U.S. v. Parshall, 84-1282

• Decision Date: 24 April 1985
• Docket Number: No. 84-1282,84-1282
• Citation: 757 F.2d 211
• Parties: -1101, 85-1 USTC P 9279 UNITED STATES of America, Appellee, v. Robert Eugene PARSHALL, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 211

757 F.2d 211

55 A.F.T.R.2d 85-1101, 85-1 USTC P 9279

UNITED STATES of America, Appellee, v. Robert Eugene PARSHALL, Appellant.

No. 84-1282.

United States Court of Appeals Eighth Circuit.

Submitted Oct. 8, 1984.

Decided March 19, 1985.

Rehearing and Rehearing En Banc Denied April 24, 1985.

Robert L. Fanter, Des Moines, Iowa, for appellant.

Guy R. Cook, Asst. U.S. Atty., Des Moines, Iowa, for appellee.

Before LAY, Chief Judge, ROSS and McMILLIAN, Circuit Judges.

McMILLIAN, Circuit Judge.

Robert Eugene Parshall appeals from a final judgment entered in the District Court ¹ for the Southern District of Iowa upon a jury verdict finding him guilty of two counts of willful failure to file federal income tax returns for tax years 1979 and 1980 in violation of 26 U.S.C. Sec. 7203. The district court sentenced appellant to one year in prison, to be released as if on parole after service of one-third of the term pursuant to 18 U.S.C. Sec. 4205(f), a fine of $5,000, and three years probation and taxed the costs of prosecution ($1,536.89) against him. For reversal appellant argues that the district court erred in (1) excluding evidence of substantially lower tax liability and testimony about the tax treatment of assignment of income by persons who have taken vows of poverty and are associated with religious orders, (2) giving instruction No. 14 to the jury and (3) denying his motion for judgment of acquittal on the ground that 26 U.S.C. Sec. 7203 is unconstitutionally vague. For the reasons discussed below, we affirm the judgment of the district court.

The government showed that although appellant was employed as a second officer by United Air Lines during the years 1977 through 1980 and had received income in excess of $40,000 annually from 1977 through 1979 and in excess of $59,000 in 1980, appellant did not file any federal income tax returns for those years and had paid no federal income taxes for those years. Appellant explained his failure to file federal income tax returns as a consequence of his having taken a vow of poverty and his membership in the Parshall Christian Order, a church that he founded in 1975 as an integrated auxiliary of the Miletus Church. Appellant claimed that he was exempt from filing federal income tax returns because he was a member of the Miletus Church and the Parshall Christian Order.

The government also presented evidence that appellant had sought the advice of a tax consultant in the early 1970s about the tax consequences of a vow of poverty, that appellant had filed federal income tax returns in 1975 and 1976 claiming that he was the chief steward of the Parshall Christian Order and as such was exempt from federal income tax, that in August 1976 and December 1976 United Air Lines had informed appellant that his wages were subject to federal income tax withholding, that in October 1976 the Internal Revenue Service (IRS) had reviewed appellant's 1975 federal income tax return and had determined that his wages were taxable as income to him and not the Parshall Christian Order, and that in April 1979 the IRS had informed appellant that a second audit of his 1975 return and a first audit of his 1976 return indicated that his wages were taxable to him and that the creation of the Parshall Christian Order and his assignment of funds and income to it "constituted a sham transaction not recognized for federal income tax purposes."

The jury found appellant guilty of willful failure to file federal income tax returns for the years 1979 and 1980. This appeal followed.

Appellant first argues that the district court erred in excluding evidence of substantially lower tax liability and expert testimony about the tax treatment of assignment of income by persons who have taken vows of poverty and are associated with religious orders. The government as part of its case-in-chief introduced evidence that appellant faced a substantial tax liability of about $30,369 as circumstantial evidence of willfulness. In order to rebut this evidence, appellant sought to introduce evidence that his tax liability was much lower. Appellant made an offer of proof that an independent tax preparer and former IRS agent had calculated that appellant's tax liability for the years 1977 through 1980 was about $3,660 and that appellant was due about $14,379 in refunds for the years 1981 and 1982. Appellant also sought to introduce evidence from a tax attorney and accountant that the tax consequences of an assignment of income to a church or religious order by a vow of poverty were uncertain until 1981.

We hold that the district court abused its discretion in excluding the proffered evidence of substantially lower tax liability. Willfulness is an element of the offense of willful failure to file income tax returns. "In a case such as this where the element of willfulness is critical to the defense, the defendant is entitled to wide latitude in the introduction of evidence tending to show lack of intent." United States v. Garber, 607 F.2d 92, 99 (5th Cir.1979) (banc) (conviction for knowingly misstating income under 26 U.S.C. Sec. 7201). Here, the government introduced evidence that appellant owed a substantial amount in taxes in order to show appellant's failure to file income tax returns was willful. Appellant permissibly sought to rebut this inference of willfulness by showing that his tax liability was much less than the government's estimate and that in fact the government owed him tax refunds.

We also hold that the district court abused its discretion in excluding evidence about the allegedly uncertain state of the law involving assignment of income to religious orders or churches. "When the taxability of unreported income is problematical as a matter of law, the unresolved nature of the law is relevant to show that [the] defe...