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Supreme Court case could mean lower penalties for tax evaders

| Jan 3, 2018 | IRS |

A new case brought to the U.S. Supreme Court last month has the potential to change the definition of tax obstruction—which could result in more lenient penalties for people convicted of tax evasion.

The case—Marinello v. United States—addresses the subject of obstructing due administration of the tax code, and whether knowledge of such obstruction is a prerequisite of such a conviction. In the case, Carlos Marinello II was found guilty on eight counts for failing to file tax returns—which is a misdemeanor offense. In addition, he was also found guilty on one count of obstruction of due process under Tax Code Section 7212(a)—which is a felony. In his trial, the court advised the jury that by finding the defendant guilty of any of the eight misdemeanor counts, that provides sufficient evidence to also find him guilty under code 7212.

This case raises an issue in the legal community, because code 7212—which is written in general terms—does not specify whether a defendant’s knowledge of committing the crime is necessary for conviction. It allows anyone charged with a misdemeanor for tax evasion to automatically be charged with an additional felony be default. According to defense attorneys, it also puts anyone who unknowingly does anything that obstructs IRS proceedings—such as destroying out-of-date tax documents or paying cash to someone who may not report the income—at risk for a felony charge.

Upon review of the case, Supreme Court Justice Kagan called the interpretation of the law “ungodly broad.” Defense attorneys are optimistic that the forthcoming ruling will lay out more concrete guidelines for interpreting code 7212—such as requiring evidence that a defendant has received some form of alert that they have crossed a legal line and ignored this warning. If these speculations prove accurate, this case could have profound impacts on how tax obstruction cases are handled in the future.

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