The Failure to Instruct the Jury That the Misdemeanor Section 7203 Willful Failure to Pay a Tax is a Lesser Included Offense of Tax Evasion Under Section 7201 is Reversible Error.

United States v. Fisher, 607 Fed. Appx. 645 (9th Cir. 2015)


Brad Fisher appealed his conviction for tax evasion under § 7201 of the Internal Revenue Code, 26 U.S.C. § 7201.  The appellate court had jurisdiction under 28 U.S.C. § 1291

The 9th Circuit vacated the conviction and remanded the case for a new trial.

Fisher raised a single issue on appeal. Fisher argued the district court abused its discretion by denying his request to instruct the jury on willful failure to pay taxes under 26 U.S.C. § 7203 as a lesser included offense.

The Court reviewed the district court's refusal to instruct on a lesser included offense using a two part test pursuant to United States v. Hernandez, 476 F.3d 791, 797 (9th Cir. 2007).

First, the defendant must prove that the offense on which instruction is sought is a lesser-included offense of that charged. United States v. Fejes, 232 F.3d 696, 703 (9th Cir. 2000)). This is reviewed de novo.

It is undisputed that § 7203 is a lesser included offense of § 7201.

Second, to warrant a lesser included offense instruction, the evidence at trial must be such that a jury could rationally find the defendant guilty of the lesser offense, yet acquit him of the greater offense. See, Schmuck v. United States, 489 U.S. 705, 716 n.8, 109 S. Ct. 1443, (1989).  The review for this step of the inquiry is abuse of discretion.

The 9th Circuit held that the district court abused its discretion by failing to give the lesser included offense instruction. The Court relied upon Sansone v. United States, 380 U.S. 343, 85 S. Ct. 1004, 13 L. Ed. 2d 882 (1965).

The trial court concluded that a § 7203 instruction was not required, because: (1) the only element of § 7201 that was in dispute was willfulness; (2) the willfulness required for §§ 7201 and 7203 were the same; and, (3) a rational jury could not convict on § 7203 without also convicting on § 7201.

However, this is precisely the reasoning that was rejected in United States v. DeTar, 832 F.2d 1110, 1113-14 (9th Cir. 1987).

For there to be a conviction under § 7201, there must be proof of willfulness in the sense of a specific intent to evade or defeat the tax or its payment. See, Edwards v. United States, 375 F.2d 862, 867 (9th Cir. 1967)). Because § 7203, by contrast, requires only a knowing failure to pay a tax when due, DeTar held that it is possible for a rational jury to find both willfulness under § 7203 and the absence of willfulness under § 7201.

The Appellate Court held that a jury could find DeTar guilty of willful failure to pay because he had filed returns indicating a tax due and had not paid.

Such a finding would not have been logically inconsistent with a finding that DeTar lacked the specific intent to evade when he engaged in the additional conduct alleged by the government as a felony violation — conduct such as placing assets in trust and receiving only cash payments from patients.

The Court rejected the government's argument that a § 7203 instruction was properly refused by the trial court because no reasonable jury could have acquitted Fisher on the § 7201 charge while convicting him on the § 7203 charge.

In determining whether to give a lesser included offense instruction, we may not weigh the evidence. See, Hernandez, 476 F.3d at 800. Here, a rational jury could have found that Fisher knowingly and intentionally failed to pay his taxes when due as required to violate § 7203. But, the jury could nonetheless have found a lack of the specific intent to evade those taxes as required by § 7201. A rational jury also could have found that, although Fisher intended to delay payment, he did not intend to evade his tax obligations permanently. See Edwards, 375 F.2d at 867.

Finally, the 9th Circuit rejected the government's argument that the error was harmless. The jury was instructed on tax evasion under § 7201 and on the lesser included offense of willfully delivering a false statement to the Internal Revenue Service under § 7207.  Both §§ 7201 and 7207 require an affirmative act in addition to the nonpayment of taxes.

Without an instruction under § 7203, the jury did not learn that willful nonpayment of taxes alone is a crime. If the jury did not believe that Fisher engaged in any affirmative act beyond mere nonpayment of taxes in violation of a known duty, but still was reluctant to allow him to get away with ignoring his substantial tax liability, its guilty verdict may have been a compromise.

This is sufficient prejudice to require reversal. See Hernandez, 476 F.3d at 801-02.

The government's argument that DeTar's willfulness standard conflicts with United States v. Bishop, 412 U.S. 346, 360, 93 S. Ct. 2008, 36 L. Ed. 2d 941 (1973), United States v. Pomponio, 429 U.S. 10, 12, 97 S. Ct. 22, 50 L. Ed. 2d 12 (1976) (per curiam), and Cheek v. United States, 498 U.S. 192, 201, 111 S. Ct. 604, 112 L. Ed. 2d 617 (1991), is without merit.

 Those cases define willfulness as a voluntary, intentional violation of a known legal duty. See Cheek, 498 U.S. at 201. The legal duty at issue here is the duty not to attempt to evade taxes. Under Cheek, therefore, willfulness under § 7201 requires a specific intent to evade taxes, as DeTar holds.


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