Willfulness does not require proof of ability to pay, atleast in the Ninth Circuit
By Vince Nardone, Tax Attorney, Columbus Ohio | Email Me
I initially chose note to discuss the case below because it starts out with the following: This case illustrates the enduring truth of Ben Franklin's sage observation that “nothing is certain but death and taxes.” But, after considering it further and hearing this quote a million times, it still rings true for me and so I reconsidered my decision and actually wanted to include it for that same reason, so here it is.
In U.S. v. Easterday(2008, CA9) 102 AFTR 2d ¶ 2008-5218, the taxpayer appealed his conviction for willful failure to pay over employee payroll taxes, in violation of 26 U.S.C. §7202. During the lower court trial, the taxpayer sought an “ability to pay instruction” in order to contend to the jury that his failure to pay over the taxes he owed was not “willful,” because he had spent the money on other business expenses and therefore could not pay it to the government when it was due. The district court refused to give the instruction, and the jury subsequently convicted the taxpayer and sentenced the taxpayer to thirty months in prison.
According to the Ninth Circuit, which heard the taxpayer’s appeal, the requested instruction by the taxpayer in the lower court case was drawn from a portion of a 1975 decision of the Ninth Circuit court, in U.S. v. Poll, 521 F.2d 329 (9th Cir. 1975). The Ninth Circuit, however, stated that it had never subsequently cited the Poll case favorably in the context of a prosecution for failure to pay taxes. The Court went onto to say that the Poll decision relied upon an earlier Ninth Circuit decision that two other circuits have expressly rejected. And, most significantly, the holding of Poll that formed the basis for the proposed instruction was effectively eradicated by subsequent Supreme Court authority in U.S. v. Pompano, 429 U.S. 10, 12 (1976).
Nevertheless, the taxpayer contended that the Poll decision was controlling because the Ninth Circuit had never expressly overruled it. The lower court had held that Poll was no longer good law. The Ninth Circuit ultimately agreed. The Ninth Circuit analyzing Poll, stated that the requirement in Poll that the government prove the taxpayer had sufficient funds to pay the tax was premised on a definition of willfulness that included some element of evil motive. The Ninth Circuit went onto to say that the Supreme Court subsequently rejected any such definition of willfulness in the tax statutes. See United States v. Pomponio, 429 U.S. 10, 12 (1976)(per curiam); see also United States v. Cheek, 498 U.S. 192, 201-02 (1991). “Willful” in the tax context means a voluntary, intentional violation of a known legal duty. See Cheek, 498 U.S. at 201-02; United States v. Powell,955 F.2d 1206, 1211 (9th Cir.1992). In other words, if you know that you owe taxes and you do not pay them, you have acted willfully. Poll has continued to be referred to occasionally in other contexts, principally in the child support area. See United States v. Ballek,170 F.3d 871, 874 (9th Cir.1999); H.R.Rep. No. 102-771, at 6 (1992). The Ninth Circuit, however, made it clear that it is not good tax law and should not be cited as such.
See the decision attached.
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