Opinion ID: 666924
Heading Depth: 2
Heading Rank: 1

Heading: Illegal activities as substantial gainful activity

Text: 12 On appeal, the Secretary contends that the illegal nature of Corrao's activities does not affect their characterization as substantial gainful activity (SGA). Whether illegal activities may be considered SGA is an issue of first impression in our circuit. 13 The Secretary argues that the fact that an activity is illegal is not a sufficient reason to exempt it from the reach of civil law. She also argues that the claimant's motive is irrelevant to the concept of whether he is earning income, and that it is against public policy to grant SSI benefits to those who obtain income illegally. 14 The only federal circuit court to address this issue is the Seventh Circuit, which held that illegal activity can constitute SGA. Dotson v. Shalala, 1 F.3d 571, 576 (7th Cir.1993). 1 The Dotson court properly noted that the regulatory definition of SGA does not distinguish between legality and illegality, but instead focuses on the nature of the claimant's activities. Specifically, an activity must be both substantial and gainful. See 20 C.F.R. Sec. 416.972 (1993). Work activity is substantial if it involves doing significant physical or mental activities. Id. at Sec. 416.972(a) (1993). It is gainful if it is the kind of work usually done for pay or profit, whether or not a profit is realized. Id. at Sec. 416.972(b) (1993). The claimant's activities need only be of the type that normally results in pay or profit. Conceivably, the claimant's activities may be gainful even if the claimant does not earn income. 20 C.F.R. Sec. 416.972(b) (1993); Callaghan v. Shalala, 992 F.2d 692, 695-96 (7th Cir.1993) (financially unsuccessful sandwich shop business and upholstery business are gainful activities). Because the regulations require an ALJ to focus on the nature of the claimant's activities and the skills required to perform them, the Dotson court concluded that whether activities are illegal is irrelevant to the analysis. 15 We agree with the Seventh Circuit's analysis that nothing in the regulations suggests that illegal activity cannot be SGA. To the contrary, there clearly exist illegal activities that are both substantial and gainful. Tax fraud, for example, involves significant mental activity, and the completion of tax forms is an activity that normally results in a benefit to the individual completing the forms. As a matter of policy, we see no reason to prefer claimants who earn a living by illegal means over those who survive without violating the law by suggesting that the illegal activity is neither substantial nor gainful. See Dotson, 1 F.3d at 576. 16 Our conclusion that illegal activity can constitute SGA receives support from the principle in taxation law that unlawful earnings are considered taxable gross income. See id. at 577. The tax laws clearly recognize that it is incongruous to have the gains of the honest laborer taxed and the gains of the dishonest immune. 2 Id. (citing James v. United States, 366 U.S. 213, 218, 81 S.Ct. 1052, 1055, 6 L.Ed.2d 246 (1961)). 17 Corrao argues that the proper distinction is not between illegal and legal activities, but between addicted individuals and other individuals. He argues that because Congress intended to award SSI to individuals who suffer from substance abuse, and because an individual must obtain an addicting substance to be addicted, to use the purchase of the substance to deny SSI benefits defeats the purpose of the statute. 18 We agree with Corrao that a primary concern of Congress in providing for SSI was to help individuals who suffer from disabling addictions. However, Congress also provided that no individual who is capable of performing SGA is entitled to SSI, even if the individual suffers from a mental or physical disability. 42 U.S.C. Secs. 1382c(a)(3)(A) & (B). Thus, we understand the correct focus of the analysis to be whether an individual is capable of performing substantial and gainful activity, not whether the individual is addicted. Some addicted individuals, such as an attorney who suffers from cocaine addiction, may be capable of performing substantial and gainful work within our economy. While their condition is undeniably tragic, the fact that they are still able to function within our society indicates that they are not disabled for SSI purposes. Other addicts, however, may be so overwhelmed by their addiction that they are unable to function within our society. It is the latter group that should be considered disabled for the purposes of awarding SSI. 19 Because the regulations make no distinction between legal and illegal activities, and because such a distinction would conflict with the purposes of SSI, we conclude that illegal activity can be considered substantial gainful activity.