The Honorable Thomas J. McAvoy of the United States 1 District Court for the Northern District of New York, sitting by designation. 07-3682-cr United States v. Ellett 1 2 UNI TEDSTATE S COURT OF APPEALS 3 4 FOR THE S ECOND CIRCUI T 5 6 Aug ustTe rm 200 7 7 8 (Ar gue d: May16 , 2 008 D eci ded : M ay 23, 20 08) 9 10 11 Doc ketNo . 07-3682-cr 12 13 - - - - - - - - - - - - - - - - - - - - x 14 15 UNI TEDST ATE S O F AMER ICA , 16 17 App ell ee, 18 19 - v .- 20 JAMES ELL ETT , 21 22 23 Def end ant -Ap pel lan t. 24 25 - - - - - - - - - - - - - - - - - - - - x 26 Bef ore : JAC OBS , C hie f Judg e; MIN ER, Ci rcu it 27 28 Jud ge; M C AVO Y, Dis tri ct Jud ge. 1 29 30 31 Def end ant -Ap pel lan t J ame s E lle tt app eal s f romth e 32 jud gme nt of the Un ite d S tat es Dis tri ct Cou rt forth e 33 Nor the rn Dis tri ct of NewYo rk (Hu rd, J. ), con vic tin g h im, 34 aft er a j urytr ial , o f f ourco unt s o f i nco me taxev asi on and 35 one count of failure to file an income tax return . We hol d2 1 tha t due pro ces s d id notre qui re tha t E lle tt be giv en the 2 opp ort uni ty to lit iga te his ta x p osi tio n c ivi llyor 3 adm ini str ati vel y b efo re bei ng pro sec ute d f or taxev asi on. 4 Aff irmed. RONALD JAY COHEN, Cohen, Estis & 5 6 Associates, LLP, Goshen, NY, for Defendant-Appellant. 7 8 9 PAUL D. SILVER, Assistant United 10 States Attorney (Glenn T. 11 Suddaby, United States Attorney, 12 Northern District of New York, 13 on the brief; Sara Lord, Brenda 14 K. Sannes, Assistant United 15 States Attorneys, of counsel), 16 United States Attorney’s Office 17 for the Northern District of New 18 York, Albany, NY, for Appellee. 19 20 21 PERCU RIAM: 22 23 Def end ant -Ap pel lan t J ame s E lle tt app eal s f romth e 24 jud gme nt of the Un ite d S tat es Dis tri ct Cou rt forth e 25 Nor the rn Dis tri ct of NewYo rk (Hu rd, J. ), con vic tin g h im, 26 aft er a j urytr ial , o n f ive ta x c oun ts. O n a ppe al, El let t 27 con ten ds tha t due pro ces s r equ ire d t hathe be gi venth e 28 opp ort uni ty to lit iga te his ta x p osi tio n c ivi llyor 29 adm ini str ati vel y b efo re bei ng pro sec ute d f or taxev asi on. 30 We rej ectth at arg ume nt in thi s o pin ion . In a s epa rat e 31 summar y o rde r f ile d t oda y, we rej ectEl let t’s ot herInth e s umm aryor derwe re jec t a rgumen ts con cer nin g: 2 (1) th e e xcl usi on of leg al mat eri als th at Ell ettcl aim s t o hav e r eli ed upo n i n f orm ingth e v iewth at taxla ws wer e inv ali d; (2) th e e xcl usi on of an IRS ag ent ’s taxwo rks hee ts andth e d eni al of an adj our nme nt to all ow the de fen se to rev iewan oth er age nt’ s c alc ula tio ns; (3 ) t he adm iss ionof evi den ce of Ell ett ’s pri or fed era l a nd sta te taxhi sto ry; (4) th e a lle gedvi ola tio n o f B rad y v . M ary lan d, 373 U. S. 83 (19 63) ; ( 5) the de lay ed fil ingofth e s upe rse din g ind ict men t; and(6 ) t he ton e a nd vol ume us ed in del ive rin g the ju ry cha rge . 3 1 cha lle nge s t o h is con vic tio n. W e t her efo re aff irmth e 2 2 jud gme nt bel ow. 3 4 BACKGR OUND 5 Ell ettwa s i ndi cte d i n t he Nor the rn Dis tri ct of New 6 Yor k o n S ept emb er 14, 20 06 forth ree co unt s o f i nco me tax 7 eva sio n f or taxye ars 20 00- 200 2, in vio lat ionof26 U. S.C . § 8 720 1. A sup ers edi ng ind ict men t f ile d o n F ebr uar y 2 , 2 007 9 add ed twoco unt s: taxev asi on forta x y ear20 03, in 10 vio lat ionof26 U. S.C . §72 01, an d m isd eme ano r f ail ure to 11 fil e f or taxye ar 200 4, in vio lat ionof26 U. S.C . §72 03. 12 The di str ictco urtre jec tedEl let t’s re que sts todi smi ss the 13 sup ers edi ng ind ict men t. 14 The ev ide nce attr ial sh owe d t hatbe gin nin g i n 1 989 15 E llett worked as a skilled mechanic at a public gas and 16 utility company. He received wages and overtime4 1 compensation and regularly filed federal and state income 2 tax returns until 1994. Th at yea r, at a c o-w ork er’ s u rgi ng, 3 Ell ettre ad Vul tur es in Eag le’ s C lot hin g: Law ful ly Bre aki ng 4 Fre e F romIg nor anc e Rela tedSl ave ry (19 97) , apu bli cat ionby 5 Lyn ne Mer edi th tha t i nst ruc ts rea der s h ow to “LAWFU LLY 6 STO P!! ! PAYI NG INC OME TAXES ” b ase d o n f anc ifu l a nal yse s o f 7 the ta x l aws . 8 Fro m M ay 199 6 t hro ughta x y ear20 04, El let t f ile d a n 9 “InLi eu of Form W -4” fo rm (mo del ed aft er a s amp le form 10 inc lud ed in Vul tur es) , whic h d ire cte d h is emp loy er to 11 wit hho ld zer o d oll ars fr om his in come. Thus, although 12 Ellett earned between $64,000 and $102,000 per year in the 13 period 2000-03, his federal withholding was zero. In the 14 lat terha lf of 200 4, at the IRS’s instruction, Ellett’s 15 employer began withholding taxes from his wages, with the 16 result that $8, 251 wa s w ith hel d f or 200 4 o n i nco me of 17 $73 ,37 6. El let t d id notfi le fed era l i nco me taxre tur ns for 18 the 20 03 and20 04 taxye ars . In all , E lle tt fai ledtopa y 19 ove r $ 64, 000 infe der al inc ome ta xes fro m 2 000 th rou gh 200 4. 20 Ell ettso ugh t t o p ers uad e t he jur y t hatth e p ros ecu tio n 21 didno t p rov e t he wil lfu lne ss ele men t o f t ax eva sio n, 22 bec aus e h e s inc ere ly bel iev ed tha t, as a n ati ve of one of5 1 the 50 st ate s who wor kedfo r apr iva te emp loy er, he wa s 2 exe rci sin g a“n ont axa ble ri ght ” t o e nga ge in lab or. Ellett 3 testified that he formulated this belief by reading portions 4 of Vultures in Eagle’s Clothing at least one hundred times 5 and by spending hours researching the topic in a law 6 library. On cross-examination Ellett conceded that he knew 7 any tax professional would have disagreed with him (so he 8 never consulted one) and that he was aware that the Supreme 9 Court has upheld the constitutionality of the federal income 10 tax. 11 The government undertook to prove willfulness by 12 showing that the IRS had notified Ellett that his legal 13 position had been “rejected repeatedly as frivolous and 14 without merit by the federal courts.” Other evidence showed 15 that the New York State Department of Taxation informed 16 Ellett that his legal position was “obviously incorrect” and 17 that it “has been rejected and deemed frivolous by the Tax 18 Appeals Tribunal and federal courts.” 19 The ju ry fou nd Ell ettgu ilt y o n a ll fiv e c oun ts of the 20 sup ers edi ng ind ict men t. Th e d ist ric t c our t d eni ed Ell ett ’s 21 mot ion s f or jud gme nt of acquit tal an d f or a n ew tri al, an d 22 on Aug ust10 , 2 007 , s ent enc ed Ell ettpr inc ipa llyto186 1 mon ths ’ i mpr iso nme nt. 2 3 DIS CUS SION 4 Ell ettar gue s t hatdu e p roc ess re qui redth at he be 5 giv en the op por tun itytoli tig ate hi s t ax pos iti on civ ill y 6 or adm ini str ati vel y b efo re bei ng pro sec ute d f or taxev asi on. 7 “Th e e lement s o f t ax eva sio n [ und er 26 U.S .C. § 720 1] 8 are wi llf uln ess , t he exi ste nce ofa taxde fic ien cy andan 9 aff irm ati ve actofev asi on, al l o f whic h t he gov ernmen t must 10 pro ve. ” Uni tedSt ate s v . P lit man , 1 94 F.3 d 5 9, 65 (2dCi r. 11 199 9); se e U nit ed Sta tes v. He lms ley , 9 41 F.2 d 7 1, 97 (2d 12 Cir . 1 991 ) ( exp lai nin g t hatth e j urymu st “fi nd a 13 sub sta nti al taxde fic ien cy” ). 14 The go ver nme nt the ref ore wa s r equ ire d t o e sta bli sh the 15 exi ste nce ofa sub sta nti al taxde fic ien cy bey onda 16 rea son abl e d oub t. Todoth at, El let t c ont end s, the 17 gov ernmen t w as fir st requir ed to adj udi cat e h is inc ome ta x 18 exe mpt ioncl aimei the r c ivi llyoradmin ist rat ive ly. I t i s 19 und isp ute d t hatth e I nte rna l Reve nue Se rvi ce nev er formal ly 20 aud ite d E lle tt andth at the Un ite d S tat es TaxCo urt 21 the ref ore ha s n eve r r ule d o n whatEl let t b eli eve s t o b e t he 22 cen tra l l ega l i ssu e o f t his ca se, namel y, whe the r aci tiz en7 1 of one ofth e 5 0 s tat es whowo rks fo r apr iva te emp loy er is 2 sub jec t t o t he fed era l i nco me tax . 3 Ell ettmi sun der sta nds th e t ax def ici enc y e lementofta x 4 eva sio n. A taxde fic ien cy ari ses byop era tio n o f l aw the 5 dat e ata x r etu rn is due bu t n ot fil ed; nofo rma l d ema nd or 6 ass ess men t i s r equ ire d. Se e 2 6 U .S. C. § 6 151 (a) (“ [W] hena 7 ret urnofta x i s r equ ire d u nde r t his ti tle orre gul ati ons , 8 the pe rso n r equ ire d t o m ake su ch ret urnsh all , w ith out 9 ass ess men t o r n oti ce or dem andfr om the Se cre tar y . . . p ay 10 suc h t ax at the ti me andpl ace fi xedfo r f ili ng the re tur n . 11 . . .” (e mph asi s a dde d)) ; i d. § 6 072 (a) (r equ iri ng ann ual 12 taxre tur ns to be fil ed on or bef ore Ap ril 15 ). Ta x 13 lia bil ityth ere for e c ome s i ntobe ingas ofAp ril 15 . A t ax 14 def ici enc y n oti ce “me rel y r emi nds th e t axp aye r o f h is dut y 15 to paya taxde bt alr ead y due[ , i t] doe s n ot cre ate th at 16 lia bil ity .” Un ite d S tat es v. Voo rhi es, 65 8 F .2d71 0, 714 17 (9t h C ir. 19 81) (i nte rna l quot ati on mar ks andal ter ati ons 18 omi tte d). 19 Acc ord ing ly, th e g ove rnmentis no t r equ ire d t o o bta in a 20 civ il or adm ini str ati ve det erm ina tio n o f ata x d efi cie ncyin 21 ord er to est abl ishth e e xis ten ce of a s ubs tan tia l t ax 22 def ici enc y b eyo nd a r eas ona ble do ubt . We joi n t he Fir st,8 1 Six th, Se ven th andNi nthCi rcu its inho ldi ng tha t due 2 pro ces s d oes no t r equ ire th e g ove rnmenttoad jud ica te tax 3 dis put es civ ill y o r a dmi nis tra tiv elybe for e p roc eed ingto 4 cri min al pro sec uti on forta x e vas ion . See Un ite d S tat es v. 5 Dan iel , 9 56 F.2 d 5 40, 54 2 ( 6thCi r. 199 2); Un ite d S tat es v. 6 Hog an, 86 1 F .2d31 2, 315 -16 (1 st Cir . 1 988 ); Uni tedSt ate s 7 v. Dac k, 747 F. 2d 117 2, 117 4-7 5 ( 7thCi r. 198 4); Vo orh ies , 8 658 F. 2d at 715 (p er cur iam ). El let t’s cr imi nal pr ose cut ion 9 was no t u nla wfu llypr ema tur e. 10 11 CONCLUSION 12 Forth e f ore goi ng rea son s, andfo r t he add iti ona l 13 rea son s d isc uss ed in ourac compan yin g s umm aryor der , w e 14 aff irmth e j udgmen t o f c onv ict ionbe low .