The opinion
TO BE PUBLISHED IN THE OFFICIAL REPORTS
OFFICE OF THE ATTORNEY GENERAL
State of California
DANIEL E. LUNGREN
Attorney General
______________________________________
OPINION :
: No. 91-301
of :
: DECEMBER 24, 1991
DANIEL E. LUNGREN :
Attorney General :
:
RONALD M. WEISKOPF :
Deputy Attorney General :
:
______________________________________________________________________________
THE FRANCHISE TAX BOARD has requested an opinion on the following
question:
Does a good-faith misunderstanding of the law or a good-faith belief that one's
actions did not violate the law, even though objectively unreasonable, prevent conviction under
those provisions of Revenue and Taxation Code sections 19405 and 19406 that contain the element
of "willfulness"?
CONCLUSION
A good-faith misunderstanding of the law or a good-faith belief that one's actions did
not violate the law, if objectively unreasonable, may not prevent conviction under those provisions
of Revenue and Taxation Code sections 19405 and 19406 that contain the element of "willfulness."
ANALYSIS
In Cheek v. United States (1991) ___ U.S. ___, 112 L.Ed.2d 617, the United States
Supreme Court held that a good-faith misunderstanding of certain provisions of the Internal Revenue
Code, leading to a good-faith belief that one's actions did not violate them, would negate the element
of "willfulness" contained in the provisions and required to establish their violation, whether or not
the claimed belief or misunderstanding was objectively reasonable. (Id. at 630.) In so doing, the
court adopted a subjective standard for purposes of establishing the willfulness element in federal
criminal tax prosecutions.
"Willfulness" is an element that must be proved to establish various violations of
Revenue and Taxation Code sections 19405 and 19406.1 Section 19405 states in part:
1
All section references are to the Revenue and Taxation Code unless otherwise specified.
"(a) Any person who--
"(1) Willfully makes and subscribes any return, statement, or other
document, which contains or is verified by a written declaration that it is made under
the penalties of perjury, and which he does not believe to be true and correct as to
every material matter,
"(2) Willfully aids or assists in, or procures, counsels, or advises the
preparation or presentation . . . of a return, affidavit, claim, or other document, which
is fraudulent or is false as to any material matter, whether or not that falsity or fraud
is with the knowledge or consent of the person authorized or required to present that
return, affidavit, claim, or document,
"(3) Simulates or falsely or fraudulently executes or signs any bond,
permit, entry, or other document required by the provisions of the Personal Income
Tax Law . . . or procures the same to be falsely or fraudulently executed or advises,
aids in, or connives at that execution thereof,
"(4) Removes, deposits, or conceals, or is concerned in removing,
depositing or concealing, any goods or commodities for or in respect whereof any
tax is or shall be imposed, or any property upon which levy is authorized . . . with
intent to evade or defeat the assessment or collection of any tax imposed by this part,
or
"(5) In connection with any settlement . . . willfully does any of the
following:
"(A) Conceals from any officer or employee of this state any property
belonging to the estate of a taxpayer or other person liable in respect of the tax.
"(B) Receives, withholds, destroys, mutilates, or falsifies any book,
document, or record, or makes any false statement, relating to the estate or financial
condition of the taxpayer or other person liable in respect of the tax, shall be guilty
of a felony and, upon conviction thereof, shall be fined not more than twenty
thousand dollars ($20,000) or imprisoned nor more than three years, or both, together
with the costs of prosecution."
Section 19406 provides:
"Any person who, within the time required by or under the provisions of this
part, willfully fails to file any return or to supply any information with intent to
evade any tax imposed by this part, or who,willfully and with like intent, makes,
renders, signs, or verifies any false or fraudulent return or statement or supplies any
false or fraudulent information, is punishable by imprisonment in the county fail not
to exceed one year, or in the state prison, or by fine of not more than twenty thousand
dollars ($20,000), or by both such fine and imprisonment, at the discretion of the
court."
We are asked whether the United States Supreme Court's recent decision in Cheek
will now prevent convictions under sections 19405 and 19406 in circumstances where a defendant
had a good faith misunderstanding of the law and entertained a good faith belief that his or her
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actions did not violate it, even though that misunderstanding or belief was "objectively
unreasonable."2
The term "willfully" is defined in section 7 of the Penal Code as follows:
"The word `willfully,' when applied to the intent with which an act is done
or omitted, implies simply a purpose or willingness to commit the act, or make the
omission referred to. It does not require any intent to violate law, or to injure
another, or to acquire any advantage."
Accordingly, for purposes of criminal prosecutions in California, "`Willful' is
interpreted as implying merely an intentional act." (Boags v. Municipal Court (1987) 197
Cal.App.3d 65, 69.) It "does not require proof of evil motive or intent to violate the law or
knowledge of illegality." (People v. Johnson (1989) 213 Cal.App.3d 1369, 1375; see Boags v.
Municipal Court, supra, 197 Cal.App.3d at 69-71; People v. Gonda (1982) 138 Cal.App.3d 774,
779; People v. Williams (1980) 102 Cal.App.3d 1018, 1029; People v. Thygesen (1979) 93
Cal.App.3d 895, 904-905; People v. Park (1978) 87 Cal.App.3d 550, 562.) Mistake of law,
including that based upon advice of counsel, provides no defense to a "willful" criminal violation.
(People v. Johnson, supra, 213 Cal.App.3d at 1376; People v. Gonda, supra, 138 Cal.App.3d 774,
779-780; People v. Clem (1974) 39 Cal.App.3d 539, 542-543.) The element of "willfulness" is
thus to be distinguished from such elements as "fraud," "deceit," and "intent to evade" which do
require guilty knowledge for purposes of California criminal prosecutions. (People v. Johnson,
supra, 213 Cal.App.3d at 1376; People v. Kuhn (1963) 216 Cal.App.2d 695, 698-700.)
As the Supreme Court noted in Cheek v. United States, supra, 112, L.Ed.2d at 628,
with respect to a defendant's claimed ignorance of the law:
"The general rule that ignorance of the law or a mistake of law is no defense
to criminal prosecution is deeply rooted in the American legal system. [Citations.]
Based on the notion that the law is definite and knowable, the common law presumed
that every person knew the law. This common-law rule has been applied by the
Court in numerous cases construing criminal statutes. [Citations]"
However, due to the complexity of federal tax statutes, federal courts have interpreted the term
"willfully" in such statutes to require proof of a specific intent to violate a "known legal duty," and
having "bad faith or evil intent," an "evil motive," or "a bad purpose." (Cheek v. United States,
supra, 112 L.Ed.2d at 628-629; United States v. Pomponio (1976) 429 U.S. 10, 11; United States
v. Bishop (1973) 412 U.S. 346, 360-361; United States v. Murdock (1933) 290 U.S. 389, 394-396.)
As explained in Cheek:
"The proliferation of statutes and regulations has sometimes made it difficult
for the average citizen to know and comprehend the extent of the duties and
obligations imposed by the tax laws. Congress has accordingly softened the impact
of the common-law presumption by making specific intent to violate the law an
element of certain federal criminal tax offenses. Thus, the Court almost 60 years ago
interpreted the statutory term `willfully' as used in the federal criminal tax statutes
2
The objective standard requires the jury not only to determine whether a defendant actually
labored under a good-faith misunderstanding of the law and believed in good-faith that his or her
actions did not violate it, but also to determine whether the belief or misunderstanding was
reasonable.
3. 91-301
as carving out an exception to the traditional rule. This special treatment of criminal
tax offenses is largely due to the complexity of the tax laws." (112 L.Ed.2d at 628.)
In this context of a recognized complex tax law, the court in Cheek found that a
violation of a "known legal duty" required the prosecution to prove "that the defendant was aware
of the duty at issue, which cannot be true if the jury credits a good-faith misunderstanding and belief
submission, whether or not the claimed belief or misunderstanding is objectively reasonable." (112
L.Ed.2d at 630.) However, the court added two significant exceptions to its general holding. First,
the claimed misunderstanding or belief may be so patently unreasonable that the requisite knowledge
is nonetheless proved by the prosecution. The court stated:
"Of course, the more unreasonable the asserted beliefs or misunderstandings
are, the more likely the jury will consider them to be nothing more than simple
disagreement with known legal duties imposed by the tax laws and will find that the
Government has carried its burden of proving knowledge." (Id., at 631.)3
Second, the defendant cannot claim the lack of a "known legal duty" if he or she knows of the duty
but believes it to be illegal. For example, the defendant's belief that a tax statute is unconstitutional
does not constitute a "good-faith misunderstanding of the law" or a "good-faith belief that one's
actions did not violate the law." As concluded by the court:
"We . . . hold that . . . 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." (Id., at
633.)
We do not believe that Cheek will significantly change the standard of proof for
prosecutions in California under sections 19405 and 19406. Cheek itself narrowed its holding by
referring to the extent of the unreasonableness of the asserted beliefs or misunderstandings as well
as the types of beliefs or misunderstandings that would be cognizable. Cheek also had before it
provisions of the Internal Revenue Code that do not track precisely with sections 19405 and 19406.
(See People v. Smith (1984) 155 Cal.App.3d 1103, 1154-1155.)
It should be noted that this issue recently arose in People v. Johnson, supra, 213
Cal.App.3d 1369, regarding the meaning of the term "willful" in Corporations Code section 25401.
The court stated:
"It is true that section 25401 is patterned after section 12(2) of the Securities
Act of 1933, and clause (b) of rule 10b-5 under the Securities Exchange Act of 1934.
(1A Marsh & Volk, Practice Under the California Securities Laws (1988) p. A-1-
593.) It is also true that `[w]hen legislation has been judicially construed and a
subsequent statute on the same or an analogous subject is framed in the identical
language, it will ordinarily be presumed that the Legislature intended that the
language as used in the later enactment would be given the like interpretation. This
rule is applicable to state statutes which are patterned after federal statutes.
3
This has been the law in the Ninth Circuit since at least 1974. (See Cooley v. United States (9th
Cir. 1974) 501 F.2d 1249, 1252-1253, cert. denied (1975) 419 U.S. 1123 ["[I]f a person acts without
reasonable ground for belief that his conduct is lawful, it is for the jury to decide whether he acted
in good faith or whether he willfully intended to fail to file a tax return"].)
4. 91-301
[Citations.]' (Los Angeles Met. Transit Authority v. Brotherhood of Railroad
Trainmen (1960) 54 Cal.2d 684, 688-689.)
"Nevertheless, even though federal cases interpret the federal act as requiring
guilty knowledge, that does not mean that California also requires guilty knowledge.
California's definition of `willfully' does not encompass guilty knowledge. Federal
decisions may be helpful in interpreting state statutes analogous to federal statutes,
but those federal decisions are not binding on California concerning the proper
interpretation of section 25401. (Courtney v. Waring (1987) 191 Cal.App.3d 1434,
1440." (Id., at 1376.)
Following Johnson, we are not persuaded that Cheek will change the law in California tax fraud
prosecutions.
Most importantly, however, is the fact that sections 19405 and 19406 do not merely
use the term "willfully." For violations of these statutes, it must also be proved that the defendant
made statements under penalties of perjury which he or she did "not believe to be true" (§ 19405,
subd. (a)(1)), or assisted in the preparation of a "fraudulent" document (§ 19405, subd. (a)(2)), or
"[c]onceals" property liable for the tax or "falsifies" any document in connection with a settlement
(§ 19405, subd. (a)(5)), or has an "intent to evade any tax" (§ 19406).4
Consequently, these statutory violations are not in the mere "willful" category. We
do not have the situation of "well-meaning, but easily confused, mass of taxpayers" (United States
v. Bishop, supra, 412 U.S. at 361) attempting to comply with complex tax regulations. (Cheek v.
United States, supra, 112 L.Ed.2 at 628-630.) Because of the additional elements of fraud, belief
of falsity, and intent to evade, the underlying concerns addressed in Cheek are not present here.
We do not view the reference in People v. Smith, supra, 155 Cal.App.3d at 1157, to
federal law and "a known legal duty" to be inconsistent with prior California law. Smith specifically
found with respect to the element of willfulness in section 19406: "The willfulness adds to the intent
to evade that defendant achieved this intent voluntarily and intentionally." (Id., at 1157.)
In answer to the question presented, therefore, we conclude that a good-faith
misunderstanding of the law or a good-faith belief that one's actions did not violate the law, if
objectively unreasonable, may not prevent conviction of those provisions of sections 19405 and
19406 that contain the element of "willfulness."
*****
4
We note that these additional requirements have the element of guilty knowledge for which a
mistake of law defense would be relevant. (See People v. Smith, supra, 155 Cal.App.3d at 1157;
People v. Kuhn, supra, 216 Cal.App.2d at 698-700.)
5. 91-301