Tax Perjury, § 7206(1), as Aggravated Felony for Immigration Purposes

This morning a petition for certiorari caught my eye in reviewing Tax Notes Today and think it is an issue that Tax Crimes practitioners and students need to be aware of. I checked the Supreme Court's docket here and find that the case will go to conference on November 24, 2009. I don't have a link to the petition itself, but here is the link to the Solicitor General's brief in opposition to the petition. The brief fairly presents the issues and is a good background discussion, although from an advocate's perspective. The Solicitor General states the issues as:

QUESTIONS PRESENTED

In 8 U.S.C. 1101(a)(43)(M), the term “aggravated felony” is defined as including an offense that—

(i) involves fraud or deceit in which the loss to the victim or victims exceeds $10,000; or

(ii) is described in section 7201 of title 26 (relating to tax evasion) in which the revenue loss to the Government exceeds $10,000.

The questions presented are:

1. Whether a conviction for a felony tax offense other than tax evasion in violation of 26 U.S.C. 7201 qualifies as an aggravated felony under 8 U.S.C. 1101(a)(43)(M)(i), where the offense involves fraud or deceit in which the loss to the victim or victims exceeds $10,000.

2. Whether a conviction for filing a false tax return qualifies as an aggravated felony under 8 U.S.C. 1101(a)(43)(M)(i), where petitioner did not dispute a finding in the pre-sentence investigation report that petitioner owed $75,982 in additional taxes during the year in which the false tax return was filed.

JAT Comments:

The first issue is one that most practitioners will face at some point in a career where tax crimes is a significant part of their practice. I cover this point in my book and just cut and past that discussion here (without the footnotes):

The second subpart [of the statute quoted above] thus makes clear that a conviction under § 7201 (tax evasion) is an aggravated felony. The question arises, however, whether other tax crimes that, in general parlance, might be viewed to include fraud or deceit are covered in the first subpart. For example, as we have noted, the Government often charges § 7206(1) (tax perjury) in a case where it could have charged tax evasion, and then the sentencing phase will require proof of a tax loss number that is the number the taxpayer fraudulently sought to avoid reporting or paying. ICE, the government agency charged with administering the immigration laws, takes the position that § 7206(1) may constitute an aggravated felony as defined in the first subpart. There is currently a split in the circuits as to whether tax felonies other than evasion (such as § 7206(1) ) can constitute an aggravated felony.

Finally, a note of caution for practitioners. The attorney should advise or obtain another qualified attorney to advise the defendant of the collateral consequences, including the immigration consequences, of the charges and a plea to the charges if the defendant considers making a plea (as will usually be the case). Certainly, at least as to this immigration collateral consequence, courts have noted that the attorney has a professional duty to make sure the client is advised. So there will be a malpractice issue involved where the attorney fails to do so. In terms of a defendant’s attack on a conviction based in ineffective assistance of counsel, the courts have historically made a distinction between the attorney who failed to advise on immigration consequences and an attorney who gives erroneous advice on the immigration consequences. Failure to advise alone is not ineffective assistance of counsel, but erroneous advice is ineffective assistance of counsel. However, courts have at least suggested that they may be willing to reconsider this historical distinction because, in view of the attorney’s duty to the client, it makes no sense; if the courts do reconsider, I predict that they will hold that failure to advise is ineffective assistance of counsel also. Cover this point with your clients.

I should note that the conflict among the circuits is an interesting conflict for criminal tax practitioners. The court of appeals' decision that held that § 7206(1) is not an aggravated felony is a Third Circuit decision in Lee v. Ashcroft, 368 F.3d 218 (3d Cir. 2004). The majority decision in Lee was written by Judge Lou 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. The dissent in Lee was written by Judge, now Supreme Court Justice, Alito. Maybe Justice Alito at least will have some interest in this issue and could influence the decision as to whether to accept certiorari. I have a lot of respect for Judge Oberdorfer and think he has the better position, but we will see.

The second issue is also one worthy of the practitioners' attention. The issue is whether the tax loss amount found by the sentencing judge (sometimes by inference if the defendant fails to object to that part of the Probation Office's PSR) is preclusive in the immigration proceeding. The Government must prove the amount in the immigration proceeding by clear and convincing proof, rather than just a preponderance. By contrast, in the sentencing phase the proof the tax loss is generally thought to be by a preponderance, although there may be some dispute about that generally or specifically if the tax loss dramatically increases the sentence. At any rate, it seems to me that the petitioner has the better part of this issue. I have asserted in a publication that the findings in the sentencing proceedings should be preclusive in the civil tax case following criminal conviction (John A. Townsend, Collateral Estoppel in Civil Cases Following Criminal Convictions, 2005 TNT 4-28) but in both of those proceedings (the criminal sentencing and the civil tax case) the findings are by a preponderance of the evidence with the outcome affected by the burden of proof only where the finder is in equipoise which is rare enough to be negligible. But, in the immigration proceeding, the required finding is by clear and convincing evidence. I am troubled that the use of the PSR in that context where the sentencing judge makes no explicit findings, and certainly would not have in any case required clear and convincing evidence on the state of the law now.