Court Opinion

ID: 4363222
Source: CourtListenerOpinion
Date Created: 2019-01-30 21:00:20.003829+00
Date Added: 2024-06-11T14:21:07.098100
License: Public Domain

NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT
                               ________________

                                      No. 17-2872
                                   ________________

                            UNITED STATES OF AMERICA

                                             v.

                              JAMES KERR SCHLOSSER,
                                                  Appellant
                                 ________________

                      Appeal from the United States District Court
                         for the Eastern District of Pennsylvania
                     (D.C. Criminal Action No. 5-16-cr-00178-001)
                      District Judge: Honorable Jeffrey L. Schmehl
                                   ________________

                      Submitted Under Third Circuit L.A.R. 34.1(a)
                                   January 8, 2019

               Before: AMBRO, KRAUSE, and FUENTES, Circuit Judges

                            (Opinion filed: January 30, 2019)

                                   ________________

                                       OPINION*
                                   ________________

*
 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
AMBRO, Circuit Judge

       James Kerr Schlosser appeals his convictions for several tax offenses. His defense

at trial was that he was misled to believe he could avoid his tax obligations by renouncing

his federal citizenship. Although we vacate one conviction in light of a superseding

decision of the Supreme Court, we affirm the District Court’s decision to limit the

admission of documentary evidence to support Schlosser’s beliefs about the tax system.

                                       Background

       In 1994, Schlosser attended a tax seminar run by one Jeffrey Thayer, who held

himself out as a lawyer. At the seminar, Schlosser learned of the distinction between

“federal citizenship” and “state citizenship,” and he discovered that by renouncing the

former he would purportedly relieve himself of the obligation to pay federal income

taxes. Armed with this newfound information, Schlosser filed a document with a county

official in New Jersey purporting to repudiate his Social Security number in order to

reject his federal citizenship. He has not paid federal income taxes since.

       The IRS uncovered Schlosser’s tax deficiency in 2006 and ordered him to pay

back taxes. When he disputed his tax obligations, both the Tax Court and our Court

rejected his arguments as “frivolous.” See Schlosser v. Comm’r of Internal Revenue, 94

T.C.M. (CCH) 346, at *3 (T.C. 2007); Schlosser v. Comm’r of Internal Revenue, 287 F.

App’x 169, 171 (3d Cir. 2008). He nonetheless persisted in refusing to pay taxes.

       Schlosser’s persistence ultimately led to criminal action in 2016. He faced

charges of “corruptly” impeding the “due administration” of the tax laws, see 26 U.S.C.

§ 7212(a), and of “willfully” failing to pay taxes for 2012 and 2013, see id. § 7203. At

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trial, his principal defense was good faith — that is, Schlosser genuinely believed that he

had no legal obligation to pay taxes because of what he had learned at the Thayer

seminar. He testified in detail about the seminar, but the District Court excluded from

evidence certain materials from the seminar that had informed Schlosser’s beliefs about

the tax laws. As the Court later explained in a post-trial decision, the seminar materials

were “duplicative” of Schlosser’s testimony and their presentation to the jury would have

been “a poor use of judicial resources.” App. 13.

       The jury convicted Schlosser on all counts, and he was sentenced to nearly four

years in prison and ordered to pay over $400,000 in restitution. His appeal centers on the

District Court’s decision to exclude the seminar materials from evidence.

                                        Discussion

       We begin with one point that is not in dispute. The Government concedes that the

evidence was insufficient to convict Schlosser for “corruptly” impeding the “due

administration” of the tax laws under 26 U.S.C. § 7212(a). After the trial, the Supreme

Court held that a conviction under § 7212(a) requires interference with “a particular

administrative proceeding” that was either “pending” or “reasonably foreseeable by the

defendant.” Marinello v. United States, 138 S. Ct. 1101, 1109–10 (2018). Because the

jury was not instructed about this requirement, we vacate Schlosser’s conviction under 26

U.S.C. § 7212(a). And because we vacate the conviction under § 7212(a), we must

remand for a revision of the loss calculation and restitution order and for resentencing on

Schlosser’s remaining counts of conviction.

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       All that remains in dispute is the District Court’s decision to exclude from

evidence certain materials from the Thayer seminar. The statute of conviction required

the Government to prove that Schlosser “willfully” failed to pay his taxes in 2012 and

2013. See 26 U.S.C. § 7203. In this context, “willfulness” means “a voluntary,

intentional violation of a known legal duty.” Cheek v. United States, 498 U.S. 192, 200

(1991) (quoting United States v. Pomponio, 429 U.S. 10, 12 (1976)). Thus if a jury

believes that a defendant had a “good-faith misunderstanding” about the law he

disobeyed — even a misunderstanding that was not “objectively reasonable” — then the

Government has failed to carry its burden as to willfulness. Id. at 202. Schlosser’s

defense at trial was exactly this: his failure to pay his taxes was not willful because he

believed, per Thayer’s seminar, that he had renounced his federal citizenship. As a result,

the key decision facing the jury was whether this belief constituted a good-faith

misunderstanding of the law. Given the task before the jury, we must decide whether the

District Court acted within its discretion in allowing Schlosser to testify extensively as to

the content of the seminar while excluding from evidence the actual materials Schlosser

received at the seminar.

       We discern no abuse of discretion. The District Court allowed Schlosser to testify

comprehensively about the Thayer seminar. The admission of seminar materials,

therefore, would have been piling on. This is especially true in light of the intervening

tax litigation in which Schlosser was told that the theories espoused at the Thayer seminar

were nonsense. In 2008, our Court rejected as “baseless” and “patently frivolous”

Schlosser’s argument that he was not a federal citizen subject to federal taxation.

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Schlosser, 287 F. App’x at 170–71. This echoed the statement of the Tax Court that

Schlosser had “advanced nothing but frivolous and meritless arguments with respect to

his underlying tax liability.” Schlosser, 94 T.C.M. (CCH) 346, at *3. Whatever

Schlosser thought he learned at Thayer’s 1994 seminar, these decisions should have set

him straight. At the very least, they justified the District Court’s decision not to let him

needlessly pile seminar materials on top of his extensive testimony about that seminar.

       In other words, the litigation culminating in our 2008 decision makes the value of

the 1994 Thayer seminar slim at best. This sets Schlosser’s case apart from those in

which excluded evidence was central to a tax protestor’s good-faith misunderstanding of

the law. See, e.g., United States v. Lankford, 955 F.2d 1545, 1551 (11th Cir. 1992)

(holding that tax expert should have been allowed to testify about the reasonableness of a

defendant’s good-faith belief that certain payment was a non-taxable gift). As the entity

charged with ensuring that the evidence presented at trial does not waste time, see Fed. R.

Evid. 611(a)(2), the District Court did not abuse its discretion in cutting off evidence

about the Thayer seminar after extensive testimony on the issue, see Fed. R. Evid. 403(b).

       Nor were the excluded materials from the Thayer seminar relevant to any of

Schlosser’s other reasons for thinking he was free from federal taxation. First, he thought

his Social Security number was invalid because he obtained it before he turned eighteen.

Without a valid Social Security number, he concluded he owed no federal taxes. Second,

he believed that several mailings from the IRS waived the Government’s right to collect

taxes from him. See, e.g., App. 850 (mail from IRS with code MFR-01, meaning “not

required to be mailed or filed”); App. 1165 (mail from IRS invalid because it was not

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signed in ink); App. 1168–73 (IRS failed to respond to 2012 letter from Schlosser and

thus waived its right to collect taxes). Finally, Schlosser believed that the Social Security

Act corresponded with the “mark of the beast” in Christian eschatology. Compare 42

U.S.C. § 666 (a portion of the Social Security Act), with Revelation 13:16-18 (the

number of the beast is 666). As a result, he felt he could not pay taxes consistent with his

religious beliefs. See, e.g., App. 184:1–13; App. 1021:14–20. Materials from the Thayer

seminar have no bearing on Schlosser’s views on these topics.

       In sum, we affirm the convictions for willfully failing to pay taxes under 26 U.S.C.

§ 7203 and vacate the conviction for corruptly impeding the collection of taxes under 26

U.S.C. § 7212(a). As a result, we remand to the District Court to recalculate the loss

amount for sentencing purposes and to correct the restitution award. See United States v.

Diaz, 639 F.3d 616, 619–20 (3d Cir. 2011). This will result in resentencing.

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