section 7201 - statute of limitations
An individual’s indictment for tax evasion was not barred by the
six-year statute of limitation under Code Sec.
6531(2) because alleged evasive conduct occurred within six
years of the indictment. The individual’s argument that the government could
not revive a time-barred criminal prosecution by an alleged act of evasion
after the limitations period closed was rejected. In order to prove a violation
of Code Sec. 7201, the government must prove an
affirmative act of evasion or attempted evasion, the existence of a tax
deficiency, and willfulness. The government need not prove that a certain
underlying act took place on a specific date to secure a conviction for tax
evasion. Moreover, in a tax evasion case, the latest act of evasion, rather
than the due date of the return, triggers the limitations period. Since the
government adequately alleged that the individual engaged in evasive conduct
within six years prior to the indictment, there was no reason to dismiss the
counts at issue
United States of America, Plaintiff v. Michael N. Mangold,
Defendant.
U.S. District Court, E.D. Wisconsin; 12-Cr-219, November 18, 2013.
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Magistrate Judge's
recommendation states that the issue is whether the statute of limitations
bars the government from obtaining an indictment if, following the evasive
conduct, there is a six-year period in which no evasive conduct occurs.
Noting that Mangold concurred with the government that the statute of
limitations runs from the last evasive act, the Magistrate Judge concluded
that the cases relied upon by the government did not address the issue raised
by Mangold's motion because “it was not relevant,” stating:
[e]ven
if there was a six-year period during which the defendant did not engage in
any evasive conduct, he would still owe the taxes he had failed to pay. A
person's civil tax liability does not vanish even if the statute of
limitations for criminal prosecution passes. See 26 U.S.C. §6501(c)(2) (stating
that in the case of a willful attempt to evade taxes, collection may be begun
at any time).
Thus, the magistrate judge held that if any act of evasion
occurs within six years of the return of the indictment, the indictment is
timely. He further held that because the Government's proffered facts
adequately demonstrated that Mangold allegedly engaged in evasive conduct
within the six years prior to the indictment, there was no reason to dismiss
counts one, two, or three of the indictment.
To establish a violation of §7201, the Government must prove the following
elements beyond a reasonable doubt: (1) an affirmative act constituting an
evasion or attempted evasion of a tax; (2) the existence of a tax deficiency;
and (3) willfulness. Kawashima v. Holder, ___U.S. ___,
132 S.Ct. 1166, 1174 (2012); Sansone v. United States, 380
U.S. 343, 351 (1965). “[T]he government need not necessarily prove that a
certain underlying act took place on a specific date to secure a conviction
for tax evasion. United States v. Scheuneman, 712 F.3d 372,
379 (7th Cir. 2013) (citing United States v. Collins, 685
F.3d 651, 656 (7th Cir. 2012)).
An affirmative act of evasion is “any conduct, the likely
effect of which would be to mislead or to conceal.” Spies v. United
States, 317 U.S. 492, 499 (1943). Spies, “[b]y way of
illustration, and not by way of limitation,” listed several examples of
conduct from which a willful affirmative act can be inferred: “keeping a
double set of books, making false entries or alterations, or false invoices
or documents, destruction of books or records, concealment of assets or
covering up sources of income, handling of one's affairs to avoid making the
records usual in transactions of the kind.” 317 U.S. at 499. Other
affirmative acts of evasion may include filing a false tax return, see
Spies, 317 U.S. at 499-500, diverting corporate funds for personal use,
and structuring payments to avoid IRS reporting requirements, see
United States v. Mounkes, 204 F.3d 1024, 1030 (10th Cir. 2000) . Even
a lawful act may serve as an affirmative act of evasion if done with the
intent to evade income tax . United States v. Valenti, 121
F.3d 327, 333 (7th Cir. 1997).
In a tax evasion case, the latest act of evasion, rather
than the due date of the taxes triggers the statute of limitations. United
States v. Trownsell, 367 F.2d 815, 816 (7th Cir. 1966); See
also United States v. Irby, 703 F.3d 280, 283-84 (5th Cir. 2012)
(collecting cases and stating that the “other circuits that have expressly
considered the issue have concluded that the statute of limitations for section 7201 offenses runs from the later date
of either: when the tax return was due or the defendant's last affirmative
act of tax evasion.”) No dates are alleged with respect to many of the additional
affirmative acts alleged in paragraph two of the indictment and incorporated
into counts one through three.
GOODSTEIN, U.S. Magistrate Judge: On October 16, 2012, the
grand jury in this district returned a five count indictment charging Michael
N. Mangold (“Mangold”) with four counts of attempting to evade the payment of
income taxes, in violation of Title 26, United States Code, Section 7201 (counts one - four), and one
count of making a false statement to the Department of Justice, in violation
of Title 18, United States Code, Section 1001(a)(3) (count five). (Docket No.
1.) On March 1, 2013, the defendant filed a motion to dismiss counts one,
two, and three of the indictment on the basis that the counts were filed
outside the statute of limitations, (Docket No. 17), to which the government
has responded, (Docket No. 19), and the defendant has replied, (Docket No.
20). The pleadings on this motion are closed and this matter is ready for
resolution. This matter has been designated as complex under the district's
local rules, and the Honorable Rudolph T. Randa has yet to schedule a trial.
Counts one, two, and three of the indictment relate to the
defendant's actions in regard to tax years 1997, 1998, and 1999,
respectively. The statute of limitations for the tax evasion offense charged
in these counts is six years. 26 U.S.C. §6531(2).
Because the offense of tax evasion is committed at the time the return is
filed, United States v. Habig, 390 U.S. 222, 223 (1968); United
States v. Daniels, 387 F.3d 636 (7th Cir. 2004), the statute of
limitations for initial alleged tax evasions contained in counts one and two,
where the defendant is alleged to have filed returns on April 14 of 1998, and
1999, respectively, appears to have run years ago. With respect to count
three, where no return has been filed, the statute of limitations began to
run on April 15, 2000, the date that the return was due, United
States v. King, 126 F.3d 987, 992 (7th Cir. 1997), and thus this count
also initially appears to have been brought beyond the statute of
limitations.
However, in the context of tax evasion, if the evasion continues
beyond the date the tax return was filed or due, it is the date of the latest
evasion that is used to mark when the statute of limitations begins to run;
if the evasive conduct continues, so does the statute of limitations. See
United States v. Trownsell, 367 F.2d 815, 816 (7th Cir. 1966) (per
curiam); see also United States v. Thompson, 518 F.3d 832, 856
(10th Cir. 2008) (citing United States v. Wilson, 118 F.3d 228,
236 (4th Cir. 1997); United States v. Dandy, 998 F.2d 1344, 1355
(6th Cir. 1993); United States v. Winfield, 960 F.2d 970, 974
(11th Cir. 1992); United States v. DeTar, 832 F.2d 1110, 1113 (9th Cir.
1987); United States v. Ferris, 807 F.2d 269, 270-71 (1st Cir.
1986)).
The government contends that the statute of limitations
for the defendant's alleged conduct for tax years 1997, 1998, and 1999 did
not expire because his evasive conduct occurred within six years before the
return of the indictment. In effect, its argument boils down to the
contention that all that is relevant when considering the statute of
limitations is whether the defendant engaged in an evasive act within the six
years prior to the indictment. In an effort to show that the defendant
engaged in such conduct within the six years before the indictment was
returned, it points to an Offer in Compromise (“OIC”) that was signed by the
defendant on January 17, 2007, rejected by the IRS on January 26, 2007, and
then resubmitted by the defendant on February 16, 2007, as the last evasive
act with respect to tax years 1997 and 1998. (Docket No. 18 at 3; see
also Docket No. 18-1.) As for tax year 1999, it points to allegedly
false statements the defendant made to an investigator on September 5, 2006.
(Docket No. 18 at 3.) While the indictment was returned more than six years
after September 6, 2006, the government entered into a tolling agreement with
the defendant on June 29, 2012 whereby he agreed to extend the statute of
limitations until January 9, 2013. (Docket No. 18-1 at 9-10.)
In reply, the defendant does not dispute the government's
argument that the statute of limitations runs from the last evasive act.
(Docket No. 20 at 1.) Rather, the defendant contends that the allegedly
evasive acts cited by the government are irrelevant because they occurred
after the statute of limitations already expired and subsequent evasive
conduct cannot restart an expired statute of limitations.
The cases cited by the government do not directly address
the question the defendant's motion presents to the court: If following the
date a fraudulent tax return is filed (or taxes are otherwise due) there is a
six-year period during which no evasive conduct, does the statute of
limitations bar the government from obtaining an indictment notwithstanding
the defendant's subsequent evasive conduct? Trownsell involved
a 1964 indictment for the defendant's actions with respect to tax years
1946-1953, but the court concluded that the indictment was timely because the
indictment alleged that the defendant's evasive conduct continued until 1961.
367 F.2d at 816. The court did not address whether a six-year period where no
evasive conduct occurred would mean that the government was forever barred
from obtaining a conviction, even if the defendant engaged in subsequent
evasive conduct.
Hunerlach involved
a similarly complex factual scenario involving the defendant's efforts to
avoid collection of taxes he agreed to pay following a prior conviction for
tax evasion, as well as efforts to evade the taxes owed on income earned
since his prior conviction, and thus it is not clear from the decision what time
period was covered in the count the defendant moved to dismiss on statute of
limitations grounds. 197 F.3d at 1064-65. The court concluded that the
indictment was timely because the defendant did not contest that he hid
rental income within six years before the indictment. Id. at
1065. As in Trownsell, the court did not discuss whether, to
avoid the statute of limitations' bar, it was necessary for the government to
establish that between the time of the initial evasion and the date the
indictment was returned, there was no period of longer than six years in
which no evasive conduct occurred.
In DeTar, the court concluded the 1985
indictment for the defendant's evasion of taxes with respect to tax years
1977 and 1978 was timely because “affirmative acts committed by DeTar through
1985 are sufficient to keep the action alive.” 832 F.2d at 1113. The court
further stated, “the indictment is timely so long as it is returned within
six years of an affirmative act of evasion,” id., but never
indicated whether a subsequent affirmative act of evasion could restart the
statute of limitations for a crime after a six-year period in which no
evasive conduct occurred. This did not appear to be an issue in the case
because it appears that the defendant's evasive conduct was ongoing from 1977
until at least 1985; he was indicted for tax evasion related to tax years
1977 through 1984. Id. at 1112.
Finally, in Ferris the court concluded
that a 1985 indictment related to the defendant's failure to pay taxes for
tax years 1977 was timely because the defendant made relevant false
statements to the IRS in 1979 and 1983. 807 F.2d at 271. Thus, there
necessarily was no span of six years in which no evasive conduct occurred.
In the court's view, there is good reason why none of these
cases addressed the question posed by the defendant's motion: it was not
relevant. Even if there was a six-year period during which the defendant did
not engage in any evasive conduct, he would still owe the taxes he had failed
to pay. A person's civil tax liability does not vanish even if the statute of
limitations for criminal prosecution passes. See 26 U.S.C. §6501(c)(2) (stating that in the case of a
willful attempt to evade taxes, collection may be begun at any time). So long
as a tax liability exists, a person might engage in criminal acts in an
effort to evade this liability. If any such act of evasion occurs within six
years of the return of the indictment, that indictment is timely. The
government's proffered facts adequately demonstrate that the defendant
allegedly engaged in evasive conduct within six years prior to the
indictment. Therefore, the court finds no reason to dismiss counts one, two,
or three of the indictment.
IT IS THEREFORE RECOMMENDED that the defendant's motion to dismiss counts one,
two, and three, (Docket No. 17), be denied.
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