U.S. v. Foster, 85-1925

• Decision Date: 23 May 1986
• Docket Number: No. 85-1925,85-1925
• Parties: -1150, 86-1 USTC P 9327 UNITED STATES of America, Plaintiff-Appellee, v. James FOSTER, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 457

789 F.2d 457

57 A.F.T.R.2d 86-1150, 86-1 USTC P 9327

UNITED STATES of America, Plaintiff-Appellee, v. James FOSTER, Defendant-Appellant.

No. 85-1925.

United States Court of Appeals, Seventh Circuit.

Argued Dec. 13, 1985.

Decided April 10, 1986.

As Amended May 13, 1986.

Rehearing and Rehearing En Banc Denied May 23, 1986.

Andrew B. Spiegel, Chicago, Ill., for defendant-appellant.

Joan Bainbridge Safford, Asst. U.S. Atty., Anton R. Valukas, U.S. Atty., Chicago, Ill., for plaintiff-appellee.

Before CUMMINGS, Chief Judge, CUDAHY, Circuit Judge, and ESCHBACH, Senior Circuit Judge.

CUDAHY, Circuit Judge.

Defendant James Foster appeals his conviction on four counts of willfully failing to file an income tax return, in violation of 26 U.S.C. Sec. 7203; two counts of willfully attempting to evade income taxes, in violation of 26 U.S.C. Sec. 7201; and one count of willfully filing a false employee's withholding allowance certificate, in violation of 26 U.S.C. Sec. 7205. We affirm.

Before 1979 James Foster filed yearly income tax returns, although in 1977 and 1978 he did not pay the full amount of tax due. For the years 1979, 1980, 1981 and 1982, he filed no tax returns, although he was employed at that time at Will-DuPage Service Co., in Wheaton, Illinois and was collecting disability pension benefits from the Village of Oak Brook, Illinois, where he had previously been employed as a policeman.

When he went to work for Will-DuPage Foster filed an employee's withholding allowance certificate ("W-4 form"), properly claiming two allowances. (He was married at that time.) On January 1, 1981, he filed a new--and false--W-4 form with Will-DuPage, claiming an exemption from withholding on the grounds that he did not owe any federal tax in 1980 and did not expect to owe any in 1981. In September 1981 the Internal Revenue Service (the "IRS") notified Will-DuPage that Foster's 1981 W-4 form was incorrect and instructed it to start withholding tax on the basis of one allowance. (Foster was divorced from his wife that month.) Will-DuPage withheld as directed. Foster wrote to his employer with instructions to stop withholding. He wrote his employer another letter in February 1982, denying that he had any tax liability and again demanding that the withholding stop. Two days later he filed another false W-4 form, claiming exemption from withholding on the basis that he owed no federal tax for 1981. On instructions from the IRS, Will-DuPage stopped withholding.

In January 1985 a grand jury indicted Foster for willfully failing to file income tax returns in 1979, 1980, 1981 and 1982; willfully attempting to evade income taxes in 1981 and 1982; and willfully filing a false W-4 form in 1982. Foster, appearing pro se, waived trial by a jury and presented no defense at his trial before the district judge. He was found guilty on all counts, the judge finding that he had known that he was required to file income tax returns and failed to do so; that he had filed false W-4 forms knowing them to be false; and that his overall purpose had been to evade taxes. Transcript of Proceedings (March 25, 1985), at 156-57.

At the sentencing hearing, Foster was represented by counsel. He was sentenced to eighteen months' imprisonment: six months on Count One (failure to file in 1979); twelve months on Count Two (failure to file in 1980), to run consecutively to Count One; eighteen months on Count Three (attempted tax evasion in 1981), to run concurrently with Counts One and Two; twelve months on Count Four (failure to file for 1981), to run consecutively to Count One but concurrently with Counts Two and Three. Sentence was suspended on Counts Five through Seven (attempted tax evasion for 1982, failure to file in 1982, filing a false W-4 form in 1982).

Foster raises three arguments on appeal: (1) that conviction for both the misdemeanors of failure to file and of filing a false W-4 form and the felony of attempted tax evasion for the years 1981 and 1982 violated the double jeopardy clause of the Fifth Amendment; (2) that the evidence was insufficient to establish the mental state necessary for a conviction on any count; and (3) that the prosecution was void ab initio because the Sixteenth Amendment to the federal Constitution was never properly ratified.

Foster argues that his convictions for both the Sec. 7201 felony and the Sec. 7203 and Sec. 7205 misdemeanors violated the double jeopardy clause. A violation of 26 U.S.C. Sec. 7201 ¹ requires proof of the following elements: (1) the existence of a tax deficiency; (2) an affirmative act constituting an evasion or attempted evasion of the tax; and (3) willfullness. Sansone v. United States, 380 U.S. 343, 351, 85 S.Ct. 1004, 1010, 13 L.Ed.2d 882 (1965). In support of its assertion that Foster attempted to evade taxes in 1981, the government offered evidence that he (1) failed to file an income tax return for that year; (2) filed a false W-4 form with his employer for that year; and (3) directed correspondence to his employer in late 1981 instructing him to honor his W-4 form and stop withholding. For the 1982 violation of Sec. 7201, the government offered evidence that Foster (1) failed to file a tax return in 1982; (2) directed correspondence to his employer in early 1982 instructing him to stop withholding; (3) filed a false W-4 form with his employer in 1982. Because he was convicted of the misdemeanors of failure to file and filing false W-4 forms as well as the tax evasion felonies for 1981 and 1982, Foster contends that his Fifth Amendment protection against "cumulative punishments for the same offense" has been violated.

In its recent opinion in Garrett v. United States, --- U.S. ----, 105 S.Ct. 2407, 85 L.Ed.2d 764 (1985), the Supreme Court discussed the double jeopardy analysis to be undertaken when the same conduct violates two statutory provisions. The first step is to determine whether Congress intended that each violation be a separate offense. "There is nothing in the Constitution which prevents Congress from punishing separately each step leading to the consummation of a transaction which it has power to prohibit and punishing also the completed transaction." Id., 105 S.Ct. at 2412 (emphasis in original), quoting Blockburger v. United States, 284 U.S. 299, 304, 52 S.Ct. 180, 182, 76 L.Ed. 306 (1932). The inquiry is into the language, structure and legislative history of the statutes involved. Garrett, 105 S.Ct. at 2412. If the legislative intent is unclear, it can also be inferred by using the test laid out in Blockburger v. United States --whether "[e]ach of the offenses created requires proof of a different element." See Garrett, 105 S.Ct. at 2411, quoting Blockburger, 284 U.S. at 304, 52 S.Ct. at 182.

As for the Sec. 7203 ² misdemeanors, the statutory language suggests two separate offenses: both Sec. 7201 and Sec. 7203 state that the penalties imposed are "in addition to other penalties provided by law." See supra notes 1 & 2. The legislative history, on the other hand, is inconclusive. See S.Rep. No. 1622, 83d Cong., 1st Sess. (1954), reprinted in [1954] U.S.Code Cong. & Ad.News 4621, 5251 ("Under these amendments, section 7201 will apply only to a willful attempt in any manner to evade or defeat the tax or payment thereof, and the lesser offense of a willful failure to file a tax return will be punishable as a misdemeanor under section 7203."); H.Conf.Rep. No. 2543, 83d Cong., 1st Sess. (1954), reprinted in [1954] U.S.Code Cong. & Ad.News 5280, 5343-44 (substantially similar language).

The structure of the statute--one broad felony followed by a large number of related misdemeanors--suggests different offenses. The Supreme Court in Spies described Sec. 7201 as "the capstone of a system of sanctions which singly or in combination were calculated to induce prompt and forthright fulfillment of every duty under the income tax law...." Spies, 317 U.S. at 497, 63 S.Ct. at 367 (emphasis supplied). The court in Reynolds v. United States, 288 F.2d 78 (5th Cir.), cert. denied, 368 U.S. 883, 82 S.Ct. 127, 7 L.Ed.2d 83 (1961), agreed, holding that Congress intended a Sec. 7201 offense and the misdemeanor of willfully failing to pay tax, 26 U.S.C. Sec. 7202, to be separate offenses. Further, applying the Blockburger test, we find that a violation of either statute would not necessarily entail a violation of the other. See United States v. Woodward, 469 U.S. 105, 105 S.Ct. 611, 612, 83 L.Ed.2d 518 (1985). In Woodward, the defendant made a false statement to a customs agent when declaring what he was bringing into the country. He was convicted of making a false statement to a United States agency and willfully failing to report that he was carrying more than $5,000 into the country. Although the same conduct--answering "no" to the question whether he was bringing more than $5,000 into the country--was the basis for both convictions, the Court noted that "proof of a currency reporting violation does not necessarily include proof of a false statement offense." Id. (emphasis supplied).

A Sec. 7203 misdemeanor requires proof that (1) the defendant had a legal duty to file a tax return; (2) he failed to do so; and (3) he acted willfully. United States v. Gorman, 393 F.2d 209, 213 (7th Cir.), cert. denied, 393 U.S. 832, 89 S.Ct. 102, 21 L.Ed.2d 103 (1968). There is no requirement of an affirmative act, whereas a Sec. 7201 offense requires some affirmative act. Failure to file without more will not sustain a conviction under Sec. 7201. United States v. Spies, 317 U.S. 492, 499, 63 S.Ct. 364, 368, 87 L.Ed. 418 (1943). Conversely, while someone attempting to evade or defeat tax will often fail to file a return, this is not necessary for the completion of the offense (for instance, one could file a fraudulent return or file a return without remitting payment). Finally there is no indication that Congress did not intend these two statutory provisions to be separate offenses. See ...