Opinion ID: 1755850
Heading Depth: 1
Heading Rank: 3

Heading: Taxability of Wages

Text: Benson contends that he was denied due process by the absence of substantive jurisdiction of the trial court and misrepresentation of code applications in the jury instructions. Benson's argument, as we understand it, is that his wages, earned in exchange for time and effort expended, represent no gain and are, therefore, not income subject to North Dakota's income tax laws. This argument is apparently derived from dicta in Eisner v. Macomber, 252 U.S. 189, 207, 40 S.Ct. 189, 193, 64 L.Ed. 521 (1920), that income must be a gain. Article X, § 3, N.D. Const., provides as follows: Section 3. No tax shall be levied except in pursuance of law, and every law imposing a tax shall state distinctly the object of the same, to which only it shall be applied. Notwithstanding the foregoing or any other provisions of this constitution, the legislative assembly, in any law imposing a tax or taxes on, in respect to or measured by income, may define the income on, in respect to or by which such tax or taxes are imposed or measured or may define the tax itself by reference to any provision of the laws of the United States as the same may be or become effective at any time or from time to time, and may prescribe exceptions or modifications to any such provision. Pursuant to this authority, Section 57-38-01(8), N.D.C.C., defines taxable income in the case of individuals as the taxable income as computed for an individual, ... for federal income tax purposes under the United States Internal Revenue Code of 1954, as amended, plus or minus such adjustments as may be provided by this act and chapter or other provisions of law. Federal taxable income is the starting point for the computation of an individual's state income tax. Erdle v. Dorgan, 300 N.W.2d 834 (N.D.1980). For federal income tax purposes, 26 U.S.C. § 61 defines gross income as all income from whatever source including compensation for services. These provisions clearly provide that wages are taxable income under North Dakota's income tax laws. Furthermore, the federal courts that have considered this argument have universally held that wages in exchange for labor or services are subject to the income tax laws. See, e.g., Hyslep v. United States, 765 F.2d 1083 (11th Cir.1985); United States v. Romero, 640 F.2d 1014 (9th Cir.1981). Benson also argues that Section 57-38-45, N.D.C.C., does not establish a requirement for filing income tax returns and does not refer to any other section which requires him to file an income tax return. Thus, Benson contends the complaint did not allege an offense, and the county court did not have jurisdiction to hear the case. In this instance, the criminal complaint charged Benson with violating Sections 57-38-45 and 12.1-32-01(5), N.D.C.C. Section 57-38-45(3), N.D.C.C., provides that any person ... who, with intent to evade any requirement of this chapter, shall fail to pay any tax, or to make, sign, or verify any return, or to supply any information required by law, or under the provisions of this chapter ... shall be liable to a penalty of not more than one thousand dollars .... Such person shall also be guilty of a class A misdemeanor. [Emphasis added.] Section 57-38-31(1), N.D.C.C., [6] provides, in part, as follows: 57-38-31, Duty of individuals and fiduciaries to make return. 1. Every resident individual, every fiduciary for a resident individual, estate, or trust, who is required by the provisions of the United States Internal Revenue Code of 1954, as amended, to file a federal income tax return, and every individual or fiduciary who receives income derived from sources in this state, shall file an income tax return with the state tax commissioner in such form as the commissioner may prescribe. ... [Emphasis added.] This section clearly requires every resident individual who is required to file a federal income tax return or who receives income from sources within the state, to file an income tax return with the state tax commissioner. This section meets the any requirement of this chapter [Chapter 57-38, N.D.C.C.] language as contemplated by Section 57-38-45(3), N.D.C.C., and provides an affirmative duty for individuals who meet its qualification to file a state income tax return. Whether or not Benson met these qualifications was a question for the jury to decide after being properly instructed. Benson has not called our attention to any erroneous jury instructions on the requirement for filing state income tax returns. We conclude that Benson was not denied due process in this regard. Benson also contends that the state failed to prove that he acted with willfulness in the commission of the alleged offenses. We note that Section 57-38-45(3), N.D.C.C., requires that there be an intent to evade any requirement of Chapter 57-38, N.D.C.C., not that the act be done willfully. Chapter 57-38, N.D.C.C., does not define intent, and the trial court instructed the jury on the definition of intentionally in Section 12.1-02-02(1)(a), N.D.C.C. Although Section 12.1-02-02, N.D.C.C., may be directly applicable only to offenses or crimes described in Title 12.1, N.D.C.C., City of Dickinson v. Mueller, 261 N.W.2d 787 (N.D.1977), it was an appropriate source to look to in determining the definition of intent. See Lord v. Job Service North Dakota, 343 N.W.2d 92 (N.D.1984). Nevertheless, we believe the trial court's instruction was more favorable to Benson than he may have been entitled. See State v. Bilbrey, 349 N.W.2d 1 (N.D.1984); State v. Goetz, 312 N.W.2d 1 (N.D.1981), cert. denied, 455 U.S. 924, 102 S.Ct. 1286, 71 L.Ed.2d 467 (1982). In essence, Benson's argument on this issue is that there was insufficient evidence to support the jury verdict. We have reviewed the record and we conclude that there was substantial evidence to support the jury verdict. See State v. Olson, 372 N.W.2d 901 (N.D.1985). The judgment is affirmed. ERICKSTAD, C.J., and VANDE WALLE, MESCHKE and GIERKE, JJ., concur.