Saturday, December 22, 2012

Evasion of Payment Statute of Limitations Runs from the Last Affirmative Act (12/22/12)

In United States v. Irby, 703 F.3d 280 (2d Cir. 12/18/12), here, the taxpayer was convicted for tax evasion under Section 7201, here, for the combination of (i) failing to file a return and (ii) subsequent affirmative acts thereafter to avoid payment of the tax due.  The latter affirmative acts, of course, transformed a failure to file case into a tax evasion case.  The statute of limitations for evasion is six-years, but from which date.  Section 6531(2), here.  In this type of case, involving failure to file which itself is a lesser misdemeanor crime, what makes it a felony is the affirmative act.  Hence, the Fifth Circuit sustained counting the period from the date of the last affirmative act after the due date of the return.  The Court said (most cases and quotation marks omitted):
The other circuits that have expressly considered the issue have concluded that the statute of limitations for section 7201 offenses runs from the later date of either: when the tax return was due or the defendant's last affirmative act of tax evasion. In Dandy, The Sixth Circuit addressed facts similar to those at issue here, where the defendant did not file tax returns for 1982 and 1983, but the last act of evasion did not occur until 1985. The Dandy court found that the statute of limitation runs from the last evasive act because it is these evasive acts  which form the basis of the crimes alleged in the indictment." In Ferris, the First Circuit supported the rule by pointedly stating, the defendant, however, by deceitful statements continued his tax evasion through date of last act of evasion. No circuit has rejected the last affirmative act of tax evasion rule. 
The rule, therefore, is well-supported in Supreme Court precedent and in the caselaw of other circuits. One element of the section 7201 offense is the commission of an affirmative act seeking to evade tax liability, which can be shown through the individual's willful failure to file a tax return, or through continued evasive acts intending to avoid the payment of taxes. The statute of limitations accrues from the later of the two. 
Irby last acted to evade the payment of his taxes in 2006, by using nominee trusts to conceal his assets. Because he was indicted in 2011, the district court did not err in concluding that Count I was not barred by the statute of limitations.

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