District Court holds in Tax Perjury (§ 7206(1)) Case That Defendant Can Introduce Evidence that IRS Failed to Pursue Civilly (11/12/22)

In United States v. Anderson-Trahan (E.D. La. 22-2 Order and Reasons Dkt. # 94 8/22/22), TN here and CL here, in a tax perjury case under § 7206(1), the Court denied the Government’s motion to prevent Anderson-Trahan from “introducing any evidence or argument concerning the fact that Defendant was prosecuted criminally rather than subjected to civil audit or collection activities by the IRS.”  The reasoning and scope of the holding is (footnotes omitted and bold-face supplied by JAT):

            If the Court allows the government to present evidence that Defendant failed to pay her taxes and/or filed her taxes late from 2012–2017, Defendant argues that she should be able to present evidence regarding the fact that she was not subject to civil collection activities by the [*8] IRS. As discussed in detail in the Order and Reasons granting the government’s Rule 404(b) motion, evidence that Defendant failed to pay her taxes and/or filed her taxes late from 2012–2017 is relevant and admissible. The government intends to argue that Defendant’s tax debt motivated her decision to file allegedly fraudulent tax returns to reduce her tax liability. The defense should be allowed to rebut this argument by pointing out that the IRS did not initiate civil audit or collection proceedings. Evidence of the actions the IRS took (or did not take) to enforce the tax liability, and evidence of whether Defendant was aware of any such actions, is probative of what Defendant knew about the tax liability. If, for example, Defendant was not aware of the extent of her tax liability, this would contradict the government’s argument regarding motive. Allowing the government to present evidence of other “bad acts” without allowing Defendant to respond that the IRS did not seek to enforce these obligations would be prejudicial to the defense. Defendant should be allowed to complete the story by showing that the IRS never instituted civil audit or collection activities.

             The government has not shown that the probative value of the evidence is substantially outweighed by a danger of unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence. The government argues that allowing this evidence could encourage jury nullification. “Jury nullification refers to the jury’s power to disregard the rules of law and evidence in order to acquit the defendant based upon the jurors’ sympathies, notions of right and wrong, or a desire to send a message on some social issue.” Defendant may not argue that the jury should acquit her because the government should have [*9] pursued civil civil (sic) audit or collection activities rather than prosecuting her criminally. Nevertheless, evidence that the government did not pursue civil audit or collection activities proceedings is relevant to Defendant’s state of mind.