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UNITED STATES v. POMPONIO
Summary of Opinion: United States v. Pomponio et al., No. 75-1667 (Dec. 12, 1976)
Factual and Procedural Background
Respondents were tried and convicted after a jury trial for willfully filing false income tax returns in violation of 26 U.S.C. § 7206(1). The indictment alleged two principal falsifications: (1) causing corporations they controlled to report payments to them as loans when the Government claimed those payments were taxable dividends, and (2) claiming partnership losses as deductions when the Government contended those losses were properly attributable to a corporation. Respondents' defense was that the transactions had been correctly reported or that they believed the reports to be correct at the time. The United States Court of Appeals for the Fourth Circuit held that the District Court had incorrectly instructed the jury concerning willfulness (relying on its reading of United States v. Bishop) and remanded for a new trial, 528 F.2d 247 (1975). The United States petitioned for certiorari to the Supreme Court.
Legal Issues Presented
- Whether the District Court's jury instructions correctly stated the meaning of "willfully" under 26 U.S.C. § 7206(1) in light of United States v. Bishop, 412 U.S. 346 (1973), or whether an additional instruction on "good faith" or an "evil motive" requirement was required.
- Whether respondents were entitled to instructions exonerating them if they believed the payments were loans or that partnership losses belonged to the partnership (i.e., whether the jury instructions on those factual belief defenses were adequate).
Arguments of the Parties
Respondents' Arguments
- Respondents maintained that the transactions were correctly reported, or at minimum that they believed at the time that their reporting was correct (a good-faith belief about the nature of the transactions).
Government's Positions (as reflected in instructions)
- The Government contended that respondents knew they could not claim the partnership losses as deductions because doing so would constitute filing a false report of gross income.
- The Government's position, as presented in the jury instructions, was that the returns were false if respondents knowingly reported loans when the withdrawals were not bona fide loans, and that the element of knowledge was essential to willfulness under § 7206(1).
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| United States v. Bishop, 412 U.S. 346 | Interpreting meaning of "willfully" in Revenue Code; held term has same meaning in misdemeanor and felony sections and requires more than careless disregard for the truth. | The Court rejected the Fourth Circuit's reading of Bishop as requiring proof of any motive beyond an intentional violation of a known legal duty; Bishop supports the Court's interpretation that willfulness means a voluntary, intentional violation of a known legal duty. |
| 528 F.2d 247 | This is the decision of the Court of Appeals (Fourth Circuit) that held the jury was incorrectly instructed concerning willfulness and remanded for a new trial. | The Supreme Court granted certiorari and reversed that judgment, concluding the District Court's instructions were adequate. |
| [United States v.] Murdock, 290 U.S. [389,] 398 | Formulation of willfulness as "bad faith or evil intent." | Quoted by the Court as one of prior formulations; the Court explained these other formulations do not alter the standard that willfulness means a voluntary, intentional violation of a known legal duty. |
| Spies [v. United States], 317 U.S. [492,] 498 | Formulation describing willfulness as "evil motive and want of justification in view of all the financial circumstances of the tax-payer." | Quoted as an illustrative formulation; Court treated it as consistent with the core definition of willfulness (intentional violation of a known legal duty) rather than as imposing an additional separate "evil motive" requirement. |
| Sansone [v. United States], 380 U.S. [343,] 353 | Formulation referring to knowledge that the taxpayer "should have reported more income than he did." | Quoted as another prior formulation; Court did not treat it as creating a requirement beyond intentional violation of a known legal duty. |
| James v. United States, 366 U.S. 213, 221 | Cited among cases interpreting willfulness and related principles. | Listed as supporting authority in the discussion of prior formulations; not read to alter the core willfulness definition used by the Court. |
| McCarthy v. United States, 394 U.S. 459, 471 | Cited among cases interpreting willfulness and related principles. | Listed as supporting authority in the Court's discussion of willfulness formulations. |
| 455 F.2d 612, 615 (CA9 1972) | Court of Appeals' view (in Bishop context) that misdemeanor statute needed only show unreasonable, capricious, or careless disregard for the truth. | The Supreme Court noted it rejected that lesser degree of culpability for the misdemeanor statute in Bishop, reaffirming a stricter willfulness standard. |
| United States v. Pohlman, 522 F.2d 974, 977 (CA8 1975) (en banc), cert. denied, 423 U.S. 1049 (1976) | Cited as one of several Courts of Appeals recognizing that willfulness means a voluntary, intentional violation of a known legal duty. | Used as supporting authority for the proposition that the District Court's instruction on willfulness was adequate without a separate good-faith instruction. |
| United States v. McCorkle, 511 F.2d 482, 484-485 (CA7) (en banc), cert. denied, 423 U.S. 826 (1975) | Cited as similar appellate authority construing willfulness. | Relied upon as corroborating the Court's view of the proper willfulness standard. |
| United States v. Greenlee, 517 F.2d 899, 904 (CA3), cert. denied, 423 U.S. 985 (1975) | Cited as appellate authority on willfulness meaning. | Referenced as part of the body of decisions recognizing willfulness as an intentional violation of a known legal duty. |
| United States v. Hawk, 497 F.2d 365, 366-369 (CA9), cert. denied, 419 U.S. 838 (1974) | Cited as appellate authority on willfulness meaning. | Included among cases confirming the Court's definition of willfulness; supported the conclusion that no additional good-faith instruction was necessary. |
Court's Reasoning and Analysis
The Court examined the District Court's jury instructions and the Fourth Circuit's interpretation of United States v. Bishop. The District Court had instructed that a defendant is guilty under § 7206(1) only if he signed the returns knowing them to be false and had done so willfully. The trial court defined "willful" as doing an act "voluntarily and intentionally and with the specific intent to do something which the law forbids," i.e., with the specific intent to disobey or disregard the law. The trial judge also instructed that a good motive alone is never a defense where the act is a crime and that motive is irrelevant except as it bears on intent.
The Court of Appeals had concluded the final instruction was improper because it believed the statute required a finding of "bad purpose or evil motive" beyond the specific intent phrasing used by the trial judge. The Supreme Court disagreed with that reading. Relying on Bishop and a set of prior formulations, the Court explained that those formulations (e.g., "bad faith or evil intent," "evil motive and want of justification," knowledge that more income should have been reported) do not change the core definition announced in Bishop: willfulness in the § 7206 context means a voluntary, intentional violation of a known legal duty. The Court emphasized that the District Court's instructions accurately communicated that a willful act requires purposeful knowing conduct and specific intent to violate the law.
The Court further reviewed the alternative ground on which the Court of Appeals ordered a new trial—namely, that respondents were entitled to instructions exonerating them if they believed the payments were loans or that the losses belonged to the partnership—and concluded that the trial record showed such instructions were in fact given and were adequate. Finally, the Supreme Court left other alleged errors raised by respondents for the Court of Appeals to consider in the first instance on remand.
Holding and Implications
The judgment of the Court of Appeals is reversed and the case is remanded for further proceedings consistent with this opinion.
Consequences: The Supreme Court held that the District Court's jury instructions correctly stated the law regarding willfulness under 26 U.S.C. § 7206(1) and that an additional instruction on good faith was unnecessary. The Court also determined that instructions shielding respondents if they believed the payments were loans or that the losses belonged to the partnership had been given and were adequate. The Supreme Court therefore vacated the Fourth Circuit's order for a new trial and remanded the matter for further proceedings; it did not announce a new legal rule beyond its interpretation and application of existing precedent in this case. The Court directed that the remaining alleged errors be addressed by the Court of Appeals in the first instance.
At respondents' trial on a charge of willfully filing false income tax returns in violation of § 7206(1) of the Internal Revenue Code, the District Court adequately instructed the jury on willfulness in accordance with the standard that willfulness in the context of § 7206 and related statutes simply means a voluntary, intentional violation of a known legal duty, United States v. Bishop, 412 U.S. 346, and hence an additional instruction on good faith was unnecessary.
Certiorari granted; 528 F.2d 247, reversed and remanded.
PER CURIAM.
After a jury trial, respondents were convicted of willfully filing false income tax returns in violation of 26 U.S.C. § 7206 (1). Based on its reading of United States v. Bishop, 412 U.S. 346 (1973), the Court of Appeals held that the jury was incorrectly instructed concerning willfulness, and remanded for a new trial. 528 F.2d 247 (1975). The United States petitioned for certiorari. We reverse.
Section 7206 provides in pertinent part:
"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 . . .
. . . . .
"shall be guilty of a felony . . . ."
The respondents were charged with falsifying tax returns in two principal ways: (1) they allegedly caused corporations they controlled to report payments to them as loans, when they knew the payments were really taxable dividends; and (2) they allegedly claimed partnership losses as deductions knowing that the losses were properly attributable to a corporation. Their defense was that these transactions were correctly reported, or at least that they thought so at the time.
The jury was instructed that respondents were not guilty of violating § 7206(1) unless they had signed the tax returns knowing them to be false, and had done so willfully. A willful act was defined in the instructions as one done "voluntarily and intentionally and with the specific intent to do something which the law forbids, that is to say with [the] bad purpose either to disobey or to disregard the law." Finally, the jury was instructed that "[g]ood motive alone is never a defense where the act done or omitted is a crime," and that consequently motive was irrelevant except as it bore on intent. The Court of Appeals held this final instruction improper because "the statute at hand requires a finding of a bad purpose or evil motive." 528 F.2d, at 249. In so holding, the Court of Appeals incorrectly assumed that the reference to an "evil motive" in United States v. Bishop, supra, and prior cases meant something more than the specific intent to violate the law described in the trial judge's instruction.
We agree with the Court of Appeals that the instructions on this point were "full and complete." 528 F.2d 247, 249-250 (1975). The jury was told that the Government contended that respondents "couldn't claim this [the partnership losses] as a deduction . . . because by so doing they would know that they were filing a false report of their total gross income." Later the jury was instructed that, if they found the loans were incorrectly reported, they must also find that the return was "made willfully and with the specific intent and knowledge at the time they made it that it was in fact a false return." In explaining intent, the trial judge said that "[t]o establish the specific intent the Government must prove that these defendants knowingly did the acts, that is, filing these returns, knowing that they were false, purposely intending to violate the law." The jury was told to "bear in mind the sole charge that you have here, and that is the violation of 7206, the willful making of the false return, and subscribing to it under perjury, knowing it not to be true and [ sic] to all material respects, and that and that alone."
In Bishop we held that the term "willfully" has the same meaning in the misdemeanor and felony sections of the Revenue Code, and that it requires more than a showing of careless disregard for the truth. We did not, however, hold that the term requires proof of any motive other than an intentional violation of a known legal duty. We explained the meaning of willfulness in § 7206 and related statutes:
The Court of Appeals in Bishop held that the evidence under the misdemeanor statute "need only show unreasonable, capricious, or careless disregard for the truth or falsity of income tax returns filed." 455 F.2d 612, 615 (CA9 1972). This Court rejected the view that this lesser degree of culpability was required for a violation of the misdemeanor statute, and held on the contrary that "Congress used the word `willfully' to describe a constant rather than a variable in the tax penalty formula." 412 U.S., at 359-360.
"The Court, in fact, has recognized that the word `willfully' in these statutes generally connotes a voluntary, intentional violation of a known legal duty. It has formulated the requirement of willfulness as `bad faith or evil intent,' [ United States v.] Murdock, 290 U.S. [389,] 398, or `evil motive and want of justification in view of all the financial circumstances of the tax-payer,' Spies [v. United States], 317 U.S. [492,] 498, or knowledge that the taxpayer `should have reported more income than he did.' Sansone [v. United States], 380 U.S. [343,] 353. See James v. United States, 366 U.S. 213, 221 (1961); McCarthy v. United States, 394 U.S. 459, 471 (1969)." 412 U.S., at 360.
Our references to other formulations of the standard did not modify the standard set forth in the first sentence of the quoted paragraph. On the contrary, as the other Courts of Appeals that have considered the question have recognized, willfulness in this context simply means a voluntary, intentional violation of a known legal duty. United States v. Pohlman, 522 F.2d 974, 977 (CA8 1975) (en banc), cert. denied, 423 U.S. 1049 (1976); United States v. McCorkle, 511 F.2d 482, 484-485 (CA7) (en banc), cert. denied, 423 U.S. 826 (1975); United States v. Greenlee, 517 F.2d 899, 904 (CA3), cert. denied, 423 U.S. 985 (1975); United States v. Hawk, 497 F.2d 365, 366-369 (CA9), cert. denied, 419 U.S. 838 (1974). The trial judge in the instant case adequately instructed the jury on willfulness. An additional instruction on good faith was unnecessary.
As an alternative ground for ordering a new trial, the Court of Appeals held that respondents were entitled to instructions exonerating them if they believed that the payments to them were loans and that the losses belonged to the partnership, 528 F.2d, at 250. Our inspection of the record indicates that such instructions were given and that they were adequate.
The instructions set forth in n. 2, supra, by requiring knowledge that the returns falsely reported the transactions, implicitly required knowledge of the true nature of the transactions. In addition, the jury was instructed with respect to the loans that "if you do find that they were not bona fide loans then you must next determine whether or not the defendants knew at the time they were withdrawing this money that it was not a loan . . . . In other words, you should determine whether they knew that, and as I have told you, that is an essential element." With respect to the partnership losses, the jury was told that the Government claimed that respondents "knew that they couldn't transfer [a certain asset] to a partnership, and, therefore, when they couldn't transfer it they couldn't take the benefits of any losses sustained by the partnership in question . . . ."
The respondents' other allegations of error which the Court of Appeals found it unnecessary to reach should be considered by that court in the first instance.
The petition for certiorari is granted, the judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.
It is so ordered.
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