Court Affirms Conviction, Rejecting Lesser Included Offense Instruction Request (7/17/19; 7/18/19)

In United States v. Rankin, 929 F.3d 399 (6th Cir. 2019), CA6 here, and GS here, Rankin was charged with (i) seven counts of failure to collect, account for and pay over payroll withholding tax in violation of  7202, (ii) six counts of tax perjury , § 7206(1), for individual tax returns, (iii) three counts of tax perjury, § 7206(1), for corporate returns, and (iv) one count of tax obstruction, § 7212(a). After trial, he was convicted on all counts and sentenced to 60 months (5 years).

On appeal, Rankin raised a number of issues and prevailed on only one relating to the timing of restitution.  I think only one issue is particularly interesting -- the lesser included offense issue.

Defendants facing felony count charges will often want a lesser included offense instruction to give the jury an alternative to conviction on the more serious offense charged.  Rankin was charged with seven counts of § 7202, a felony 5-year charged.  Rankin asked to a lesser included offense instruction for § 7203, failure to pay, which is a 1-year misdemeanor.  The district court denied the instruction.  The Court of Appeals affirmed the denial of the instruction.

The Court starts off with the guiding law (slip op., at 8, cleaned up; 929 F.3d at 406):

If a defendant asks for a lesser included offense instruction to which he is entitled, it is generally reversible error not to give it. A defendant is entitled to an instruction on a lesser-included offense if: (1) a proper request is made; (2) the elements of the lesser offense are identical to part of the elements of the greater offense; (3) the evidence would support a conviction on the lesser offense; and (4) the proof on the element or elements differentiating the two crimes is sufficiently disputed so that a jury could consistently acquit on the greater offense and convict on the lesser.

Section 7202 (cleaned up) makes it a felony for "any person required . . . to collect, account for, and pay over any tax imposed" to "willfully fail to collect or truthfully account for and pay over such tax."

Section 7203 (cleaned up) makes it a misdemeanor for "any person required . . . to pay any estimated tax or tax, or required . . . to make a return, keep any records, or supply any information," to "willfully fail to [do so] at the time or times required by law or regulations."

Here, the Court rejected Rankin's claim that he was entitled to a § 7203 lesser included offense instruction (slip op., at pp 8-9; 929 F.3d at 406-407). The gist of the reasoning is:  While it is true that a failure to pay over withheld payroll taxes would be a crime described in both § 7202 and § 7203, § 7202, the felony did not have an extra element that would permit a jury to convict for § 7203, the misdemeanor, but acquit for § 7202, the felony.

The Court does paint in (too) broad strokes in getting there.  The Court said (929 F.3d at 407):  "all violations of § 7203 for failing to pay a tax necessarily constitute violations of § 7202."  (929 F.3d at 407) That statement is only true in the context of taxes that a person is required to collect, account for and pay over (like payroll withholding tax). My experience is that § 7203 failure to pay cases can be applied in contexts well outside withholding taxes.

JAT Comments:
1. Even if Rankin prevailed on this argument, it is doubtful that his sentence would have been affected had he been convicted of the lesser § 7203 misdemeanor charges.  The misdemeanor counts of conviction would have been enough to support a sentence up to 72 months, and there were other felony counts of conviction.  And, it is unlikely that the Sentencing Guidelines calculations would be any different, for they do not distinguish between felonies and misdemeanors.  I suppose that the sentencing judge might have done some extra type of Booker downward variance if those 7 counts of conviction were misdemeanors rather than felonies.  But, that would be speculation.

2. The leading case on lesser included offense is Sansone v. United States, 380 U.S. 343 (1965), here, where the court rejected the claim of a defendant charged with § 7201, tax evasion, for a lesser included offense jury instruction for § 7203, failure to file.  The syllabus for Sansone is short and sweet (although masking some complexity).  So here is the syllabus:

Syllabus 

Petitioner was indicted for willfully attempting to evade federal income taxes in violation of 26 U.S.C. § 7201. At the end of his trial, he requested that the jury be instructed that it could acquit him of that offense, a felony, but could convict him of the lesser included misdemeanors of willfully filing a fraudulent or false return in violation of § 7207, or willfully failing to pay his taxes when due in violation of § 7203. The request was denied, and petitioner was found guilty. The Court of Appeals upheld the conviction. 

Held:

1. Since § 7207 applies to income tax violations, as §§ 7201 and 7203 clearly do, with obvious overlapping among them, the lesser included offense doctrine would be applicable in an appropriate case. Pp. 380 U. S. 347-349.

2. A lesser included offense instruction is proper only where the charged greater offense requires that the jury find a disputed factual element which is not a requisite for conviction of the lesser included offense. Berra v. United States, 351 U. S. 131, followed. Pp. 380 U. S. 349-350. 

3. There were here no disputed issues of fact which would justify instructions to the jury that it could find that petitioner had committed all the elements of §§ 7203 and 7207 without having violated § 7201, and so petitioner was not entitled to lesser included offense instructions. Pp. 380 U. S. 350-354.

3. Some other lesser included offense Federal Tax Crime Blogs offerings:

• Defense Request of Lesser Included Offense Instruction Precludes Questioning Sufficiency of Conviction (Federal Tax Crimes Blog 10/3/17), here.
• Inconsistent Verdicts and the Lesser Included Offense Doctrine (Federal Tax Crimes Blog 10/28/16), here.
• 7th Circuit Speaks on Convictions for Tax Evasion and Failure to File (Federal Tax Crimes Blog 7/7/12), here.

4,  One other item of interest is the discussion of the background from civil investigation to criminal investigation.  Here is the key quote discussing events after the civil investigation in which, to say the least, Rankin was not cooperative:

The IRS eventually initiated a criminal investigation into Rankin's tax activities. Rankin was informed in person by an IRS officer that he was under investigation in April 2011. R. 181 (Trial Tr. at 231-33) (Page ID #4540-42). In May 2011, Rankin filed five amended individual income tax returns for the years 2005 through 2009. These tax returns falsely declared negative adjusted gross income and no federal tax due. Rankin achieved this outcome by declaring some previously undisclosed income and claiming suspicious new offsets to which he was not entitled. See, e.g., R. 182 (Trial Tr. at 32-35) (Page ID #4602-4605).

While filing amended returns during a criminal investigation may be a good strategy, filing false amended returns is not a good strategy.