26 U. S. C. §7212(a) Obstruction of the IRS and the “Nexus” Requirement: Marinello v. United States, US Supreme Court, Filed March 21, 2018
When can you be charged with obstruction of the IRS under 26 U. S. C. §7212(a)? For example, if you fail to maintain complete business records, destroy business records, or give your accountant incomplete information, can you be charged with obstruction?
Although some of these activities may be covered by other federal criminal statutes, the US Supreme Court has held in Marinello v. US that you cannot be charged with obstruction of the IRS unless ”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.”
What is 26 U. S. C. §7212(a), and what does Marinello say about when a person can be prosecuted for obstruction of the IRS?
What is 26 U. S. C. §7212(a) – Obstruction of the IRS?
26 U. S. C. §7212(a) contains two clauses under which a person can be prosecuted. The first, called the “Officer Clause,” makes it a crime to:
“corruptly or by force or threats of force (including any threatening letter or communication) endeavor[ing] to intimidate or impede any officer or employee of the United States acting in an official capacity under [the Internal Revenue Code].” Ibid. (emphasis added).
The Officer Clause is intended to punish any person who “corruptly or by force or threats of force” obstructs an officer or employee of the IRS.
The second clause – the one at issue in Marinello – makes it a crime to obstruct “the due administration” of the Internal Revenue Code, as opposed to obstructing an officer or employee of the IRS.
Obstruction of the IRS Under the Omnibus Clause of 26 U. S. C. §7212(a)
The “Omnibus Clause” of 26 U. S. C. §7212(a) makes it a crime to:
…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…
But what does “the due administration” of the Internal Revenue Code mean? Must there be a pending action by the IRS before the Omnibus Clause applies? Does the defendant have to know that there is a pending action before he or she can be prosecuted under the Omnibus Clause?
When Can the Government Charge Someone with Obstruction of the IRS Under 26 U. S. C. §7212(a)?
Marinello was convicted of obstruction of the IRS under 26 U. S. C. §7212(a) for eight alleged 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.
The trial court did not tell the jurors that they needed to find that Marinello knew he was under investigation or that he “intended corruptly to interfere with that investigation.”
The US Supreme Court reversed his conviction for obstruction of the IRS, finding that the trial court’s application of 26 U. S. C. §7212(a) was too broad.
While obstruction of the IRS under 26 U. S. C. §7212(a) is a felony offense, applying the Omnibus Clause to all Code administration would transform a host of misdemeanor offenses, like failure to pay owed income tax, into felonies – a result that was almost certainly not intended by Congress:
…the Code creates numerous misdemeanors, ranging from willful failure to furnish a required statement to employees, §7204, to failure to keep required records, §7203, to misrepresenting the number of exemptions to which an employee is entitled on IRS Form W–4, §7205, to failure to pay any tax owed, however small the amount, §7203. To interpret the Omnibus Clause as applying to all Code administration would potentially transform many, if not all, of these misdemeanor provisions into felonies, making the specific provisions redundant, or perhaps the subject matter of plea bargaining.
While a person who “pays a babysitter $41 per week in cash without withholding taxes,” “leaves a large cash tip in a restaurant,” or “fails to keep donation receipts from every charity to which he or she contributes” might understand that they are breaking an IRS rule, they probably don’t expect to be prosecuted for felony tax obstruction…
What is Marinello’s “Nexus” Requirement for Obstruction of the IRS Under 26 U. S. C. §7212(a)?
The Court held that the government must prove that there is a nexus between the Defendant’s activity and a specific IRS proceeding – there must be a “relationship in time, causation, or logic with the [administrative] proceeding:”
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 (citing Wood, 6 F. 3d, at 696).
Although the Court does not provide an exhaustive list of all administrative proceedings that would be covered by 26 U. S. C. §7212(a), they held that it “does not include routine, day-to-day work carried out in the ordinary course by the IRS, such as the review of tax returns.”
Although the Court stopped short of holding that the government must prove the defendant knew about the proceeding, they did find that “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.”
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