### 1997 D e c i sion s O p inion s of the U nit e d

S t a t e s C our t of Appe al s

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11-17-1997



# U S A v . Gol l a pudi

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D ock e t

97-5137



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. e du/thir dc ir c uit_1997/260Filed November 17, 1997

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 97

- 5137

UNITED STATES OF AMERICA

v.

RAO GOLLAPUDI,

Appellant

On Appeal from the United States District Court

for the District of New Jersey

(D.C . Criminal Action No. 96

- cr

- 00220)

Argued September 23, 1997

Before: COWEN, ROTH and LEWIS, Circuit Judges

(Opinion Filed November 17, 1997)

Howard W. Goldstein, Esq. (Argued)

Laura Grossfield Birger, Esq.

Fried, Frank, Harris, Shriver &

Jacobson

One New York Plaza

New York, NY 10004

Attorneys for Appellant

Faith S. Hochberg

United States Attorney

Amanda Haines (Argued)

Kevin McNulty

Ass istant United States Attorneys

Office of United States Attorney

970 Broad Street

Room 502

Newark, NJ 07102

Attorneys for Appellee

OPINION OF THE COURT

ROTH, Circuit Judge.I. INTRODUCTION

This is an ap peal from a twelve

- count indictment

charging the defendant, Rao Gollapudi, with violating two

provisions of the Internal Revenue Code. More specifically,

Gollapudi was charged with failing to account for and pay

over to the Internal Revenue Service fed eral income taxes,

deducted and collected from the total taxable wages of his

employees, between 1989 and 1991, in violation of 26

U.S.C. S 7202. Additionally, Gollapudi was indicted for filing

a false personal income tax return, Form 1040, for the

ye ars 1989 through 1991, in violation of 26 U.S.C.

S 7206(1). Gollapudi now appeals on the grounds (1) that

his prosecution for violating 26 U.S.C. S 7202 is barred by

the three

- year statute of limitations of S 6531, and (2) that

because the responses on the 1040 he filed were truthful

he cannot be found guilty of filing a false statement under

S 7206(1). For reasons set forth below, we affirm the

decision of the District Court.

II. FACTS

From the company's inception in 1984, the appellant,

Rao Gollapudi, has been the president and sole shareholder

of Softstar Computer Consultants, Incorporated ("Softstar"),

2

a Michigan corporation involved in the business of

analyzing and improving computer systems fo r Fortune 500

companies. Following the departure of his partner from the

company in 1986, Gollapudi became solely responsible for

preparing and filing the company's tax returns and paying

the wages of its employees. Shortly after assuming this

respons ibility, Gollapudi failed to make any payment of

employment taxes and stopped filing Employer's Quarterly

Tax Returns ("941's") with the IRS.

During the years 1989 through 1991, Softstar employed

fifteen individuals, who were paid by checks drawn fro m

the company's corporate checking account. Although the

checks indicated that federal income taxes and Federal

Insurance Contributions Act ("FICA") taxes were being

withheld from the employees' wages, Gollapudi did not

remit the withheld funds to the IRS. Rather, these funds,

totaling approximately $527,828, were deposited into

Softstar's corporate checking account where they were used

to pay corporate operating expenses.1 Furthermore, by

failing to file 941's, Gollapudi never reported the collect ion

of these withholding taxes to the IRS and, thus, avoided

detection.After an IRS tax examiner discovered that Softstar had

failed to file the required 941's and remit any tax refunds

to the federal government, Gollapudi admitted that

although h e collected the appropriate taxes from his

employees, he did not turn over the withholdings to the

IRS. Instead, he kept the money in the company. Gollapudi

further admitted that, although he was aware of his

obligations, he did not file the required 9 41's, W

- 2's, or

corporate tax forms with the IRS. Subsequently, Gollapudi

contacted an accountant, David Karpel, who on behalf of

Gollapudi filed the delinquent 941's and corporate tax

returns and paid $591,000 in back taxes.

Gollapudi's handling of the withdrawals from his own

salary was also questionable. Gollapudi filed a personal

income tax return, Form 1040, for the tax years 1989,

_________________________________________________________________

1. In addition, Gollapudi listed the corpor ate checking account

containing these funds on a personal mortgage application in order to

overstate his assets.

3

1990, and 1991, in which he claimed that he had withheld

approximately $6,000 in federal income taxes from himself.

This amount was not turned over to the IRS. Additionally,

there was a question of whether the funds were in fact

withheld. Although the government argued that such funds

were not withheld, Gollapudi testified that, because he did

n ot receive a regular salary, his withholdings were

calculated in a unique manner. Gollapudi explained that

instead of receiving a regular salary, he periodically took

disbursements from the company. At the end of each year

he received the corporate rec ords, calculated the total sum

that he had paid as salary, checked the relevant tax tables

and calculated the gross salary that would correspond to

the net salary he had actually received. The difference

between the gross and net salaries, he argued, w as treated

as having been withheld from his gross pay.

On April 19, 1996, Gollapudi was indicted on nine counts

of failing to account for and pay over to the IRS federal

income taxes and FICA taxes, deducted and collected from

the total taxable wage s of his employees, for thefinal

quarter of 1989 and for all four quarters of the years 1990

and 1991, in violation of 26 U.S.C. S 7202. In addition,

Gollapudi was charged with three counts of filing false

personal income tax returns for the calendar y ears 1989

through 1991 in violation of 26 U.S.C. S 7206(1). Prior to

trial, Gollapudi moved to dismiss the first nine counts of

the indictment as barred by the three year statute oflimitations. This motion was denied. Gollapudi was found

guilty on al l counts and now appeals.

III. JURISDICTION

This is an appeal from a final judgment of the United

States District Court for the District of New Jersey, entered

March 7, 1997. An appeal was filed on March 10, 1997.

The District Court had jurisdicti on pursuant to 18 U.S.C.

S 3231. We have jurisdiction pursuant to 28 U.S.C. S 1291

and 18 U.S.C. S 3742.

4

IV. DISCUSSION

A. Statute of Limitations.

The first issue before the court is whether a violation o f

26 U.S.C. S 7202, which prohibits the willful failure "to

collect or truthfully account for and pay over" any tax,2 is

subject to a three

- or six

- year statute of limitations. For the

following reasons, we hold that the violation is subject to a

six

- y ear statute of limitations and thus will affirm the

decision of the District Court on this issue.

The statute of limitations governing 26 U.S.C. S 7202, as

well as other criminal tax violations, is set forth in 26

U.S.C. S 6531. This section generall y provides that criminal

tax proceedings must be initiated within three years of the

offense, unless the offense falls into one of eight exceptions

providing for a six

- year period of limitations. Specifically,

the relevant section, S 6531(4), provides that:

No person shall be prosecuted, tried, or punished for

any of the various offenses arising under the internal

revenue laws unless the indictment is found or the

information instituted within 3 years next after the

commission of the offense, except that the period of

limitations shall be 6 years

-

* * * *

(4) for the offense of willfully failing to pay any tax, or

make any return (other than a return required under

aut hority of part III of subchapter A of chapter 61) at

the time or times required by law or regulations;

26 U.S.C. S 6531(4). The question here is whether a failure

_________________________________________________________________

2. Section 7 202 provides:Any person required under this title to collect, account for, and

pay

over any tax imposed by this title who willfully fails to collect

or

truthfully account for and pay over such tax shall, in addition to

ot her penalties provided by law, be guilty of a felony and, upon

conviction thereof, shall be fined not more than $10,000, or

imprisoned for more than 5 years, or both, together with the costs

of prosecution.

26 U.S.C. S 7202.

5

to "pay over" any tax under S 7202 constitutes a failure to

"pay any tax, or make any return," under S 6531(4), and

thus is subject to a six rather than three

- year statute of

limitations.

While the Third Circui t has not yet addressed the issue

of whether S 6531(4) applies to criminal offenses under

S 7202, the District Court followed the decisions of the

Second and Tenth Circuits in holding that prosecutions for

violations of S 7202 must be commenced within six years

under S 6531(4). Conversely, two district courts that have

addressed the issue have held that section 6531(4) does not

apply to S 7202 offenses and that the applicable statute of

limitations is three years. Gollapudi contends that the two

di strict court cases are more persuasive in their analysis

than the opinions of the circuit courts and the District

Court in this case.

Relying on United States v. Block, 497 F.Supp. 629 (N.D.

Ga. 1980), and United States v. Brennick, 908 F.Supp. 1004

(D. Mass. 1995), Gollapudi maintains that the plain

language of the statute dictates that failure "to pay any tax,

or make any return" under S 6531(4) does not encompass

"the offense of failing to collect, account for or pay over any

tax" under S 7202 (emphasis added). Gollapudi contends

that because Congress explicitly distinguished between the

failure to "pay" a tax and the failure to "pay over" a tax

collected from another in other sections of the Internal

Revenue Code and did not include such " pay over"

language in S 6531, it did not intend to include the failure

to "pay over" any tax in S 6531(4).

In support of his first argument, Gollapudi notes that in

designing the criminal tax offense set forth in 26 U.S.C.

S 7202 et seq., Congress e xplicitly distinguished between

the failure to pay a tax and the failure to pay over a tax

collected from another, as is evident in the comparisonbetween S S 7202 and 7203. Furthermore, Gollapudi

maintains that the phrase "pay over" or "paid over" was

used by Congress sixteen times in the Internal Revenue

Code and, thus, constitutes a statutory term of art,

referring to (1) third

- party taxes as in S S 3505(b), 6672(a)

and 7501; (2) other amounts collected from third parties as

in S S 3304(a)(3) an d 7652(b)(3); and (3) non

- tax amounts as

6

in S S 143(g)(3)(D) and 6096(a). Gollapudi argues that

because the phrase is a term of art, "pay over" has a

specific meaning which is not included in nor

interchangeab le with "pay".

Next, Gollapudi argues that because S 6531(4) applies to

"the offense" (singular) of willfully failing to pay any tax or

make any return, as opposed to any other offense, and

because S 7203 is "the offense" which criminalized such

act s, Congress intended that S 6532(4) apply only to the

offense identified in S 7203,3 and not to other criminal tax

violations. See Block, 497 F.Supp. at 632 (finding

persuasive fact that S 6531(4) is directed at"the offense" of

wilfully failing to pay tax, as opposed to class of offenses);

Brennick, 908 F.Supp. at 1019 (finding that Congress had

expressed its will "in reasonably plain terms" that S 6531(4)

applies only to single offense described in S 7203).

In interpreting a statute, the startin g point is the

language of the statute itself. National Union Fire Ins. Co. of

Pittsburgh v. City Sav., F.S.B., 28 F.3d 376, 384 (3d Cir.

1984); United States v. Cicco, 10 F.3d 980, 984 (3d Cir.

1993). "In most situations, the plain language rule is th e

preferred method of statutory interpretation." United States

v. Zheng, 768 F.2d 518, 523 (3d Cir. 1985), cert. denied,

474 U.S. 1060 (1986). "[O]nly the most extraordinary

showing of contrary intentions" in the legislative history will

justify a dep arture from that language. Garcia v. United

States, 469 U.S. 70, 75 (1984).

Under a plain reading of this statute, we find it clear that

violations of S 7202 are subject to a six

- year statute of

limitations under S 6531(4). Specifically, 26 U.S.C. S 7202

_________________________________________________________________

3. Section 7203 provides in relevant part:

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

tax,

or required by this title or by regulations made u nder authority

thereof to make a return, keep any records, or supply any

information, who willfully fails to pay such estimated tax or tax,make such return, keep such records, or supply such information,

at the time or time s required by law or regulations, shall, in

addition

to other penalties provided by law, be guilty of a misdemeanor . .

. .

26 U.S.C. S 7202.

7

makes it an offense for an employer to willfully fail to

" account for and pay over" to the IRS taxes withheld from

employees. Given that S 6531 pertains to "failing to pay any

tax," the District Court correctly found that the failure to

pay third

- party taxes as covered by S 7202 constitutes

failure to pay "an y tax," and thus, is subject to the six

- year

statute of limitations under S 6531(4). United States v.

Gollapudi, 947 F.Supp. 763 (D. N.J. 1996). Accord United

States v. Musacchia, 900 F.2d 493, 500 (2d Cir. 1990), cert.

denied, 501 U.S. 1250 (1991) (ho lding that six

- year statute

of limitations in S 6531(4) is applicable to violations of

S 7202); United States v. Porth, 426 F.2d 519, 522 (10th

Cir.) (finding that S 7202 was "clearly within the six

- year

exception to the general three

- year statute of l imitations of

S 6531"), cert. denied, 400 U.S. 824 (1970). See also United

States v. Evangelista, Nos. 1478, 1479, Dockets 96

- 1712(L),

96

- 1718(CON), 1997 WL 459057, at *8 (2d Cir. Aug. 13,

1997) (reaffirming Musacchia, holding that six

- year statute

of limitations applies to offense defined by S 7202).

Although we could conclude our analysis here as the

statutory language in S 6531(4) is plain and unambiguous,

United States v. Cicco, 10 F.3d 980, 984 (3d Cir. 1993)

(unambiguous language deemed "co nclusive"), we will

address why we find the Georgia and Massachusetts cases

relied upon by Gollapudi to be unpersuasive.

In United States v. Block, the court found that Congress

had the statutory scheme of 26 U.S.C. S 7201 et seq. in

mind when fashi oning S 6531. 497 F.Supp. at 632. This

was inferred from the facts that there are specific references

to S 7201 et seq. provisions in S 6531, and that the

language of S 6531 borrows extensively from various S 7201

et seq. sections. The Block court reas oned "[i]t seems

unlikely . . . that Congress would have used the language

of so many of the S 7202 et seq. code sections when

drafting the subsections of S 6531 but omit use of the key

words of S 7202 if it had intended to make failure to `pay

over' third

- party taxes subject to the six

- year statute of

limitations." Id.

We find this line of reasoning in Block unpersuasive. Thestatute of limitations for all criminal tax violations is set

forth in 26 U.S.C. S 6531. The offenses which fall under th e

8

eight exceptions to S 6531 are included either by general

description of the proscribed conduct or by a reference to a

specific section of the code. It is clear to us that where

Congress intended to limit th e applicability of theS 6531

exceptions, it unambiguously did so. Thus, whereas

subsections five, six, seven and eight of S 6531 are

expressly limited to offenses arising under S S 7206(1) and

7202, 7212(a), 7214(a), and 18 U.S.C. S 371 respectively,

the District Court correctly held that subsection four

contains a general description of offenses, not limited to

violations of S 7203 or to any other specific offense.

Gollapudi, 947 F.Supp. at 766. Musacchia, 900 F.2d at 500.

As the District Court st ated, "[t]he focus must be on the

duty imposed by these specific sections of the Code, not on

the particular words present or absent in an attempt to

reconstruct congressional intent. An employer's duty to pay

taxes withheld from his employees is at le ast as great as

the duty to pay personal income taxes." Gollapudi, 947

F.Supp. at 767.

Furthermore, the fact that S 6531(4) uses the word

"offense" rather than "offenses" does not convince us that

Congress intended S 6531(4) to be limited to violati ons of

S 7203. Conversely, we agree with the rationale of the

Second Circuit in United States v. Musacchia that "the

language of section 6531(4)

-- applying the six

- year statute

of limitations to `the offense of willfully failing to pay any

tax, or ma ke any return . . . at the time or times required

by law or regulations'

-- suggests that it applied to any of

several sections of the Code that define such an offense."

900 F.2d at 500 (citing 26 U.S.C. S 6531(4)).

Moreover, we find the District Cou rt's reliance on the

Second Circuit's decision that it would be inconsistent for

Congress to have prescribed a six

- year limitation period for

the misdemeanor offense defined in 26 U.S.C. S 7203

(failure to file a return or pay a tax) while providing on ly a

three

- year limitation period for the felony offense defined in

S 7202, to be well

- founded. Gollapudi, 947 F.Supp. at 766

(citing Musacchia, 900 F.2d at 500). As the court in

Musacchia concluded, it would make little sense if the

period in which a n offense could be prosecuted for the

misdemeanor of failing to file a tax return was twice as long

9as the period in which an offender could be prosecuted for

the felony of failure to pay taxes over to the IRS collected on

behalf of employees.4 As the District Court stated, "[t]he

focus must be on the duty imposed by these specific

sections of the Code, not on the particular words present or

absent in an attempt to reconstruct congressional intent.

An emplo yer's duty to pay taxes withheld from his

employees is at least as great as the duty to pay personal

income taxes." Gollapudi, 947 F.Supp. at 767.

B. Filing False Income Tax Return.

The second issue before us is whether the District Court

erred in finding Gollapudi guilty of violatingS 7206(1), for

filing a false personal tax return.5 In order to find Gollapudi

_________________________________________________________________

4. In support of the application of the three year statute of limit ations

to

an employer's failure to "pay over" withheld taxes, the dissent argues

that it is more difficult for the IRS to detect an individual's failure to

pay

his own taxes than it is to discover an employer's failure to transfer

funds withheld from e mployees. The Assistant U.S. Attorney took the

opposite position at oral argument due to the fact that the IRS does not

routinely cross

- check employees' W

- 2 forms against the employers'

payments into the IRS of taxes withheld from the employees:

HAINES: Judge Cowen, what I was told in my office is that if

someone, in this case Mr. Gollapudi, is filing false withholding so

the individual employees file returns that look like there have

been

taxes withheld because they ha d W

- 2s attached, and then in not

filing the 941s, it is virtually impossible

-- there is no cross

- referencing there so the IRS can tell automatically that the

withholdings coming from the employees' personal income taxes are

not being actually . . .

COURT: Who told you that in your office?

HAINES: Someone who worked for the Tax Division and is now a

specialist in tax crimes, that actually tried this case below. In

fact,

this particular c ase shows that. Because

-- they only caught Mr.

Gollapudi because the W

- 2s themselves were hand

- written and

looked kind of sloppy and that triggered something in one of the

IRS

agents' minds that these might be fraudulent. Then afte r trying a

bunch of blind alley ways, they finally were able to track it back

to

Mr. Gollapudi and find out he wasn't filing the 941s. But that was

the only way he was ever caught. He could have gone on for years

and years.5. Section 7206(1) provides that any person who,"[w]illfully makes and

subscribes any return, statement, or other document, which contains or

10

guilty of that offense, the government had to prove that (1)

def endant made and subscribed a return which was false

as to a material matter; (2) the return contained a written

declaration that it was made under the penalties of perjury;

(3) defendant did not believe the return was true and

correct as to every mater ial matter; and (4) defendant

falsely subscribed to the return willfully, with the specific

intent to violate the law. United States v. Bishop, 412 U.S.

346, 350 (1973).

Gollapudi contends that because his tax return was

accurate as to the amount of federal income tax withheld

from his gross pay and because the form did not ask

whether the withholdings were ever submitted, he cannot

be found guilty of this offense. Gollapudi argues that the

amount of withholdings were accurate in that they reflec ted

a "gross up" process. In addition, relying on two Seventh

Circuit decisions, Gollapudi argues that the literal truth of

the information on a tax return is a complete defense, even

if the response on the return was highly misleading. United

States v. Reynolds, 919 F.2d 435 (7th Cir. 1990), cert.

denied, 499 U.S. 942 (1991); United States v. Borman, 992

F.2d 124, 126 (7th Cir. 1993) (in establishing violation of

S 7206(1), "the untruth must be found in a statement of

some material information cal led for by the form itself, and

any implication drawn from the filing of a particular form

. . . is simply not enough.").

We must examine the evidence in the light most favorable

to the government and sustain the verdict if "any rational

trier of fa ct could have found the essential elements of the

crime beyond a reasonable doubt." Jackson v. Virginia, 443

U.S. 307, 318 (1979). We conclude that there was ample

evidence for the District Court to find that Gollapudi filed a

false statement. First, a n IRS agent testified that Gollapudi

admitted that he prepared and signed the W

- 2 forms and

that they were false. Additionally, although Gollapudi

presented evidence that the withholding amounts were true

_______________________________________________ __________________

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 . . . ."

11based on his "gross up" method, the District Court found

this theory to be without merit based on the testimony of

another IRS agent who demonstrated that no withholding

was actually made. Moreover, it was established that the

all eged withholding was never submitted to the IRS, but

rather, was maintained in Gollapudi's corporate checking

account.

Furthermore, Gollapudi's reliance on Reynolds and

Borman is misguided. Both of those cases involved

S 7206(1) charges for filing t he wrong tax form. Reynolds,

919 F.2d at 437 ("Using the wrong form does not violate

S 7206(1)."); Borman, 992 F.2d at 126 (holding that filing of

improper form is not enough to establish false statement

for S 7206(1) purposes). Furthermore, in Reynold s, the

theory in the indictment was that one specific line (line 7)

of the form which was filed was false. 919 F.2d at 437. The

Seventh Circuit held that because line 7 was merely derived

arithmetically from two other lines, and was thus an

accurate r eflection of the difference between the other two

lines on the form, that the literal truth of the answer was

a defense to perjury. Id. The Seventh Circuit indicated,

however, that if the charge in the indictment had not been

limited to that one line o r if the defendant had left

something blank indicating that he was hiding something,

its decision would have been different. Id.

Regardless, we hold that the District Court was correct in

finding that Gollapudi filed a false statement on a tax

retur n in violation of S 7206(1), in that he misstated the

amount of his withholdings. Despite the fact that he

understood his obligations, he submitted a form which he

did not believe was true and accurate as to every material

matter.

V. CONCLUSION

F or the above reasons, we will affirm the decision of the

District Court.

12

COWEN, Circuit Judge, dissenting.

The majority errs in concluding that the criminal conduct

of an employer in failing to pay over tax es withheld from the

wages of employees, in violation of 26 U.S.C. S 7202, falls

within the fourth exception to the three

- year statute of

limitations for violations of the Internal Revenue Code(I.R.C.), 26 U.S.C. S 6531(4). I respectfully dissent from

section IV

- A of the majority's opinion that the statute of

limitations for violations of S 7202 is six years rather than

the normal three years. The conviction of the defendant,

Rao Gollapudi, should be vacated due to the expiration of

the three

- year statute of limitations.

I.

Gollapudi was convicted of failing to transfer funds

withheld from his employees' salaries in violation of S 7202.

Section 7202 is entitled "Willful failure to collect or pay over

tax" and reads as follows:

A ny person required under this title to collect,

account for, and pay over any tax imposed by this title

who willfully fails to collect or truthfully account for

and pay over such tax shall, in addition to other

penalties pro vided by law, be guilty of a felony and,

upon conviction thereof, shall be fined not more than

$10,000, or imprisoned not more than 5 years, or both,

together with the costs of prosecution.

The statute of limitations for prosecut ions under the

I.R.C. in general and S 7202 in particular is contained

within 26 U.S.C. S 6531. Section 6531 institutes a general,

three

- year statute of limitations for criminal prosecutions

under the I.R.C. but lists eight exceptions qualifying for a

six

- year statute of limitations. Section 6531 is entitled

"Periods of limitation on criminal prosecutions" and reads

in relevant part:

No person shall be prosecuted, tried, or punished for

any of the various offenses arising under the internal

revenue laws unless the indictment is found or the

information instituted within 3 years next after the

commission of the offense, except that the period of

limitation shall be 6 years

-

13

* * *

(4) for the offense of willfully failing to pay any tax, or

make any return

(other than a return required under authority of part

III of

subchapter A of chapter 61) at the time or times

required by law orregulations....

II.

The majority makes several arguments why S 7202 falls

within S 6531(4). First, the majority argues that, "[u]nder a

plain reading of this statute," it is "clear" that S 7202 falls

within S 6531(4). Maj. Op. at 7

- 8. The majority seizes on the

word "any" from the language of 6531(4), "failing to pay any

tax," and argues that, since paying over withheld funds is

a type of tax, it qualifies as "any tax" under S 6531(4). The

meaning of S 6531(4), according to the majority, is "plain

and unambiguous[.]" Maj. Op. at 8.

The majority then attempts to confront the argument

that, since the exceptions to the three

- year statute of

limitations which are contained in S 6531 track and

exp licitly mention the list of offenses in 26 U.S.C. S 7201 et

seq., the failure of S 6531(4) to mention S 7202 specifically

means that Congress did not intend S 7202 to be included

in S 6531(4). The majority offers two responses. First, the

majority argu es that the exceptions in S 6531 not

specifically mentioning sections of S 7201 et seq. are to be

viewed expansively rather than restrictively. In other words,

exceptions (5)

- (8) of S 6531 refer to specific sections among

S 7201 et seq. and thus apply only to the sections

enumerated, while S 6531(4) does not delineate specific

sections to which it applies and thus covers an array of

offenses including S 7202. Second, the majority rejects

Gollapudi's claim that, since S 6531(4) refers to "offense"

r ather than "offenses," S 6531(4) refers only to one offense,

namely S 7203, which uses language very similar to

S 6531(4) and covers the offense of failing to "pay any

14

estimated tax...or make a return[.]"1 The majority points to

S 6531(4)'s language of "failing to pay any tax, or make any

return" as evincing that S 6531(4) applies to more than one

type of offense and therefore encompasses S 7202 in

addition to S 7203 and possibly other offenses.

The majo rity subsequently argues that it would be

"inconsistent" for Congress to prescribe a six

- year statute of

limitations for S 7203, the misdemeanor of failing to file a

return or pay a tax, and a three

- year statute of limitations

for S 7202, which is a fe lony offense. According to the

majority, the need to prevent a disparity between the

statutes of limitations for a misdemeanor and for a felony

should motivate us to subsume S 7202 within S 6531(4). In

addition, the majority dismisses Gollapudi's claim that,

because S 7202 talks of "paying over" taxes (referring totransferring employees' withheld taxes to the government)

while S 6531(4) covers "pay[ing]" a tax (referring to one's

own tax obligations), S 6531(4) cannot subsume S 7202.

III.

As the majority states, two circuit courts ruled that

S 7202 receives a six

- year statute of limitations by virtue of

S 6531(4). See United States v. Porth, 426 F.2d 519, 521

(10th Cir. 1970); see also United States v. Musacchia, 900

F.2d 493, 500 (2d Cir. ), vacated in part on other grounds,

955 F.2d 3 (2d Cir. 1991). In contrast, two district courts

rejected any linkage between S 6531(4) and S 7202,

_________________________________________________________________

1. Title 26, United States Code, S 7 203 is entitled "Willful failure to

file

return, supply information, or pay tax" and reads in relevant part:

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

tax,

or required by this title or by regulations made under aut hority

thereof to make a return, keep any records, or supply any

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

make such return, keep such records, or supply such information,

at the time or times requir ed 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 $26,000

($100,000 in the case of a corporation), or be imprisoned not more

than 1 year, or both, together with the cost of prosecution....

(emphasis added).

15

therefore applying the three

- year statute of limitations to

S 7202. See United States v. Brennick, 908 F.Su pp. 1004,

1019 (D.Mass. 1995); see also United States v. Block, 497

F.Supp. 629, 632 (N.D.Ga. 1980). However, the Tenth

Circuit's decision, holding that S 6531(4) covers S 7202, is

conclusory and furnishes no analytical assistance or

weighty precedent ial authority. The decision offers a string

of citations, but none deals with the relationship between

S 7202 and S 6531(4). See Porth, 426 F.2d at 521; see also

Block, 497 F.Supp. at 631 (the cases mentioned in Porth do

not support Porth's conclusion) ; Brennick, 908 F.Supp.

1018 n.6 (none of the cases cited by Porth supports Porth's

conclusion). In addition to the lack of analysis, the Tenth

Circuit in Porth also argued in the alternative, stating

immediately after its S 6531(4) pronouncement that the first

indictment in the case, which occurred within three yearsof the offenses, should be looked to for statute of limitations

purposes despite the fact that the first indictment was

dismissed for technical reasons. See Porth, 426 F.2d at 521.

Th e Tenth Circuit itself appears uncertain of the strength of

its own S 6531(4) conclusion, undermining the authority of

its decision.

IV.

I respectfully disagree with the arguments raised by the

majority and by the Second Circuit in Musacchia. The

majority claims that the plain meaning of S 6531(4) clearly

encompasses S 7202, vitiating any need for other

techniques of statutory interpretation. However, the

meaning of S 6531(4) is anything but plain and

unambiguous. While the majority claims tha t S 6531(4) is

clear by stressing the importance of the word "any[,]" the

majority ignores the fact that applying S 6531(4) effectively

swallows the general rule of a three

- year statute of

limitations for tax offenses. Nearly every violation of the

I. R.C. translates into an attempt not to pay taxes. Seizing

on "any" to broaden the reach of S 6531(4) in order to

include S 7202 has the net effect of vastly expanding

S 6531(4), shrinking the applicability of the three

- year

statute of limitations to ne ar oblivion and rendering the

other seven exceptions to the three

- year statute of

16

limitations nugatory. The majority provides no principled

rationale for delineating the contours of its expanded

S 6531(4). As I argue below, the term "any" could properly

refer only to tax obligations encompassed by the word "pay"

but not obligations to "pay over" taxes. Accordingly, the

meaning of S 6531(4) is far from plain and unambiguous. It

calls for judicial interpreta tion.

Resolving S 6531(4)'s ambiguity activates two venerated

members of the canon of statutory interpretation which the

majority ignored. First, `excepting' clauses are to be

interpreted narrowly. See United States v. McElvain, 272

U.S. 633, 639, 4 7 S. Ct. 219, 220 (1926); see also United

States v. Scharton, 285 U.S. 518, 521

- 2, 52 S. Ct. 416, 417

(1932). Second, criminal statutes are to be interpreted in

favor of repose. See United States v. Marion, 404 U.S. 307,

322 n.14, 92 S. Ct. 455, 464 n. 14 (1971). These principles

provide the framework for determining the meaning and

scope of S 6531(4). As a result, the excepting clause of

S 6531(4) must be interpreted narrowly, especially given

that the instant statute deals with criminal liability.

Moving to the text at issue here, the majority dismissesthe difference between the terms "pay" and "pay over" too

handily.2 Both S 7202 and its civil analogue, 26 U.S.C.

S 6672, use the term "pay over" in the context of

transferring employees' with held funds to the government,

strongly implying that "pay over" is a statutory term of art

referring to transferring a third

- party's taxes to the

government. While the use of the term "pay over" by the

United States Code does not rise to the level of a statutory

term of art, the term "pay over" does have a strong

tendency to refer to transferring a third

- party's taxes to the

government. Accordingly, the majority misses the point by

stressing the importance of "any" in S 6531(4). Even if "any"

is to be interpreted expansively as referring to all taxes

owed, the expansiveness is only within the category of taxes

that are `paid,' not the category of funds `paid over.'

_________________________________________________________________

2. The Block Court rejected the argument that "pay" includes "pay over,"

noting that "although a lay person would probably use this approach,

the drafters of s 6531 more likely would have used the terms as are

reflected in ss 7201 et seq [sic]." Block, 497 F.Supp. a t 632 n.2.

17

V.

The majority argues that having different statutes of

limitations for S 7202 and S 7203 would reflect inconsistent

decisionmaking on the part of Congress. The answer to the

inconsistency char ge lies in observing the difference

between the crimes of failure to transfer withheld funds and

failure to pay one's own taxes. In the case of transferring

withheld funds, an employer fails to transfer the funds

withheld from several if not hundreds o f employees. The

more employees affected, the greater the chances that the

I.R.S. will discover the crime. In the case of an individual

failing to pay his own taxes, such a crime is harder for the

I.R.S. to detect since only one individual's return is

involved. Accordingly, it would make sense to apply the

normal statute of limitations (three years) to the crime of

failing to pay withheld taxes since the I.R.S. has greater

potential to discover the crime; in the case of the single

individual, the I .R.S. has greater difficulty in discovering

the crime and needs an extended statute of limitations.3

Furthermore, even if Congress was inconsistent in

authorizing a three

- year statute of limitations forS 7202

and a six

- year statute of limitations for S 7203, it is not our

prerogative to remedy the inconsistency. To interpret a

statute in a manner designed to resolve a putative policy

based inconsistency brings the court into the forbidden

realm of legislative policy

- making.VI.

Finally, the m ajority selects the wrong inference from the

fact that S 6531 tracks S 7201 et seq. While SS 6531(5)

- (8)

specifically refer to sections in S 7201 et seq., S 6531(4)

_________________________________________________________________

3. The majority con tests this by citing the statement of the Assistant

U.S.

Attorney during oral argument that the I.R.S. does not routinely cross

check employees' W

- 2 forms against employers' payments of funds

withheld from employees' wages. See Maj. Op. at 10 n.4. Howe ver, this

statement by the AUSA, attributed to "[s]omeone who worked for the Tax

Division and is now a specialist in tax crimes," is not contained in the

record and reflects a litigation position taken during oral argument. This

court should not adopt such a counter

- intuitive notion without adequate

evidentiary support.

18

does not contain an explicit reference. The majority infers

from this lack of a specific reference in S 6531(4) that it

covers more than j ust the section it clearly parallels,

S 7203, and encompasses S 7202 as well.4 However, the

majority ignores the need to construe excepting clauses

restrictively and to interpret criminal statutes in favor of

repose. Indeed, S 6531's tracking of S 7201 et seq. gives rise

to an alternative inference, namely that even though

S 6531(4) fails to mention S 7203, S 6531(4) still should be

viewed in the context of the tracking by its sister

exceptions. In other words, since exceptions (5)

- (8) explicitly

t rack sections of S 7201 et seq., Congress may have

intended S 6531(4) to track S 7203 by virtue of the similarity

in language between the two provisions even thoughS 7203

is not mentioned explicitly. In fact, the close similarity

between the diction of S 7203 and S 6531(4) may have

obviated the need for S 6531(4) to mentionS 7203 explicitly.

This argument is buttressed by the contention that

S 6531(4) refers to only one "offense" rather than "offenses,"

which must be S 7203 rather than S 7202 given the

similarity of language between S 7203 and S 6531(4). In

sum, while the majority's inference is plausible, another

possible inference exists. Our duty to construe S 6531(4)

restrictively and in favor of repose requires selecting the

inference that S 6531(4) tracks only S 7203, not S 7202 as

well.

VII.

For the above reasons, I respectfully dissent from the

majority's conclusion that violations of S 7202 receive a six

year rather than a three

- year statute of limitations. Thedistrict court' s decision should be reversed and the

conviction of Gollapudi vacated due to the expiration of the

three

- year statute of limitations prior to the commencement

of prosecution.

_________________________________________________________________

4. Secti on 6531(4) is closely aligned with S 7203 since S 6531(4) refers

to

"the offense of willfully failing to pay any tax, or make any return[,]"

S 7203 covers "[a]ny person...who willfully fails to pay such estimated

tax

or tax, make such return" and S 7202 merely adverts to "[a]ny person

required to collect, account for, and pay over any tax...."

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A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

20