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March 21, 2018 at 12:37 PM
Justice Stephen Breyer on Capitol Hill in 2011. Credit: Diego M. Radzinschi/ National Law Journal
The U.S. Supreme Court on Wednesday reined in federal prosecutors’ use of a broad tool in federal tax prosecutions.
In the case Marinello v. United States, a 7-2 majority, led by the Justice Stephen Breyer, rejected the government’s interpretation of an omnibus obstruction clause in the federal tax code because it risked depriving individuals of fair warning and risked “all kinds of related unfairness.”
To win a conviction under the obstruction clause, Breyer wrote, “the government must show (among other things) that there is a ‘nexus’ between the defendant’s conduct and a particular administrative proceeding, such as an investigation, an audit, or other targeted administrative action.”
That proceeding, Breyer said, must be “pending at the time the defendant engaged in the obstructive conduct or, at the least, was then reasonably foreseeable by the defendant.”
“Just because a taxpayer knows that the IRS will review her tax return every year does not transform every violation of the Tax Code into an obstruction charge,” Breyer wrote.
The omnibus clause, in 26 U. S. C. §7212(a) of the Internal Revenue Code makes it a felony to “corruptly … endeavo[r] to obstruct or imped[e] the due administration of this title.”
Justice Clarence Thomas, joined by Justice Samuel Alito Jr., dissented. “I would hold that the Omnibus Clause does what it says: forbid corrupt efforts to impede the IRS from performing any of these activities,” Thomas wrote. “The court, however, reads ‘this title’ to mean ‘a particular [IRS] proceeding.’ The court may well prefer a statute written that way, but that is not what Congress enacted.”
The Supreme Court case stemmed from the conviction of Carlo Marinello on nine counts of tax fraud, including failing to file individual and corporate tax returns—serious misdemeanors—and the felony of obstruction. He was sentenced to three years in prison, primarily because of the felony charge. The U.S. Court of Appeals for the Second Circuit affirmed, with two judges dissenting and writing that the majority had cleared “a garden path for prosecutorial abuse.”
