04 February 2008

Wisdom Out Of The Snipes Split Verdict

Wesley Snipes was prosecuted for both felony and misdemeanor tax fraud violations in connection with failing to file tax returns based upon a tax protestor justification. He was convicted of the misdemeanors but not of the felonies.

An interesting tidbit of commentary arising out of that case notes that this was not an accident. If the I.R.S. hadn't recommended felony charges, the charges would probably not have been filed. The U.S. Justice Department has a troubling policy of prosecuting misdemeanor tax offenses only if they are accompanied by felon tax crimes. It is troubling because misdemeanor tax prosecutions are often easier to prove (some are strict liability offenses), and can be almost as effective as felony charges (and considerably more effective than civil collection) at securing collection and compliance from taxpayers.

It is also troubling in Snipes case, because he contested venue in the case, and in the absence of the felony charges brought against him it is likely that venue in Florida would have been improper. I'm not enough of a federal criminal procedure guru to know if that venue issue was wrongly decided in any case, or whether it is subject to harmless error analysis (there is a good argument that Snipes did as well as he possibly could have done on the merits).

Also interesting, and probably connnected to the U.S. Justice Department policy, is that the federal sentencing guidelines make no distinction between felony tax evasion conduct and misdemeanor tax offenses. Only the amount in controversy matters. In effect, a penalty based upon acquitted conduct is built right into the guidelines without requiring any findings by the judge.

For what it is worth, the conviction of Snipes for misdemeanor failure to file charges, while acquittals of more serious tax crime charges, seems about right for the conduct he appeared to have engaged in that was prosecuted in this case. Willful failure to file your taxes should be a crime, but not necessarily a terribly serious one.

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