Sunday, May 25, 2014

Is Section 7202 an Aggravated Felony for Immigration Purposes? (5/25/14)

Section 7202, here, criminalizes the following conduct:
Any person required under this title to collect, account for, and pay over any tax imposed by this title who willfully fails to collect or truthfully account for and pay over such tax shall, in addition to other penalties provided by law, be guilty of a felony [balance omitted]
Like evasion, section 7202 is a 5-year felony offense.  It is the most serious offense chargeable specifically for payroll tax fraud so common in the business world.  Much of that fraud could possibly be charged as a conspiracy or tax evasion or, possibly, tax obstruction under Section 7212(a).  But Section 7202 is the targeted serious tax crime for this particular conduct.

I would have thought that it is a "no brainer" that this serious conduct involves fraud or deceit and thus would be an aggravated felony, just as tax evasion is.  But, apparently, I am wrong.

In Corral-Trevizo v. Holder, 2014 U.S. App. LEXIS 9007 (5th Cir. 2014), here, the opinion in its entirety is (absent captions) (JAT has supplied the bold-facing):
Jesus Roberto Corral-Trevizo (Corral), a native and citizen of Mexico, petitions for review of a decision of Board of Immigration Appeals (BIA) dismissing his appeal of a decision by an immigration judge (IJ) ordering him removed under 8 U.S.C. § 1227(a)(2)(A)(iii) for having been convicted of an aggravated felony. The BIA affirmed the IJ's decision only to the extent that it found that Corral's prior offense under 26 U.S.C. § 7202 categorically met the definition of an aggravated felony under Clause (i) of 8 U.S.C. § 1101(a)(43)(M). It did not address the IJ's determination that the offense met the definition under Clause (ii). 
The parties concur, and a plain reading of the statute reveals, that there is at least one way to commit a § 7202 offense that does not involve fraud or deceit. Thus, Corral's conviction is not categorically an aggravated felony. See Larin-Ulloa v. Gonzales, 462 F.3d 456, 464-67 (5th Cir. 2006). The Government urges that under the modified categorical approach, however, it is clear that Corral pleaded guilty to an offense necessarily involving fraud or deceit because the information charged Corral with "willfully fail[ing] to truthfully account for and pay" the taxes that were due. Corral's plea agreement included a factual basis, however, indicating that Corral agreed only that he failed to pay the taxes, a failure which did not necessarily require fraud or deceit. Corral's admission to failing to pay the tax was sufficient for a conviction under § 7202. See United States v. Gilbert, 266 F.3d 1180, 1184-85 (9th Cir. 2001); United States v. Evangelista, 122 F.3d 112, 120-22 (2d Cir. 1997). Thus, although the information was charged in the conjunctive, it is not clear that Corral was necessarily admitting that his offense involved fraud or deceit. See United States v. Morales-Martinez, 496 F.3d 356, 358-59 (5th Cir. 2007); cf. Descamps v. United States, 133 S. Ct. 2276, 2288 (2013) ("[W]hatever [defendant] says, or fails to say, about superfluous facts cannot license a later sentencing court to impose extra punishment."). Because the documents approved for review under the modified categorical approach "are insufficient to establish that [Corral] was necessarily convicted of an aggravated felony," i.e. one involving fraud or deceit, the petitioner must prevail. Larin-Ulloa, 462 F.3d at 464 (emphasis added). 
Corral's § 7202 offense was not categorically an aggravated felony under Clause (i) of 8 U.S.C. § 1101(a)(43)(M). We do not reach the question whether the offense meets the definition of an aggravated felony under Clause (ii) because the BIA did not address it. 
We GRANT Corral's petition for review, VACATE the BIA's decision, and REMAND the case for further proceedings.
Any thoughts from readers?  Did Corral just win this skirmish and will eventually lose the war?

Also, I did try to pull the briefs from Pacer, but could not do it.  I presume that they are filed under seal for some reason.


  1. Milan, regarding PFICs what you say applies only if you elect mark-to-market (MTM.) With the default method of PFIC accounting the tax only applies when selling at a gain or (sometimes) when dividends are paid. I would go more into it but it would take pages.

  2. Thanks. I am familiar with MTM (1296 treatment), so I was assuming most Americans would "check the box" . But you are right, the 1291 treatment is default, assuming those foreign citizens in the USA and abroad know that their mutual funds are PFICS in the first place (asset & income test). The OVDI I believe, is giving participants the MTM treatment, with the basis reset back to "zero" after the OVDI period, so no unreversed inclusions can apply afterwards.

  3. On the penalty worksheet, tax-compliant accounts are not subject to the penalty. "Tax compliant" means that either the income was reported on the original return, or that the account earned no income and therefore there was no income to report.

    By doing this, the IRS is assessing penalties on non-tax-compliant accounts. Isn't this double jeopardy prohibited by the fifth amendment, since there already is the accuracy related penalty of 20%

    And even if it's not double jeopardy, if the maximum civil penalty for tax fraud is 70% of unpaid tax, plus interest thereon, how/why can the FBAR penalty be so much greater?

  4. I opted out under OVDI 2011 and finally have a settlement with IRS. I am happy I decided to withdraw from OVDI. I am really thankful to others who helped me through detailed information about their case. Here is a summary of my case. I will add more details as I find time.

  5. I opted out under OVDI 2011 and finally have a settlement with IRS. I am happy I decided to withdraw from OVDI. I am really thankful to others who helped me through detailed information about their case. Here is a summary of my case. I will add more details as I find time.

  6. Thank you for taking the time to write in detail about your OVDI experience. Really appreciated! I am an U.S. citizen of Indian origin with inherited foreign accounts (no money transfer from U.S.). Unfortunately our high balance is such that if we penalized 10K per year or 5K per year (for me and wife) the number of years 2003 to 2010 will result in penalty greater than 27.5% of high balance. Lawyer and CPA fees are adding up so I plan to just pay the penalty. Insane that IRS will charge 800% (of my tax due over 8 years) as penalty for honest mistake on my part. IRS rule making is terrible and as incompetent as the organization.


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