Willfully
Defined
7207- Fraudulent
Returns, Statements, or Other Documents: "Willfully" Defined
[73-1
USTC ¶9459]
United States
v. Bishop
SupremeCourt
of the United States, No. 71-1698, 412 US 346, 93 SCt 2008,
5/29/73
, Rev'g and rem'g, CA-9, 72-1 USTC ¶9252, 455 F. 2d 612
[Code Secs. 7206(1) and 7207]
Crimes: Fraudulent and false statements: Instructions to jury:
Lesser-included offense: Meaning of word "willfully".--In
a criminal case in which the taxpayer was found guilty of a felony under
Code Sec. 7206(1) for willfully making a fraudulent return under penalty
of perjury, the District Court properly refused to issue a
lesser-included-offense jury charge under Code Sec. 7207, which makes it
a misdemeanor when one willfully delivers or discloses to the Internal
Revenue Service any return or document that is known to be false or
fraudulent as to any material matter. Under both statutory provisions,
the word "willfully" has the same meaning, connoting the
voluntary, intentional violation of a known legal duty. The distinction
between the provisions lies in the additional misconduct that is
essential to the violation of the felony provision. Therefore, the Court
of Appeals erred in reversing the District Court on the ground that the
word "willfully" in the misdemeanor statute implied less
knowledge than the same word in the felony statute. One dissent.
Scott
P. Crampton, Assistant Attorney General, Erwin N. Griswold, Solicitor
General, Philip A. LaCovara, Deputy Solicitor General, Keith A. Jones,
Assistant Solicitor General, John P. Burke, Richard B. Buhrman,
Department of Justice, Washington, D. C. 20530, for petitioner. J.
Richard Johnston, Robert H. Solomon, Johnston, Klein, Horton &
Solomon, 833 United California Bank Bldg., Oakland, Calif., for
respondent.
Syllabus
Respondent
was convicted of violating 26 U. S. C. §7206(1), which makes it a
felony when one "[w]illfully makes and subscribes any return . . .
which he does not believe to be true and correct as to ever material
matter," after the District Court refused a lesser-included-offense
jury charge under §7207, which makes it a misdemeanor when one
"willfully delivers or discloses" to the Internal Revenue
Service any return or document "known by him to be fraudulent or to
be false as to any material matter." The Court of Appeals reversed
on the ground that "willfully" as used in §7206 implied an
evil motive and bad faith, but the same word as used in §7207 required
only a showing of unreasonable, capricious, or careless disregard for
the truth. Held: The word "willfully" has the same
meaning in §§ 7206(1) and 7207, connoting the voluntary, intentional
violation of a known legal duty, and the distinction between the
statutes is found in the additional misconduct that is essential to the
violation of the felony provision; hence, the District Court properly
refused the requested lesser-included-offense instruction based on
respondent's erroneous contention that the word "willfully" in
the misdemeanor statute implied less scienter than the same word in the
felony statute. Pp. 350-362.
[72-1
USTC ¶9252] 455 F. 2d 612, reversed and remanded.
BLACKMUN,
J., delivered the opinion of the Court, in which BURGER, C. J., and
BRENNAN, STEWART, WHITE, MARSHALL, POWELL, and REHNQUIST, JJ., joined.
DOUGLAS, J., filed a dissenting statement, post, p. 362.
MR.
JUSTICE BLACKMUN delivered the opinion of the Court.
[Issue]
Chapter
75, subchapter A, of the Internal Revenue Code of 1954, as amended, 26
U. S.
C. §§ 7201-7241, is concerned with tax crimes. Sections 7201-7207,
inclusive, which in the aggregate relate to attempts to evade or defeat
tax, to failures to act, and to fraud, all include the word
"willfully" in their respective contexts. Specifically, §7206
is a felony statute and reads:
"§7206.
Fraud and false statements.
"Any
person who--
"(1)
Declaration under penalties of perjury.
"Willfully
makes and subscribes any return, statement, or other document, which
contains or is verified by a written declaration that it is made under
the penalties of perjury, and which he does not believe to be true and
correct as to every material matter . . ..
.
. .
"shall
be guilty of a felony and, upon conviction thereof, shall be fined not
more than $5,000, or imprisoned not more than 3 years, or both, together
with the costs of prosecution."
Section
7207 is a misdemeanor statute 1 and reads:
"7207.
Fraudulent returns, statements, or other documents.
"Any
person who willfully delivers or discloses to the Secretary or his
delegate any list, return, account, statement, or other document, known
by him to be fraudulent or to be false as to any material matter, shall
be fined not more than $1,000, or imprisoned not more than 1 year, or
both."
This
case presents the issue of the meaning of the critical word
"willfully" as it is employed in these two successive
statutes. Is its meaning the same in each, or is the willfulness
specified by the misdemeanor statute, §7207, of somewhat less degree
than the felony willfulness specified by §7206?
[Reason
for Hearing Appeal]
I
Respondent, Cecil J. Bishop, was convicted by a jury on all three counts
of an indictment charging him with felony violations of §7206(1) with
respect to his federal income tax returns for the calendar years 1963,
1964, and 1965. The Court of Appeals, holding that a
lesser-included-offense instruction directed to the misdemeanor statute,
§7207, was improperly refused by the trial judge, reversed the judgment
of the District Court and remanded the case for a new trial. [72-1 USTC
¶9252] 455 F. 2d 612 (CA9 1972). Since the meaning of
"willfully," as used in the tax crime statutes, has divided
the circuits, 2 we granted
certiorari. 409
U. S.
841 (1972).
We
conclude that it was proper and correct for the District Court to refuse
the lesser-included-offense instruction. In our view, the word
"willfully" has the same meaning in both statutes.
Consequently, we reverse and remand so that the Court of Appeals may now
proceed to consider the additional issues that court found it
unnecessary to reach.
[Facts]
II
Mr. Bishop is a lawyer who has practiced his profession in
Sacramento
,
California
, since 1951. During that period, he owned an interest in a walnut ranch
he and his father operated. In 1960 his secretary, Louise, married his
father. The father died, and thereafter respondent's stepmother managed
the ranch.
Respondent
periodically sent checks to Louise. These were used to run the ranch, to
pay principal on loans, and to make improvements.
Louise
maintained a record of ranch expenditures and submitted an itemized list
of these disbursements to respondent at the end of each calendar year.
In his 1963 return respondent asserted as business deductions all
amounts paid to Louise and, in addition, all the expenses Louise listed.
This necessarily resulted in a double deduction for all ranch
expenditures in 1963. Moreover, some of these expenditures were for
repayment of loans and for other personal items that did not qualify as
income tax deductions. In his 1964 and 1965 returns respondent similarly
included non-deductible amounts among the ranch figures that were
deducted.
The
aggregate amount of improper deductions taken by respondent for the
three taxable years exceeded $45,000. He enjoyed aggregate gross income
for those years of about $70,000.
The
incorrectness of the returns as filed for the three years was not
disputed at trial. Transcript of Trial 869-872, 1148. Neither is it
disputed here. Brief for Respondent 4.
[Request
for Jury Instruction]
III
Section 7206(1), the felony statute, is violated when one
"[w]illfully makes and subscribes any return," under penalties
of perjury, "which he does not believe to be true and correct as to
every material matter." Respondent based his defense at trial on
the ground that he was not aware of the double deductions asserted in
1963 or of the improper deductions taken in the three taxable years. He
claimed that his law office secretary prepared the return schedules from
his records and from the information furnished by Louise; he merely
failed to check the returns for accuracy.
Respondent
requested lesser-included-offense instructions based on the misdemeanor
statute, §7207. This tax misdemeanor is committed by one "who
willfully delivers or discloses" to the Internal Revenue Service
any return or document "known by him to be fraudulent or to be
false as to any material matter." Respondent argued that the word
"willfully" in the misdemeanor statute should be construed to
require less scienter than the same word in the felony statute. App. 28.
With the state of respondent's guilty knowledge in dispute, his proposed
instructions would have allowed the jury to choose between a misdemeanor
based on caprice or careless disregard and a felony requiring evil
purpose. The trial judge declined to give the requested instructions
and, instead, gave an instruction only on the felony, requiring a
finding by the jury that the defendant intended "with evil motive
or bad purpose either to disobey or to disregard the law." App. 24.
After
the guilty verdict on all counts was returned, respondent was sentenced
to two years' imprisonment on each count, the sentences to run
concurrently. The court, however, suspended all but 90 days of each
sentence and placed respondent on probation for five years on condition
that he pay a fine of $5,000. App. 31.
[Ninth
Circuit's Rule]
IV
The Court of Appeals relied upon and followed, 455 F. 2d, at 614, a
series of its own cases, 3 particularly
Abdul v. United States [58-1 USTC ¶9453], 254 F. 2d 292 (1958),
enunciating the proposition that the word "willfully" has a
meaning in tax felony statutes that is more stringent than its meaning
in tax misdemeanor statutes. 4 Our
examination of these Ninth Circuit precedents in the light of this
Court's decisions leads us to conclude that the Court of Appeals'
opinion cannot be sustained by this asserted distinction between §7206(1)
and §7207.
A.
The Ninth Circuit rule appears to have been evolved from language in
this Court's opinion in Spies v. United States [43-1 USTC ¶9243],
317
U. S.
492 (1943). In Spies the defendant requested an instruction to
the effect that an affirmative act was necessary to constitute a willful
attempt to evade or defeat a tax, within the meaning of §145(b) of the
Revenue Act of 1936, 49 Stat. 1703. The trial court refused the request.
The Second Circuit affirmed. This Court reversed. We were concerned in Spies
with a felony statute, §145(b), applying to one "who willfully
attempts in any manner to evade or defeat any tax," and with a
companion misdemeanor statute, §145(a), applying to one who
"willfully fails to pay such tax, make such return, keep such
records, or supply such information, at the time or times required by
law or regulations." These statutes were the predecessors of the
current §§ 7201 and 7203, respectively, of the 1954 Code. In
distinguishing between the two offenses, the Court said:
"The
difference between willful failure to pay a tax when due, which is made
a misdemeanor, and willful attempt to defeat and evade one, which is
made a felony, is not easy to detect or define. Both must be willful,
and willful, as we have said, is a word of many meanings, its
construction often being influenced by its context. United States v.
Murdock [3 USTC ¶1194], 290
U. S.
389. It may well mean something more as applied to nonpayment of a tax
than when applied to failure to make a return. Mere voluntary and
purposeful, as distinguished from accidental, omission to make a timely
return might meet the test of willfulness. But in view of our
traditional aversion to imprisonment for debt, we would not without the
clearest manifestation of Congressional intent assume that mere knowing
and intentional default in payment of a tax, where there had been no
willful failure to disclose the liability, is intended to constitute a
criminal offense of any degree. We would expect willfulness in such a
case to include some element of evil motive and want of justification in
view of all the financial circumstances of the taxpayer.
"Had
§145(a) not included willful failure to pay a tax, it would have
defined as misdemeanors generally a failure to observe statutory duties
to make timely returns, keep records, or supply information--duties
imposed to facilitate administration of the Act even if, because of
insufficient net income, there were no duty to pay a tax. It would then
be a permissible and perhaps an appropriate construction of §145(b)
that it made felonies of the same willful omissions when there was the
added element of duty to pay a tax. The definition of such nonpayment as
a misdemeanor, we think, argues strongly against such an
interpretation." 317
U. S.
, at 497-498.
In
Abdul the court considered an appeal by a taxpayer convicted of
tax misdemeanors (§2707(b) of the 1939 Code and §7203 of the 1954
Code) based on failure to file but acquitted of tax felonies (§2707(c)
of the 1939 Code and §7202 of the 1954 Code) based on failure to
account for and pay withholding taxes. The defense was inability to pay.
The trial judge instructed the jury that the term "wilful" in
the misdemeanor counts meant, among other things, "capriciously or
with a careless disregard whether one has the right so to act,"
whereas the same word in the felony counts meant "with knowledge of
one's obligation to pay the taxes due and with intent to defraud the
Government of that tax by any affirmative conduct." 254 F. 2d, at
294. Relying on Spies, the Court of Appeals approved these
instructions and concluded that
"the
word 'wilful' as used in the misdemeanor statute means something less
when applied to a failure to make a return than as applied to a felony
nonpayment of a tax. This being true, then the words used in the
instruction defining 'wilful' as relates to a misdemeanor adequately and
clearly point up that difference." Ibid.
Because
of an error in the cross-examination of Abdul, his conviction was
reversed. On retrial, he was again convicted. He appealed, and the
judgment was affirmed. Abdul v. United States [60-1 USTC ¶9432],
278 F. 2d 234 (CA9 1960). When Abdul sought certiorari, the Solicitor
General conceded that the sentence under one of the counts could not
stand and undertook to say that the Government would present to the
District Court a motion for correction of the sentence. Certiorari,
accordingly, was denied. Two Justices would have grnated the writ to
review the correctness of the charge "regarding the requirement of
willfulness." 364
U. S.
832 (1960).
In
the present case the Court of Appeals continued this Abdul
distinction between willfulness in tax misdemeanor charges and
willfulness in tax felony charges. Section 7207, it was said, requires
only a showing of "unreasonable, capricious, or careless disregard
for the truth or falsity of income tax returns filed," whereas §7206(1)
"requires proof of an evil motive and bad faith." 455 F. 2d,
at 615. The level of willfulness, thus, would create a disputed factual
element that made appropriate a lesser-included-offense instruction.
[Ninth
Circuit Rule Is Incorrect]
B.
The decisions of this Court do not support the holding in Abdul,
and implicitly they reject the approach taken by the Court of Appeals.
In Spies, the Court speculated, 317
U. S.
, at 495-498, that Congress could have distinguished between the
regulatory aspects of the tax system, which call for compliance
regardless of financial status, and the revenue-collecting aspects,
which may place demands on a taxpayer he cannot meet. Since the
antecedent of §7203 (as does that section itself today) punished both
failure to file and failure to pay as misdemeanors, the Court concluded
that Congress had not drawn the line between felonies and misdemeanors
on the basis of distinctions between the system's regulatory aspects and
its revenue-collecting aspects. The reliance in Abdul on that
hypothetical statutory scheme, discussed by this Court in Spies
but found not in line with what Congress had actually done, was
misplaced. Utilizing the unsupported Abdul distinction as a
foundation, the Court of Appeals constructed the further general
distinction between tax felonies and tax misdemeanors, a distinction
also inconsistent with prior decisions of this Court.
In
Berra v. United States [56-1 USTC ¶9480], 351 U. S. 131 (1956),
a defendant was convicted of violating the antecedent of §7201, namely,
§145(b) of the 1939 Code, a felony statute identical, for present
purposes, with the section of the same number in the Revenue Act of 1936
at issue in Spies. The defendant claimed that he was entitled to
a lesser-included-offense instruction based on §3616(a) of the 1939
Code, the antecedent to §7207. The Court rejected this contention,
concluding that the two sections of the 1939 Code then "covered
precisely the same ground." 351
U. S.
, at 134. Implicit in this was the conclusion that the level of intent
required for tax misdemeanors was not automatically lower than the level
of intent required for tax felonies.
Although
the misdemeanor statute, §3616(a), proffered by the defendant in Berra
did not contain the word "willfully," the Berra facts
were presented to the Court again in Sansone v. United States
[65-1 USTC ¶9307], 380 U. S. 343 (1965), when the misdemeanor statutes
there in issue, §§ 7207 and 7203 of the 1954 Code, both contained the
word "willfully." 5 In Sansone
the Court rejected the argument that a set of facts could exist that
would satisfy the willfulness element in the §7207 misdemeanor but not
in the §7201 felony:
"Given
petitioner's material misstatement which resulted in a tax deficiency,
if, as the jury obviously found, petitioner's act was willful in the
sense that he knew that he should have reported more income than he did
for the year 1957, he was guilty of violating both §§ 7201 and 7207.
If his action was not willful, he was guilty of violating neither."
380
U. S.
, at 353.
The
same analysis was applied to the requested lesser-included-offense
instruction for §7203.
Id.
, at 352. The clear implication of the decision in Sansone
is that the word "willfully" possesses the same meaning in
§§ 7201, 7203, and 7207. Sansone thus foreclosed the argument
that the word "willfully" was to be given one meaning in the
tax felony statutes and another meaning in the tax misdemeanor statutes.
The
thesis relied upon by the Court of Appeals, therefore, was incorrect.
[Meaning
of Term "Willfully"]
V.
It would be possible, of course, that the word "willfully" was
intended by Congress to have a meaning in §7206(1) different from its
meaning in §7207, and we turn now to that possibility.
We
continue to recognize that context is important in the quest for the
word's meaning. See United States v. Murdock [3 USTC ¶1194], 290
U. S.
389, 394-395 (1933). Here, as in Spies, the "legislative
history of the section[s] contains nothing helpful on the question here
at issue, and we must find the answer from the [sections themselves] and
[their] context in the revenue laws." 6 317 U. S.,
at 495. We consider first, then, the sections themselves.
A.
Respondent argues that both §§ 7206(1) and 7207 apply to a fraudulent
"return" and cover the same ground if the word
"willfully" has the same meaning in both sections. Since
"it would be unusual and we would not readily assume that Congress
by the felony . . . meant no more than the same derelictions it had just
defined . . . as a misdemeanor," 317
U. S.
, at 497, respondent concludes that Congress must have intended to
require a more willful violation for the felony than for the
misdemeanor.
The
critical difficulty for respondent is that the two sections have
substantially different express terms. The most obvious difference is
that §7206(1) applies only if the document "contains or is
verified by a written declaration that it is made under the penalties of
perjury." No equivalent requirement is present in §7207.
Respondent recognizes this but then relies on the presence of perjury
declarations on all federal income tax returns, a fact that effectively
equalizes the sections where a federal tax return is at issue. See 26 U.
S. C. §6065(a). 7
This
approach, however, is not persuasive for two reasons. First, the
Secretary or his delegate has the power under §6065(a) to provide that
no perjury declaration is required. If he does so provide, then §7207
immediately becomes operative in the area theretofore covered by §7206(1).
Second, the term "return" is not necessarily limited to a
federal income tax return. A state or other nonfederal return could be
intended and might not contain a perjury warning. If this type of return
were submitted in support of a federal return, or in the course of a tax
audit, §7207 could apply even if §7206(1) could not.
There
are other distinctions. The felony applies to a document that a taxpayer
"[w]illfully makes and subscribes . . . and which he does not
believe to be true and correct as to every material matter,"
whereas the misdemeanor applies to a document that a taxpayer
"willfully delivers or discloses to the Secretary or his delegate .
. . known by him . . . to be false as to any material matter." In
the felony, then, the taxpayer must verify the return or document in
writing, and he is liable if he does not affirmatively believe that the
material statements are true. For the misdemeanor, however, a document
prepared by another could give rise to liability on the part of the
taxpayer if he delivered or disclosed it to the Service; additional
protection is given to the taxpayer in this situation because the
document must be known by him to be fraudulent or to be false.
These
differences in the respective applications of §§ 7206(1) and 7207
provide solid evidence that Congress distinguished the statutes in ways
that do not turn on the meaning of the word "willfully." Judge
Hastie, in analyzing this Court's holding in Spies, appropriately
described this distinction as follows:
"However,
this distinction is found in the additional misconduct which is
essential to the violation of the felony statute . . . and not in the
quality of willfulness which characterizes the wrongdoing." United
States v. Vitiello [66-2 USTC ¶9480], 363 F. 2d 240, 243 (CA3
1966).
Thus
the word "willfully" may have a uniform meaning in the several
statutes without rendering any one of them surplusage. We next turn to
context.
B.
The heirarchy of tax offenses set forth in §§ 7201-7207, inclusive,
utilizes the mental state of the offender as a guide in establishing the
penalty. Section 7201, relating to attempts to evade or defeat tax, has
been described and recognized by the Court as the "climax of this
variety of sanctions" and as the "capstone of a system of
sanctions which singly or in combination were calculated to induce
prompt and forthright fulfillment of every duty under the income tax law
and to provide a penalty suitable to every degree of delinquency." Spies,
317
U. S.
, at 497; Sansone, 380
U. S.
, at 350-351. The actor's mental state is described both by the
requirement that acts be done "willfully" and by the
designation of certain express elements of the offenses. In §7201, for
example, the Court has held that, by requiring an attempt to evade,
"Congress intended some willful commission in addition to the
willful omissions that make up the list of misdemeanors." Spies,
317
U. S.
, at 499. Similarly, in §7207, the Government must show that the
document was known by the taxpayer to be fraudulent or to be false as to
a material matter.
All
these offenses, except two subsections of §7206 viz.,
subsections (3) and (4), require that acts be done
"willfully." Although the described states of mind might be
included in the normal meaning of the word "willfully," the
presence of both an express designation and the simultaneous requirement
that a violation be committed "willfully" is strong evidence
that Congress used the word "willfully" to describe a constant
rather than a variable in the tax penalty formula. 8
The
Court, in fact, has recognized that the word "willfully" in
these statutes generally connotes a voluntary, intentional violation of
a known legal duty. It has formulated the requirement of willfulness as
"bad faith or evil intent," Murdock, 290
U. S.
, at 398, or "evil motive and want of justification in view of all
the financial circumstances of the taxpayer," Spies, 317
U. S.
, at 498, or knowledge that the taxpayer "should have reported more
income than he did." Sansone, 380
U. S.
, at 353. See James v. United States [61-1 USTC ¶9449], 366
U. S.
213, 221 (1961); McCarthy v. United States [69-1 USTC ¶9312],
394
U. S.
459, 471 (1969).
This
long standing interpretation of the purpose of the recurring word
"willfully" promotes coherence in the group of tax crimes. In
our complex tax system, undertainty often arises even among taxpayers
who earnestly wish to follow the law. The Court has said, "It is
not the purpose of the law to penalize frank difference of opinion or
innocent errors made despite the exercise of reasonable care." Spies,
317
U. S.
, at 496. Degrees of negligence give rise in the tax system to civil
penalties. The requirement of an offense committed "willfully"
is not met, therefore, if a taxpayer has relied in good faith on a prior
decision of this Court. James v. United States, supra, 366
U. S.
, at 221-222. Cf. Lambert v.
California
, 355
U. S.
225 (1957). The Court's consistent interpretation of the word
"willfully" to require an element of mens rea
implements the pervasive intent of Congress to construct penalties that
separate the purposeful tax violator from the well-meaning, but easily
confused, mass of taxpayers.
["Willfully"
Has Same Meaning for Both Statutes]
Until
Congress speaks otherwise, we therefore shall continue to require, in
both tax felonies and tax misdemeanors that must be done
"willfully," the bad purpose or evil motive described in Murdock,
supra. We hold, consequently, that the word "willfully"
has the same meaning in §7207 that it has in §7206(1). Since the only
issue in dispute in this case centered on willfulness, it follows that a
conviction of the misdemeanor would clearly support a conviction for the
felony. 9 Under these
circumstances a lesser-included-offense instruction was not required or
proper, for in the federal system it is not the function of the jury to
set the penalty. Berra v.
United States
, 351
U. S.
, at 134-135.
The
judgment of the Court of Appeals is reversed, and the case is remanded
for further proceedings.
It
is so ordered.
[Dissent]
Mr.
JUSTICE DOUGLAS would affirm the judgment of the Court of Appeals for
the Ninth Circuit on the opinion written for that court by Judge Powell.
455 F. 2d 612.
1
18
U. S.
C. §1 defines felony and misdemeanor:
"§1.
Offenses classified.
"Notwithstanding
any Act of Congress to the contrary:
"(1)
Any offense punishable by death or imprisonment for a term exceeding one
year is a felony.
"(2)
Any other offense is a misdemeanor."
2
Compare United States v. Vitiello [66-2 USTC ¶9480], 363 F. 2d
240, 243 (CA3 1966) (§§ 7201 and 7203), and Haner v. United States
[63-1 USTC ¶9390], 315 F. 2d 792, 794 (CA5 1963) (§7203), where the
Ninth Circuit analysis was rejected, with United States v. Fahey
[69-2 USTC ¶9450], 411 F. 2d 1213 (CA9), cert. denied, 396 U. S. 957
(1969) (§7203); Martin v. United States [63-2 USTC ¶9502], 317
F. 2d 753 (CA9 1963) (§7203); Abdul v. United States [58-1 USTC
¶9453], 254 F. 2d 292 (CA9 1958) (§§ 2707(b) and (c) of the 1939 Code
and §§ 7202 and 7203 of the 1954 Code). See also Janko v. United
States [60-2 USTC ¶9580], 281 F. 2d 156, 166-167 (CA8 1960),
reversed on confession of error by the Solicitor General, 366 U. S. 716
(1961) (§§ 7201 and 7207); Lumetta v. United States [66-2 USTC
¶9492], 362 F. 2d 644, 646 n. 3 (CA8 1966) (§§ 7201 and 7203); Escobar
v. United States [68-1 USTC ¶9125], 388 F. 2d 661 (CA5 1967), cert.
denied, 390 U. S. 1024 (1968) (§§ 7206(1) and 7207). Other
inconsistencies in interpreting the word "willfully" have
compounded the confusion. See n. 8, infra. Cf. United States
v. Lachman [72-2 USTC ¶9766], 469 F. 2d 1043 (CA1 1972) (§§ 7201
and 7203).
3
United States v. Haseltine [70-1 USTC ¶9140], 419 F. 2d 579, 581
(1970) (§§ 7201 and 7203); United States v. Fahey, supra, n. 2;
Eustis v. United States [69-1 USTC ¶9299], 409 F. 2d 228 (1969)
(§7203); Edwards v. United States [67-1 ¶9356], 375 F. 2d 862
(1967) (§§ 7201, 7203, and 7206(2)); Martin v. United States,
n. 2, supra; p. 3; Abdul v. United States, n. 2. supra.
4
One possible result of this distinction, of course, is that the
Government's burden in a misdemeanor case could be less than in felony
case.
5
The applicability of §3616(a) of the 1939 Code to income tax returns
was not contested in Berra v. United States [56-1 USTC ¶9480],
351 U. S., 131, 133 (1956), but the Court soon held that that statute
"did not apply to evasion of the income tax." Achilli v.
United States [57-1 USTC ¶9692], 353
U. S.
373, 379 (1957). In Sansone, however, statutory revisions
effected by the enactment of the 1954 Code were held to make §7207
applicable to income tax violations. Sansome v.
United States
, 380
U. S.
, at 343, 347-349 (1965).
6
See H. R. Rep. No. 1337, 83d Cong., 2d Sess., A425 (1954); S. Rep. No.
1622, 83d Cong., 2d Sess., 602-603 (1954). The predecessor to §7206(1)
was §3809(a) of the 1939 Code. The antecedent to §7207 was, as we have
noted above, §3616(a) of the 1939 Code. See Sansone, 380
U. S.
, at 347.
7
"§6065. Verification of returns.
"(a)
Penalties of perjury.
"Except
as otherwise provided by the Secretary or his delegate, any return,
declaration, statement, or other document required to be made under any
provision of the internal revenue laws or regulations shall contain or
be verified by a written declaration that it is made under the penalties
of perjury." See also Treas. Reg. §1.6065-1 (1972).
8
Semantic confusion sometimes has been created when courts discuss the
express requirement of an "attempt to evade" in §7201 as if
it were implicit in the word "willfully" in that statute. This
type of analysis produces language suggesting that "willfully"
in §7201 has a different meaning from the same term in §7203. See United
States v. Ming [72-1 USTC ¶9449], 466 F. 2d 1000, 1004 (CA7), cert.
denied, 409 U. S. 915 (1972) (§§ 7201 and 7203); United States v.
Matosky [70-1 USTC ¶9210], 421 F. 2d 410 (CA7), cert. denied, 398
U. S. 904 (1970) (§7203); United States v. Haseltine, 419 F. 2d,
at 581; Edwards v. United States, 375 F. 2d, at 867; United
States v. Schipani [66-2 USTC ¶9512], 362 F. 2d 825, 831 (CA2),
cert. denied, 385 U. S. 934 (1966). This Court may be somewhat
responsible for this imprecision because a similar analysis was employed
in Spies v. United States, 317
U. S.
492, 497-499 (1943). Greater clarity might well result from an analysis
that distinguishes the express elements, such as an "attempt to
evade," prescribed by §7201, from the uniform requirement of
willfulness.
9
The Government has argued that the misdemeanor of §7207 could never be
a lesser included offense in §7206(1) because the misdemeanor requires
that the actor have knowledge of the falsity. This is said to create an
additional element in the misdemeanor, not present in the felony, so the
misdemeanor is not "necessarily included" in the felony,
within the meaning of Fed Rule Crim. Proc. 31(c). Our conclusion that
the word "willfully" has the same meaning in both statutes
makes it unnecessary to reach this contention.
[73-2
USTC ¶9571]
United States of America
, Appellee v. Edwin H. Fritz, Appellant
(CA-9),
U. S. Court of Appeals, 9th Circuit, No. 72-1937, 481 F2d 644,
7/3/73
, Aff'g unreported District Court decision
[Code Sec. 7206]
Crimes: Fraud and false statements: Subscribing to false return.--Conviction
for willfully subscribing to false income tax returns was affirmed.
Since the trial court had not erred in failing to instruct the jury of a
lesser-included offense or in rejecting testimony concerning possible
adjustments, the jury's decision was affirmed.
William
C. Smitherman, United States Attorney, Morton Sitver, Assistant United
States Attorney, Phoenix, Ariz., for appellee. Ward S. Johnson, Sheldon
Green, Green & Green, 919
Arizona
Title Bldg., 111 W.
Monroe
,
Phoenix
,
Ariz.
, for appellant.
Before
BARNES and DUNIWAY, Circuit Judges and JAMESON, * District
Judge.
PER
CURIAM:
Appellant,
Edwin H. Fritz, a certified public accountant, was convicted on two
counts of violation of 26 U. S. C. §7206(1) 1 in willfully
subscribing to false income tax returns for 1964 and 1965. He contends
that the district court erred in (1) failing to instruct the jury on a
lesser-in-cluded-offense under §7207 and (2) rejecting testimony
concerning possible adjustments in his 1965 tax return.
In
contending that the court on its own motion should have given a
lesser-included-offense instruction directed to §7207 (furnishing false
or fraudulent information), a misdemeanor statute, appellant relied on United
States v. Bishop [72-1 USTC ¶9352], 455 F. 2d 612 (9 Cir. 1972),
holding that the trial court erred in refusing an offered instruction on
lesser-included-offense with respect to the same statutes.
This
case was argued on
October 6, 1972
. On October 10 certiorari was granted in
United States
v. Bishop. Thereupon an order was entered deferring submission
of this case until the Supreme Court acted on Bishop. On
May 29, 1973
the Supreme Court reversed Bishop, holding that the district
court had properly refused the lesser-included-offense instruction. 2
The
offered exhibits and supporting expert testimony relating to adjustments
which would have affected appellant's tax liability for 1965 were
properly rejected by the trial court as speculation, "reconstructed
for purposes of litigation, without * * * any receipts, records or
anything to back them up." There was no testimony that the
appellant considered marking the proposed adjustments when he filed his
tax return for 1965. The offered proof under these circumstances was not
relevant to the issue of willfulness in subscribing to a false return.
See Schepps v. United States [68-2 USTC ¶9523], 395 F. 2d 749 (5
Cir. 1968), cert. denied, 393
U. S.
925, 89 S. Ct. 256, 21 L. Ed. 2d 261. 3
Affirmed.
*
Honorable W. J. Jameson, United States Senior District Judge for the
District of Montana, sitting by designation.
1
Section 7206(1) provides in pertinent part:
"Any
person who--(1) Willfully makes and subscribes any return, statement, or
other document, which contains or is verified by a written declaration
that it is made under the penalties of perjury, and which he does not
believe to be true and correct as to every material matter; * * * shall
be guilty of a felony * * *."
2
This disposes of appellant's first claim of error, and it is unnecessary
to consider the effect of appellant's failure to offer the
lesser-included-offense instruction.
3
The cases cited by appellant, United States v. Moody [64-2 USTC
¶9873], 339 F. 2d 161 (6 Cir. 1964), and Koontz v. United States
[60-1 USTC ¶9405], 277 F. 2d 53 (5 Cir. 1960), involved charges of
income tax evasion, where evidence relating to the amount of the tax
liability was clearly relevant.
[69-2
USTC ¶9450]
United States of America
, Plaintiff-Appellee v. John J. Fahey, Defendant-Appellant
(CA-9),
U. S. Court of Appeals, 9th Circuit, No. 23,210, 411 F2d 1213, 6/6/69,
Affirming an unreported District Court decision
[Code Sec. 7203]
Crimes: Failure to file returns: Willfulness.--The misdemeanor
charge for willful failure to file a tax return, unlike the felony
charge for willful failure to pay the tax, does not involve an intent to
defraud the Government. The misdemeanor requires "only willfulness
and the omission of the required act." Therefore, an attorney, who
failed to file tax returns for several years despite the fact that he
was aware of the criminal sanctions involved and knew that the Internal
Revenue Service was investigating his failure to file, was properly
found guilty of the willful failure to file returns even though the
government failed to establish intent to evade taxes.
F.
Steele Langford, Assistant United States Attorney (argument), Cecil F.
Poole, United States Attorney, and Jerrold M. Ladar, Assistant United
States Attorney, Chief of Criminal Division, San Francisco, Calif., for
plaintiff-appellee. Richard H. Foster (argument) and John V. Lewis,
San Francisco
,
Calif.
, for defendant-appellant.
Before
BARNES and CARTER, Circuit Judges, and KILKENNY, District Judge. *
[Issue]
BARNES,
Circuit Judge:
Appellant
was charged with and found guilty of the wilful failure to file income
tax returns (26
U. S.
C. §7203) for the tax years 1960, 1961 and 1962.
The
sole issue on this appeal is the sufficiency of the evidence to
establish his wilful intent. As appellant's counsel concedes, appellant
"for some seven years . . . failed to file a tax return,"
although he was a practicing attorney, and although he had been warned
as to the effect of such failure in several of the years subsequent to
1962 by his own attorney. He had been told of the criminal sanctions
imposed for a wilful failure to file, and knew the Internal Revenue
Service was investigating his failure to file the returns for the years
charged.
[Question
of Wilfulness]
This,
urges appellant's counsel, was "apparently a product of his
emotional and psychological disturbances," and no willfulness was
involved.
We
turn to the trial court's findings of fact 10, 11 and 12 (R. T. 33-34). 1
The
trial judge did not place in his findings that appellant had no intent
to defraud the Government, although he so stated at the trial (R. T.
138). In his memorandum opinion of
March 6, 19
69, he ruled the Government "had failed to establish that the
defendant intended to defraud the Government of tax revenues due
it." (C. T. 36, lines 16-18)
Appellant
suggests that without an intent to defraud the Government there can be
no violation of the statute--no willful intent exists in a mere failure
to file a return.
[Fraudulent
Intent Not Necessary]
We
believe the contrary. Unlike some other circuits, we suggest that
Congress intended to draw a distinction between an intent to defraud
(which intent must be wilful), and a wilful intent to fail to file,
which may or may not involve an intent to defraud. For example, one
might honestly plan and intend to pay the tax revenues due his
Government at some future time subsequent to the required filing date,
and hence have no intent to defraud. If one intentionally fails to file
a return (or keep records, or supply information) at the times required
by law, with full knowledge he was required to do so (whether or not he
can pay), would it not be an intentional act--not to defraud, but to
file the required return? The Supreme Court has held it to be. Sansone
v. United States [65-1 USTC ¶9307], 380
U. S.
343 (1965).
"This
misdemeanor requires only wilfulness and the omission of the required
act. . . .
*
* *
"[T]he
intent to report the income and pay the tax sometime in the future does
not vitiate the willfulness required by §7203. . . ."
Id.
at 354.
Certainly
if the taxpayer's conduct was "voluntary, deliberate, intentional
and purposeful, and with bad purpose" (as the acts here were found
to have been), the required intent existed.
The
court below relied on our previous pronouncements in Abdul v. United
States [58-1 USTC ¶9453], 254 F. 2d 292 (9th Cir. 1958), cert.
denied, 364
U. S.
832 (1960), and Martin v. United States [63-2 USTC ¶9502], 317
F. 2d 753 (9th Cir. 1963).
The
rule of Abdul is:
"The
word 'willful' as used in [the misdemeanor] counts . . . that is,
failure to make a tax return, means with a bad purpose or without
grounds for believing that one's act is lawful or without reasonable
cause, or capriciously or with a careless disregard whether one has the
right so to act."
Id.
at 294.
It
then points out the felony charge (failure to pay) requires an intent to
defraud the Government.
This
rule has been criticized by a divided court in Haner v. United States
[63-1 USTC ¶9390], 315 F. 2d 792 (5th Cir. 1963) (Cf. the
dissent at 795), and by another divided court in United States v.
Vitiello [66-2 USTC ¶9480], 363 F. 2d 240 (3d Cir. 1966), following
United States v. Palermo [58-2 USTC ¶9850], 259 F. 2d 872 (3d
Cir. 1958).
But
we affirmed our previous interpretation as expressed in Abdul in Edwards
v. United States [67-1 USTC ¶9356], 375 F. 2d 862 (9th Cir. 1967),
relying primarily on and quoting the language used in United States
v. Murdock [3 USTC ¶1194], 290
U. S.
389, 394 (1933).
Id.
at 864.
We
recently again succinctly affirmed our previous position in Eustis v.
United States [69-1 USTC ¶9299], 409 F. 2d 228, (No. 22809,
March 21, 19
69).
We
think Abdul and the cases cited therein express the better rule,
and we affirm the decision and judgment below. 2
The
trial judge quite properly and humanely considered the defendant's
emotional problems in fixing punishment. That alone was the area in
which such consideration was proper, in view of the uncontradicted
content of the expert testimony introduced on the subject.
AFFIRMED.
*
Hon. John F. Kilkenny, United States District Judge for the District of
Oregon, sitting by designation.
1
Finding 10. The Defendant was at all times material fully aware that the
law contained criminal sanctions for the willful failure to file timely
income tax returns.
Findings
11. Notwithstanding the existence of emotional and psychological
problems which the Defendant had and which were likely attributable to
personal domestic circumstances, together with time-consuming
professional pressures, the Defendant was nonetheless sane throughout
the period beginning 1960 and continuing to date. Further, the Defendant
knew the difference between right and wrong and was particularly aware
and informed of the criminal penalties in respect to the willful failure
to file federal income tax returns.
Finding
12. The failure of the Defendant to timely file federal income tax
returns for each of the years 1960, 1961 and 1962 was in each instance
of omission a voluntary, deliberate, intentional and purposeful act on
his part, and with bad purpose in that by his particular knowledge,
professional training and experience, and by virtue of his previous
experience in the filing of his personal income tax returns prior to
1960, the Defendant was aware that there were no reasonable or
justifiable grounds for failure to timely file such tax returns.
2
"The word 'willful' is a word of many meanings, depending on the
context in which it is used." Zimberg v. United States, 142
F. 2d 132, 137 (1st Cir. 1944); United States v. Vitiello, supra
(dissent at 244); Spies v. United States [43-1 USTC ¶9243], 317
U. S.
492, 497 (1943). For the difference between willful commission (felony)
and willful omission (misdemeanor), see Spies at 499.
The
trial court's determination is one of fact. United States v. Johnson
[67-2 USTC ¶9750], 386 F. 2d 630 (3d Cir. 1967).
Ripperberger
v. United States [57-2 USTC ¶9997],
248 F. 2d 944 (4th Cir. 1957).
United
States v. Schipani [66-2 USTC
¶9512], 362 F. 2d 825 (2d Cir. 1966), cert. denied, 385
U. S.
934.
Cf.
also United States v. Ostendorff
[67-1 USTC ¶9204], 371 F. 2d 719 (4th Cir. 1967).