The Willfulness Element of Most Tax Crimes Not Present in All Tax Crimes (8/30/13)

Practitioners and students of tax crimes know that most of the commonly charged tax crimes have an element of willfulness which the Supreme Court interpreted in Cheek to mean a voluntary intentional violation of a known legal duty.  In other words, conviction requires that the Government prove that the defendant knew the law and intended to violate the law.  In Cheek, the Court said that proof that the defendant acted in good faith would perforce negate willfulness.  Some tax crimes do not have an explicit requirement of willfulness but have an equivalent element that substantially overlaps willfulness.  E.g., Section 7212(a)'s requirement that the defendant act corruptly and even the defraud conspiracy in 18 USC 371.  See  John A. Townsend, Tax Obstruction Crimes: Is Making the IRS's Job Harder Enough, 9 Hous. Bus. & Tax. L.J. 255, 277-314 (2009), here.

But not all tax crimes will have such a heightened mens rea requirement as in Cheek.

In United States v. Jirak, 2013 U.S. App. 17937 (8th Cir. 2013), here, the defendant was convicted inter alia of violating 18 USC 287, which provides:

18 USC § 287 - False, fictitious or fraudulent claims
Whoever makes or presents to any person or officer in the civil, military, or naval service of the United States, or to any department or agency thereof, any claim upon or against the United States, or any department or agency thereof, knowing such claim to be false, fictitious, or fraudulent, shall be imprisoned not more than five years and shall be subject to a fine in the amount provided in this title.

Jirak had filed a false income tax return claiming a refund to which he knew he was not entitled.  He nevertheless sought to make a defense that he had acted in good faith by relying on advice he allegedly received from a tax service.  The Court rejected the claim on the following reasoning:

Unlike the crimes charged in Cheek, 18 U.S.C. § 287 does not require "willfulness." As the Court in Cheek noted, "[t]he general rule that ignorance of the law or a mistake of law is no defense to criminal prosecution is deeply rooted in the American legal system," and Congress can soften the impact of this common law presumption by making "specific intent to violate the law an element" of the crime. 498 U.S. at 199-200. Congress has not done so here. Thus Cheek does not persuade us to conclude that evidence of a good faith belief defense is relevant. See United States v. Hildebrandt, 961 F.2d 116, 118-19 (8th Cir. 1992) (concluding Cheek did not mandate a good faith defense instruction because its holding was premised on the complexity of the tax laws, and the defendant in Hildebrandt was convicted under a statute similar to § 287-18 U.S.C. § 1001).

Moreover, Jirak asserts that he should have been allowed to present the evidence that he relied on Liberty Tree because "[g]ood faith reliance on an expert tax preparer may be a defense to a tax evasion charge, but only if the taxpayer makes complete disclosure of all the relevant facts." United States v. Meyer, 808 F.2d 1304, 1306 (8th Cir. 1987) (citation omitted). Jirak, however, was not charged with tax evasion nor even charged under the Internal Revenue Code. But even assuming, without holding, that reliance on an expert tax preparer is a valid defense to the § 287 claims here, the district court did not abuse its discretion in excluding the evidence as unreasonable, because the advice received was not from an expert tax preparer, as it was not from an attorney or an accountant. McGraw v. C.I.R., 384 F.3d 965, 973 (8th Cir. 2004) ("Good faith reliance on expert advice of a tax preparer (i.e., an attorney or accountant) may be a defense . . . ."). Nor did Jirak offer evidence indicating he gave the purported expert complete disclosure, as required. Meyer, 808 F.2d at 1306 (noting the defense is only available if the taxpayer made complete disclosure of all of the relevant facts). The evidence offered did not establish the elements of the defense, and thus the district court did not abuse its discretion here. See United States v. Luker, 395 F.3d 830, 833 (8th Cir. 2005) (upholding the grant of a motion in limine to exclude evidence intended by the defendant to establish a defense, where the defendant's proffered evidence failed to satisfy the necessary prerequisites of the defense).

The key difference between the mens rea element in Section 287 and willfulness in the tax crimes is that the former merely requires that the defendant make a claim that is knowingly false, not that he know that doing so is a crime.  Willfulness would require that he know that he is violating a known legal duty -- i.e., committing a crime.  See Ratzlaf v. United States, 510 U.S. 135, 137 (1994) for a good discussion of this distinction.

Addendum 9/2/13 10:15 am:

I just recalled that I had posted a blog on another case addressing this issue.  Good Faith as a Defense to Tax Crimes (Federal Tax Crimes Blog 2/9/13), here.  In that blog, I discuss United States v. Nash, 175 F.3d 429 (6th Cir. 1999) where the court recognized that, despite the fact that willfulness is not a textual requirement of Section 287, good faith may be a defense to Section 287.  The Naxh court  affirmed anyway because the instructions were otherwise adequate.