U.S. v. King

• Decision Date: 02 October 1997
• Docket Number: No. 96-4086,96-4086
• Citation: 126 F.3d 987
• Parties: -6747, 97-2 USTC P 50,746 UNITED STATES of America, Plaintiff-Appellee, v. Ronald A. KING, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 987

126 F.3d 987

80 A.F.T.R.2d 97-6747, 97-2 USTC P 50,746

UNITED STATES of America, Plaintiff-Appellee, v. Ronald A. KING, Defendant-Appellant.

No. 96-4086.

United States Court of Appeals Seventh Circuit.

Argued May 28, 1997.

Decided Oct. 2, 1997.

Judith A. Stewart, Office of the United States Attorney, Indianapolis, IN, Robert E. Lindsay, Alan Hechtkopf, Meghan Skelton (argued), Department of Justice, Tax Division, Appellate Section, Washington, DC, for Plaintiff-Appellee.

Robert C. Perry, Indianapolis, IN, Jeffrey A. Dickstein (argued), Tulsa, OK, for Defendant-Appellant.

Before BAUER, COFFEY, and RIPPLE, Circuit Judges.

BAUER, Circuit Judge.

Ronald A. King was convicted by a jury of attempting to evade the assessment of income taxes for the years 1989 through 1993, in violation of 26 U.S.C. § 7201. On appeal, King challenges the sufficiency of the evidence, as well as various rulings by the district court. Although King presents four separate issues for review, the resolution of each turns, in some way, on the question of whether filing and maintaining on file a Form W-4 which falsely claims exemption from withholding may serve as the basis for a § 7201 violation in future years. For the reasons stated below, we find that it may. We therefore affirm.

BACKGROUND

From 1965 through the time of his trial, King was an employee of Delco Electronics Corporation, a division of General Motors. During the 1980's and 1990's, Delco paid King wages ranging from approximately $29,900 to $50,000 per year. King also earned interest income during this period.

In September 1983, King filed a Form W-4 in which he claimed to be exempt from the In February 1984, King again filed a Form W-4 in which he claimed to be exempt from withholding. Again, the IRS notified Delco that the W-4 was incorrect and directed Delco to withhold taxes as if King were single and claiming one exemption. Delco complied with the directive.

requirement that taxes be withheld from his wages. Delco's practice was to honor a Form W-4 submitted by an employee until the Internal Revenue Service ("IRS") or the employee told the company to withhold differently, so Delco originally honored King's claimed exemption from withholding. However, in November 1983, the IRS informed Delco that the form was false and instructed Delco to begin withholding income tax from King's pay. A copy of the IRS letter was forwarded to King. Delco began withholding taxes from King's wages in November 1983, pursuant to the IRS's directive. King paid his 1983 taxes the following spring.

The next time King filed a Form W-4 was in March 1987. At that time, he renewed his claim of exemption from withholding and wrote "under duress" in place of his signature. Delco honored the form. This time, the IRS did not issue a directive to Delco, but instead, commenced a criminal investigation. King maintained the 1987 W-4 on record at Delco at least throughout 1993.

King did not file a tax return for any year after 1983. Delco, however, filed Forms W-2, which reported to the IRS the wages it paid to King. From these W-2s, as well as from records regarding King's interest income and state personal property taxes, the criminal investigation unit of the IRS was able to calculate King's tax liability for the tax years 1989 through 1993. The IRS determined that King owed $6,941 for 1989, $6,606 for 1990, $7,919 for 1991, $8,628 for 1992, and $5,897 for 1993.

On June 5, 1996, King was charged in a five-count superseding indictment with attempting to evade the assessment of income tax during the calendar years 1989 through 1993, in violation of 26 U.S.C. § 7201. By bill of particulars, the government alleged that King committed affirmative acts of evasion (an element of the offense) by filing with Delco three Forms W-4 which falsely claimed exemption from withholding. King filed a motion to dismiss the superseding indictment on the ground that filing Forms W-4 falsely claiming exemption from withholding in 1983, 1984 and 1987 could not, as a matter of law, constitute affirmative acts of evasion for the years 1989 through 1993. The court denied the motion, and the case went to trial. King made motions of acquittal at the close of the government's case and again at the close of all the evidence, arguing that the government had failed to prove any affirmative act of evasion. The court denied the motions. On September 1, 1996, a jury found King guilty on all counts, and the court sentenced King to concurrent terms of twenty-one months' incarceration on each count.

On appeal, King argues that (1) the district court erroneously denied his motion to dismiss because the superseding indictment failed to allege affirmative acts of evasion for the years charged; (2) there was insufficient evidence that he committed an affirmative act of evasion; (3) the court erred in denying his requested motion in limine; and (4) the court failed to adequately instruct the jury by refusing to give two of his proposed jury instructions.

ANALYSIS

A. Motion to Dismiss

Title 26 U.S.C. § 7201 provides that "[a]ny person who willfully attempts in any manner to evade or defeat any tax imposed ... or the payment thereof shall ... be guilty of a felony...." In order to obtain a conviction under § 7201, the government must prove three elements: (1) the existence of a tax deficiency; (2) willfulness; and (3) an affirmative act constituting an attempt to evade or defeat tax. Sansone v. United States, 380 U.S. 343, 351, 85 S.Ct. 1004, 1010, 13 L.Ed.2d 882 (1965); United States v. Eaken, 995 F.2d 740, 742 (7th Cir.1993). King raises issues relating only to the third element, the requirement that the defendant have committed an affirmative act of evasion.

An affirmative act is some conduct, undertaken at least in part because of a tax evasion motive, "the likely effect of which would be to mislead or to conceal." Spies v. United States, 317 U.S. 492, 499, 63 S.Ct.

364, 368, 87 L.Ed. 418 (1943). Filing a false Form W-4 satisfies the affirmative act requirement. Sansone, 380 U.S. at 351-52, 85 S.Ct. at 1010; United States v. Sloan, 939 F.2d 499, 501 (7th Cir.1991), cert. denied, 502 U.S. 1060, 112 S.Ct. 940, 117 L.Ed.2d 110 (1992); see also Spies, 317 U.S. at 499, 63 S.Ct. at 368 (giving examples of conduct that could constitute an affirmative act of evasion, including filing a false document and any other positive conduct the likely effect of which would be to mislead or conceal tax liability). If the false filing is shown to be willful, the offense is complete with the filing. United States v. McGill, 964 F.2d 222, 230 (3d Cir.), cert. denied, 506 U.S. 1023, 113 S.Ct. 664, 121 L.Ed.2d 588 (1992).

In his motion to dismiss, King contended that his filings in 1983, 1984 and 1987 could not, as a matter of law, support tax evasion charges for the years covered by the superseding indictment because the last of those forms legally expired no later than February 15, 1988. Title 26 C.F.R. § 31.3402(f)(4)-2(c)(1) provides that a Form W-4 that claims total exemption from withholding expires, as a matter of law, on February 15 of the year after that in which it is filed. ¹ Under this regulation, the Forms W-4 that King filed in 1983, 1984 and 1987 legally expired on February 15, 1984, 1985 and 1988, respectively, at which times, according to King, they became totally ineffective for any purpose and could not mislead anyone or conceal anything about his tax liability for any future year.

The district court, relying on United States v. Williams, 928 F.2d 145 (5th Cir.), cert. denied, 502 U.S. 811, 112 S.Ct. 58, 116 L.Ed.2d 34 (1991), denied King's motion to dismiss and explained:

As Williams makes clear, the law does not require a separate affirmative act for each separate year charged. As this court understands the requirements of Spies, the issue is whether the government can prove, for each felony charge of an attempt to evade taxation, an affirmative act that the defendant undertook willfully, with the intention of evading taxes. What matters are the defendant's intentions and expectations at the time he took the action in question, and evidence of later willful omissions, such as failures to file returns and to pay taxes due, is relevant. In the absence of more specific guidance identified by the parties, it appears to the court that the issue the jury may have to decide is this: Whether the earlier W-4 filings are so related, in terms of common purpose, time, and likely effects (as they appeared to the defendant at the time), to the defendant's later failures to file tax returns and pay taxes that one or more of the earlier W-4 filings can be considered part of an attempt to evade taxes for each specific tax year charged. Whether a particular false filing has "expired" pursuant to Treasury regulations does not control the answer to that question, but it might be relevant if there is evidence that the defendant knew the filing would expire soon. But such expiration does not defeat the charges in this case as a matter of law.

On appeal, King asserts two errors in reasoning by the district court: (1) that the court erroneously relied upon Williams for its conclusion that the expiration of a Form W-4 does not preclude prosecution for tax evasion and that a separate affirmative act of evasion is not required for each separate count of the indictment, and (2) that the court confused the requirement that there be an affirmative act of concealing, deceiving or defeating the ascertainment of a known tax liability with issues concerning King's state of mind. We review the district court's refusal to dismiss the superseding indictment de novo. United States v. Lee, 72 F.3d 55, 57 (7th Cir.1995).

We begin our analysis with United States v. Williams, in which the Fifth Circuit held that the filing of a fraudulent Form W-4 (that had not legally expired) could supply the affirmative act required for tax evasion charges in...