Government Attempts to Sidestep Arguments in Marinello Brief

The government’s brief in a Supreme Court case concerning the elements of tax obstruction charges under the omnibus clause of section 7212(a) does not defend the broad interpretation of the charge attacked by the petitioner and the amici, instead applying a different specific intent requirement than they advocate.

When the Supreme Court hears oral arguments December 6 on whether a defendant can obstruct only a known, existing IRS investigation, it will face two different versions of the rest of the elements. On the one hand, the petitioner and the four amici assert that without the known investigation element, the obstruction charge could reach any conduct that could happen to make the IRS’s job harder as long as the defendant intended to obtain a benefit that happens to be unlawful. On the other hand, the government asserts that the required state of mind for tax obstruction requires that conduct be intended to impede the IRS’s administration of the tax code and that the defendant know that the intended benefit is illegal.

Jeremy H. Temkin of Morvillo Abramowitz Grand Iason & Anello PC is one of the authors of the amicus brief filed by the New York Council of Defense Lawyers. He told Tax Analysts that the government’s position on intent likely arises out of the Supreme Court’s requirement that the
government establish a higher level of scienter for tax crimes. “So they tried to present the requirement of an intent to obtain an unlawful benefit as meeting the heightened scienter standards,” he said.

Temkin said that he is curious to see how Justice Neil Gorsuch approaches the case during the oral argument. In April, Gorsuch was confirmed to the seat vacated by the death of Justice Antonin Scalia.

“Scalia wrote or joined the majority in many white-collar, defense-friendly cases,” Temkin said, adding that it will be interesting to see if Gorsuch carries on Scalia’s skepticism of the government and preference for narrow construction of white-collar crimes.

Paula M. Junghans of Zuckerman Spaeder LLP said that the flaw in the petitioner’s argument for a knowledge of a pending administrative proceeding requirement under section 7212(a) arises from the similarity between the tax obstruction charge and the conspiracy to defraud the
government charge under 18 U.S.C. section 371. The same conduct is often charged under either statute, and the conspiracy charges are regularly upheld despite not having a pending proceeding requirement, she said.

The Supreme Court granted certiorari to the appeal from the Second Circuit’s decision in United States v. Marinello, 839 F.3d 209 (2d Cir. 2016), on the question of whether one of the elements of a charge under section 7212(a)’s omnibus clause is knowledge of an existing IRS investigation. The omnibus clause of section 7212(a) makes it a felony punishable by up to three years in prison for a person to, among other things, “corruptly” obstruct or impede “the due administration of” title 26.

The Second Circuit declined to hold that “the due administration of this title” language requires the IRS to have begun some sort of investigation or proceeding with regard to the defendant and the defendant to know about it. The Supreme Court took up the case to resolve the circuit split between the Sixth Circuit, which requires an existing investigation and the defendant’s knowledge of it, and the Second, First, Fifth, Ninth, and Tenth Circuits, which have rejected that requirement.

Two Proceedings?

Jay R. Nanavati of Kostelanetz & Fink LLP said that the core issue in the case is the import of the self-assessment mode of tax assessment. The issue underlies the government’s assertion that tax administration is always at issue for a taxpayer and the petitioner’s counter that it only matters when the government specifically engages the taxpayer, such as in an audit, he said.

The tax system is odd because while the government does need to engage the taxpayer on the back end, the taxpayer performs the first half of the tax administration process on its own, Nanavati said. The key question is whether the taxpayer’s interference with the first half, before the government becomes engaged, can obstruct the due administration of the tax code, he said. “Or is it only when you mess with the part of the process that the government is supposed to do, which is reaching out and touching you via audit, examination, investigation, what have you?” he asked.

The line where administration begins is much cleaner in other areas because the government has not deputized the citizen, such as for the obstruction of justice statute to which the Sixth Circuit drew comparison in United States v. Kassouf, 144 F.3d 952 (6th Cir. 1998), Nanavati said.

For section 7212(a), the government seems to want to base the charge on the whole of the proceeding, including the taxpayer’s initial behavior, and the petitioner and amici seem to want to focus on only the second half, in which the government makes contact with the taxpayer, Nanavati said. It is unclear which position is correct because the self-assessed tax system is so different, he said.

This is one of the key issues to look for at the oral argument, Nanavati said. The petitioner will likely assert that “administration” only includes the government’s portion and the government will likely argue that administration of the tax code includes taxpayer conduct such as sitting down to compute the tax liability, he said.

If the government does not address the effect of the self-assessment system on what “administration” is, it “risks ceding the field to the petitioner, who makes a pretty eloquent argument that ‘administration’ means things a government does,” he said. The government needs to avoid the appearance that it is hiding from this argument and instead embrace the argument that the tax system, which includes taxpayers deputized as their own assessors, is unusual and use that as an argument that the self-assessment is part of tax administration, he said.

Other Issues

In addition to the central question of whether the intent requirement for the tax obstruction charge requires a known investigation, the amici and petitioner raise concerns regarding overlap with other tax crimes, the Second Circuit’s blessing of omissions as conduct subject to the tax obstruction charge, and the strength of the “corruptly” mens rea requirement.

The petitioner and the amici are particularly concerned with the potential for section 7212(a) felony charges to overlap with misdemeanor charges such as failure to file under section 7203. The government responds by pointing out that a significant degree of overlap between felony and misdemeanor charges has been found permissible in the past and notes that the same overlap appears with section 7201 tax evasion and the misdemeanors.

Temkin said that the real issue with Marinello’s conduct is not whether he committed a crime, but rather how severe a crime he committed. “No one is saying that Marinello did not commit a crime. The question is ‘Is he a felon?’” he said.

“The government has taken conduct that is criminalized as a misdemeanor and tried to convert it into a felony, and that has consequences,” Temkin said, noting the collateral consequences of a felony record such as voting restrictions in some states or impacts on immigration status.

The defense will have to deal with the issue of Marinello’s indefensible conduct when trying to focus the Court on the issue of selecting the correct criminal statute, Temkin said.

Junghans said that her main concern is the current trend in which section 7212(a) counts seem to be added to tax indictments almost automatically. “If what this means is that every case is going to have a couple of substantive charges plus a [section] 7212 count, you might as well just dispense with all of the substantive counts,” she said, adding that section 7212 is “the tail, not the dog.”

The government often attempts to justify using section 7212(a), rather than tax evasion under section 7201, by pointing to a difficulty in proving the deficiency element of tax evasion and the absence of that element in tax obstruction, Junghans said. That argument is unpersuasive because of the long history of tax evasion cases resting on indirect methods of proving income and because of the use of tax loss in sentencing calculations, she said.

The argument is the result of “an inability or an unwillingness to do the hard work of an evasion case,” Junghans said. While sentencing tax loss calculations do not require a precise figure, neither does the deficiency element of tax evasion, she said.

Further, free-standing tax obstruction cases are infrequent, she said, converting the catchall provision into a prosecutorial insurance policy that is difficult for a defendant to wriggle out of. “That’s the part that troubles me,” she said.


The government did not address the concerns raised by the amici and petitioner over the Second Circuit’s extension of tax obstruction under the omnibus clause to mere omissions. That question was not included in the grant of certiorari.

Temkin noted that the government’s failure to discuss omissions seems to be an attempt to avoid the parade of horribles presented by the petitioner and amici. “On the other hand, it is not as though they are ducking one of the questions presented because that was not one of the
questions presented in the cert petition,” he said.

“The petitioner and the amici did a good job of raising what happens when you allow the government to go down the path of omission,” Temkin said, highlighting the discussion presented in the brief submitted by the American College of Tax Counsel.

The inclusion of omissions as conduct chargeable under section 7212(a) would be a much harder issue for the government to address, Nanavati said. However, omissions can be the overt acts required for conspiracies to defraud the government even though they would not
support tax evasion charges, he added.

Junghans said that the government may not have wanted to defend the Second Circuit’s holding that even one failure to file a tax return might be tax obstruction under section 7212(a). Another interesting example would be a taxpayer who, rather than destroy the business records, stored them in a heap in a basement, she said. Either the IRS will have a difficult time sorting through unorganized records or the combination of dampness and vermin could destroy the records in the place of a shredding machine, she said.

“That’s the whole problem with [the Second Circuit’s decision to allow omissions under section 7212]: that nobody knows where the line is,” she said.

Professional Obstruction

Another issue highlighted in the American College of Tax Counsel’s brief is the possibility that a tax practitioner could face charges under a broadly read omnibus clause for vigorously defending a client.

Junghans said that concern over section 7212(a) charges against tax representatives arising out of vigorous defenses may be a little excessive. For example, even though advising a client to assert the Fifth Amendment privilege during an exam impedes the IRS, the advantage is a
lawful one, rather than the unlawful advantage required under the “corruptly” standard of section 7212(a), she said.

Tax professionals are ethically obliged to aggressively defend the positions taken by their clients, and as long as they don’t cross a line such as lying to an IRS agent, their conduct should not be criminalized, Temkin said. For example, answering only and exactly the question asked by a revenue agent without volunteering other negative facts should not be thought of as obstructing tax administration, he said.


While the government claims that the “corruptly” element of tax obstruction will restrain many of the bad outcomes predicted by the petitioner and the amici, the latter assert that it would prove almost no impediment, particularly in charging decisions.

Temkin said that the government does not have a difficult time alleging that conduct was done corruptly under even the heightened standard it posits.

Once the government has made such an allegation, the target will then have to bear the stigma of being criminally charged, the costs of a defense at trial, and the risk of a conviction, Temkin said. The concern is not merely what standards will apply at trial to obtain a conviction but also prosecutorial overreach at the charging stage, he said.

“You can’t just assume that the government is going to act as a restraint on itself,” Temkin said, pointing to the discrepancy between the Tax Division’s Criminal Tax Manual position on use of section 7212(a) and the more aggressive use of the charge seen recently. The pending proceeding requirement makes sense as a restraint on the use of section 7212(a), he said.

Another concern arises out of the IRS Criminal Investigation division’s participation in investigative task forces, which might lead prosecutors to add a Title 26 charge to an indictment to give the IRS agents some credit for their work, Temkin said. This could be another area where an overbroad reading of section 7212(a) could lead to abuse, he added.

Junghans said that while the pattern jury instructions for conspiracy to defraud use “willfulness” rather than “corruptly,” both standards lead to the same question: did the defendant know that it was doing something wrong? She gave the example of a taxpayer throwing out records after the civil statute of limitations on assessment had lapsed but before the criminal statute had expired, only to learn later of a criminal investigation. The taxpayer has an argument that when the records were thrown out, it did not have a corrupt motive for doing so, she said. “Maybe the IRS would argue that you did have a corrupt purpose, but they’d have to show some frame of mind that distinguishes it from an innocent act,” she said.

Criminal tax cases do not usually rest on just one fact or event, Junghans said, pointing to the multiple years in which Marinello disposed of his records.

Nanavati said that the assertion that the government’s reading of section 7212 would chill lawful conduct is not very persuasive because the “corruptly” requirement is not an insignificant hurdle. “I don’t see ‘corruptly’ as that unclear of a mens rea,” he said. “It is pretty well defined in the jury instructions. There is pretty good case law on that.” Further, there does not seem to be much real difference between “corruptly” and “willfully,” he said.

Additional Briefs
Petitioner’s Reply brief
Cause of Action Institute and National Association of Criminal Defense Lawyers amicus brief
U.S. Chamber of Commerce and National Federation of Independent Business amicus brief

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