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On December 4, 2020, the Third Circuit affirmed the district court’s willfulness jury instruction in a criminal payroll tax case under I.R.C. § 7202, which followed the familiar definition of willfulness found in Cheek v. United States, 498 U.S. 192, 201 (1991). In United States v. Gilmore, No. 20-1234 (3d Cir. Dec. 4, 2020), the Third Circuit rejected the defendant’s contention that willfulness requires knowledge that the defendant’s conduct is criminal, affirming that “willfulness in the context of tax crimes merely requires knowledge and violation of a duty.” Slip Op. at 6.
In Gilmore, the
defendant was an attorney and had exclusive control over his law firm’s
finances, including expenditures and taxes. Under his management, the law firm
often submitted late payroll tax payments to the IRS, despite numerous written
and in-person reminders of the firm’s payroll tax obligations. At trial, the
defendant was convicted, inter alia, on two counts of failing to
collect, account for, and pay over payroll taxes in violation of 26 U.S.C. § 7202
and sentenced to a year and a day in prison.
On appeal, the
defendant raised two challenges with respect to willfulness. First, he claimed
that the district court erred by precluding testimony of a putative expert
witness who would have testified that “because [the defendant] was a compulsive
hoarder, his failure to timely pay taxes could not be considered willful or
voluntary.” Slip Op. at 3. The expert physician “would have explained to the
jury that [defendant] suffers from a mental-health disorder that explains his
otherwise irrational behavior of not paying taxes while knowing that such
failure would be apparent to the IRS.” Id. at 3-4 (internal quotation
marks omitted). The defendant argued that this testimony would provide the jury
with an alternative explanation of the behavior that the government presented
as proof of willfulness, i.e., that the defendant knew of his duty to
pay over the firm’s payroll taxes on time because of the IRS’s repeated
warnings to that effect and failed to comply with this duty.
The Third Circuit
affirmed the district court’s refusal to permit the putative expert’s
testimony, explaining that “evidence of diminished volitional control or lack
of ordinary self-judgment does not constitute an acceptable theory of lack of mens
rea” which is required to permit evidence of mental abnormality under Third
Circuit precedent. Id. at 4. Moreover, the court determined that the
putative expert’s testimony was a “conduit for hearsay” as the expert planned
to testify that the defendant “told me that he would never dream of hiding
income tax or taking any other illegal steps to evade taxes” and “told me he
has never filed a false tax return.” Id. at 5 (internal quotation marks
omitted).
Second, the defendant
challenged the district court’s instruction to the jury that “willfulness could
not be found if [defendant] believed in good faith that the tax laws did not
make his conduct unlawful.” Id. at 6. At trial, the defendant requested
that the court substitute “criminal” for “unlawful” in the instruction, arguing
that the court’s version “was legally erroneous because it equated belief of
‘unlawful’ action with belief of ‘criminal’ action.” Id. The Third
Circuit rejected the defendant’s argument, holding under Cheek, the
government only had to prove that the defendant had a duty, that he knew of it,
and that he voluntarily and intentionally violated that duty – not that he was
aware that such a violation was criminal. Id.at 6-7. Accordingly, there
was no error in the district court’s instruction.
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