U.S. v. Uchimura

• Citation: 107 F.3d 1321
• Decision Date: 25 February 1997
• Docket Number: No. 94-10579,94-10579
• Parties: -1224, 97-1 USTC P 50,245, 97 Cal. Daily Op. Serv. 1304, 97 Daily Journal D.A.R. 1931 UNITED STATES of America, Plaintiff-Appellee, v. Harold H. UCHIMURA, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1321

107 F.3d 1321

79 A.F.T.R.2d 97-1224, 97-1 USTC P 50,245,

97 Cal. Daily Op. Serv. 1304,

97 Daily Journal D.A.R. 1931

UNITED STATES of America, Plaintiff-Appellee, v. Harold H. UCHIMURA, Defendant-Appellant.

No. 94-10579.

United States Court of Appeals, Ninth Circuit.

Argued Jan. 9, 1996.

Submission Deferred April 4, 1996.

Submitted Sept. 11, 1996.

Decided Feb. 25, 1997.

Trott, Circuit Judge, filed a dissenting opinion.

Arthur E. Ross, Elizabeth A. Fisher, Honolulu, Hawaii, for the defendant-appellant.

Craig H. Nakamura, Assistant United States Attorney, Honolulu, Hawaii, for the plaintiff-appellee.

Appeal from the United States District Court for the District of Hawaii, Alan Cooke Kay, District Judge, Presiding. D.C. No. CR 92-01579 ACK.

Before: SCHROEDER and TROTT, Circuit Judges, and REED, ^* District Judge.

EDWARD C. REED, Jr., District Judge:

Appellant Harold H. Uchimura ("Uchimura") appeals his conviction for filing a materially false tax return in violation of 26 U.S.C. § 7206(1). The question presented is whether the trial court committed reversible error by ruling that "materiality" in the context of 26 U.S.C. § 7206(1) is a question of law for the court. We have jurisdiction pursuant to 28 U.S.C. § 1291 and we reverse. ¹

FACTS AND PROCEEDINGS BELOW

Until his retirement in 1991, Appellant was a police officer with the Honolulu Police Department. From 1983 to 1991, he worked in the Narcotics Vice Division, and in 1988 he began selling cocaine and crystal methamphetamine with two drug dealers he had arrested. On his 1990 tax return, Uchimura reported a 1990 joint taxable income of $32,416. Based on his expenditures, though, the IRS calculated Uchimura's true 1990 joint taxable income as $136,163.

Uchimura was charged with, among other things, filing a materially false tax return (count 8) in violation of 26 U.S.C. § 7206(1). On June 9, 1994, the jury found him guilty, and on November 28, 1994, he was sentenced to 36 months for count 8 and longer concurrent terms for the other counts. Uchimura timely appealed. ²

DISCUSSION

I. Materiality

Section 7206(1) makes it a crime for a person to file a tax return "which he does not believe to be true and correct as to every material matter." Uchimura argues that the district court erred by refusing to submit materiality to the jury. As of June 1994, when the jury was charged, whether a statement on a tax return was a "material matter" was a question of law for the court. U.S. v. Flake, 746 F.2d 535, 537 (9th Cir.1984), cert. denied, 469 U.S. 1225, 105 S.Ct. 1220, 84 L.Ed.2d 360 (1985). After trial, however, the Ninth Circuit decided U.S. v. Gaudin, 28 F.3d 943 (9th Cir.1994) (en banc), which was affirmed by the Supreme Court on June 19, 1995. 515 U.S. 506, 115 S.Ct. 2310, 132 L.Ed.2d 444 (1995). Gaudin holds that materiality in the context of 18 U.S.C. § 1001 is a mixed question of law and fact for the jury to decide. 515 U.S. at ----, 115 S.Ct. at 2320; 28 F.3d at 951. The application of Gaudin in this context is a question of first impression in this Circuit.

A. Gaudin

In Gaudin, the defendant had been convicted of making false statements on Department of Housing and Urban Development loan documents, in violation of 18 U.S.C. § 1001. The trial court, as in the instant case, instructed the jury that materiality was a question of law for the court. The Supreme Court, in rejecting this holding, employed the following syllogism:

The Constitution gives a criminal defendant the right to demand that a jury find him guilty of all the elements of the crime with which he is charged; one of the elements in the present case is materiality; [the defendant] therefore had a right to have the jury decide materiality.

515 U.S. at ----, 115 S.Ct. at 2314. Materiality is also one of the essential elements of 26 U.S.C. § 7206(1). U.S. v. Marabelles, 724 F.2d 1374, 1380 (9th Cir.1984). Uchimura therefore also had a right to have a jury decide materiality.

Indeed, the Supreme Court's reasoning applies with equal potency to every crime of which materiality is an element. Accordingly, in every post-Gaudin perjury-type case where we have reached the issue this Court has ruled that materiality, if an element must be submitted to the jury. U.S. v. Keys, 95 F.3d 874, 880 (9th Cir.1996) (en banc) (18 U.S.C. § 1623 (Perjury)); Fecht v. Price Company, 70 F.3d 1078, 1080 (9th Cir.1995), cert. denied, --- U.S. ----, 116 S.Ct. 1422, 134 L.Ed.2d 547 (1996) (15 U.S.C. § 78j(b) (Civil Securities Fraud)); U.S. v. Nash, 76 F.3d 282, 285 (9th Cir.1996) (18 U.S.C. § 1014 (False Statement to FDIC)). But see Hervey v. Estes, 65 F.3d 784, 789 n. 4 (9th Cir.1995) (Gaudin not applicable to civil cases). We have also limited Gaudin to its syllogism; if materiality is not an element of the crime charged, then the jury need not consider it. U.S. v. Taylor, 66 F.3d 254, 255 (9th Cir.1995) (18 U.S.C. § 287 (False Claims Against the U.S.)).

B. Materiality--A Mixed Question of Law and Fact

The government nonetheless argues that Gaudin is distinguishable because the respective definitions of materiality in 18 U.S.C. § 1001 and 26 U.S.C. § 7206(1) are different; "material" in 18 U.S.C. § 1001 means having "a natural tendency to influence, or [be] capable of influencing, the decision of the decisionmaking body to which it was addressed." Gaudin, 28 F.3d at 948 (quotation omitted). Such a definition "almost always necessitates a factual inquiry." Appellee Br. at 30. By contrast, argues the government, the test for materiality in the present case was so clearly met that materiality was established as a matter of law.

This argument is, at first glance, beside the point. The Supreme Court's syllogism renders the fact/law distinction irrelevant-the only pertinent inquiry is whether materiality is an essential element of the crime. Gaudin, 515 U.S. at ----, 115 S.Ct. at 2314. Nevertheless, two other Circuits have reached this issue and have split on its resolution. ³ U.S. v. DiRico, 78 F.3d 732, 736 (1st Cir.1996) (using the Gaudin definition of "material" in Section 7206(1) cases, materiality is a mixed question of law and fact for the jury to decide); U.S. v. Klausner, 80 F.3d 55, 60-61 (2d Cir.1996) ("material" means "essential to the accurate computation of ... taxes;" under such a definition, "no ... factual questions needed to be resolved by the jury in the present case"). ⁴ In addition, this Court addressed the same argument when we applied Gaudin to the perjury statute, 18 U.S.C. § 1623. Keys, 95 F.3d at 878 (the Supreme Court's syllogism applies "because materiality contains a 'factual component' " (quoting Gaudin, 28 F.3d at 949)). We must therefore determine whether materiality has a factual component in this case, as well.

This Circuit has never explicitly defined "material" in § 7206(1), although our Model Jury Instructions for § 7206(2) define it as "something necessary to a determination of whether income tax was owed." Ninth Circuit Model Jury Instructions: Criminal 9.06E (1995). The definitions applied by other Circuits, and by at least one of our Districts, have similar language. Klausner, 80 F.3d at 60 ("essential to the accurate computation of ... taxes"); Aramony, 88 F.3d at 1384 ("in order that the taxpayer estimate and compute his tax correctly"); U.S. v. Warden, 545 F.2d 32, 37 (7th Cir.1976) (same); U.S. v. Rayor, 204 F.Supp. 486, 491 (S.D.Cal.1962) (same).

Despite our adoption of a materiality definition similar to the one in Klausner, we cannot agree with the Second Circuit. The logic that must be employed (whether by a judge or by a jury) to deduce that a false statement is material renders materiality a "mixed question of law and fact." Under 18 U.S.C. § 1001, deciding whether a statement is material requires the determination of "at least two subsidiary questions of purely historical fact: (a) 'what statement was made?'; and (b) 'what decision was the agency trying to make?'." Gaudin, 515 U.S. at ----, 115 S.Ct. at 2314. Under 26 U.S.C. § 7206(1), deciding whether a statement is material surely requires a similar determination of (a) "what statement was made?"; and (b) "what information was necessary in this case to a determination of whether income tax was owed?".

The government correctly notes that the answer to (b) is spelled out in detail in the Internal Revenue Code and Regulations. Appellee Br. at 31. The answer to (b) in Section 7206 cases is therefore not "purely" a matter of historical fact. But each case is different, and the answer to (b) in each case is necessarily different. For example, a taxpayer is required to report her Social Security number on her tax return. But willfully falsifying one's Social Security number, while it may hinder the IRS' record keeping, normally does not affect a determination of whether income tax is owed. As a more cogent example, if one's legitimate deductions exceed one's true gross income, taxable income will be zero. Failure to report all income will thus have no effect on taxes owed, at least for that year, and unreported income will not be necessary to a determination of whether income tax is owed.

Under most circumstances, this Court's pre-Gaudin statement that "any failure to report income is material" is one with which most juries would agree, since any failure to report income usually affects a determination of whether tax is owed. U.S. v. Holland, 880 F.2d 1091, 1096 (9th Cir.1989). But just because a jury usually would agree with such a statement does not mean that a jury must agree with it, as a matter of law. Even if any failure to report income is material in most circumstances, it is not necessarily material in all circumstances, since the materiality of an underreporting of income necessarily depends on the facts of each case. The materiality of other false statements on a tax return, such as deductions, is surely just as fact-dependent. For this reason, we cannot agree with the Klausner court's...