Petition for Writ of Certiorari — Williams v. United States

90-1748

NO.

Supreme Court, U.S.

FILE @

MAY 13 1997

OFFICE OF THE CLERK

IN THE SUPREME COURT OF

THE UNITED STATES

October Term, 1990

JERRY R. WILLIAMS, PETITIONER,

V.

UNITED STATES OF AMERICA

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE FIFTH CIRCUIT

FARLEY P. KATZ

Counsel of Record

C. J. MULLER

ANTHONY E. REBOLLO, III.

Counsel for Petitioner

Matthews & Branscomb, P.C.

One Alamo Center, Suite 800

106 South St. Mary's Street

San Antonio, Texas 78205-3692

(512) 226-4211

QUESTION PRESENTED

In Spies v. United States, 317 U.S. 492 (1943), this

Court held that the mere failure to file an income tax return

Or pay a tax, however willful and intentional, only constitutes

the misdemeanor crime of failure to file a return, and to

elevate that crime into the felony of attempted tax evasion,

there also must be some additional affirmative act constituting

an attempt. The question presented here is whether an

individual's failure to withdraw or amend a Form W-4, on

file with his employer, constitutes an affirmative act under

Spies which could elevate a failure to file a tax return into the

felony of attempted evasion. _

(i)

TABLE OF CONTENTS

ae ols bh K iG 0b 0% > 6 Wik’ s ‘aio wid 1050 1

eM ideas & 5s > 0 64 > ok oo e000 2

Ne SEs a eb dp baile no cobb ce 2

ae as Db pe so 2b Oke 020-010 oo © #0 3

Reasons for Granting the Petition ............... 7

Conclusion .. . Oe ee eee eee ee 11

ES a a ae la

Se Sa

EE Ee ee 16a

(iii)

TABLE OF AUTHORITIES

Cases:

Spies v. United States,

op SF ee re 7, 10

Clay v. United States,

pam ie ee coe Ge, BSS) 0 eS 8

Dunn v. United States,

pe Ee 8

United States v. Huff,

PEW Fi Oe EG: B9IO) ive ee eek ee 8

United States v. Copeland,

ee ee ee eee See. BOOB) 2 wie ce 9

United States v. Waldeck,

ee ee Se Cee GO, BPE oe ec den 9

Statutes:

Internal Revenue Code of 1954 (26 U.S.C.)

TIT ROI gts SN A PI 8-10

ioe Sas Wace a kee ek ee 10

Miscellaneous:

U.S. Department of Justice, Tax Division

Criminal Tax Manual

SE er cnn eS ss kk bok 8 cbse ee )

IN THE SUPREME COURT OF

THE UNITED STATES

October Term, 1990

No.

JERRY R. WILLIAMS, PETITIONER,

v.

UNITED STATES OF AMERICA

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE FIFTH CIRCUIT

Petitioner, Jerry R. Williams, respectfully prays that

a writ of certiorari issue to review the judgment and opinion

of the United States Court of Appeals for the Fifth Circuit,

entered in this proceeding on March 27, 1991.

OPINION BELOW

The opinion of the court of appeals (App., infra, Sa)

is reported at 928 F.2d 145. There was no opinion of the

district court.

2

JURISDICTION

The judgment of the court of appeals (App., infra,

16a) was entered on March 27, 1991. The jurisdiction of this

Court is invoked under 28 U.S.C. 1254(1).

STATUTES INVOLVED

Section 7201 of the Internal Revenue Code of 1954

(26 U.S.C.) as amended:

SECTION 7201. ATTEMPT TO EVADE OR

DEFEAT TAX.

Any person who willfully attempts in any manner to

evade or defeat any tax imposed by this title or the

payment thereof shall, in addition to other penalties

provided by law, be guilty of a felony and, upon

conviction thereof, shall be fined not more than

$100,000 ($500,000 in the case of a corporation), or _

imprisoned not more than 5 years, or both, together

with the costs of prosecution.

Section 7203 of the Internal Revenue Code of 1954

(26 U.S.C.) as amended:

SECTION 7203. WILLFUL FAILURE TO FILE

RETURN, SUPPLY INFORMATION, OR PAY TAX.

Any person required under this title to pay any

estimated tax or tax, or required by this title or by

—— ee

3

regulations made under authority thereof to make a

retum...', keep any records, or supply any informa-

tion, who willfully fails to pay such estimated tax or

tax, make such return, keep such records, or suppiy

such information, at the time or times required by law

or regulations, shall, in addition to other penalties

provided by law, be guilty of a misdemeanor and,

upon conviction thereof, shall be fined not more than

$25,000 ($100,000 in the case of a corporation), or

imprisoned not more than 1 year, or both, together

with the costs of prosecution.

STATEMENT

1. Jerry R. Williams was indicted in a three—count

felony indictment, charged under Section 7201 of the Internal

Revenue Code of 1954? with attempting to evade federal

income tax for the years 1983, 1984, and 1985. A copy of

the indictment is attached. (App., infra, 1a.)

Count I alleged that he attempted to evade his income

tax for the year of 1983 by failing to file an income tax

return for that year, by failing to pay tax for that year, "and

by filing with his employer a false and fraudulent Form W-4,

’ A parenthetical phrase, not relevant to this case, was deleted from

section 7203, effective for tax years beginning after December 31, 1984.

See Deficit Reduction Act of 1984, Pub. L. No. 98-369, § 412(b\(9), 98

Stat. 494 at 792.

? Unless otherwise noted, all statutory references are to the Internal

Revenue Code of 1954 (26 U.S.C.), as amended (the "Code”).

4

claiming 35 exemptions and later, during the same year, filing

a further false Form W-4 to claim 50 exemptions....". (App.,

infra, 2a.)

Counts II and III similarly charged that Williams

attempted to evade income tax for years 1984 and 1985 by

failing to file returns for those years and pay tax for those

years, but those counts did not allege the filing of a false

Form W-4. Instead, they alleged that Williams attempted to

evade tax for 1984 and 1985, "by maintaining of record with

his employer his claim on Form W-4 of 50 exemptions...."

(App., infra, 2a—-3a.)

A Form W-4 is a form filed by an employee with his

employer, setting forth a number of "withholding allowan-

ces." The number of withholding allowances is used by

the employer in determining how much income tax to

withhold from the employee's wages. The employee deter-

mines the number of withholding allowances to enter on the

form, in part, by estimating the amount of deductions, such

as interest or business expenses, he anticipates he will incur

in the future. See Code Section 3402(f)(1)(D) and (m).

At trial, the Government introduced evidence, and

Williams conceded, that he had failed to file income tax

> The withholding allowances on Form W-4 sometimes are referred

to as "exemptions," as in the indictment. Withholding allowances based

on estimated deductions for business expenses and interest, as are

involved here, however, have no relationship to the "personal exemptions”

that may be deducted on an income tax return for a taxpayer, his spouse

and children. See Code Section 151.

5

returns since 1972. Williams, who was an insurance execu-

tive employed by Great American Reserve Life Insurance

Company since 1971, filed with his employer three Forms

W-4 in late 1982 and early 1983. The first form claimed 14

withholding allowances, which the Government conceded was

correct. The second Form W-4, however, increased Will-

iams' withholding allowances to 35, and the third Form W-4,

filed in March of 1983, increased those allowances to 50.

The Government introduced evidence that, based on after the

fact calculations of Williams' ‘actual taxable income and

deductions for each of the three taxable years, the correct

number of withholding allowances he would have been

entitled to was 21 for 1983, 6 for 1984, and 3 for 1985. The

Goveinment asserted that the second and third Forms W-4,

therefore, falsely overstated Williams' withholding allowances

and that he consequently had attempted to evade his income

tax for the years 1983 through 1985. (App., infra, 6a-7a; 4

Tr. 38-44.)*

Following the close of the Government's case,

Williams moved for a judgment of acquittal on Counts II and

III on grounds that those counts failed to state a felony

offense in that the Government had not alleged in those

counts any affirmative act of evasion as required by this

Court's holding in Spies v. United States, 317 U.S. 492

(1943). The Government took the position that Williams was

under an affirmative duty to withdraw or correct the Form

W-4 on file with his employer and his failure to do so was

an affirmative act under Spies, sufficient to establish attempt

“"Tr." references are to the volume and page of the trial transcript.

6

ed tax evasion. The trial court denied Williams’ motion

without explanation of its rationale. (4 Tr. 101-107.)

Williams took the stand in his own defense and

testified that in the years preceding 1972 he had received tax

refunds, and he was entitled to a refund in 1972, and simply

failed to file his return for that year. He further testified that

"after that it just kind of got away from me,” and that he

knew he should have filed his returns, but that he never was

successful in doing so. (4 Tr. 155-156.)

Williams testified that in 1982 his employer moved

him from Dallas to San Antonio and changed his compensa-

tion from a straight salary to a commission structure under

which, he anticipated, he would incur substantial amounts of

deductible business expenses which he had not previously

incurred. In addition, Williams purchased a home in San

Antonio which would generate substantial interest and real

property tax deductions. He consulted with officials of his

employer regarding the preparation of a Form W-4, and

received a range of figures that other individuals, whom he

believed to be in similar situations, had claimed. Based on

those estimates, he revised his withholding allowances,

raising them first to 35 and then to 50. He testified that he

did not intend to leave the allowances at 50 permanently, but

rather intended to leave it there temporarily until his com—

missions began to build up. (4 Tr. 157-177.)

The jury returned a verdict of guilty on all counts.

The district court denied Williams’ post-trial motions for

7

acquittal based on the failure of the indictment to allege an

offense.

2. The court of appeals affirmed the convictions. That

court acknowledged that Spies v. United States requires that

the felony of attempted tax evasion requires that there be an

affirmative act. The court, however, stated that "Williams

was under a continuing obligation to correct his [Form W-

4}," but "[hje failcs to do so." It concluded, therefore, that

"maintaining on file the March 17, 1983 W-4 thus constitu-

ted an act 'the likely effect of which would be to mislead or

conceal," quoting Spies v. United States, supra at 499.

(App., infra, 13a.)

REASONS FOR GRANTING THE PETITION

The court of appeals’ decision undermines this Court's

holding in Spies v. United States, supra. In Spies, this Court

recognized that the failure to file a tax return may be a lesser

included offense with respect to the felony of attempted tax

evasion and held that "the difference between the two

offenses ... is found in the affirmative action implied from the

term ‘attempt,’ as used in the felony subsection." Jd. at 498.

For a failure to file a tax return or pay a tax to constitute a

felony, there must be "some willful commission in addition

to the willful omissions that make up the list of misdemean-

ors. Willful but passive neglect of the statutory duty [to file

*Because the court rejected Williams’ argument that Counts II and III

were legally defective, it did not reach his contention that erroneous jury

instructions involving those counts also tainted his conviction on Count |.

8

a return Or pay a tax]" may constitute a misdemeanor, but not

the felony of attempted tax evasion. Id. at 499.

An indictment which charges attempted tax evasion by

alleged means which, in fact, are mere omissions or failures

to act, is defective and cannot support a conviction under

Code Section 7201.° Clay v. United States, 218 F.2d 483

(Sth Cir. 1955). Here, Counts II and III -— which must stand

on their own for this purpose as if Count I were not included

in the indictment (see Dunn v. United States, 284 U.S. 390,

393 (1932); United States v. Huff, 512 F.2d 66, 69 (Sth Cir.

1975)) -- allege no affirmative acts. Instead, those counts

simply charge that Williams attempted to evade tax for years

1984 and 1985 by failing to file tax returns for those years,

by failing to pay tax for those years, "and by maintaining of

record with his employer his claim on Form W-4 of 50

exemptions...." "[MJaintaining of record with bis employer"

a Form W-4, however, is not in any sense a commission.

Williams did nothing affirmative whatsoever to "maintain"

that form on file, and there is no "act" to which the Govern-

ment can point. Rather, the Government here complains of

a pure omission; that Williams failed to withdraw or to

amend a form.’ Counts II and III thus contain only allega-

tions of omissions, but not a single allegation of any com-

*Williams' contention thus is that the indictment is defective. The

court of appeals mistakenly stated that Williams contended that “the

elements of the felony offense were not proven.” (App., infra, Sa;

emphasis supplied.)

7 In fact, Counts Il and III do not even allege that the Form W-4 on

file was false, just that it claimed 50 allowances.

9

mission, as the Government in effect recognizes elsewhere.

See U.S. Department of Justice, Tax Division, Criminal Tax

Manual (6th ed. 1985) 8-4 ("failing to act or do something

does not constitute an attempt [under Section 7201].")

The Government could easily have charged Williams

in a manner that would have alleged a felony. For example,

it could have charged in Counts II and III that he attempted

to evade tax by filing a false Form W-4 in 1983 and, as part

of a plan, failing to file his tax retums in the following

years. The Government routinely prosecutes similar cases

in that manner. See, e.g., United States v. Waldeck, 909 F.2d

555, 557, 560 (1st Cir. 1990) ("Courts have uniformly held

that the filing of false W-4s constitutes evidence of a willful

attempt to evade taxes..."; emphasis supplied); United States

v. Copeland, 786 F.2d 768, 770-771 & n.3 (7th Cir. 1986).

Indeed, the Fifth Circuit here seems to have assumed that

Williams’ failures to file returns were an integral part of an

affirmative plan set into motion in an earlier year (App.,

infra, 11a), but that court ignored the fact that Counts II and

III include no such allegations. Those counts allege only that

* Had the Government so charged Williams, however, it would have

had to show that when he filed the Form W-4 in 1983 he then intended

it as an attempt to evade his 1983, 1984, and 1985 taxes. That would

have been difficult to prove since in 1983 Williams obviously could not

know the amount of withholding allowances he would be entitled to in

subsequent years. In contrast, by not charging an affirmative act intended

to evade tax as required by Spies, the Government could imply guilt by

focusing simply on Williams’ continuing duty to correct the Form W-4 on

file and the growing disparity between the amount of withholding

allowances reflected in that form (50) and the number to which he was

currently “entitled,” ie., 6 in 1984 and 3 in 1985.

10

Williams failed to take certain actions, and consequently do

not state the felony crime.

Section 7201 of the Internal Revenue Code is the

"capstone" of the hierarchy of the tax crimes in the Internal

Revenue laws. Spies, supra, at 497. However, the Fifth

Circuit's opinion -- which it expressly recognizes is "res

nova at the appellate level” (App., infra, 11a n.2) -- threat-

ens to replace that hierarchy with an autocracy under which

virtually any tax crime could be prosecuted as a felony

violation of section 7201. Under the indictment approved

here by the court of appeals, any employee who fails to file

a return could be convicted of attempted evasion of tax, even

if he originally filed a correct Form W-4, if through changed

financial circumstances that form is no longer correct, and if

the employce is aware of his obligation to correct that form.

Indeed, under this rationale, the intentional failure to file a

tax return or pay a tax by itself could constitute the felony of

attempted tax evasion, since one also is under an affirmative

duty imposed by law to file the return, supply information, or

pay the tax, just as one is under a "affirmative duty” to

correct a Form W-4 on file. The Fifth Circuit's opinion thus

undermines this Court's distinction in Spies between attempt-

ed evasion of tax and failure to file a tax return, and makes

any simple failure to file a return or pay a tax potentially

punishable as a felony, contrary to Congress’ intent in Code

Section 7203.

11

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted,

FARLEY P. KATZ

C. J. MULLER

ANTHONY E. REBOLLO, III.

Counsel for Petitioner

May 1991

la

APPENDIX A

UNITED STATE DISTRICT COURT

WESTERN DISTRICT OF TEXAS

SAN ANTONIO DIVISION

UNITED STATES OF AMERICA,

) CRIMINAL NO. SA89CR336

)

Plaintiff, INDICTMENT

Vv.

JERRY R. WILLIAMS,

).

&

) [Vio: 26 U.S.C. § 7201:

) Income Tax Evasion]

)

)

Defendant.

THE GRAND JURY CHARGES:

COUNT ONE

[26 U.S.C § 7201]

That during the calendar year 1983, Defendant,

JERRY R. WILLIAMS,

a resident of the San Antonio Division of the Western District

of Texas, had and received taxable income in the sum of

$21,861.63, which amount was his one-half community

property interest in his total income; that upon said taxable

income, there was Owing to the United States of America an

income tax of $2,080.26; that well knowing and believing the

foregoing facts, Defendant Jerry R. Williams on or about

April 15, 1984, in the Western District of Texas, did willfully

attempt to evade and defeat the said income tax due and

2a

owing by him to the United States of America for said

calendar year by failing to make an income tax return on or

before April 15, 1984, as required by law, to any proper

officer of the Internal Revenue Service, by failing to pay to

the Internal Revenue Service said income tax in full and by

filing with his employer a false and fraudulent Form W-4,

claiming 35 exemptions and later, during the same year, filing

a further false Form W-4 to claim 50 exemptions, in viola

tion of Title 26, United States Code, Section 7201.

COUNT TWO

[26 U.S.C. § 7201]

That during the calendar year 1984, Defendant,

JERRY R. WILLIAMS,

a resident of the San Antonio Division of the Western District

of Texas, had and received taxable income in the sum of

$27,543.14, which amount was his one-half community

property interest in his total income; that upon said taxable

income, there was owing to the United States of America an

income tax of $6,035.41; that well knowing and believing the

foregoing facts, Defendant Jerry R. Williams on or about

April 16, 1985, in the Western District of Texas, did willfully

attempt to evade and defeat the said income tax due and

owing by him to the United States of America for said

calendar year by failing to make an income tax return On or

before April 16, 1984, as required by law, to any proper

officer of the Internal Revenue Service, by failing to pay to

the Internal Revenue Service said income tax in full and by

3a

maintaining of record with his employer his claim on

Form W-4 of 50 exemptions, in violation of Title 26, United

States Code, Section 7201.

COUNT THREE

[26 U.S.C. § 7201]

That during the calendar year 1985, Defendant,

JERRY R. WILLIAMS,

a resident of the San Antonio Division of the Western District

of Texas, had and received taxable income in the sum of

$33,380.52, which amount was his one-half community

property interest in his total income; that upon said taxable

income, there was owing to the United States of America an

income tax of $5,747.69; that well knowing and believing the

foregoing facts, Defendant Jerry R. Williams on or about

April 15, 1986, in the Western District of Texas, did willfully

attempt to evade and defeat the said income tax due and

owing by him to the United States of America for said

calendar year by failing to make an income tax return on or

before April 15, 1986, as required by law, to any proper

officer of the Internal Revenue Service, by failing to pay to

the Internal Revenue Service said income tax in full and by

maintaining of record with his employer his claim on

Form W-4 of 50 exemptions, in violation of Title 26, United

States Code, Section 7201.

4a

A TRUE BILL

[S/

FOREPERSON

RONALD F. EDERER

United States Attorney

By: WAYNE F. SPECK

Assistant United States Attorney

Senior Litigation Counsel |

Sa

APPENDIX B

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

NO. 90-5569

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

JERRY R. WILLIAMS,

Defendant—Appellant.

Appeal from the United States

District Court

for the Western District of Texas

(March 27, 1991)

Before RUBIN, POLITZ, and DUHE, Circuit Judges.

POLITZ, Circuit Judge:

Convicted of three felony counts of attempting to

evade federal income taxes, 26 U.S.C. § 7201, arising out of

his failure to file returns for the years 1983, 1984, and 1985,

Jerry R. Williams appeals, contending that the elements of the

' felony offense were not proven and that the charge in one

| count was untimely. Finding no error, we affirm.

6a

Background

While employed by the Great American Reserve Life

Insurance Company (GARCO), from 1971 through late 1982

Williams maintained on file a W-4 form claiming one

personal exemption. Taxes were deducted by his employer

but Williams filed no federal income tax returns. In 1982

Williams was promoted and transferred to San Antonio.

Anticipating more deductions from increased business

expenses and the purchase of a home, in October 1982 he

filed a new W-4 claiming 14 exemptions. On March 17,

1983, Williams again revised his W-4 filing, this time

submitting a form claiming 50 exemptions. He explained the

massive exemption increase in an accompanying note to

GARCO's accounting office which read: "I'm going to have

to increase my exemption to 50 for a few months. I've got

to survive the tax bite until my 0/w build up." The "o/w"

referred to "overwrites," the payments Williams received

based on insurance written by subordinate agents. The

"survival period" was extensive. Because of the claimed

exemptions, for nearly three years GARCO withheld only

negligible amounts, considering Williams’ earnings, ranging

from just over $1,200 on compensation exceeding $61,000 to

$5,455 on earnings exceeding $74,600.

In December 1986 Williams' tax—savings gambit came

to an end. A revenue officer went to Williams’ office and

told him that the IRS had information that he had not filed

income tax returns for the prior six years. Asked to confirm

or deny, Williams lied, claiming that he had filed the

requisite returns and offering to produce copies at a later

Ta

meeting. Williams conceded, however, that he probably

owed taxes beyond the amount paid. A second meeting was

scheduled for the following month in the IRS office. During

that meeting Williams admitted that he had lied earlier and

acknowledged that he had not filed a tax return since 1971.

Williams produced W-2 forms for the years 1979, 1980,

1983, 1984, and 1985.

Williams was indicted on December 6, 1989 for three

felony counts of attempting to evade federal income tax by

failing to file tax returns for the years 1983, 1984, and 1985,

failing to pay the tax due, and submitting a false and

fraudulent Form W-4 to his employer and maintaining it on

file during the indictment period. Williams was convicted on

all counts and was sentenced to two concurrent three-year

periods of incarceration, an additional suspended three-year

term, five years probation, and a fine of $10,000. As a

condition of probation Williams must pay all taxes, interest,

and penalties due. He timely appealed.

Analysis

Williams first contends that his convictions on Counts

Two and Three for attempting to evade taxes for tax years

1984 and 1985 should be reversed because the indictment

failed to allege a necessary element of the crime charged.

Relying heavily on his interpretation of Spies v. United

States, 317 U.S. 492, 63 S.Ct. 364, 87 L.Ed. 418 (1943), and

this court's holding in Clay v. United States, 218 F.2d 483

(Sth Cir. 1955), Williams argues that the government neither

alleged nor proved any affirmative act for those tax years and

8a

therefore he could not properly have been convicted of a

felonious attempt to evade tax.

Our analysis begins with the recognition that before

one may be convicted of the felony offense charged there

must be the requisite proof of a specific intent of the accused

to defeat or evade the payment of the subject tax. United

States v. Nelson, 791 F.2d 336 (Sth Cir. 1986). Spies v.

United States is the Supreme Court's seminal case

distinguishing between the misdemeanor of willful failure to

file, 26 U.S.C. § 7203, and the felony of attempting to evade

or defeat tax under section 7201. Both crimes are based on

similar provisions in the Internal Revenue Code,’ and both

'§ 7201 Attempt to evade or defeat tax.

Any person who willfully attempts in any manner to evade or

defeat any tax imposed by this title or the payment thereof shall,

in addition to other penalties imposed by law, be guilty of a

felony and upon conviction thereof, shall be fined not more than

$100,000 ($500,000 in the case of a corporation), or imprisoned

not more than 5 years, or both, together with the costs of

prosecution.

§ 7203 Willful failure to file return, supply information, or

pay tax.

Any person required under this title to pay any estimated tax or

tax, or required by this title or by regulations made under

authority thercof to make a return, keep any records, or supply

any information, who willfully fails to pay such estimated tax or

tax, make such retum, keep such records, or supply such

information, at the time or times required by law or regulations,

shall, in addition to other penalties provided by law, be guilty of

2 misdemeanor and, upon conviction thereof, shall be fined not

more than $25,000 . . . or imprisoned not more than 1 year, or

both, together with the costs of prosecution. .. .

(continued...)

RE

9a

require willfulness, Sansone v. United States, 380 U.S. 343,

85 S.Ct. 1004, 13 L.Ed.2d 882 (1965), but, as Justice Jackson

wrote in Spies:

The difference between the two offenses, it

seems to us, is found in the affirmative action implied

from the term “attempt,” as used in the felony

subsection. It is not necessary to involve this subject

with the complexities of the common-law "attempt."

The attempt made criminal by this statute does not

consist of conduct that would culminate in a more

serious crime but for some impossibility of

completion or interruption or frustration. This is an

independent crime, complete in its most serious form

when the attempt is complete, and nothing is added to

its criminality by success or consummation, as would

be the case, say, of attempted murder. Although the

attempt succeed in evading tax, there is no criminal

offense of that kind, and the prosecution can be only

for the attempt. We think that in employing the

terminology of attempt to embrace the gravest of

offenses against the revenues, Congress intended some

willful commission in addition to the willful

omissions that make up the list of misdemeanors.

Willful but passive neglect of the statutory duty may

constitute the lesser offense, but to combine with it a

willful and positive attempt to evade tax in any

manner or to defeat it by any means lifts the offense

to the degree of felony.

'(...continued)

For our purposes, the statutory language construed by Spies is

identical to the version currently in force. Nelson, 791 F.2d at 337 n.1.

10a

317 US. at 498-99, 63 S.Ct. at 368, 87 L.Ed. at 423

(footnote omitted). The Court, noting congressional use of

the term “in any manner,” provided an illustrative, non-

exhaustive list of incidents upon which an inference of

affirmative willful attempt could be predicated, including

keeping false or double books, false invoicing, destruction of

records, concealment of assets, and “any conduct, the likely

effect of which would be to mislead or to conceal." /d. at

499, 63 S.Ct. at 368, 87 L.Ed. at 423.

The Clay case, which Williams vigorously insists is

both squarely on point and completely supportive of his

position, is, in fact, neither. Will Clay and three other men

were convicted of willfully attempting to evade a tax imposed

on persons engaged in the business of accepting wagers. The

indictment alleged only "that appellants were engaged in the

business of accepting wagers without having paid the

occupational tax." We applied the Spies analysis and arrived

at the inexorable conclusion that the convictions could not

stand because no affirmative act had been alleged, only a

willful failure to pay the tax. 218 F.2d at 486. Absent an

allegation of an affirmative act to mislead or conceal a felony

fax evasion indictment is defective.

The convictions at bar are based on charges of more

than the owing and mere failure to pay taxes. The counts of

the indictment for the years 1984 and 1985 charge that

Williams had a specific amount of income upon which a

specific amount of tax was due, facts known to Williams, and

that he willfully attempted to evade and defeat the tax by

failing to make an income tax return by the required date, by

lla

failing to pay the tax due, and by “maintaining of record with

his employer his claim on Form W-4 of 50 exemptions.”

Williams insists that the mere maintenance of the fraudulent

W-4 is only an omission, not the commission of an act, and

he is therefore accountable only for the misdemeanor offense

of failure to file.2 See United States v. Masat, 896 F.2d 88

(Sth Cir. 1990). We are not persuaded by this semantic

legerdemain.

Williams concedes that the filing of the fraudulent W-

4 form claiming 50 exemptions on March 17, 1983 was an

affirmative act for that tax year. He maintains, however, that

the government must prove cither a new affirmative act in

1984 and 1985 or that he intended in March of 1983 that the

fraudulent form would carry forward to later years. This

argument blithely overlooks the continuing nature of the W-4

form he filed and his obligation to correct intentional

misrepresentations of facts.

? The precise issue presented on this appeal appears to be res nova at

the appellate level. Positions similar to that advanced by Williams have

been rejected. See United States v. Copeland, 786 F.2d 768, 770 (7th Cir.

1985) (false W-4 form was filed during first tax year charged and during

the year after the second tax year charged: “Where a taxpayer has

willfully failed to file a tax retum in violation of § 7203, a prior,

concomitant or subsequent false statement may elevate the § 7203

misdemeanor to the level of a § 7201 felony.”) (citing United States v.

Goodyear, 649 F.2d 226, 228 (4th Cir. 1981); United States v. Crocker,

753 F.Supp. 1209 (D.Del. 1991).

12a

The W-4 form Williams completed in March 1983

contained the following instructions:’

Your Form W-4 remains in effect until you

change it or, if you entered "EXEMPT" on line 6b

above, until February 15 of next year.

* * *

If the number of withholding allowances you

are entitled to claim decreases to less than you are

now claiming, you must file a new W-4 with your

employer within 10 days.

* bd *

You may be fined $500 if you file, with no

reasonable basis, a W-4 that results in less tax being

withheld than is properly allowable. In addition,

criminal penalties apply for willfully supplying false

or fraudulent information or failing to supply

information requiring an increase in withholding.

Your employer must send to IRS any W-4

claiming more than 14 withholding allowances or

claiming exemption from withholding if the wages are

expected to usually exceed $200 a week. The

> Form W-4 (Rev. 1-83) has a detachable portion with a withholding

worksheet which the taxpayer is instructed to detach and keep for his

records. The form which Williams signed, under penalty of perjury, still

has the worksheet attached. The quotations above are from the

information and instruction portion of that form, which was admitted as

an exhibit at trial.

13a

employer is to complete boxes 7, 8, and 9 only on

copies of the W-4 sent to IRS.‘

By maintaining the false form on file Williams continued to

perpetrate his initially-intended misrepresentations which

were vitally relevant to the tax issue. There is no doubt that

Williams knew the form contained false relevant data and that

he intended such precisely to prevent the appropriate

withholding of his taxes by his employer. Williams was

under a continuing obligation to correct his intentional

misrepresentations. He failed to do so. Maintaining on file

the March 17, 1983 W-4 thus constituted an act "the likely

effect of which was to mislead or conceal.” Cf. United States

v. Copeland, 786 F.2d 768 (7th Cir. 1986); United States v.

Crocker, 753 F.Supp. 1209 (D.Del. 1991). The record thus

reflects affirmative acts for tax years 1984 and 1985.

Williams next challenges his conviction on Count

One, invoking the six-year statute of limitations which he

claims should commence when he filed the fraudulent W—4

in March 1983. If Williams is correct the six-year period

had elapsed before his indictment was handed up in

December 1989. The government counters that the relevant

date for limitations purposes is April 16, 1984, the date on

which the 1983 return was due. Whether the period runs

* From the record it is evident that GARCO did not submit the W-4

to the IRS. Whether it failed to do so because of Williams’ representation

that he was increasing his exemptions for only a short period of time is

not before this court.

14a

from the due date of the return, when the defendant has not

filed a return, is an issue of first impression for this court.’

We conclude that the indictment was filed timely.

Williams' offense is the willful failure to file a tax retum®

coupled with an affirmative act to conceal or mislead as to

his tax liability. Both elements were proven. Whereas the

filing of the fraudulent W-4 was the affirmative act needed

to enhance the crime to felony status, the failure to file a

return was an essential part of his attempt to evade or defeat

5 This issue is distinct from the commencement of the limitations

period when a return has been filed, either before or after the deadline.

A quarter-century ago we noted:

In a thoroughly documented opinion which traces the full

legislative history of I.R.C. sections 6513 and 6531, the Supreme

Court, in a unanimous opinion written by Mr. Justice Fortas, and

in effect overruling Hull [v. United States, 356 F.2d 919 (Sth Cir.

1966)), held that where the return was filed after the due date,

the Statute of Limitations did not begin to run until the date of

filing. (That is the date when the alleged crime was committed.)

The Court said that when the retum is filed prior to the due date,

the statute begins to run on the due date. United States v. Habig,

390 U.S. 222, 88 S.Ct. 926, 19 L.Ed.2d 1055, decided March 5,

1968 (mandate issued April 1, 1968). The decision in Habig is

now binding upon us and therefore appellant's argument that this

action was instituted too late has no merit. Bursten v. United

States, 395 F.2d 976, 980 (Sth Cir. 1968) (emphasis supplied),

cert. denied, 409 U.S. 843, 93 S.Ct. 44, 34 L.Ed.2d 83 (1972).

6 There is no question of Williams’ willfulness or of his tax

deficiency. He conceded as much to the jury; his counsel's opening

statement suggested that the jury should convict him of failure to file his

retums.

15a

his tax liability. We therefore agree with those courts and

commentators who have held or suggested that the limitations

period for a prosecution under section 7201 in which no tax

return was filed begins to accrue the day the return is due.

E.g., United States v. Ferris, 807 F.2d 269, 271 (1st Cir.

1986) ("If all that defendant had done was to fail to file his

1977 income tax return, then the last act of evasion would

have been April 15, 1978, the date the return and tax were

due."), cert. denied, 480 U.S. 950, 107 S.Ct. 1613, 94

L.Ed.2d 798 (1987); United States v. Crocker, 753 F.Supp.

1209 (D.Del. 1991); United States v. Sloan, 704 F.Supp. 880

(N.D.Ind. 1989); United States v. Sherman, 426 F.Supp. 85

(S.D.N.Y. 1976); 15 Mertens Law of Federal Income

Taxation § S55A.21 (1988); Annotation, Start of Limitations

Period (26 US.C.S. § 6531) Against Prosecution for

Attempted Evasion of Taxes Under 26 U.S.C.S. § 7201, 85

A.L.R.Fed. 880, 883 (1987). We express no opinion relative

to the effect of affirmative acts occurring subsequent to the

filing date.’

Williams’ 1983 tax return was due to be filed on

April 16, 1984. He was indicted on December 6, 1989,

within the six-year period of limitations.

The convictions are AFFIRMED.

ATTOIC7C-Arb/obw

” We do not consider whether Williams’ subsequent false statements

to the revenue agent constituted affirmative acts; no mention of such

Statements was contained in the indictment.

16a

APPENDIX C

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 90-5569

D. C. Docket No. CR-89-336-01

UNITED STATES OF AMERICA,

Plaintiff—Appellee,

versus

JERRY R. WILLIAMS,

Defendant—Appellant.

Appeal from the United States

District Court

for the Western District of Texas

Before RUBIN, POLITZ, and DUHE, Circuit Judges.

JUDGMENT

This cause came on to be heard on the record on

appeal and was argued by counsel.

ON CONSIDERATION WHEREOF, It is now here

ordered and adjudged by this Court that the judgment of the

District Court in this cause is affirmed.

March 27, 1991

ISSUED AS MANDATE: