Tax Obstruction, Section 7212(a), Sentenced Under Tax Guidelines Rather than Obstruction Guidelines (7/10/13)

In United States v. Neilson, 721 F.3d 1185 (10th Cir. 2013), here, the defendant was convicted by plea of tax obstruction, Section 7212(a), here.  Defendant admitted the following as the basis for his plea:

[D]uring the period alleged in Count Two of the Indictment I did corruptly endeavor to obstruct and impede the due administration of the Internal Revenue laws by using third parties to accomplish the transfer of property to trusts; reporting financial information to the IRS that was different from the information I reported to lenders from whom I sought loans; mailing frivolous letters to the IRS as part of a scheme wherein I sought to "redeem" the value of my birth certificate by stamping "Accepted for Value" on documents sent to me by the IRS and attaching them to such letters; presenting "Bills of Exchange" as payment of my tax debts; declaring that I was a sovereign citizen of the State of Utah and not subject to the laws of the United States; and sending harassing documents to the IRS seeking personal information on all IRS employees.

The defendant's pattern of conduct was not untypical conduct to hide assets from the IRS and probably could have been charged several ways, including possibly tax evasion.  Still, it is also an obstruction crime.  For sentences for convictions of Section 7212(a), the Guidelines refer to two different Guidelines - the tax Guidelines in 2T1.1, here, and the obstruction Guidelines in 2J1.2, here.  Both cannot apply, so the sentencing court is tasked to pick the most appropriate one.  That task is done by assessing the conduct in question, assessing the type of conduct clearly covered by the two Guidelines, and picking the closest Guideline.  In Nielsen, the court picked the tax Guideline.  Nielsen preferred the obstruction guideline and appealed.  (JAT Note, the key difference between the two relates to the Base Offense Level and Specific Offense Characteristics in the two cited Guidelines provisions; once the calculations clear Part Two, they would be the same.)

On appeal, the court affirmed the sentencing court's application of the tax guidelines.  The Court reasoned (bold face supplied by JAT):

Comparing the stipulated conduct to the conduct covered under each guideline, we agree with the district court that Section 2T1.1 was the most appropriate guideline. Although some of Defendant's conduct may also have obstructed justice, his conduct overall had more to do with taxation. The actions he stipulated to—using third parties to transfer property to trusts, reporting different financial information to the IRS than he reported to lenders, mailing frivolous letters seeking to "redeem" the value of his birth certificate, declaring that he was not subject to the laws of the United States, harassing IRS employees, and seeking to satisfy his tax debts through "Bills of Exchange" rather than payment—are more akin to the other types of tax offenses covered under Section 2T1.1 than to the other types of obstruction of justice covered under Section 2J1.2.

We are unpersuaded by Defendant's argument that Section 2T1.1 is inapplicable because his admitted conduct does not squarely meet every element of the tax evasion statute, 26 U.S.C. § 7201, which is one of several statutes punishable under this guideline. In order for Defendant's violation of the omnibus clause to be punishable under Section 2T1.1 rather than Section 2J1.2, his conduct need only be more akin to the other conduct punishable under that section—it need not meet every element of a particular offense (other than a violation of the omnibus clause) punishable under that section. Regardless of whether Defendant's stipulated conduct would meet every element of tax evasion, it is certainly akin to tax evasion and the other taxation offenses punishable under Section 2T1.1. It is likewise irrelevant that Defendant edited the proposed statement of facts in the plea agreement to remove allegations that were even more clearly linked to various tax evasion strategies. The question is simply whether the conduct he ultimately admitted to was more akin to Section 2T1.1's tax evasion and related taxation offenses than to Section 2J1.2's obstruction of justice offenses, and we conclude it was.

For my other views on various aspects of the history and interpretation of the tax obstruction statute, Section 7212(a), see John A. Townsend, Tax Obstruction Crimes: Is Making the IRS’s Job Harder Enough?, 9 HOUS. BUS. & TAX L.J. 260 (2009) Article available here.