KASSOUF: THE SIXTH CIRCUIT'S MISGUIDED ATTEMPT TO REIN IN THE IRS.

• Author: Valcarce, Brian

TABLE OF CONTENTS INTRODUCTION 337 I. THE OMNIBUS CLAUSE OF SECTION 7212 339 A. Criminal Obstruction in the U.S. Code 339 B. Tax Crimes Generally and Tax Obstruction 341 C. History of Section 7212 and the Omnibus Clause 342 D. Requisite Mens Rea for Omnibus Clause Convictions 343 II. THE CIRCUIT SPLIT 344 A. Kassouf Applies Aguilar to Narrow the Omnibus Clause 344 B. Circuit Courts Broaden the Omnibus Clause 346 1. Other Circuits Disagree with the Nexus Requirement 346 2. Bowman Walks Back Kassouf 350 C. Sixth Circuit Affirms District Court Applying Bowman Over Kassouf 350 D. Miner Walks Back Bowman 351 E. District Court Within the Sixth Circuit Applies Miner 352 III. WHY KASSOUF WAS WRONGLY DECIDED 353 A. There is No Textual Ambiguity in Section 7212(a) 353 1. "Administration of this Title" Has Plain Meaning 353 2. "Endeavor" is Synonymous with Attempt 355 3. Courts Should Not Apply the Rule of Lenity to Create a Nexus Test 357 4. The Legislative History is Not Helpful 359 B. Aguilar Does Not and Should Not Apply to Section 7212(a) 360 1. Differences Between Section 1503(a) and Section 7212(a) 360 2. Interpretation by Comparing Statutes 361 IV. RESOLUTION OF THE ISSUE 363 A. The Supreme Court Should Interpret the Statute as Written 363 B. Congress Should Rethink the Role of the Omnibus Clause 364 C. Easy and Simple Changes to the Omnibus Clause Are Necessary 365 CONCLUSION 365 INTRODUCTION

In United States v. Kassouf, (1) the Sixth Circuit held that a "nexus test" is required to convict an individual for criminal tax obstruction under the "omnibus clause" of 26 U.S.C. [section] 7212(a). The [section] 7212(a) omnibus clause makes it a felony for any individual who "in any other way [other than through intimidation or impedance of a tax officer or employee] corruptly or by force or threats of force (including any threatening letter or communication) obstructs or impedes, or endeavors to obstruct or impede, the due administration of [the Internal Revenue Code]." (2) Kassouf held that in order to convict a person of violating the omnibus clause, that person must be aware of an ongoing investigation or proceeding against them. (3) Kassouf's requirement that a person have this awareness has been referred to as a "nexus" test. (4) Other circuits have resisted Kassouf's holding, and confusion exists even within the Sixth Circuit about whether or not Kassouf is still good law. (5)

Kassouf imposed a nexus test on omnibus clause violations notwithstanding over fifty years of precedent convictions which applied no such test to the statute. (6) The court's main concern was policy: that without a nexus test, the omnibus clause "would open [people] up to a host of potential liability of conduct that is not specifically proscribed." (7) Since Kassouf courts that have rejected the nexus requirement have been accused of allowing omnibus clause charges to "expand almost infinitely to reach all misconduct that is in any way tax-related," (8) and of providing an "overzealous or partisan prosecutor [an easy path to] investigate, to threaten, to force into pleading, or perhaps (with luck) to convict anybody." (9) What started as a moderate concern from the Kassouf court has since become the aim of more aggressive predictions from those who seem worried that the government is going to use [section] 7212(a) to punish everyone who so much as forgets to properly store their annual Form 1040. In this way, the imagined slope of prosecutorial abuse of [section] 7212(a) has been becoming more slippery as warnings of omnibus clause abuse grow direr. This concern is understandable given the somewhat recent concern of abuse of power by the Internal Revenue Service (IRS). (10) However, this Comment principally argues that the Kassouf test, whether or not good policy, is not a correct interpretation of [section] 7212(a).

The arguments and suggestions proposed in this Comment articulate much needed guidance on an issue that is now regularly dividing courts. In just over three years, five different circuit courts have issued opinions on this issue. (11) One of these opinions attempted to clarify the now confusing precedent within the Sixth Circuit. (12) Another resulted in a forceful dissent to an en banc hearing request (13) and a granted petition to the U.S. Supreme Court. (14) This Comment offers not only the first comprehensive analysis of almost two decades of case law since the Kassouf holding, but more importantly, it makes the case about why Kassouf should be overruled by the Supreme Court while maintaining a different but more important limiting principle. It concludes by advocating for change which can and should only be initiated through the legislative process, by Congress. It advises Congress as to two potential minor alterations to [section] 7212(a) that could meaningfully limit its scope.

This Comment proceeds as follows: it begins in Part I by providing a brief overview of criminal obstruction statutes and tax crimes to give a general background. It then focuses specifically on the U.S. tax obstruction statute, [section] 7212, and discusses its omnibus clause. As part of the discussion of [section] 7212 and its omnibus clause, this Comment briefly discusses the legislative history of the provision followed by noting how courts have narrowed the mens rea term "corruptly."

Part II of this Comment reviews the important circuit court decisions that have resulted in the conflict presently plaguing courts. It begins by describing how the Kassouf court, in what it deemed to be an issue of first impression, interpreted the omnibus clause to include a nexus test. It then lists and discusses the many circuit court decisions that have declined to follow the Kassouf holding. It also underscores the confusion within the Sixth Circuit. Part III presents arguments discussing why Kassouf was wrongly decided. Part IV advocates for solutions. It advises the Supreme Court to reject Kassouf and limit the omnibus clause to criminalizing affirmative acts. It then implores Congress to act, by considering what function the omnibus clause should serve within the statutory scheme of criminal tax obstruction and by suggesting minor changes Congress could make to improve the statutory language.

1. THE OMNIBUS CLAUSE OF SECTION 7212

   There are many different obstruction statutes that exist within the U.S. Code, including [section] 7212(a). The different statutes have many similarities but also some stark differences. An understanding of the background of obstruction crimes and tax crimes generally is necessary to fully comprehend [section] 7212(a) and the role it serves in punishing tax obstruction.

   1. CRIMINAL OBSTRUCTION IN THE U.S. CODE

      Obstruction is "[t]he act of impeding or hindering something" or "interference." Obstruction statutes criminalize an individual for "impeding or hindering" some governmental function. (16) Various obstruction statutes exist, most within Title 18 of the U.S. Code. (17) Each of these sections falls within Chapter 73, which defines the crime of "obstruction of justice." (18) Other obstruction statutes exist outside of Title 18, but often serve the same function of protecting government processes. (19) Some of the Title 18 sections are construed broadly to punish any acts that encumber the official activities of government agents. (20) They often focus explicitly on obstructive use of force or a type of written threat against another individual. (21) However, some also contain a catch-all word or phrase, ensuring that the statutes are not limited to only physical or written actions. (22)

      Specifically, obstruction of justice is most commonly prosecuted through 18 U.S.C. [section] 1503 and involves demonstrating proof of three elements: (1) a pending judicial proceeding, (2) defendant's knowledge of the proceeding, and (3) obstruction.

      How broadly or narrowly the obstruction statutes should be interpreted has been thoroughly debated within the federal judiciary and at the highest levels. (24) Determining the knowledge requirement, i.e., mens rea, has been particularly problematic. (25) One point of confusion for courts and prosecutors has been the use of the term "corruptly" to describe the mens rea for certain obstruction convictions. (26) Early on, however, the Supreme Court attempted to clarify the issue by holding that obstruction-of-justice mens rea requires specific intent. (27) Pettibone v. United States interpreted one of the earliest versions of what is now [section] 1503, stating "the specific intent to violate the statute must exist to justify a conviction, and this being so, the doctrine that there may be a transfer of intent in regard to crimes flowing from general malevolence has no applicability." (28)

   2. TAX CRIMES GENERALLY AND TAX OBSTRUCTION

      Most criminal violations of the tax code are prosecuted under one of three sections of the Internal Revenue Code. (29) These three sections include two felonies (tax evasion (30) and filing a false tax return (31)) as well as one misdemeanor: the "[w]illful failure to file [a tax] return, supply information, or pay tax." (32)

      A criminal provision of the tax code that is becoming increasingly important is [section] 7212, titled "Attempts to interfere with administration of internal revenue laws." (3) It specifically criminalizes tax obstruction by individuals. (34) Subsection (a) of the statute punishes (as a felony) an individual who does any of the following:

      [C]orruptly or by force or threats of force (including any threatening letter or communication) endeavors to intimidate or impede any officer or employee of the United States acting in an official capacity under this title, or in any other way corruptly or by force or threats of force (including any threatening letter or communication) obstructs or impedes, or endeavors to obstruct or impede, the due administration of this title. (35) This subsection separates into two clauses. The first clause of...