U.S. v. Payne

• Decision Date: 28 October 1992
• Docket Number: No. 91-8073,91-8073
• Citation: 978 F.2d 1177
• Parties: -372, 92-2 USTC P 50,555 UNITED STATES of America, Plaintiff-Appellee, v. James C. PAYNE, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1177

978 F.2d 1177

71 A.F.T.R.2d 93-372, 92-2 USTC P 50,555

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

No. 91-8073.

United States Court of Appeals, Tenth Circuit.

Oct. 28, 1992.

Michael Abramovitz (Theordore H. Merriam, with him on the brief), of Abramovitz, Merriam & Shaw, Denver, Colo., for defendant-appellant.

John Barksdale, Asst. U.S. Atty. (Richard A. Stacy, U.S. Atty., and Maynard D. Grant, Sp. Asst. U.S. Atty., with him on the brief), Cheyenne, Wyo., for plaintiff-appellee.

Before McKAY, Chief Judge, BALDOCK and LAY, ^* Circuit Judges.

BALDOCK, Circuit Judge.

Defendant James C. Payne appeals his convictions on four counts of tax evasion, 26 U.S.C. § 7201, and three counts of false representations of social security numbers. 42 U.S.C. § 408(a)(7)(B). Defendant contends that the evidence was insufficient on all counts because the affirmative acts giving rise to the criminal charges occurred outside of the applicable statutes of limitations. Defendant also claims that the district court erroneously excluded evidence regarding his good faith belief that his conduct was legal. ¹ Our jurisdiction arises under 28 U.S.C. § 1291.

During the relevant period, Defendant received interest and dividend income from savings and brokerage accounts. When Defendant opened these accounts between 1977 and 1984, he provided false social security numbers to his bank and brokerage firms (collectively "the payors"). The payors issued Internal Revenue Service ("IRS") Forms 1099 annually for the 1984-87 tax years, reporting Defendant's income to the IRS under the false social security numbers. Defendant received the 1099 forms for the 1984-87 tax years from the payors, but never filed income tax returns for these years. In March 1991, Defendant was indicted on four counts of tax evasion for the years 1984-87 respectively and three counts of false representation of social security numbers. Following a jury trial, Defendant was convicted of all counts.

The federal tax evasion statute provides that "[a]ny person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall ... be guilty of a felony...." 26 U.S.C. § 7201. The elements of a § 7201 violation are an affirmative act constituting an evasion or attempted evasion of the tax, willfullness, and the existence of a substantial tax deficiency. Sansone v. United States, 380 U.S. 343, 351, 85 S.Ct. 1004, 1010, 13 L.Ed.2d 882 (1965); United States v. Swallow, 511 F.2d 514, 519 (10th Cir.), cert. denied, 423 U.S. 845, 96 S.Ct. 82, 46 L.Ed.2d 66 (1975). The failure to file a tax return is insufficient to establish the affirmative act necessary for a § 7201 conviction. Spies v. United States, 317 U.S. 492, 499, 63 S.Ct. 364, 368, 87 L.Ed. 418 (1943). A tax evasion prosecution must be commenced within six years after the commission of the offense. 26 U.S.C. § 6531(2).

Defendant argues that the evidence is insufficient on the four tax evasion counts because the government failed to prove an affirmative act within the six year statute of limitations. Defendant concedes that he provided false social security numbers to the payors between 1977 and 1984, but argues that these affirmative acts cannot support his conviction because they occurred more than six years prior to the indictment. The government counters by arguing that Defendant's "annual reaffirmation"--i.e. failure to correct--the erroneous social security numbers on the 1099 forms that he received from the payors constitutes an affirmative act within the limitations period. See United States v. Williams, 928 F.2d 145, 149 (5th Cir.) (knowingly maintaining false W-4 form on file with employer constituted affirmative act supporting § 7201 conviction), cert. denied, --- U.S. ----, 112 S.Ct. 58, 116 L.Ed.2d 34 (1991).

We need not decide whether Defendant's failure to correct the erroneous social security numbers satisfies the "affirmative act" element of § 7201 because Defendant's argument is premised on the erroneous assumption that an affirmative act commences the running of the statute of limitations. Generally, the statute of limitations does not begin to run until the crime is complete. Toussie v. United States, 397 U.S. 112, 115, 90 S.Ct. 858, 860, 25 L.Ed.2d 156 (1970); Pendergast v. United States, 317 U.S. 412, 418, 63 S.Ct. 268, 270, 87 L.Ed. 368 (1943). "A crime is complete as soon as every element in the crime occurs." United States v. Musacchio, 968 F.2d 782, 790 (9th Cir.1991). Because a tax deficiency is an essential element of the crime of tax evasion, Sansone, 380 U.S. at 343, 85 S.Ct. at 1004; Swallow, 511 F.2d at 514, the statute of limitations did not begin to run on Defendant's § 7201 violations until Defendant incurred a tax deficiency. See United States v. Kafes, 214 F.2d 887, 890 (3d Cir.) (tax evasion offense not complete until defendant's tax payment became due), cert. denied, 348 U.S. 887, 75 S.Ct. 207, 99 L.Ed. 697 (1954). Defendant did not incur a tax deficiency until his tax liability for the years 1984-87 became due--i.e. April 15 of each succeeding year. See United States v. DiPetto, 936 F.2d 96, 97 (2d Cir.) (per curiam) (tax deficiency element satisfied after April 15 of each year defendant failed to file tax return), cert. denied, --- U.S. ----, 112 S.Ct. 193, 116 L.Ed.2d 153 (1991). Therefore, Defendant's earliest act of tax evasion was not complete until April 15, 1985. See id. at 98 ("limitations period began on the day on which the tax returns were due"). See also 85 A.L.R.Fed. Limitations Period-Tax Evasion § 3[a] at 885 (1987) (when tax evasion based on failure to file return, statute of limitations begins to run when return is due). The indictment, returned in March 1991, timely commenced the prosecution of Defendant for tax evasion within the six-year statute of limitations. ²

Defendant raises a similar statute of limitations argument relating to his convictions for false representations of social security numbers. 42 U.S.C. § 408(a)(7)(B). The statute under which Defendant was convicted provides, in relevant part,

[w]hoever, ... for any ... purpose, ... with intent to deceive, falsely represents a number to be the social security account number assigned by the Secretary to him or to another person, when in fact such number is not the social security account number assigned by the Secretary to him or to such other person, ... shall be guilty of a felony....

Id. As § 408(a)(7)(B) does not contain its own statute of limitations, the general five year statute of limitations for non-capital offenses applies. 18 U.S.C. § 3282. Despite the undisputed evidence that Defendant's last false representation of a social security number to a payor occurred in 1984, more than five years prior to the return of the indictment, the government contends that a violation of § 408(a)(7)(B) is a continuing offense that is not completed until Defendant corrects the false numbers, and that Defendant committed new acts of false representation when he reaffirmed the social security numbers by failing to correct the 1099 forms he received from the payors.

The continuing offense doctrine "should be applied in only limited circumstances ... [in which] the explicit language of the substantive criminal statute compels such a conclusion, or the nature of the crime involved is such that Congress must assuredly have intended that it be treated as a continuing one." Toussie, 397 U.S. at 115, 90 S.Ct. at 860. See also 18 U.S.C. § 3282 (statute of limitations should not be extended "[e]xcept as otherwise provided by law"). In Toussie, the defendant was prosecuted for failing to register for the draft and moved to dismissed on statute of limitations grounds because the prosecution was initiated more than five years after he was initially required to register. The lower courts had interpreted the statute, which required all male citizens between the ages of eighteen to twenty-six to register, as imposing a continuing duty to register until the age of twenty-six. The Supreme Court reversed, finding nothing in the language of the statute or in the nature of the crime to compel the conclusion that failing to register was a continuing offense. Toussie, 397 U.S. at 120-22, 90 S.Ct. at 863-64.

Like the statute at issue in Toussie, nothing in the plain language of § 408(a)(7)(B) nor the nature of the crime itself supports the government's contention that Congress intended it to be a continuing offense. Section 408(a)(7)(B) prohibits "falsely represent[ing] a social security number." Had Congress intended the crime to continue beyond the point that Defendant made the false representations, Congress could easily have prohibited concealing or failing to disclose a true social security number as it did in another subsection. See 42 U.S.C. § 408(a)(4) (prohibiting "conceal[ing] or fail[ing] to disclose" the occurrence of an event affecting the continued right to payment). See also United States v. Morrison, 43 F.R.D. 516, 519 (N.D.Ill.1967) (failure to notify Social Security Administration of beneficiary's death was a continuing course of conduct under § 408(a)(4) until notification of death was provided). However, by only prohibiting a false representation, Congress expressed its intention that the crime is complete at the time of the representation. See United States v. Joseph, 765 F.Supp. 326, 330 (E.D.La.1991) (violation of § 408(a)(7)(B) is complete when the false representation is made).

Similarly, we find no merit in the government's contention that Defendant's failure to correct the erroneous social security numbers constituted a reaffirmation of the false representation. After Defendant falsely represented the social security numbers to the payors, he made no further representations of the erroneous social security numbers nor did he file any income tax returns. While the payors relied on Defendant's false...