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Cheek v. United States: Is Ignorance Of Federal Tax Laws A Defense?

by | Jul 29, 2021 | Federal Taxation |

 

An old adage in countries with a Roman law tradition is ignorantia juris non excusat, translated to “ignorance of the law excuses not”.  Generally speaking, being unaware of a law in a particular jurisdiction does not excuse a person from liability if that law is violated.  However, a lucky taxpayer was able to use his ignorance of federal tax laws to dodge several charges for tax evasion.

John L. Cheek was an American Airlines pilot that stopped filing tax returns beginning in 1980.  By that time, he started attending seminars and following the edicts of a group that advocated the federal tax system was unconstitutional.  This group had attorneys among its membership that advocated the Sixteenth Amendment did not authorize taxes on wage and salaries.  Cheek relied on these professional opinions and even filed civil actions against his employer in court to challenge the withholding of wages for tax purposes (all dismissed as frivolous).  Eventually, Cheek was charged by the federal government with six counts of willfully failing to file a federal income tax return for the years 1980, 1981, and 1983 through 1986, in violation of 26 U.S.C. §7203. He was further charged with three counts of willfully attempting to evade his income taxes for the years 1980, 1981, and 1983 in violation of 26 U.S.C. §7201. In those years, American Airlines withheld substantially less than the amount of tax petitioner owed because of the numerous allowances and exempt status he claimed on his W-4 forms.  These federal tax offenses are specific-intent crimes that require the government to prove that the defendant acted “willfully” in violating the law.

Cheek represented himself at his criminal jury trial in his own defense.  He admitted he didn’t file returns or pay taxes as required in the years in question but stated that he was indoctrinated and brain-washed by the group he was following.  Based on what the “professionals” in this group advised him and supplemented by his own study, he claimed to sincerely believe that the tax laws were unconstitutional and his actions between 1980-1986 were lawful.  As a result, he claimed to lack the specific intent of “willfulness” required for conviction of the crimes he was charged with.

The trial court instructed the jury that, to prove “willfulness”, the government “must prove the voluntary and intentional violation of a known legal duty, a burden that could not be proved by showing mistake, ignorance, or negligence.”  The court further advised that “an objectively reasonable good-faith misunderstanding of the law would negate willfulness, but mere disagreement with the law would not.”  Finally, the trial court described Cheek’s beliefs about the income tax system and instructed the jury that, if it found that Cheek “honestly and reasonably believed that he was not required to pay income taxes or to file tax returns,” a not guilty verdict should be returned.  The jury became deadlocked during the first day of deliberation and asked the judge for assistance.  The trial court gave a supplemental instruction stating “[a] person’s opinion that the tax laws violate his constitutional rights does not constitute a good faith misunderstanding of the law, [and], [f]urthermore, a person’s disagreement with the government’s tax collection systems and policies does not constitute a good faith misunderstanding of the law.”  When the jury indicated it was still deadlocked, the judge gave additional instructions that, in part, stated “[a]n honest but unreasonable belief is not a defense, and does not negate willfulness,” and that “[a]dvice or research resulting in the conclusion that wages of a privately employed person are not income or that the tax laws are unconstitutional is not objectively reasonable, and cannot serve as the basis for a good faith misunderstanding of the law defense.”  The trial court also added that “”[p]ersistent refusal to acknowledge the law does not constitute a good faith misunderstanding of the law.”  The jury found Cheek guilty on all counts.  The Seventh Circuit U.S. Court of Appeals upheld the convictions.

In Cheek v. United States, 498 U.S. 192; 111 S.Ct. 604; 112 L.Ed.2d 617 (1991), the U.S. Supreme Court reversed Cheek’s convictions and found that an actual good-faith belief that one is not violating the tax law, even if that belief is irrational or unreasonable, negates the specific-intent of “willfulness”.  However, this actual good-faith belief must be based on a misunderstanding due to the complexity of the Internal Revenue Code, and not based on the belief that the tax laws are unconstitutional or unenforceable.

The trial court’s error was “to instruct the jury to disregard evidence of Cheek’s understanding that, within the meaning of the tax laws, he was not a person required to file a return or to pay income taxes and that wages are not taxable income, as incredible as such misunderstandings of and beliefs about the law might be.”  498 U.S. at 203.  The U.S. Supreme Court felt this was fair evidence to present to show lack of willfulness because “in our complex tax system, uncertainty often arises even among taxpayers who earnestly wish to follow the law” and “`[i]t is not the purpose of the law to penalize frank difference of opinion or innocent errors made despite the exercise of reasonable care.'”  498 U.S. at 205.  However, claims that the tax laws are unconstitutional do not negate willfulness:

  • “Claims that some of the provisions of the tax code are unconstitutional are submissions of a different order. They do not arise from innocent mistakes caused by the complexity of the Internal Revenue Code. Rather, they reveal full knowledge of the provisions at issue and a studied conclusion, however wrong, that those provisions are invalid and unenforceable.  Thus, in this case, Cheek paid his taxes for years, but after attending various seminars and based on his own study, he concluded that the income tax laws could not constitutionally require him to pay a tax.  We do not believe that Congress contemplated that such a taxpayer, without risking criminal prosecution, could ignore the duties imposed upon him by the Internal Revenue Code and refuse to utilize the mechanisms provided by Congress to present his claims of invalidity to the courts and to abide by their decisions. There is no doubt that Cheek, from year to year, was free to pay the tax that the law purported to require, file for a refund and, if denied, present his claims of invalidity, constitutional or otherwise, to the courts.  Also, without paying the tax, he could have challenged claims of tax deficiencies in the Tax Court, with the right to appeal to a higher court if unsuccessful.  Cheek took neither course in some years, and, when he did, was unwilling to accept the outcome. As we see it, he is in no position to claim that his good-faith belief about the validity of the Internal Revenue Code negates willfulness or provides a defense to criminal prosecution under 7201 and 7203.”  498 U.S. at 205-206.

In the end, the U.S. Supreme Court found that Cheek deserved a new trial where the jury should be instructed to consider whether his good-faith beliefs about the tax code not being applicable to him or his wages amount to an actual misunderstanding of the law that can negate willfulness:

  • “We thus hold that, in a case like this, a defendant’s views about the validity of the tax statutes are irrelevant to the issue of willfulness, need not be heard by the jury, and if they are, an instruction to disregard them would be proper. For this purpose, it makes no difference whether the claims of invalidity are frivolous or have substance. It was therefore not error in this case for the District Judge to instruct the jury not to consider Cheek’s claims that the tax laws were unconstitutional. However, it was error for the court to instruct the jury that petitioner’s asserted beliefs that wages are not income and that he was not a taxpayer within the meaning of the Internal Revenue Code should not be considered by the jury in determining whether Cheek had acted willfully.” 498 U.S. at 206-207.

Cheek did get a new trial with the proper instructions, but his arguments were still rejected by the jury.  He was convicted again and sentenced to one year and one day in federal prison with five years on probation.  He was also ordered to cooperate with the IRS to pay his back taxes and a fine of $62,000.00.

This case gave rise to what is known as the Cheek defense.  Naturally, the tax protestor movement loves to cite this case for the premise that it is possible to avoid paying taxes without consequence by asserting a misunderstanding of the tax code.  However, the Cheek defense is only available as a defense in a criminal prosecution for violating federal tax laws, not as a strategy with the IRS to avoid paying taxes.  Ironically, the Cheek defense has a fatal flaw for those who plan to assert it in their own cases.  If a defendant announces he is employing the defense to establish a “good faith belief” he was mistaken about the Internal Revenue Code, the government can use this to argue that the defendant knew he was violating the law at the time he acted and planned to use the Cheek defense in advance.  In fact, history since the Cheek decision is proof that this defense is not a viable strategy to defeat federal income taxes.  No one since Cheek has been as successful in employing ignorance of the law to win their cases.

Criminal defense strategies should be considered and developed in consultation with a knowledgeable and skilled lawyer.  If you or a loved one have any questions about federal taxation or need legal representation, then do not hesitate to contact the experienced attorneys at Kershaw, Vititoe & Jedinak PLC for assistance today.

 

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