CARLO J. MARINELLO, II v. UNITED STATES
Supreme Court of the United States, Breyer, March 21, 2018,
IRS Interference – Federal Law prohibiting obstruction of an IRS investigation “corruptly or by force or threats of force” does not apply to lies or misrepresentations on a tax return before an investigation has begun
(Dissent- Thomas with Alito – the statute doesn’t require an ongoing investigation; should apply to corrupt action with regard to any IRS activity)
Facts:
Between 2004 and 2009, the IRS was investigating Marinello’s tax activities.
In 2012, he was indicted for violating a variety of tax crimes, including obstructing an IRS investigation.
The Government alleged that Marinello violated the statute by “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.
The judge did not instruct the jury that it had to find that Marinello knew he was under investigation and intended corruptly to interfere with that investigation.
Instead, the judge merely instructed them that they had to find that Marinello acted “with the intent to secure an unlawful advantage or benefit.”
Marinello was convicted on all counts.
Marinello then appealed, arguing that in order to “interfere” or “obstruct” with an IRS investigation, he had to know that an IRS investigation was going on.
The 2nd Circuit upheld Marinello’s conviction and he requested review from the Supreme Court.
Held: In order to be convicted of Interference with an IRS Investigation, there has to be an IRS investigation. Fraudulent or misleading tax returns alone are not enough, as those are standard administrative tasks performed by the IRS.
IRS Interference – In order to commit the crime of interference with the IRS, a person must:
– Corruptly or by force or threats of force (including any threatening letter or communication)
– AND Either:
* endeavor to intimidate or impede any officer or employee of the United States acting in an official capacity under the IRS Code
* OR in any other way obstruct or impede the due administration of the IRS Code
* OR tries to obstruct or impede the due administration of the IRS Code
IRS Interference – Corruptly means to “obtain an unlawful advantage,” either for that person or a third party
IRS Interference – There must be a “nexus” between the defendant’s conduct and a particular administrative proceeding, such as an investigation, an audit, or other targeted administrative action.
IRS Interference – This does not include “routine, day to-day work carried out in the ordinary course by the IRS, such as the review of tax returns.”
IRS Interference – 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.
IRS Interference – It is not enough that the defendant “knew the IRS may catch on to his unlawful scheme eventually.”
From the Case: “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.”
IRS Interference – The part of the law that makes it illegal to “obstruct or impede, the due administration of this title,” does not serve as a “catchall” for every violation that interferes with the “continuous, ubiquitous, and universally known” administration of the Internal Revenue Code.
From the Case: Interpreting “due administration” to apply to every part of the IRS Code would make someone a felon who “pays a babysitter $41 per week in cash without withholding taxes, leaves a large cash tip in a restaurant, fails to keep donation receipts from every charity to which he or she contributes, or fails to provide every record to an accountant. Such an individual may sometimes believe that, in doing so, he is running the risk of having violated an IRS rule, but we sincerely doubt he would believe he is facing a potential felony prosecution for tax obstruction. Had Congress intended that outcome, it would have spoken with more clarity than it did…”
From the Case: A broad statute cannot be saved by relying on “prosecutorial discretion” because it invites arbitrary discretion and “nonuniform execution of that power across time and geographic location.” That, in turn, undermines “necessary confidence in the criminal justice system.”