The Tax Obstruction of Justice: 26 USC 7212 Requirement

The Tax Obstruction of Justice Charge – 26 USC 7212 Requirements

Tax Obstruction of Justice Violations

In general, most types of obstruction of justice violations are crimes that do not directly include tax violations — even if it is the type of violation that US Taxpayers who have run afoul of tax laws worry about. In other words, when looking at the typical types of criminal tax violations such as tax evasion and all the different forms of tax fraud — obstruction of justice is not a common type of criminal tax violation the US Government pursues. With that said, the IRS or DOJ may still try to pursue an instruction of justice tax violation by way of a violation of Title 26 USC 7212(a).  The reason why this statute is so important is that about five years back, the Supreme Court issued a very important ruling that limited the US Government’s ability to pursue an obstruction of justice violation involving federal tax crimes and the omnibus clause. Let’s take a look at how the Supreme Court narrowed the government’s ability to pursue a 7212(a) obstruction case involving the ‘omnibus clause’ by taking a look at the ruling in Marinello.

26 U.S. Code 7212 – Attempts to interfere with administration of internal revenue laws

• • • Corrupt or forcible interference

      • Whoever corruptly or by force or threats of force (including any threatening letter or communication) endeavors to intimidate or impede any officer or employee of the United States acting in an official capacity under this title, or in any other way corruptly or by force or threats of force (including any threatening letter or communication) obstructs or impedes, or endeavors to obstruct or impede, the due administration of this title, shall, upon conviction thereof, be fined not more than $5,000, or imprisoned not more than 3 years, or both, except that if the offense is committed only by threats of force, the person convicted thereof shall be fined not more than $3,000, or imprisoned not more than 1 year, or both. The term “threats of force”, as used in this subsection, means threats of bodily harm to the officer or employee of the United States or to a member of his family.

• • • Forcible rescue of seized property

      • Any person who forcibly rescues or causes to be rescued any property after it shall have been seized under this title, or shall attempt or endeavor so to do, shall, excepting in cases otherwise provided for, for every such offense, be fined not more than $500, or not more than double the value of the property so rescued, whichever is the greater, or be imprisoned not more than 2 years.

Marinello vs. United States

Marinello is a very important case on matters involving obstruction of justice in tax matters. As provided by the Supreme Court

• • • Between 2004 and 2009, the Internal Revenue Service (IRS) opened, then closed, then reopened an investigation into the tax activities of Carlo Marinello, the petitioner here. In 2012 the Government indicted Marinello, charging him with violations of several criminal tax statutes including the Omnibus Clause. In respect to the Omnibus Clause the Government claimed that Marinello had engaged in at least one of eight different specified activities, including “failing to maintain corporate books and records,” “failing to provide” his tax accountant “with complete and accurate” tax “information,” “destroying … business records,” “hiding income,” and “paying employees … with cash.” 839 F.3d 209, 213 (C.A.2 2016).

    • Before the jury retired to consider the charges, the judge instructed it that, to convict Marinello of violating the Omnibus Clause, it must find unanimously that he engaged in at least one of the eight practices just mentioned, that the jurors need not agree on which one, and that he did so “corruptly,” meaning “with the intent to secure an unlawful advantage or benefit, either for [himself] or for another.” App. in No. 15–2224(CA2), p. 432. The judge, however, did not instruct the jury that it must find that Marinello knew he was under investigation and intended corruptly to interfere with that investigation. The jury subsequently convicted Marinello on all counts.

The Main Issue in Marinello

The key issue in this particular case is the omnibus clause and the fact that the trial judge did not instruct the jury properly. Omnibus Clause

• • • “corruptly or by force or threats of force (including any threatening letter or communication) obstruct[ing] or imped[ing], or endeavor[ing] to obstruct or impede, the due administration of [the Internal Revenue Code].” Ibid. (emphasis added).

Judges Instruction

• • • The allegation was the Judge failed to instruct the jury “that it must find that Marinello knew he was under investigation and intended corruptly to interfere with that investigation. The jury subsequently convicted Marinello on all counts.

Second Circuit Court of Appeals Ruled Against Petitioner

• • • Marinello appealed to the Court of Appeals for the Second Circuit. He argued, among other things, that a violation of the Omnibus Clause requires the Government to show that the defendant had tried to interfere with a “pending IRS proceeding,” such as a particular investigation. Brief for Appellant in No. 15–2224, pp. 23–25. The appeals court disagreed. It held that a defendant need not possess ” ‘an awareness of a particular [IRS] action or investigation.’ ” 839 F.3d, at 221 (quoting United States v. Wood, 384 Fed.Appx. 698, 704 (C.A.2 2010) ; alteration in original). The full Court of Appeals rejected Marinello’s petition for rehearing, two judges dissenting. 855 F.3d 455 (C.A.2 2017).

Split Circuit Rulings

• • • Marinello then petitioned for certiorari, asking us to decide whether the Omnibus Clause requires the Government to prove the defendant was aware of “a pending IRS action or proceeding, such as an investigation or audit,” when he “engaged in the purportedly obstructive conduct.” Pet. for Cert. i. In light of a division of opinion among the Circuits on this point, we granted the petition. Compare United States v. Kassouf, 144 F.3d 952 (C.A.6 1998) (requiring showing of a pending proceeding), with 839 F.3d, at 221 (disagreeing with Kassouf ).

Court Rules in Favor of Marinello (Narrowing the Scope)

• • • We conclude that, to secure a conviction under the Omnibus Clause, the Government must show (among other things) that there is a “nexus” between the defendant’s conduct and a particular administrative proceeding, such as an investigation, an audit, or other targeted administrative action. That nexus requires a “relationship in time, causation, or logic with the [administrative] proceeding.” Aguilar, 515 U.S., at 599, 115 S.Ct. 2357 (citing Wood, 6 F.3d, at 696 ). By “particular administrative proceeding” we do not mean every act carried out by IRS employees in the course of their “continuous, ubiquitous, and universally known” administration of the Tax Code. Brief in Opposition 9. While we need not here exhaustively itemize the types of administrative conduct that fall within the scope of the statute, that conduct does not include routine, day-to-day work carried out in the ordinary course by the IRS, such as the review of tax returns. The Government contends the processing of tax returns is part of the administration of the Internal Revenue Code and any corrupt effort to interfere with that task can therefore serve as the basis of an obstruction conviction. But the same could have been said of the defendant’s effort to mislead the investigating agent in Aguilar. The agent’s investigation was, at least in some broad sense, a part of the administration of justice. But we nevertheless held the defendant’s conduct did not support an obstruction charge. 515 U.S., at 600, 115 S.Ct. 2357. In light of our decision in Aguilar, we find it appropriate to construe § 7212’s Omnibus Clause more narrowly than the Government proposes. Just because a taxpayer knows that the IRS will review her tax return every year does not transform every violation of the Tax Code into an obstruction charge.

    • In addition to satisfying this nexus requirement, the Government must show that the proceeding was pending at the time the defendant engaged in the obstructive conduct or, at the least, was then reasonably foreseeable by the defendant. See Arthur Andersen, 544 U.S., at 703, 707–708, 125 S.Ct. 2129 (requiring the Government to prove a proceeding was foreseeable in order to convict a defendant for persuading others to shred documents to prevent their “use in an official proceeding”). It is not enough for the Government to claim that the defendant knew the IRS may catch on to his unlawful scheme eventually. To use a maritime analogy, the proceeding must at least be in the offing. For these reasons, the Second Circuit’s judgment is reversed, and the case is remanded for further proceedings consistent with this opinion.

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