U.S. v. Phillips, 84-2265

Citation775 F.2d 262
Decision Date17 October 1985
Docket NumberNo. 84-2265,84-2265
Parties-6178, 85-2 USTC P 9745 UNITED STATES of America, Plaintiff-Appellee, v. Richard R. PHILLIPS, Defendant-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)

Scott McLarty, Athens, Ga. (Larry E. Blount, Athens, Ga., and Cecil A. Hartman, Denver, Colo., with him on brief) for defendant-appellant.

Catharine M. Goodwin, Asst. U.S. Atty., for the Dist. of Colo., Denver, Colo. (Robert N. Miller, U.S. Atty., with her on the brief), Denver, Colo., for plaintiff-appellee.

Before McKAY, DOYLE and SEYMOUR, Circuit Judges.

McKAY, Circuit Judge.

Defendant was convicted in a jury trial of willfully and knowingly failing to file income tax returns for three years. In his defense, he argued that he had not filed because he had sincerely and honestly believed that wages were not income. This good faith misunderstanding defense was significantly limited by the following jury instruction:

A mistake of law must be objectively reasonable to be a defense. If you find that the defendant did not have a reasonable ground for his belief, then regardless of the defendant's sincerity of belief, you may find that he did not have a good faith misunderstanding of the requirements of the law.

Record, vol. 1, at 58 (emphasis added).

On appeal, defendant argues that this instruction was erroneous in that subjective belief that filing is not required, regardless of whether reasonably based, negates willfulness. The government argues that the objective standard used in the instruction was appropriate.

We find the First Circuit case of United States v. Aitken, 755 F.2d 188 (1st Cir.1985), to be highly instructive on this issue. In that case, as in the case at hand, the defendant claimed that he sincerely believed wages not to be income. The court found that a subjective, rather than an objective, standard was the appropriate measure of this belief. In support of that finding, the court explicated a number of Supreme Court cases giving rise to an inference that a subjective standard should be employed in assessing "willfulness" in criminal tax prosecutions.

In United States v. Murdock, 290 U.S. 389, 396, 54 S.Ct. 223, 226, 78 L.Ed. 381 (1933), the Court found that:

Congress did not intend that a person, by reason of a bona fide misunderstanding as to his liability for the tax, as to his duty to make a return, or as to the adequacy of the records he maintained, should become a criminal by his mere failure to measure up to the prescribed standard of conduct.

In United States v. Pomponio, 429 U.S. 10, 97 S.Ct. 22, 50 L.Ed.2d 12 (1976), the Court considered facts similar to those involved in the case before us. The taxpayers argued that the returns they had filed were not false because they had believed that certain payments to them were loans, rather than dividends, and that certain losses were properly attributable to their partnership, rather than to a corporation. The Court defined willfulness as an "intentional violation of a known legal duty," id. at 12, 97 S.Ct. at 23 (quoting United States v. Bishop, 412 U.S. 346, 360, 93 S.Ct. 2008 2017, 36 L.Ed.2d 941 (1973) ), and upheld a jury instruction that if the defendants actually believed as they claimed they should be found not guilty. See also Sansone v. United States, 380 U.S. 343, 353, 85 S.Ct. 1004, 1011, 13 L.Ed.2d 882 (1965); Bishop, 412 U.S. at 360, 93 S.Ct. at 2017.

The government points to United States v. Moore, 627 F.2d 830 (7th Cir.1980), cert. denied, 450 U.S. 916, 101 S.Ct. 1360, 67 L.Ed.2d 342 (1981), in support of an objective standard. In that case, the defendant claimed that he believed Federal Reserve Notes were not income. In dicta the court concluded that a mistake of law must be objectively reasonable. Id. at 833. The defendant's alleged good faith belief was not based upon a misunderstanding of the tax laws, however, as the defendant alleges in the case before us, but, rather, upon the supposed unconstitutionality of the income tax and of Federal Reserve Notes. Id. * Regardless, to the extent Moore can be read as requiring that a good faith misunderstanding of the tax laws be objectively reasonable, we decline to follow it.

While the Tenth Circuit has never explicitly held that an objective standard is impermissible in failure to file cases, we have implied that the appropriate standard is a subjective one. In Haigler v. United States, 172 F.2d 986 (10th Cir.1949), we overturned a judgment against the defendant because the court had disallowed the introduction of evidence of subjective intent and had instructed the jury that ignorance of the law was no excuse. We noted: "We think it irreconcilably inconsistent to say in one breath that guilty knowledge of the consequences of the act done is the essence of the offense, and in the next breath say that ignorance of the consequences of those acts is no excuse." Id. at 989. More recently, in United States v. Ware, 608 F.2d 400 (10th Cir.1979), we endorsed an instruction that allowed a good faith misunderstanding defense without requiring that the misunderstanding have a reasonable basis.

With the exception of the Seventh Circuit in Moore, no other circuit has approved of an objective standard in failure to file cases. The balance of the circuits that have considered the issue have either implicitly...

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18 cases
  • Cheek v. United States
    • United States
    • U.S. Supreme Court
    • January 8, 1991
    ...of several other Courts of Appeals, see, e.g., United States v. Whiteside, 810 F.2d 1306, 1310-1311 (CA5 1987); United States v. Phillips, 775 F.2d 262, 263-264 (CA10 1985); United States v. Aitken, 755 F.2d 188, 191-193 (CA1 1985), we granted certiorari, 493 U.S. 1068, 110 S.Ct. 1108, 107 ......
  • U.S. v. Harrold
    • United States
    • U.S. Court of Appeals — Tenth Circuit
    • July 14, 1986
    ...that, if he had a good-faith belief that he owed no income tax, he could not be found guilty of tax evasion. 7 In United States v. Phillips, 775 F.2d 262 (10th Cir.1985), we held that a defendant in a tax evasion case was entitled to an instruction that a subjective good-faith misunderstand......
  • Salberg v. U.S., 91-3248
    • United States
    • U.S. Court of Appeals — Seventh Circuit
    • July 22, 1992
    ...of willfulness in criminal tax cases. See, e.g., United States v. Whiteside, 810 F.2d 1306, 1310 (5th Cir.1987); United States v. Phillips, 775 F.2d 262, 264 (10th Cir.1985); United States v. Aitken, 755 F.2d 188, 191 (1st Cir.1985); Cooley v. United States, 501 F.2d 1249, 1253 n. 4 (9th Ci......
  • U.S. v. Foster, 85-1925
    • United States
    • U.S. Court of Appeals — Seventh Circuit
    • May 23, 1986
    ...S.Ct. 22, 23, 50 L.Ed.2d 12 (1976). Foster's reliance upon United States v. Aitken, 755 F.2d 188 (1st Cir.1985), and United States v. Phillips, 775 F.2d 262 (10th Cir.1985), where a subjective test--requiring an inquiry into the defendant's actual state of mind--was employed, is misplaced. ......
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