Voluntary Disclosure Participation Does Not Excuse § 7202 Trust-Fund Tax Nonpayment; Indictment May Go to Jury with Limiting Instruction

1. Introduction

In United States v. Richard Brasser (consolidated with the appeal of Gregory Gentner), the Fourth Circuit affirmed felony convictions under 26 U.S.C. § 7202 for willfully failing to pay over payroll “trust-fund taxes” withheld from employees. The defendants—senior executives of a software company, rFactr, Inc.—argued that the district court committed reversible errors in jury management and jury instructions (particularly regarding willfulness, good faith, and the IRS Voluntary Disclosure Program), and that the court should have granted a new trial under Federal Rule of Criminal Procedure 33.

The central appellate issues were:

  • whether the district court abused its discretion by permitting the jury to review the indictment during deliberations;
  • whether the jury instructions were legally defective or misleading—especially in light of rFactr’s participation in an IRS Voluntary Disclosure Program;
  • whether the placement and phrasing of the good faith instruction created prejudice; and
  • whether the district court abused its discretion by denying a Rule 33 motion for a new trial based on the defendants’ claimed “cooperation” with the IRS.

2. Summary of the Opinion

The Fourth Circuit affirmed the convictions and sentences. It held that:

  • Sending the indictment to the jury was within the district court’s discretion where the jury was unequivocally instructed the indictment is not evidence.
  • The willfulness instructions (including that the jury may infer willfulness from an intentional preference for other creditors over the United States) were consistent with circuit law.
  • The defendants’ Voluntary Disclosure Program argument rested on a fatal factual premise: they were convicted for post-disclosure quarters, not quarters “while in” the program.
  • Considering the instructions as a whole (including a supplemental instruction), the jury charge was not confusing or prejudicial, and the defendants’ complaint about “false statement on a tax return” language was undermined because it came from their proposed instructions.
  • Denial of the Rule 33 motion was not an abuse of discretion: evidence of willfulness was “overwhelming,” and purported cooperation did not outweigh repeated nonpayment and preference of other expenditures over trust-fund taxes.

3. Analysis

3.1. Precedents Cited

A. Standards of appellate review and jury instructions

  • United States v. Miltier (882 F.3d 81 (4th Cir. 2018)): Used for the dual review framework—abuse of discretion for giving an instruction, de novo for whether it correctly states the law—and the principle that even if erroneous, reversal requires “serious prejudice.” The panel used this structure to reject the defendants’ instruction-based attacks.
  • United States v. Kivanc (714 F.3d 782 (4th Cir. 2013)): Cited for the holistic evaluation rule: instructions “construed as a whole” must adequately inform the jury without misleading or confusing it to the objector’s prejudice.
  • United States v. Passaro (577 F.3d 207 (4th Cir. 2009)): Reinforced the “no single instruction in isolation” approach, central to rejecting complaints about where the good faith instruction appeared and how often it was repeated.

B. Indictment submitted to the jury

  • United States v. Polowichak (783 F.2d 410 (4th Cir. 1986)): The controlling authority on the indictment issue. The court reiterated that providing an indictment to the jury is discretionary and not error where the jury is “unequivocally instructed” the indictment is not evidence and is only an aid. The district court’s limiting instruction tracked this safeguard, so the panel found no abuse of discretion.

C. New trial under Rule 33 and abuse-of-discretion constraints

  • United States v. Palin (874 F.3d 418 (4th Cir. 2017)) and United States v. Arrington (757 F.2d 1484 (4th Cir. 1985)): These cases supply the key Rule 33 principle: a new trial should be granted “sparingly,” and only where the evidence weighs so heavily against the verdict that it would be unjust to enter judgment. The panel used this demanding standard to uphold the denial of a new trial.
  • United States v. Burfoot (899 F.3d 326 (4th Cir. 2018)): Reinforced the Arrington formulation for when evidence so heavily contradicts the verdict that a new trial is warranted.
  • United States v. Dillard (891 F.3d 151 (4th Cir. 2018)) and Wudi Indus. (Shanghai) Co. v. Wong (70 F.4th 183 (4th Cir. 2023)): Cited to define abuse of discretion (arbitrary action, failure to consider constraining factors, reliance on erroneous premises, or legal error), framing why the district court’s denial of relief was affirmed.

D. Preservation, waiver, and plain error (not ultimately dispositive)

  • United States v. Brewer (157 F.4th 332 (4th Cir. 2025)) and United States v. Spirito (36 F.4th 191 (4th Cir. 2022)): The government argued the jury issues were unpreserved and subject only to plain error review. The panel declined to decide waiver because the defendants’ claims failed even under abuse-of-discretion review.

E. The meaning of “willfulness” and proof in tax offenses

  • Cheek v. United States (498 U.S. 192 (1991)): The foundational definition: willfulness is the “voluntary, intentional violation of a known legal duty.” This anchored the willfulness analysis under § 7202 and framed why “good faith” matters—because good faith can negate willfulness.
  • Turpin v. United States (970 F.2d 1344 (4th Cir. 1992)): Critically applied to validate the instruction that an “intentional preference of other creditors over the United States” supports a finding of willfulness. This precedent is central because the defendants argued business pressures and competing obligations; Turpin rejects that as a legal excuse when a known tax duty is intentionally subordinated.
  • United States v. Lord (404 Fed. App'x 773 (4th Cir. 2010)): Cited for the proposition that a pattern of failing to pay taxes over an extended period supports willfulness.
  • United States v. Boccone (556 Fed. App'x 215 (4th Cir. 2014)): Used to describe the § 7202 elements and the two-prong burden (duty plus willful failure). The defendants challenged only the willfulness prong.
  • United States v. Easterday (564 F.3d 1004 (9th Cir. 2009)): Cited illustratively for the common-sense inference: knowing taxes are owed and not paying them can establish willfulness, reinforcing the panel’s conclusion that the evidence was ample.

F. Background fact recitation standard

  • United States v. Washington (743 F.3d 938 (4th Cir. 2014)): Cited for the rule that appellate courts recite facts in the light most favorable to the government after a conviction.

3.2. Legal Reasoning

A. Indictment in the jury room: discretion plus a strong limiting instruction

The court treated the indictment question as a trial-management matter. Under United States v. Polowichak, the key protections are: (1) clarity that the indictment is not evidence; and (2) that it is provided only as an aid. The district court expressly told the jurors that the indictment is “not evidence of any kind” and permits no inference of guilt. That instruction—combined with the court’s view that the indictment was “straightforward”—supported the conclusion that there was no abuse of discretion.

Notably, the opinion also highlights a practical point about “prejudice” arguments: defense counsel had itself referenced that the indictment would go back with the jury. That fact did not legally waive the issue (the panel did not decide preservation), but it undermined the narrative that the practice was inherently unfair.

B. Voluntary Disclosure Program: not a carve-out from § 7202 willfulness

The defendants framed the IRS Voluntary Disclosure Program as if it created “allowances” permitting nonpayment or reprioritization inconsistent with the jury instructions. The panel rejected this primarily on factual grounds: the five charged quarters occurred after rFactr’s disclosures, so the defendants could not claim they were being prosecuted for quarters “while in” the program.

On the legal side, the panel emphasized that the jury was properly told it could consider ability to pay and creditor preference, and that the “intentional preference” instruction is correct under Turpin v. United States. The Fourth Circuit thus treated voluntary disclosure participation as neither (a) a legal defense to willfulness nor (b) an instruction-altering framework that displaces established § 7202 doctrine—especially where IRS communications repeatedly warned that the taxpayer must “stay current.”

C. Willfulness and good faith: holistic charge review and curative supplementation

The defendants’ “confusing and prejudicial” instruction argument combined several themes: insufficient funds, “discretionary purchases,” creditor preference, and the structure/placement of the good faith instruction. The Fourth Circuit’s response followed the standard instruction-review method from United States v. Kivanc and United States v. Passaro: evaluate the charge as a whole, in context, for whether it fairly states the law.

Three aspects of the court’s reasoning are important:

  • Defense theory was not excluded: the defendants testified about financial struggles; the jury could assess their narrative. The court did not accept the premise that omission of a particular “insufficient funds” formulation made the instructions legally defective.
  • Good faith was made global: although the good faith instruction appeared toward the end, the judge stated it was “a complete defense to the charges” and then issued a supplemental instruction explicitly clarifying that willfulness and good faith “apply to all the charges.”
  • Invited-language problem: the defendants complained that a phrase referenced “false statement on a tax return,” but the panel noted that this language came from the defendants’ proposed instructions—making it difficult to characterize as prejudicial judicial error.

D. Rule 33 new trial: “cooperation” does not outweigh strong willfulness evidence

Applying United States v. Palin and United States v. Arrington, the panel reiterated that Rule 33 is an extraordinary remedy. It then upheld the district court’s denial because the record supported willfulness: repeated warnings, repeated nonpayment across quarters, substantial revenues, continued high compensation to the defendants, and payments to other creditors and even unrelated litigation funding while trust-fund taxes remained unpaid.

The opinion treats “cooperation,” including participation in the Disclosure Program, as not dispositive where the charged conduct involves post-disclosure failures to remain current and evidence supports intentional preference away from known tax duties.

3.3. Impact

  • Clarifies the limited relevance of IRS voluntary disclosure participation in § 7202 prosecutions: The decision signals that voluntary disclosure may affect enforcement posture but does not rewrite the elements of § 7202, particularly where the charged quarters are post-disclosure and the taxpayer was repeatedly warned to remain current.
  • Reinforces “preference of creditors” as a powerful willfulness theory: By reaffirming Turpin v. United States in the jury-instruction context, the court underscores that choosing to fund other obligations—even in the name of keeping a business afloat—can support willfulness when trust-fund taxes are knowingly unpaid.
  • Trial practice guidance on indictments and instructions: The opinion strengthens the practical rule that indictments can go to the jury if the court gives a strong limiting instruction; and it illustrates how a brief, targeted supplemental instruction can cure concerns about the scope of a defense instruction (here, good faith).
  • Rule 33 remains exceptional: Defendants seeking a new trial must show more than an alternative interpretation of “cooperation”; they must show the verdict is against the great weight of the evidence in a way that makes judgment unjust.

4. Complex Concepts Simplified

  • Trust-fund taxes: amounts withheld from employees’ wages (e.g., income and payroll taxes) that the employer must hold “in trust” for the United States and pay to the Treasury.
  • Form 941: the IRS quarterly payroll tax return employers file to report wages and the taxes withheld and owed.
  • 26 U.S.C. § 7202: a felony statute punishing responsible persons who are required to collect and pay over taxes and who willfully fail to pay them over.
  • Willfulness (tax crimes): under Cheek v. United States, a voluntary and intentional violation of a known legal duty. Evidence of choosing to pay others instead of the IRS can support willfulness.
  • Good faith defense: if the defendant sincerely believed he was complying with the law, that belief can negate willfulness—even if the belief was objectively unreasonable (as the jury was instructed here).
  • Rule 33 new trial: a post-verdict remedy granted “sparingly,” typically only when the evidence weighs so heavily against the verdict that letting it stand would be unjust.
  • Indictment is not evidence: an indictment is merely an accusation; jurors may not treat it as proof. A strong limiting instruction is essential if an indictment is provided during deliberations.

5. Conclusion

The Fourth Circuit’s decision affirms a stringent, familiar rule in payroll tax enforcement: responsible corporate officers who knowingly fail to pay over trust-fund taxes may be found to act willfully, particularly where they prioritize other expenditures over the United States. The court also reinforces two procedural principles: (1) a district court may, in its discretion, provide the indictment to the jury when it clearly instructs that the indictment is not evidence; and (2) jury instructions are evaluated in context and as a whole, and can be effectively clarified via a supplemental instruction.

In practical terms, the opinion limits attempts to recast IRS voluntary disclosure participation as a quasi-safe harbor from § 7202 liability—especially for post-disclosure quarters—and confirms that Rule 33 relief is unavailable where the record strongly supports the jury’s finding of willfulness.