Is It the Defendant's Burden to Prove Good Faith As a Defense to Willfulness? (8/10/13)

Willulness is the express statutory requirement for most tax crimes.  (Some alternative formulation approaching if not equaling willfulness is required for the tax related crimes, such as tax obstruction or conspiracy; but I focus here on a crime that does have an express requirement of willfulness.) What does willfulness mean?  I don't propose to provide a definitive answer here, but will address an aspect of willfulness as played out in United States v. Favato, 2013 U.S.App.LEXIS 16137 (3d Cir. 2013), a nonprecedential opinion, here.  In that case, the defendant, a former accountant with BDO Seidman, had gotten too close to the client and assisted the client in playing fast and loose with taxes.  The defendant was convicted of tax obstruction (Section 7212(a)) and aiding and assisting (Section 7206(2)).  On appeal, the defendant complained about the willfulness instruction with respect to the aiding and assistance conviction.  Here is the Court's succinct statement of his complaint and holding:

Favato's proposed jury charge was incorrect. Favato requested a jury instruction stating that "it is the taxpayer who signed the return under penalties of perjury . . . who is ultimately responsible for the accuracy of the return that is filed." This instruction misstated the law and could have confused the jury because it could imply that assisting in the preparation of a false tax return is not a crime. However, assisting in tax fraud is a crime regardless of "whether or not such falsity or fraud is with the knowledge or consent of the [taxpayer]." See 26 U.S.C. § 7206(2). 

As for willfulness, to establish a willful violation of the tax code, the government must prove "the voluntary, intentional violation of a known legal duty." United States v. McKee, 506 F.3d 225, 236 (3d Cir. 2007). Where a defendant proves that he had a good faith belief that he did not violate the tax code, regardless of whether that belief was objectively reasonable, he establishes that he did not act willfully. United States v. DeMuro, 677 F.3d 550, 557 (3d Cir. 2012). The District Court explained this standard through an instruction from the Third Circuit's pattern jury instruction on willfulness. This included an instruction that conduct is not willful if performed through negligence, mistake, accident, or due to a good faith misunderstanding of the requirements of the law. The District Court also included a separate instruction explaining that good faith on the part of Favato would be a complete defense—inconsistent with his acting knowingly, intentionally, or willfully. These instructions correctly stated the law and permitted Favato to argue his theory of the case regarding good faith accounting practices. Cf. United States v. Flores, 454 F.3d 149, 161 (3d Cir. 2006) ("So long as the court conveys the required meaning, the particular words used are irrelevant.").

I know Favato is a nonprecedential opinion but that is not an excuse for sloppiness in a judicial opinion with important consequences, particularly when the sloppiness is so fundamentally off.  The Court says (emphasis supplied): "Where a defendant proves that he had a good faith belief that he did not violate the tax code, regardless of whether that belief was objectively reasonable, he establishes that he did not act willfully."  I don't think it is the defendant's burden to prove that he acted in good faith and did not act willfully.  That is the Government's burden.  While the defendant may have some burden -- perhaps better stated as risk -- if the record does not put good faith in issue, if the record does put good faith in issue, it is not the defendant's burden to prove anything.  The Government must prove willfulness which means proving that he did not act in good faith.  I have no idea whether, on balance, the actual instructions given fairly presented that concept, but the Court of Appeals surely botches it.

I note in this regard that good faith is not an affirmative defense in a criminal case (although it is commonly characterized as a defense).  Surely if the defendant affirmatively proves good faith, he is entitled to acquittal because willfulness cannot exist if there is good faith.  The issue here, however, is where the risk lies with respect to good faith properly before the jury where the evidence does not affirmatively establish the defense but the record does not establish lack of good faith (willfulness) beyond a reasonable doubt.  It should be with the Government.