4.26.7201 Income Tax Evasion, 26 U.S.C. § 7201 See Statute
[Defendant] is charged with federal income tax evasion. It is against federal law intentionally to evade or defeat the assessment or payment of federal income tax. For you to find [defendant] guilty of this crime, the government must prove the following things beyond a reasonable doubt:
First, that [defendant] owed substantially more federal income tax for the year[s] [__________] than was indicated as due on [his/her] income tax return;
Second, that [defendant] intended to evade or defeat the assessment or payment of this tax; and
Third, that [defendant] willfully committed an affirmative act in furtherance of this intent.
[Fourth, that [defendant] did not have a good-faith belief that [he/she] was complying with the provisions of [specific provision]. A belief may be in good faith even if it is unreasonable.]
A person may not be convicted of federal tax evasion on the basis of a willful omission alone; he or she also must have undertaken an affirmative act of evasion. The affirmative act requirement can be met by [the filing of a false or fraudulent tax return that substantially understates taxable income or by other affirmative acts of concealment of taxable income such as keeping a double set of books, making false entries or invoices or documents, concealing assets, handling affairs so as to avoid keeping records, and so forth].
[Defendant] acted "willfully" if the law imposed a duty on [him/her], [he/she] knew of the duty, and [he/she] voluntarily and intentionally violated that duty. Thus, if [defendant] acted in good faith, [he/she] cannot be guilty of this crime. The burden to prove intent, as with all other elements of the crime, rests with the government. This is a subjective standard: what did [defendant] honestly believe, not what a reasonable person should have believed. Negligence, even gross negligence, is not enough to meet the "willful" requirement.
(1) This instruction covers two distinct felony crimes under § 7201. A defendant may be charged with a "willful attempt to evade or defeat" either "the 'assessment' of a tax" or "the 'payment' of a tax." United States v. Hogan, 861 F.2d 312, 315 (1st Cir. 1988) (citing Sansone v. United States, 380 U.S. 343, 354 (1965)). "The elements of both crimes are the same." Id.
(2) The felony of tax evasion under § 7201 is distinguishable from the misdemeanor of failing to file a tax return under § 7203 in that it requires an affirmative "attempt to evade or defeat taxes." Sansone, 380 U.S. at 351; see also United States v. Waldeck, 909 F.2d 555, 557, 559 (1st Cir. 1990). "A mere willful failure to pay a tax" is not sufficient. Sansone, 380 U.S. at 351.
(3) Although § 7201 does not contain an explicit "substantiality" requirement, most circuits require the government to prove that the amount of tax evaded was substantial. See, e.g., United States v. Gonzales, 58 F.3d 506, 509 (10th Cir. 1995); United States v. Romano, 938 F.2d 1569, 1571 (2d Cir. 1991); United States v. Goodyear, 649 F.2d 226, 227 (4th Cir. 1981); United States v. Burkhart, 501 F.2d 993, 995 (6th Cir. 1974); McKenna v. United States, 232 F.2d 431, 436 (8th Cir. 1956). But see United States v. Marashi, 913 F.2d 724, 735 (9th Cir. 1990). The First Circuit appears to follow this majority approach. See United States v. Sorrentino, 726 F.2d 876, 879, 880 n.1 (1st Cir. 1984) (showing of substantiality required under net-worth method of proof) (citing United States v. Nunan, 236 F.2d 576 (2d Cir. 1956) (showing that a substantial tax was evaded required generally in § 7201 cases)); United States v. Morse, 491 F.2d 149, 153 n.3 (1st Cir. 1974) (showing of a substantial discrepancy required under bank-deposits method of proof). But the Government need not prove the exact amount due. Sorrentino, 726 F.2d at 880 n.1.
(4) "Willfulness" is an element of any crime under 26 U.S.C. §§ 7201-07. That term has been defined in the context of criminal tax cases as "requir[ing] the Government to prove that the law imposed a duty on the defendant, that the defendant knew of this duty, and that he voluntarily and intentionally violated that duty." Cheek v. United States, 498 U.S. 192, 201 (1991); see also United States v. Olbres, 61 F.3d 967, 970 (1st Cir. 1995). Mistake, negligence and gross negligence are not sufficient to meet the willfulness requirement of these tax crimes. Hogan, 861 F.2d at 316; United States v. Aitken, 755 F.2d 188, 191-93 (1st Cir. 1985).
(5) Cheek also held that the government has the burden of "negating a defendant's claim of ignorance of the law or a claim that because of a misunderstanding of the law, he had a good-faith belief that he was not violating any of the provisions of the tax laws." 498 U.S. at 202. A defendant has a valid good-faith defense "whether or not the claimed belief or misunderstanding is objectively reasonable." Id.; see also Aitken, 755 F.2d at 190-92. However, a belief that the tax statutes are unconstitutional is "irrelevant to the issue of willfulness." Cheek, 498 U.S. at 206.
(6) The court may add an instruction on conscious avoidance "if a defendant claims a lack of knowledge, the facts suggest a conscious course of deliberate ignorance, and the instruction, taken as a whole, cannot be misunderstood as mandating an inference of knowledge." United States v. Littlefield, 840 F.2d 143, 147 (1st Cir. 1988). Such an instruction does not impermissibly lessen the government's burden of proof because "it goes to knowledge and not to willfulness." Hogan, 861 F.2d at 316 (emphasis added).