Court Opinion

ID: 9467174
Source: CourtListenerOpinion
Date Created: 2023-08-05 01:40:37.727159+00
Date Added: 2024-06-11T17:40:12.386492
License: Public Domain

*474TJOFLAT, Circuit Judge,
concurring in part and dissenting in part:
Martin Herzog was convicted on four counts of supplying false or fraudulent information on income tax withholding exemption certificates in violation of Internal Revenue Code section 7205. In pertinent part, section 7205 provides a penalty for “[a]ny individual required to supply information to his employer under section 3402 who willfully supplies false or fraudulent information . . ..” I.R.C. § 7205. Two counts of Herzog’s indictment concern the willfully fraudulent preparation and submission of W-4 forms to Herzog’s employer; Herzog had claimed ninety — nine exemptions on those forms. Record, vol. 1 at 1. These acts allegedly violated Internal Revenue Code section 3402(f)(2)(A), which provides:
On or before the date of the commencement of employment with an employer, the employee shall furnish the employer with a signed withholding exemption certificate relating to the number of withholding exemptions which he claims, which shall in no event exceed the number to which he is entitled.
The other two counts of Herzog’s indictment allege a willfully fraudulent preparation of W-4E forms, also submitted to Herzog’s employer. Record, vol. 1 at 1. These forms provide for total exemption from withholding of federal income tax upon an employee’s declaration that he neither incurred tax liability in the preceding year nor anticipates incurring tax liability for the current year:
Notwithstanding any other provision of this section, an employer shall not be required to deduct and withhold any tax under this chapter upon a payment of wages to an employee if there is in effect with respect to such payment a withholding exemption certificate . . . furnished to the employer by the employee certifying that the employee-
(1) incurred no liability for income tax imposed under subtitle A for his preceding taxable year, and
(2) anticipates that he will incur no liability for income tax imposed under subtitle A for his current taxable year.
I.R.C. § 3402(n).
I fully concur in the majority’s reasoning concerning Herzog’s conviction for willfully fraudulent preparation of W-4 forms, but I am forced reluctantly to dissent to upholding Herzog’s conviction for fraudulent preparation of W-4E forms.
This appeal concerns the admissibility of certain testimony allegedly relevant to the issue of intent. Herzog has maintained that he did not willfully violate the provisions of section 3402 because he honestly believed that his wages did not constitute income for tax purposes, and thus were not subject to federal taxation. Herzog purportedly reached this conclusion through extensive study of the law of federal income taxation, which led him to embrace the “equal exchange theory” of income. This theory, he asserts, precludes the taxation of wages.
Herzog contends that the trial court erred in excluding the testimony of his expert witness. Herzog offered the. testimony of Dr. David Goshien, a professor of tax law, to bolster his claim that he lacked willfulness. Herzog wished to question Dr. Goshien about the equal exchange theory and the complexity of the tax laws; through this testimony, he hoped to substantiate the reasonableness of his conclusions about the “equal exchange theory.” The trial court sustained relevancy objections to the presentation of this testimony.
United States v. Garber, 607 F.2d 92 (5th Cir. 1979), (en banc), presented an appeal closely akin to Herzog’s. In Garber, a taxpayer appealed from a conviction for willfully evading federal tax liability. The taxpayer, Dorothy Garber, had failed to report income she received from selling her blood plasma. Her defense to the charge was that she had not willfully misstated her income; any misstatement was due solely to a bona fide belief that “because she was selling a part of her body the money received was not taxable.” Id. at 96 n.3. To support her claim that she lacked the requi*475site intent, Garber proffered the expert testimony of a tax accountant who also believed that the sales were not taxable. Although Garber had not consulted this expert in relation to preparing her tax forms, the defense nevertheless argued that this testimony should be presented to the jury because it revealed sufficient doubt concerning the taxability of Garber’s receipts to preclude a finding of willful intent. The trial court excluded the testimony, but this circuit reversed, concluding:
In a case such as this where the element of willfulness is critical to the defense, the defendant is entitled to wide latitude in the introduction of evidence tending to show lack of intent.... The defendant testified that she subjectively thought that proceeds from the sale of part of her body were not taxable. By disallowing [expert] testimony that a recognized theory of tax law supports Garber’s feelings, the court deprived the defendant of evidence showing her state of mind to be reasonable. .
Id. at 99 (emphasis added). See also id. at 97.
The testimony of Herzog’s expert was surely irrelevant to the charge that he intended to prepare his W-4 forms fraudulently. Dr. Goshien was not going to testify that it was reasonable for Herzog to believe himself entitled to ninety-nine exemptions, or that it was reasonable for Herzog to believe that he legitimately could avoid taxation by falsely declaring tax exemptions. The two counts involving W — 4 forms simply charged that Herzog willfully declared an entitlement to ninety-nine exemptions when he knew that he was not so entitled. Nothing the defense offered about Dr. Goshien’s testimony could have been construed as relevant to Herzog’s willfulness on this question, and thus the majority rightfully holds that Garber is inapplicable.
The expert testimony, however, was, under Garber, quite relevant to the reasonableness of Herzog’s W-4E declarations that he was exempt from tax. Thus Garber requires that it be admitted as probative of Herzog’s requisite intent under section 7205. At trial, Herzog testified that before February of 1976 he believed his wages were not taxable under the Internal Revenue Code. Record, vol. V at 174. This indicates that Herzog may have concluded that he had not, under subtitle A of the Code, incurred tax liability on his wages in the preceding tax year and that he also would not incur tax liability in his then current tax year. Arguably, it was these beliefs that Herzog declared on his W — 4E forms. Under Garber, Dr. Goshien’s testimony concerning the theory supposedly underlying Herzog’s declarations was relevant to the reasonableness of Herzog’s beliefs and, thus, probative of his lack of intent. Moreover, under Garber it is irrelevant that Herzog had never consulted Dr. Goshien, or even discussed his theories of tax law with him prior to this action. Garber, 607 F.2d at 96, 98-99. The expert testimony is still relevant because it is supposedly probative of the reasonableness of Herzog’s beliefs. Id. at 99. Consequently, I would remand this case for retrial of Herzog’s conviction for fraudulently preparing W — 4E forms.
I must emphasize that I reach the result of this dissent quite reluctantly, especially in light of Mr. Herzog’s apparent guilt. The reasoning of Garber, in my view, is sophistic, see United States v. Garber, 607 F.2d 92 at 109-116 (5th Cir. 1979) (en banc) (Tjoflat, J., dissenting); I urge following it here simply because I believe the weight of precedent too compelling to disregard.