Supreme Court Saves US From Felony Prosecution for Tax Obstruction

• Published date: 01 May 2018
• DOI: http://doi.org/10.1002/npc.30466
• Date: 01 May 2018

Bruce R. Hopkins’ NONPROFIT COUNSEL

May 20188THE LAW OF TAX-EXEMPT ORGANIZATIONS MONTHLY

Bruce R. Hopkins’ Nonprofit Counsel DOI:10.1002/npc

amounts of three donors who contributed $2.5 billion in

money and other assets to the fund in 2016. The fund

raised $3.2 billion in that year.

Perhaps Goldman will join in the campaign to elimi-

nate Form 990 Schedule B. [28.3(i)] ◆

SUPREME COURT SAVES US

FROM FELONY PROSECUTION

FOR TAX OBSTRUCTION

The US Supreme Court, on March 21, held (7–2) that,

to convict an individual under the omnibus clause of

IRC § 7212(a), the federal government must prove that

he or she was aware of a pending tax-related proceed-

ing, such as a particular investigation or audit, or could

reasonably foresee that this type of a proceeding would

commence (Marinello v. United States).

The Court interpreted the clause, which makes it a

felony “corruptly or by force” to “endeavo[r] to obstruct

or imped[e] the due administration of” the Internal

Revenue Code. It rejected the view that this clause is

a “catchall applicable to the entire Code including the

routine processing of tax returns, receipt of tax pay-

ments, and issuance of tax refunds.” This approach, the

Court observed, could transform many lesser offenses

into felonies. The Court expressed concern about the

“risk” of the “lack of fair warning and related kinds of

unfairness.” The Court accordingly required a “nexus”

between a defendant’s conduct and a “particular admin-

istrative proceeding such as an investigation, an audit, or

other targeted administrative action.”

To illustrate these distinctions, the Court hypoth-

esized an individual who “fail[ed] to keep donation

receipts from every charity to which he or she contrib-

utes.” This individual, the Court mused, may sometimes

believe that, in doing so, he or she is “running the risk

of having violated an IRS rule.” But, the majority wrote,

“we sincerely doubt he [or she] would believe he [or

she] is facing a potential felony prosecution for tax

obstruction.” ◆

OTHER DEVELOPMENTS

◆The US Supreme Court, on February 26, heard oral

arguments in a case concerning the constitutionality of

the practice of forcing workers to pay for the collective

bargaining positions of public unions (Janus v. American

Federation of State, County and Municipal Employees).

Those who oppose this practice claim it is a violation of

free speech rights. The Court was poised to uphold the

First Amendment claim in a case it heard in 2016 (Fried-

richs v. California Teachers Association) (referenced in the

June 2016 issue)) but deadlocked on a 4–4 vote follow-

ing the death of Justice Antonin Scalia. To strike down

the practice as a free speech transgression, the Court

would have to overrule a decision made in 1977 that

these compulsory payments are necessary to prevent

free-riding and ensure “labor peace” (Abood v. Detroit

Board of Education). In some quarters, this case is seen

as a direct attack on public unions; others see it as a

threat to the labor movement generally. [16.1]

◆The Commonwealth of Massachusetts attempted to

have the interim final rules on the religious exemption

to insurance coverage (summarized in the December

2017 issue) permanently enjoined on a nationwide basis.

The US District Court for Massachusetts, on March 12,

however, ruled that the state lacks standing to sue, in

that it was unable to demonstrate it was likely to incur

injury caused by the conduct of the federal government

(Massachusetts v. Department of Health and Human

Services).

◆The US District Court for the Western District of

Oklahoma, on March 15, enjoined the federal govern-

ment from enforcing the Patient Protection and Afford-

able Care Act as to contraceptive coverage on the basis

of freedom of religion (Reaching Souls International v.

Azar). [10.1(a)]

Quote of the Month: “Donor-advised funds are here

to stay for the foreseeable future, and this study will

be the bedrock on which future quantitative studies

will be built.” This from the Giving USA Foundation’s

report on donor-advised funds (see article beginning

on p. 4). ◆

Each article in the newsletter on a tax-exempt organizations law topic ends with a citation to the appropriate chapter(s) or

subchapter(s) in Hopkins, The Law of Tax-Exempt Organizations, Eleventh Edition (Wiley, 2018 cumulative supplement). This is done

to provide ready access to additional and background information concerning these articles. For example, underlying information

concerning the first article in this issue is available in Chapter 27 § 7(c); thus, the citation is referenced as [27.7(c)]. Likewise, each

article in the newsletter on a charitable giving law topic ends with a citation to the appropriate chapter(s) or subchapter(s) in Hop-

kins, The Tax Law of Charitable Giving, Fifth Edition (Wiley, 2018 cumulative supplement). For example, information concerning the

fifth item under Other Developments in this issue is available in Chapter 21 § 5; thus, the citation is referenced as [21.5].

This newsletter is a stand-alone publication. An inventory of articles in the newsletter since its inception in 1983, and a subject mat-

ter index, as well as an index of the court opinions, IRS revenue rulings and procedures, IRS technical advice memoranda, and IRS

private letter rulings discussed in the newsletter, are available at www.brucerhopkinslaw.com. For those who have the books, the

newsletter also provides monthly updates. Both books are annually supplemented. Questions concerning nonprofit law develop-

ments in general may be sent to brucerhopkins@brucerhopkinslaw.com. Also, a comprehensive summary of nonprofit law is avail-

able in the Bruce R. Hopkins Nonprofit Law Library, an e-book published by Wiley. Follow BRHopkins_NPLaw on Twitter.

The newsletter has a dedicated website. Please visit www.hopkinsnonprofitcounsel.com.