Opinion ID: 4019312
Heading Depth: 3
Heading Rank: 1

Heading: Legal Sufficiency of The Levy Counts

Text: On appeal, Wanland renews his attacks on the levy counts, arguing that his partnership draws were neither salary nor wages as a matter of law and fact. The district court correctly left that decision to the jury, and ample evidence supported the guilty verdicts on these counts. An inquiry into tax evasion does not end with how the defendant labels his income. Otherwise, evaders could paint their salary and wages as “fruits of labor,” “donations for work,” or “gifts from my boss” and avoid the levy process altogether. The district court put it this way: “[n]obody in his right mind would think that somehow or other lawyer’s draws ought to be treated differently than wages and salary in general.” Wanland cannot point to anything that suggests Congress had a different take. Rather than limiting our review to labels, we look at the substance of Wanland’s partnership draws, which the district court correctly cast as a jury question. The district court’s jury instruction, quoted above, captured the essence of the inquiry. Under the partnership agreement, Wanland was entitled to receive routine, equal monthly draws that were remuneration solely for services provided to the partnerships’ clients. These draws were set at a predetermined amount, 12 UNITED STATES V. WANLAND identical to wages or salary in all relevant respects. This included a routine $3,000 per month payment for the rent on his house. That Wanland occasionally withdrew more money in one month than another does not change the routine income he was guaranteed and that he received for his work as a lawyer. Not surprisingly, other courts agree with our analysis. For example, in United States v. Jefferson-Pilot Life Insurance Co., 49 F.3d 1020 (4th Cir. 1995), a civil case, the Fourth Circuit held that section 6331’s “salary or wages” language covered commissions paid to an insurance salesman, rejecting the same argument that Wanland now makes. Id. at 1021. Even though the defendant did not label his commissions as “salary” or “wages,” they were payments made to the individual on a repeat basis and at consistent amounts. Id. As such, they fit directly within “[t]he underlying purpose of the [continuous levy] provision,” which was designed “to provide a means of levying upon remuneration payable to a taxpayer on a recurring basis for personal services performed for the payor.” Id. at 1022. Similarly, in United States v. Moskowitz, Passman & Edelman, 603 F.3d 162 (2d Cir. 2010), another civil case, the Second Circuit applied Jefferson-Pilot to law firm partnership draws. The court explained that the “salary or wages” provision applies to “compensation for services paid in the form of fees, commissions, bonuses, and similar items.” Id. at 168 (quoting 26 C.F.R. § 301.6331-1(b)(1)). Partnership draws are similar to fees, commissions, or bonuses, and are compensation directly for services rendered to clients. Id. at 168–69; see also Mission Primary Care Clinic, PLLC v. Dir., Internal Revenue Serv., 370 F. App’x 536 (5th Cir. 2010) (holding that payments remunerated to doctor-members of a UNITED STATES V. WANLAND 13 PLLC could constitute “salary or wages” because the “critical characteristics” of the payments were similar to traditional salaries or wages). Wanland falls back on the rule of lenity to argue that we should dismiss his levy convictions because the extent of the “salary or wages” language was ambiguous. But the rule of lenity has limited application generally, and none here. While no previous Ninth Circuit case has addressed this particular issue, that is not determinative. “[A] lack of prior appellate rulings on the topic does not render the law vague.” United States v. Kahre, 737 F.3d 554, 568 (9th Cir. 2013) (quoting United States v. George, 420 F.3d 991, 995 (9th Cir. 2005)). “The rule of lenity only applies . . . where there is a grievous ambiguity or uncertainty in the language and structure of the statute, such that even after a court has seized every thing from which aid can be derived, it is still left with an ambiguous statute.” Id. at 572 (quoting United States v. Carona, 660 F.3d 360, 369 (9th Cir. 2011)). Lenity is especially inappropriate here, as “[i]nclusion of a scienter requirement ‘mitigates a law’s vagueness, especially with respect to the adequacy of notice to the complainant that his conduct is proscribed.’” Id. (quoting United States v. Guo, 634 F.3d 1119, 1123 (9th Cir. 2011)); see also Guo, 634 F.3d at 1123 (reasoning that a scienter requirement in the statute “alleviates any concern over the complexity of the regulatory scheme”). The jury had to find that Wanland acted with the intent “to evade and defeat the collection of the assessed taxes,” a stringent mens rea element. Moreover, the continuous levy, served on Wanland, stated that “[w]ages and salary include fees, commissions, and bonuses.” Wanland was therefore on notice that his rigid definition of “salary or wages” may have been incorrect. See 14 UNITED STATES V. WANLAND United States v. Cabaccang, 332 F.3d 622, 635 n.22 (9th Cir. 2003) (explaining that the rule of lenity is concerned with ensuring that “defendants have notice of the criminality of their actions” and “that legislatures . . . define criminal activity” (quoting United States v. Bass, 404 U.S. 336, 348 (1971))). Moreover, as requested by Wanland, the district court gave the jury advice of counsel and good faith instructions. Had the jury believed Wanland relied on an attorney or was genuinely uncertain about his responsibilities under the law, it could have acquitted him. Accordingly, neither the district court nor the jury erred in concluding that Wanland’s monthly income from his law practice qualified as “salary or wages” under section 6331(e). Finally, Wanland argues that it is incorrect to treat partnership draws as “salary or wages” under section 6331(e) because the Internal Revenue Code treats self-employment income differently from the salary and wages of employees. He contends that the “salary” and “wages” referenced in section 6331 must have the same meanings that they have in the employment tax code. We disagree. “There is no indication in the Code . . . that Congress intended to coordinate the meanings of these terms between the two separate sets of provisions.” Jefferson-Pilot, 49 F.3d at 1023. As the Fourth Circuit pointed out, “[i]f Congress had so intended, it easily could have included in § 6331(e) a cross reference to the employment tax provisions, as it has done repeatedly in other sections of the Code.” Id. Instead, like the district court, we construe “salary or wages” in section 6331(e) in accordance with its plain or natural meaning. Black’s Law Dictionary defines a “salary” as “[a]n agreed upon compensation for services—esp. professional or semiprofessional services—usu. paid at UNITED STATES V. WANLAND 15 regular intervals on a yearly basis, as distinguished from an hourly basis.” The jury instructions closely tracked this definition. Here, there was ample evidence for the jury to find that Wanland’s partnership draws were remuneration paid for professional services (legal services), defined on a yearly basis (based on the year’s profits), and payable at regular intervals (monthly), rendering them a “salary.”