Opinion ID: 1253249
Heading Depth: 2
Heading Rank: 3

Heading: The Fifth Amendment Challenge to Counts 7-15

Text: Josephberg contends here, as he did in the district court, that Counts 7-15 of the indictment, charging him with willful failure to file timely income tax returns for the years 1999-2002 and willful failure to pay tax for the years 1999-2003, must be dismissed as violative of his Fifth Amendment privilege against self-incrimination. He argues principally that because in those years there was an ongoing investigation into the propriety of his continued claims of net operating loss, the very filing of returns for those years would tend to incriminate him, for if he continued to claim the loss he would subject himself to prosecution for those years as well, whereas if he did not claim the loss it would be tantamount to an admission that his prior NOL claims were impermissible. The district court properly rejected this argument, based on long-standing Supreme Court precedent. It is well settled that the Fifth Amendment does not provide a blanket defense for a failure to file tax returns. See California v. Byers, 402 U.S. 424, 434, 91 S.Ct. 1535, 29 L.Ed.2d 9 (1971); United States v. Sullivan, 274 U.S. 259, 263-64, 47 S.Ct. 607, 71 L.Ed. 1037 (1927). Although a taxpayer may, on his return, invoke his Fifth Amendment privilege selectively as to any particular item of information solicited, see, e.g., id. at 264, 47 S.Ct. 607; United States v. Barnes, 604 F.2d 121, 148 (2d Cir.1979) cert. denied, 446 U.S. 907, 100 S.Ct. 1833, 64 L.Ed.2d 260 (1980), [t]here is no constitutional right to refuse to file an income tax return, Byers, 402 U.S. at 434, 91 S.Ct. 1535. This principle has been applied even where there is an ongoing investigation into the taxpayer's affairs. See, e.g., United States v. Poschwatta, 829 F.2d 1477, 1482 & n. 3 (9th Cir.1987) ([e]ven assuming that the IRS was known to be conducting an ongoing criminal investigation, defendant was required to file his returns (citing Sullivan )), cert. denied, 484 U.S. 1064, 108 S.Ct. 1024, 98 L.Ed.2d 989 (1988), effectively overruled on other grounds by Cheek v. United States, 498 U.S. 192, 111 S.Ct. 604, 112 L.Ed.2d 617 (1991), as noted in United States v. Powell, 936 F.2d 1056, 1064 n. 3 (9th Cir.1991); United States v. Malquist, 791 F.2d 1399, 1401-02 (9th Cir.) (failure to file a tax return within the meaning of § 7203 is not excused by Fifth Amendment concerns over a pending investigation (citing Sullivan )), cert. denied, 479 U.S. 954, 107 S.Ct. 445, 93 L.Ed.2d 394 (1986). Although Josephberg contends that this Court in United States v. Romano, 938 F.2d 1569 ( Romano ), ruled that the Fifth Amendment provides protection against a willful-failure-to-file charge where there is an ongoing investigation into the taxpayer's affairs, that contention is squarely contradicted by Romano itself. The case involved a defendant who in November 1983 attempted to transport $359,500 in cash from the United States into Canada. The cash was seized and held by United States customs officials, and the IRS immediately served Romano with a termination assessment of $169,973 as income tax due, an assessment that causes the resulting tax to be due immediately. Romano, 938 F.2d at 1570. On the following day, the IRS filed a lien to secure payment of the assessed tax. Thereafter the government sought forfeiture of the entire $359,500. While the forfeiture proceeding was pending, the government commenced a criminal prosecution against Romano alleging various tax violations; ultimately, all but a charge of tax evasion were dismissed on consent; and after a bench trial on stipulated facts, Romano was convicted of that offense. On appeal, we held that the evidence was insufficient to prove the affirmative-act element of tax evasion, despite several theories advanced by the government. One of the theories we rejected was that Romano's failure to file a tax return in April 1984  some five months after the border incident, the seizure of the cash, and the IRS's filing of its lien  constituted an attempt to evade taxes. Although Josephberg states that [t]his Court reversed Romano's conviction, holding that by filing a tax return Romano might have revealed the source of the currency and incriminated himself, in violation of his Fifth Amendment privilege (Josephberg brief on appeal at 77), the Romano opinion itself, far from supporting this imputation of a Fifth Amendment rationale for the reversal, expressly noted that Romano was not excused from filing the return. The offense of which Romano was convicted was tax evasion, not failure to file. This Court rejected the government's failure-to-file theory of evasion simply because (1) a mere willful omission is not an affirmative act, see Romano, 938 F.2d at 1573, and (2) Romano's failure to file could not logically be viewed as an act of evasion or attempted evasion because, as Romano was well aware, before the tax return was due the government already knew of the money and, indeed, had custody of it, see id. at 1573-74. Notwithstanding the fact that the tax return could have called for incriminating information as to the source of the money, we stated that Romano was, of course, required to file a tax return, id. at 1574; see also id. at 1570-71 (The filing of a termination assessment does not relieve the taxpayer of her obligation to prepare, sign, and file a true and correct income tax return for that year.). Citing Sullivan, 274 U.S. 259, 47 S.Ct. 607, we reasoned that the mere requirement that the tax return be filed did not infringe Romano's Fifth Amendment privilege because Romano need only have filed a return reporting this money as `Sullivan case income  $395,500'. Id. at 1573. [W]hatever Romano's specific reasons may have been for not filing the 1983 return, an attempt to evade taxes was not one of them, for there was nothing for Romano to gain, nothing to conceal from the IRS, except possibly some incriminating information as to the source of the income-information that is protected by the fifth amendment. Romano was, of course, required to file a tax return, and his failure to do so might have been a basis for the lesser criminal charge of failure to file, see 26 U.S.C. § 7203, one of the charges that was dropped. However, given that Romano was required to provide only the bare minimum of information under Sullivan, to protect his fifth amendment rights, information which the government already had and which Romano knew the government had, we cannot accept the government's claim that Romano's failure to file under these circumstances has probative weight in establishing the more serious crime of tax evasion. Romano, 938 F.2d at 1574 (first emphasis in original; subsequent emphases ours). We agree with the reasoning adopted in Romano. The pendency of a government investigation does not give a taxpayer a Fifth Amendment option to fail to file his tax return. His privilege against self-incrimination is protected by his right to refuse, with a Sullivan citation, to answer the questions that implicate that privilege. The district court correctly denied Josephberg's motion to dismiss Counts 7-15.