It’s No Fun Being a Legal Alien Either (If You Plead to a Tax Crime)

On August 4, 2010, the Ninth Circuit denied panel and en banc rehearing in a case applying 8 U.S.C. § 1101(a)(43)(M)(i) to hold that a tax offense other than tax evasion is a crime involving fraud or deceit and thus an aggravated felony under the immigration laws (which allows for deportation).  Kawashima v. Holder, 2010 U.S. App. LEXIS 16125 (9th Cir. Aug. 4, 2010).  This is actually the fourth opinion issued by the Ninth Circuit in the case, appending a three-judge dissent from denial of en banc rehearing to the third panel opinion issued back in January 2010. Kawashima v. Holder, 593 F.3d 979 (9th Cir. 2010).  (The first two panel opinions (Kawashima v. Mukasey, 530 F.3d 1111 (9th Cir. 2008), and Kawashima v. Gonzalez, 503 F.3d 997 (9th Cir. 2007)), were withdrawn so that the panel could reconsider the case in light of new Ninth Circuit and Supreme Court decisions.)  The Ninth Circuit has now placed itself squarely in conflict with the decision of a divided panel of the Third Circuit (Ki Se Lee v. Ashcroft, 368 F.3d 218 (3d Cir. 2004), in which then Judge (now Justice) Alito was the dissenter.  The Fifth Circuit, however, adopted the same basic reasoning as Kawashima in Arguelles-Olivares v. Mukasey, 526 F.3d 171 (5th Cir. 2008), cert. denied, 130 S. Ct. 736 (2009).

The primary question in these cases is one of statutory interpretation.  8 U.S.C. §1101(a)(43)(M) provides that an aggravated felony includes an offense that:

(i) involves fraud or deceit in which the loss to the victim or victims exceeds $ 10,000; or

(ii) is described in section 7201 of the Internal Revenue Code of 1986 (relating to tax evasion) in which the revenue loss to the Government exceeds $ 10,000;

Mr. Kawashima pled guilty to section 7206(1), a tax crime that involves subscribing to a false statement on a tax return; his wife pled to section 7206(2), a tax crime involving aiding and assisting in the preparation of a false tax return.  Neither pled to section 7201, tax evasion.

The dispute between the circuits rests on how much the interpretation of (M)(i) should be guided by the existence of (M)(ii).  As the Third Circuit and a strongly worded dissent in Kawashima both note, “statutory text must be read in context.”  2010 U.S. App. LEXIS 16125 at *28.  When read in context, it appears that the only tax crime that was intended to be covered is tax evasion as set out in (M)(ii).  This is so because if tax crimes are governed by (M)(i), then (M)(ii) would be superfluous.  Superfluities are a red flag in statutory interpretation.  See, e.g., Market Co. v. Hoffman, 101 U.S. 112, 115 (1879) (“We are not at liberty to construe any statute so as to deny effect to any part of its language. It is a cardinal rule of statutory construction that significance and effect shall, if possible, be accorded to every word.”).

The majority in Kawashima evaded this reasoning on the basis that if Congress had not wanted (M)(i) to apply to tax offenses “Congress surely would have included some language in that provision to signal that intention.”  U.S. App. LEXIS 16125 at *13.  Apparently, the language in the next clause, (M)(ii), doesn’t count.  And the majority’s opinion does not convincingly address the problem of creating superfluities.  Merely because the language of (M)(i) is broad enough to cover tax offenses other than tax evasion when that subsection is read in isolation, that doesn’t mean that one can divine Congressional intent to actually do so when the statute is read holistically.  Regardless, two circuits have now adopted the view that a tax offense other than tax evasion can be an “aggravated felony.”

It is too early to tell if a petition for certiorari will be filed in Kawashima but given the split and the substantial number of amici involved in the circuit filings, one might reasonably expect one.  That said, the same conflict was presented in Arguelles-Olivares yet the Court denied certiorari, apparently persuaded by the Solicitor General’s suggestion that the Court “should wait for further developments.”  Having the Ninth Circuit join the Fifth Circuit in agreeing with the government may not be the kind of development the Supreme Court had in mind.  A petition for certiorari would be due on November 2, 2010.  The final Ninth Circuit opinion and the United States brief in opposition in Arguelles-Olivares are attached.