U.S. v. Powell

• Decision Date: 13 June 1991
• Docket Number: No. 90-10060,90-10060
• Citation: 936 F.2d 1056
• Parties: -5016 UNITED STATES of America, Plaintiff-Appellee, v. Roy G. POWELL; Dixie Lee Powell, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1056

936 F.2d 1056

68 A.F.T.R.2d 91-5016

UNITED STATES of America, Plaintiff-Appellee, v. Roy G. POWELL; Dixie Lee Powell, Defendants-Appellants.

No. 90-10060.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 12, 1990.

Decided June 13, 1991.

Michael Louis Minns, Houston, Tex., for defendants-appellants.

Yoel Tobin, U.S. Dept. of Justice, Washington, D.C., for plaintiff-appellee.

Appeal from the United States District Court for the District of Arizona.

Before TANG, FLETCHER and REINHARDT, Circuit Judges.

TANG, Circuit Judge:

Roy and Dixie Lee Powell appeal their jury convictions for the willful failure to file income tax returns in violation of 26 U.S.C. Sec. 7203. The dispositive issues are whether the district court erred in its jury instructions and in limiting evidence that the Powells could present. ¹ More specifically, we address whether the district court erred in (1) its instruction on willfulness, (2) refusing to allow an instruction on jury nullification, (3) instructing the jury that a federal statute did not relieve the Powells of their obligation to file an income tax return, and (4) refusing to allow the Powells to present evidence of existing law as relevant to their intent at the time of the offense. We reverse and remand for a new trial.

FACTUAL AND PROCEDURAL BACKGROUND

On March 8, 1989, the government filed an indictment charging Roy and Dixie Powell with willful failure to file income tax returns in violation of 26 U.S.C. Sec. 7203 during tax years 1982, 1983, and 1984. Each of the Powells separately had gross incomes in excess of $5,400 in those years. Thus, under federal law, they were required to file a tax return. 26 U.S.C. Sec. 6012(a) (1982 ed.) (amended 1986). The Powells failed to file returns for those years.

The Internal Revenue Service (Service) informed the Powells by letter dated January 23, 1984, that the Service was unable to locate their 1982 return. The Service mailed a second, third, and fourth letter on February 27, 1984, March 19, 1984, and April 9, 1984. The last letter stated the Service could take legal action if the Powells did not respond. The Powells made no response.

The Powells had filed tax returns for the tax years 1977 through 1981. The Powells filed the 1977, 1978, and 1979 returns separately, while the 1980 and 1981 tax returns were filed jointly.

Dixie Powell submitted her 1980 and 1983 W-4 forms to her employer claiming to be exempt from the federal income tax. As a result, no federal taxes were withheld from her pay. Roy Powell also claimed exemption from withholding in his 1981 During trial, Roy Powell testified that he had no recollection as to whether he had signed or filed returns for 1982, 1983, and 1984. He also testified that he had been audited almost every year since 1968. Roy Powell said that this auditing situation prompted him to think that he and his wife should research the tax laws. He testified that they concluded from their research that filing a return is voluntary and that wages and compensation are different from income. He testified that he intended to obey the law as he understood it.

W-4 form, and his employer did not withhold any money from his pay.

Dixie Powell testified that she was too busy to file her income taxes for 1982. She also testified that she was not sure whether she had filed a return for 1982, but that her recollection was she did not. She testified as to her understanding of the income tax laws and her research results. Dixie Powell concluded, "I was not necessarily required to file an income tax...." She told the jury that she wanted "to do what I am supposed to do...." Dixie Powell cross-examined Roy Powell on their theory that the Service can file their income taxes for them.

The district court allowed the Powells to testify as to their understanding of the law and its requirement on filing a return. It would not, however, allow the Powells to present the statutes or cases they had relied upon in forming their belief. Specifically, the district court refused to allow the Powells to read to the jury 26 U.S.C. Sec. 6020(b), which the Powells said they had studied in determining that the Service could file their tax returns for them and that their filing was therefore voluntary.

After both parties rested, the court instructed the jury that the Powells were required to file tax returns for 1982, 1983, and 1984. The court further instructed the jury that, in order for the Powells to be convicted, the government must have proved, beyond a reasonable doubt, that the Powells had failed to file their returns.

Finally, the court instructed the jury that the government, in order to convict, must have proved, beyond a reasonable doubt, that the Powells had willfully failed to file returns. The court informed the jury that willful "means a voluntary intentional violation of a known legal duty." The court instructed: "Bad purpose or evil motive is not an element of willfully failing to file an income tax return." The court instructed further that, if "a person believes, in good faith, that he or she has done all that the law requires, that person cannot be guilty of criminal intent to willfully fail to file a tax return." The court qualified that statement by saying: "[b]ut if a person acts without reasonable grounds for belief that his or her conduct is lawful, it is for you to decide whether the defendants acted in good faith, or whether they willfully intended to fail to file an income tax return." The court instructed that a citizen's belief that the tax laws are unconstitutional or that a taxpayer disagrees with those laws does not constitute a defense of good faith misunderstanding. The court informed the jury that Congress has the authority and general power to levy taxes and require the filing of tax returns, and that the failure to comply with that requirement is a criminal offense.

After the jury had deliberated for some time, it sent a note to the judge asking, "[c]an IRS file a 1040 without persons signing? ... In other words, can or will the IRS file a 1040 for a person who does not file--this would be without taxpayer's request or consent." The court then read to the jury 26 U.S.C. Sec. 6020(b), the statute that it had prohibited the Powells from introducing. The court explained the statute as follows: "[T]he [Service] is permitted and not required to prepare a return for a person who fails to make any return required by law,.... this section ... provides the [Service] with some recourse should a taxpayer fail to fulfill his obligation to file a return and does not supplant the taxpayer's original obligation to file." The court reiterated its instructions pertaining to willfulness, bad purpose or evil motive, and good faith belief.

The jury found the Powells guilty on all charges. The court sentenced them to one

year in prison, with all but one month suspended, and to probation for sixty months.

DISCUSSION

The Powells object to several of the instructions given by the court to the jury. They argue that the district court improperly formulated the instruction on willfulness. They assert that the jury instruction on their good faith defense improperly required them to have had an objectively reasonable good faith belief that the tax laws did not apply to them. They argue that two additional instructions otherwise misstated the law. The Powells also assert that the district court erred in failing to instruct the jury on jury nullification. Finally, they assert that the district court erred in instructing the jury that 26 U.S.C. Sec. 6020(b) did not relieve them of their obligation to file an income tax return. We conclude that the district court erroneously formulated the instructions on their good faith defense and on Sec. 6020(b), and we reverse on those issues.

The Powells further argue that the district court committed reversible error by prohibiting them from reading Sec. 6020(b) into the record to support their belief that they were not required to file a tax return. We agree, reverse on that issue as well, and remand for a new trial.

1. Jury Instructions

a. Standard of Review

We review the district court's formulation of jury instructions for an abuse of discretion. United States v. Linn, 880 F.2d 209, 217 (9th Cir.1989). We examine "whether or not the instructions taken as a whole were misleading or represented a statement inadequate to guide the jury's deliberations." United States v. Kessi, 868 F.2d 1097, 1101 (9th Cir.1989) (quotations omitted). We review an instruction for plain error when the defendant has not raised a proper objection at trial. Id. at 1102. Where the defendants have failed to object, but have submitted an instruction on the issue to the district court making the court aware of the defendants' position, plain error is inappropriate. United States v. Egan, 860 F.2d 904, 907 n. 1 (9th Cir.1988). In the latter instance, we review the questioned instruction to determine whether it misled the jury or misstated the law. Id.

Neither the prosecution nor a defendant is entitled to the particular language requested in a proposed jury instruction. United States v. Soulard, 730 F.2d 1292, 1303 (9th Cir.1984). "A trial court is given substantial latitude in tailoring jury instructions so long as they fairly and adequately cover the issues presented." Id.

b. Willfulness Instruction

The Powells argue the trial court's instructions regarding willfulness were improper. While the Powells failed to object to these instructions, they preserved their appellate rights by presenting their position to the district court in their proposed jury instructions number four, twelve, and sixteen. "Willfulness" in the context of criminal tax cases is defined as a "voluntary, intentional violation of a known legal duty." Cheek v. United States, --- U.S. ----, ----, 111 S.Ct. 604, 610, 112 L.Ed.2d 617 (1991); United States v. Pomponio, 429 U.S. 10, 12, 97...