Seventh Circuit Rejects Duplicity, Multiplicity and Other Arguments (11/23/11)

In United States v. Hassebrock, 663 F.3d 906 (7th Cir. 2011), here, the Seventh Circuit addressed a number of interesting issues relate to criminal tax law and sentencing. Hassebrock was a tax protestor (or perhaps more politically correct, a tax defier). Hassebrock "consciously disobeyed his obligation to pay taxes, joined a fictitious Native American tribe to avoid his tax obligation, and attempted to pay taxes with fraudulent sight drafts." Hassebrock was indicted and convicted for one count of tax evasion and one count of failure to file for, respectively, evasion of his 2004 tax liability and failure to file with respect to 2004. (I hope that statement has your antenna raised!)

The indictment for failure to file alleged that he committed the crime by failing to file the 2004 return on or before April 15, 2005. As it turns out, however, there was "strong evidence" that he had not filed for an extension on or before April 15, 2005 (as required for a valid extension) but, on August 12, 2005, had applied for an extension which, if granted, arguably would have extended the filing date until October 15, 2005. There was some argument about the meaning of these events that, but I address it below.

The points of the opinion that I find of interest and believe readers -- at least some readers -- may also be interested in are:

1. Hassebrock argued that the indictment was "duplicitous or, in the alternative, multiplicitous." Now, those terms are terms of art in the criminal arena, so I will describe them and how the court resolved the arguments.

a. Duplicity. Duplicity is describing more than one crime in a single count. The danger is the risk that a jury verdict of guilty may not be based on unanimity as to each offense Recall that Hassebrock had allegedly requested an extension on August 15, 2005 which, if granted, would treat his return as timely filed if he had filed it by October 15, 2005. The Government had charged that the  failure to file occurred on April 15, 2005. The Government's technical argument, I suppose, would be that the extension, if it was granted at all, only would have conferred timely filing status if the return were filed by October 15, 2005; but, since no return was filed, the key delinquency date was April 15, 2005, the original due date of the return.  Hassebrock's technical argument, I suppose if he made it, was that on the magical moment at midnight on April 15, 2005, he did not have the requisite willful intent to fail to file because he intended to and did file for extension and thus his willfulness only came when he defaulted on what he thought was his obligation to file by October 15, 2005.  At the request of the defendant, the jury was presented a Special Verdict form in which the jury indicated that it found Hassebrock guilty of failing to file on or before April 15, 2005 but found him not guilty of failing to file on or before October 15, 2005. Although finding that this Special Verdict "suggested some confusion" over the nature of the failure to file count, the Second Circuit was irrelevant or immaterial. The court's reasoning is not clear. I would articulate the rationale as (i) the due date (beyond which there is a failure to file) is April 15, but a return filed during an extension period will be deemed timely filed and (ii) Hassebrock did not file in the alleged extension period (if it were ever granted), hence his failure to file occurred by failing to file by the original due date for the return.  Readers will note that this does not really address the willfulness issue noted above. 

b. Multiplicity. Multiplicity is charging a single crime in more than one count. Here the defendant claimed that the conduct alleged in the two counts (evasion and failure to file) described a single crime. Facially, the prohibited conduct is different -- evasion is attempt to evade the tax liability and failure to file, a misdemeanor, is just failure to file. In practice, the two crimes are not usually charged with respect to the same year. In the case of a failure to file a tax return, the Government will usually just charge failure to file since that can be established without the greater burden of proving evasion. Sometimes, the Government will charge evasion with failure to file being one of the required Spies affirmative acts. The Government usually does not charge both crimes for the same year. The Hassebrock indictment charges both. The multiplicity question asks whether Congress intended to have the same conduct subject to both crimes. The answer to the question in Hassebrock is that the charges were not for the same conduct. Hassebrock launched his argument based on the reasoning of Sansone v. United States, 380 U.S. 343, 351 (1965). Sansone and its progeny deal directly the lesser included offense doctrine and specifically, whether one of the parties in the criminal case can request an uncharged lesser included offense as way to give the jury a middle ground rather than an up or down guilty or not guilty verdict on the greater offense. An offense is a lesser included offense only if it is necessarily subsumed in the greater offense but the greater offense has some additional element not in the lesser offense. In other words, there is not complete overlap between the two offenses. If there is complete overlap, then the indictment can charge one or the other, but not both (based on related principles). Consistent with its precedent, the Seventh Circuit held that failure to file was not necessarily subsumed in the greater offense of evasion and therefore the two were separate crimes that could be charged separately.

2. Lesser Included Offense Instruction. As apparent from the multiplicity

3. Odds and Ends. There are some other snippets worth noting.

a. The Seventh Circuit states that, for tax evasion, one of the elements is a "tax deficiency," what I commonly call a tax due and owing. In a related discussion, it says that the tax loss for sentencing is "the amount of tax that the taxpayer owed but did not pay." This does not give the critical nuance that both the tax due and owing element of evasion and the tax loss for sentencing is the amount due to fraud or intent to evade. In fact, there are often amounts that the taxpayer owed but did not pay that are not due to fraud or intent to evade; those amounts are not included either in the tax due and owing element of the crime or in sentencing tax loss computation.

b. Mitigating or eliminating the tax due and owing element and tax loss for sentencing is a common and essential drill for the tax practitioner.See, for example, the recent postings on Attacking the Tax Due and Owing Element of Tax Evasion and Tax Loss for Sentencing (11/18/11), here and Tenth Circuit Decision on Unclaimed Deductions for Sentencing Tax Loss Calculations (8/16/11), here. But, unlike the Tenth Circuit in Hoskins (discussed in the latter blog), in Hassebrock, the Seventh Circuit restated its position that the tax loss includes the intended loss rather than the actual tax loss (which would exclude consideration of unclaimed deductions and credits).