tax evasion and failure to file. As is frequently the case in criminal tax cases that go to trial, the taxpayer's defense was that the Government had not proved that he acted willfully. This is sometimes called the "Cheek" defense, after Cheek v. United States, 498 U.S. 192 (1991), also involving an airline pilot asserting that his income was not taxable. Cheek established the principle that a subjective belief that the law does not impose income tax is not willful under the criminal tax statutes regardless that it is not an objectively reasonable belief. But, Cheek added some twists that tax protestors do not like. First, if it is a constitutional claim that income is not taxable, the Cheek defense does not work. Second, in assessing whether the taxpayer had a sincerely held belief, the jury is entitled to consider the reasonableness of the belief -- the more unreasonable, the less likely it is to be sincerely held. On this second point, the Court of Appeals held:
After this Court in 2003 affirmed the Tax Court’s decision that Tuka’s disability benefits were taxable, any subjective belief that Tuka’s disability benefits were not taxable became objectively unreasonable. And while an honestly held belief, regardless of its reasonableness, will still negate the element of willfulness in a tax prosecution such as this, the jury was free to infer from this unreasonableness that Tuka did not actually hold such a belief. Cheek v. United States, 498 U.S. 192, 203-04 (1991) (“[T]he more unreasonable the asserted beliefs or misunderstandings are, the more likely the jury will consider them to be nothing more than simple disagreement with known legal duties imposed by the tax laws and will find that the Government has carried its burden of proving knowledge.”).
Thus, we will uphold Tuka’s convictions under 26 U.S.C. §§ 7201 and 7203.The Court of Appeals next affirmed the sentencing court's application of the obstruction enhancement in U.S.S.G. § 3C1.1 for the Sentencing Guidelines calculation. The Court held:
Perjury is one form of obstruction of justice. See U.S.S.G. § 3C1.1 cmt. n.4(B). A defendant qualifies for the perjury enhancement by giving “false testimony concerning a material matter with the willful intent to provide false testimony . . . .” United States v. Dunnigan, 507 U.S. 87, 94 (1993). In assessing whether Tuka’s testimony at trial satisfied the elements of perjury, the District Court was required “to accept the facts necessarily implicit in the verdict.” United States v. Boggi, 74 F.3d 470, 478-79 (3d Cir. 1996) (internal quotation marks and citation omitted). And while “it is preferable for a district court to address each element of the alleged perjury in a separate and clear finding, express separate findings are not required.” Id. at 479 (internal quotation marks and citation omitted).
One fact “necessarily implicit” in the jury’s verdict is that Tuka did not have a good-faith belief that his disability benefits were not taxable, for if he did have such a belief, the jury would not have convicted him. Thus, his testimony asserting such a good-faith belief must have been false and material. Cf. id. (concluding that the defendant’s testimony at trial “was necessarily material” because the jury would not have convicted him if it had believed the testimony). In explaining why it was applying the enhancement, the District Court stated, “I’m disappointed in you, Mr. Tuka, to have testified in the fashion that you did . . . . I agree[ ] with th[e] finding [that you were not truthful].” App. 597. Though the court could have more clearly enunciated its findings as to each individual element, these statements sufficiently indicated that it thought Tuka’s testimony satisfied these elements.
Thus, the court did not commit error, clear or otherwise, in applying the enhancement under § 3C1.1.JAT Comments:
1. The first holding on the sufficiency of the evidence is not exceptional. I discuss it principally to remind students and practitioners of the limits of the Cheek defense. In this regard, although Cheek established the key element of the defense that the sincerely held belief need not be reasonable, on remand, Cheek was convicted after a new jury was properly instructed as to that element of the offense. Moreover, remember that the Cheek defense is not really a defense. A defense suggests that a defendant must prove some exculpatory factor. That is not true for the Cheek nuance on willfulness. The Government must prove willfulness which means that the evidence must negate that the defendant had a sincerely held belief. Of course, as discussed in other blog entries, the defendant wanting to remind the jury that the Government must negate the claim will want a specific instruction to that effect which will mean that he or she must put on some evidence as to the sincerely held belief claim. That is usually done by the defendant testifying to that effect. But, as the second holding indicates, there are risks in a defendant testifying. The defendant does not have to testify, but it may be difficult -- but not impossible -- to present the sincerely held belief claim without the defendant's testimony.
2. The second holding is important. One of the dangers that lurks in having a defendant testify in his defense on any issue is that the testimony may subject him or her to the obstruction enhancement for perjury. Perjury is hard to prove, of course, but students and practitioners should remember that, for sentencing, perjury need be proved only by a preponderance of the evidence (OK, perhaps in some cases in some circuits by clear and convincing evidence). But the sentencing judge will have heard the now convicted defendant testify. Hence, the sentencing judge's assessment that the defendant perjured himself will have some critical weight. And, focusing on the element at issue in Tuka -- willfulness, which is to say whether defendant had a reasonable belief -- it is necessarily implicit in the jury's guilty verdicts that the defendant did not and therefore that he perjured himself in claiming that he did.