Supreme Court Struggles With Confusing Criminal Tax and Deportation Interplay in Kawashima Oral Argument

We are finally getting around to updating Kawashima, the Supreme Court case involving the question of whether a conviction under section 7206 is a deportable offense under the immigration laws.  The Court heard argument on the case back in November.  A decision likely will be issued this spring.  It’s hard to read which way the Court is leaning based on the arguments.  Several Justices seemed to balk at petitioners’ technical argument that a false statement on a return (under section 7206) can be something less than intending to deceive the IRS (a crime involving “fraud or deceit” is deportable under the immigration laws — see our prior post).

The argument first focused on the Code’s “willfulness” concept and whether the requirement in section 7206 that the false statement be submitted willfully in fact turned an act that — without willfulness — might not be intended to deceive into something that showed intent to deceive.  Petitioners’ counsel tried to focus the Court on the concept that intent to deceive required intent to induce an action or reliance and not merely intent to make a false statement.  This position seemed to concern several Justices given that the false statement was on a document submitted to the government for a specific purpose (reporting taxes).  The argument also briefly turned to the question of the case law — largely Tax Court case law — which historically held that a conviction under section 7206 did not automatically trigger the extended limitations period for fraud unless the IRS independently proved fraud.  The Justices did not substantively comment on this point during petitioners’ time but came back to it during the government’s argument and it seemed to get some traction with the Chief Justice.

Petitioners’ counsel and Justice Scalia spent a substantial amount of time discussing whether the inclusion of both section 7201 and the “fraud or deceit” provision in the deportation law rendered the former superfluous if the government’s reading was adopted.  This involved a discussion of the text of section 7201, which has long been textually framed as an attempt “to evade or defeat any tax” and does not specifically use the words fraud or deceit.  While the Justices did not seem to be happy with the responses by petitioners’ counsel, an amicus brief submitted by Johnnie Walters — a former IRS Commissioner — deals with the history and meaning of section 7201 quite compellingly.  And when questioning the government’s counsel, Justices Ginsburg and Kagan both seemed concerned that the government’s position could read one part of the deportation statute out of the law based on this historic reading of section 7201.  This led Justice Breyer to introduce the idea that section 7206 does not seem to meet the common law definitions of fraud or deceit — a point not raised by counsel as best as we can tell — but something that could be relevant in determining Congressional intent.

Piercing through the government’s argument, Justice Kagan was able to get its counsel to admit that even the evasion-of-payment cases under section 7201 have to involve some sort of fraud in order to be prosecuted under that statute.  Counsel also basically admitted that the IRS/DOJ has never prosecuted a section 7201 case that didn’t involve fraud.  This triggered a question by Justice Breyer as to whether the government’s position would make every single perjury statute a deportable offense — something that would profoundly impact both defendants and the system.  Justice Kagan then returned to the circularity of the government’s arguments regarding superfluity (a point we have made a few times previously).

As we said at the outset, it is difficult to see where all of this is going.  Petitioners do seem to us to have the stronger case when you consider the historic meaning of section 7201 (which is fundamental to criminal tax practice) but the statutory text could be confusing when read outside of that context.  We will update you as soon as we see a decision.

Taxpayer and Supporting Amicus Briefs Filed in Home Concrete

The taxpayer has filed its brief in Home Concrete.  The brief argues forcefully that the case is controlled by Colony, characterizing the underlying statutory issue as “settled by stare decisis.”   The brief disputes the government’s arguments that the changes made by Congress in the 1954 Code had the effect of extending the six-year statute to overstatements of basis outside the trade or business context, observing that the 1954 Code changes were all designed to favor taxpayers. 

With respect to the regulations, the taxpayer first argues that Colony should be understood as having held that the statutory language was unambiguous, thus foreclosing Treasury from issuing regulations that would require a different statutory interpretation.   (As we previously reported, this particular point was the focus of oral argument before the Federal Circuit in Grapevine, with the court ultimately resolving that point in favor of the government and deferring to the regulation.)  Second, the brief argues that the regulation would in any event be invalid because of its retroactive effect on pending litigation.  In addition, the brief makes some narrower arguments about this particular regulation, maintaining that by its terms the regulation does not cover cases like Home Concrete and that the regulation is procedurally defective.

At least eight amicus briefs were filed in support of the taxpayer.  A brief filed by the American College of Tax Counsel focuses on the retroactive application of the regulations, elaborating on the taxpayer’s arguments in asserting that “retroactive fighting regulations” that are designed to change the outcome of pending litigation “are inconsistent with the highest traditions of the rule of law” and should not be afforded Chevron deference.  The brief invokes general principles against retroactive legislation and also argues that Code section 7805(b)’s prohibition on retroactive regulations applies.  The government argues that section 7805(b) does not apply to regulations interpreting statutes enacted before 1996, a position that was not heavily disputed by taxpayers in the court of appeals litigation of these cases.

Four other amicus briefs were filed by taxpayers who litigated the Home Concrete issues in other circuits and whose cases will be controlled by the outcome — one filed by Grapevine Imports (Federal Circuit), one filed by UTAM, Ltd. (D.C. Circuit), one filed jointly by Daniel Burks (5th Circuit) and Reynolds Properties (case pending in the 9th Circuit), and one filed by Bausch & Lomb (cases pending in the Second Circuit).   The latter brief emphasizes that Bausch & Lomb’s case does not involve a son-of-BOSS tax shelter, but rather a more standard business transaction, and also that it involves only section 6229, which does not contain the statutory changes from the 1939 Code found in section 6501 and on which the government heavily relies to distinguish Colony.  Amicus briefs were also filed by the Government of the U.S. Virgin Islands, the National Association of Home Builders, and the National Federation of Independent Business, Small Business Legal Center.  Copies of the taxpayer’s brief and some of the amicus briefs are attached.

The oral argument in Home Concrete is scheduled for January 17.   The government’s reply brief is due on January 10.

Home Concrete – Taxpayer’s Supreme Court brief

Home Concrete – Amicus Brief of American College of Tax Counsel

Home Concrete – Grapevine Amicus Brief

Home Concrete – Amicus Brief of Burks and Reynolds Properties

Home Concete – Amicus Merits Brief of Bausch & Lomb

Court of Federal Claims Construes “Same Taxpayer” Requirement for Interest Netting

In Magma Power v. United States, Case No. 09-419T, the Court of Federal Claims tackled the arcane topic of interest netting.  The issue in Magma Power was a narrow question of statutory interpretation, but the broader topic of interest netting warrants a word of explanation. 

The government charges interest on tax underpayments at a higher rate (under section 6601) than it pays on tax overpayments.  Because it often takes several years or more to determine whether a taxpayer has an overpayment or underpayment for a particular tax year and the amount of that overpayment or underpayment, there are sometimes post-return periods during which a taxpayer has overlapping overpayments and underpayments.  When this occurs, the taxpayer should owe no interest on the overlapping amount.  If the overlapping amounts are not netted, however, the rate disparity results in net interest in the government’s favor.  To correct this inequity, Congress enacted section 6621(d), which provides that “to the extent that, for any period, interest is payable . . . and allowable . . . on equivalent underpayments and overpayments for the same taxpayer, . . . the net rate of interest on such amounts shall be zero.” 

The narrow statutory-interpretation issue in Magma Power is the meaning of the term “same taxpayer” under section 6621(d).  The IRS had denied section 6621(d) relief to Magma Power on the theory that Magma Power was no longer the “same taxpayer” after becoming a member of a consolidated group. 

Magma Power filed a return for its 1993 tax year sometime in 1994.  In February 1995, CalEnergy Company acquired Magma Power and subsequently included Magma Power on its consolidated tax returns.  The IRS later determined a deficiency for Magma Power’s 1993 tax year, and Magma Power paid that deficiency and over $9 million in associated underpayment interest in 2000 and 2002.  The CalEnergy consolidated group overpaid its taxes in four consecutive tax years from 1995 through 1998.  Despite some disagreement between the parties, the court found that some portion of these overpayments were attributable to Magma Power’s activities.  In 2004 and 2005, the IRS refunded those overpayments plus the associated overpayment interest to the consolidated group agent (which by then was MidAmerican Energy Holdings Company).  There were overlapping underpayments and overpayments for the period that began with the filing of the 1995-98 returns and ended with the satisfaction of Magma Power’s 1993 underpayment.  Magma Power claimed interest-netting refunds for that period.  The IRS denied the refund on the theory that the consolidated group could not net its overpayments with Magma Power’s underpayments because of the “same taxpayer” requirement of section 6621(d). 

The court’s plain-language analysis of section 6621(d) is straightforward and decisively rebuts what appears to be a flimsy position taken by the IRS.  The essence of the court’s conclusion is that becoming a member of a consolidated group does not fundamentally alter a taxpayer’s identity.  The court rests this decision on the uncontroversial premise that the taxpayer identification number (or EIN, for corporations like Magma Power) is the sine qua non of taxpayer identity.  And because Magma Power retained the same EIN (and therefore same identity) after its inclusion in the consolidated group, the court held that Magma Power was the same taxpayer for section 6621(d) purposes for the 1993 underpayment and its allocable portion of the 1995-98 overpayments. 

Although the court addresses several arguments made by the government, the only notable bump in the court’s road to its conclusion was some language in another Court of Federal Claims decision, Energy East v. United States, 92 Fed. Cl. 29 (2010), aff’d 645 F.3d 1358 (Fed. Cir. 2011).  Interpreting the meaning of “same taxpayer” for interest-netting purposes in Energy East, the lower court cited the dictionary definition of “same” and decided that section 6621(d) requires that the taxpayer must be “identical” and “without addition, change, or discontinuance.”  (The issue on appeal was narrower and the Federal Circuit did not reject or adopt this aspect of the lower court’s opinion.)

The court in Magma Power had little difficulty distinguishing Energy East:  Energy East was trying to net the overpayment years of acquired companies against its own underpayment years.  The hitch was that both the underpayment years and overpayment years came before Energy East acquired those companies.  In Magma Power, the court held that the Energy East situation was “radically different” than Magma Power’s attempt to net its own 1993 underpayment against its own later overpayments (albeit encompassed within the Cal Energy consolidated group).

The government may well appeal Magma Power based on the broad language in the lower court’s decision in Energy East.  If they do, we’ll keep you posted. 

Magma Power opinion 10.28.2011

Supreme Court Briefing Underway and Argument Date Set in Home Concrete

The Supreme Court has set January 17 as the date for the oral argument in Home Concrete, the case in which it will decide the “Intermountain” issues concerning the applicability of the six-year statute of limitations to overstatements of basis, on which we have reported extensively many times before.  (See here and here for a sample.)  In the meantime, the briefing has commenced with the filing of the government’s opening brief (linked below).

The brief covers what is mostly familiar ground at this point, but it does further develop some of the arguments that have emerged in the course of the court of appeals litigation, with particular reliance on the D.C. Circuit’s decision in Intermountain.  The government divides its argument into three sections.  The first analyzes the statutory text, structure, and purpose, emphasizing a broad definition of the word “omission” and arguing that its position is supported by other subsections within section 6501(e).  Second, the government argues for deference to the final regulations.  Finally, the third section argues that the Supreme Court’s Colony decision is not controlling.

With respect to the administrative deference point that is of the broadest significance in this case, the government not surprisingly offers up arguments that will enable the Court to rule in its favor without exploring the outer limits of the power that the Court’s recent precedents arguably confer on the Treasury Department.  But the government does not shirk from pushing those limits in case its other arguments are unpersuasive. 

For example, although the government argues that the Colony decision is inapplicable because it involved a 1939 Code provision that has since changed in some ways, the government maintains that it should still prevail even if no changes had been made to the statute in the 1954 Code.  “Under Brand X,” the government states, “the new Treasury Department regulation would be entitled to Chevron deference even if that rule construed precisely the same statutory provision that was before the Court in Colony.”  Thus, the government is not bashful about claiming an extraordinary amount of power for the Treasury Department.  Congress can pass a law establishing a particular rule, and the Supreme Court can construe that law, but the Treasury Department can turn it all upside down as long as the Court did not declare the statutory language unambiguous. 

The government’s brief also addresses the additional objection that the regulations operate retroactively.  The government argues that they are not truly retroactive, because they supposedly “clarified rather than changed existing law” (notwithstanding Colony and two court of appeals decisions that were unquestionably on point) and addressed “procedures,” rather than the legality of the conduct.  In the end, however, the government maintains that “the rule would be valid even if it had retroactive effect.” Thus, the government fully embraces an expansion of the Treasury Department’s power beyond that recognized in Mayo — arguing that an agency not only has the power to promulgate rules that overturn settled judicial precedents, but also has the power to apply those new rules to prior years.  Given that even Congress is usually constrained in adopting retroactive legislation, it will be interesting to see if the Court balks at conferring this kind of power on unelected officials.

The taxpayer’s brief is due December 15.

Home Concrete – U.S. Supreme Court opening brief

Supreme Court Briefs Filed in Kawashima

The petitioners’ and respondent’s briefs have been filed in Kawashima v. Holder, Sup. Ct. Docket No. 10-577, appealing 615 F.3d 1043 (9th Cir. 2010).  As described in our original post, that case involves the question of whether pleas to section 7206 offenses (subscribing to false statements and assisting same) are “aggravated felonies” that result in deportation under the immigration laws.  The case turns largely on the statutory interpretation of the relevant portion of 8 U.S.C. §1101(a)(43)(M).

The petitioners’ position is essentially the same as it was below (although more developed).  The primary argument is based on the language of 8 U.S.C. §1101(a)(43)(M), which provides, in relevant part, 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.

The crime to which petitioners pled is plainly not an aggravated felony under the second prong, because petitioner pled to section 7206 and not to section 7201.  Petitioners argue that section 7206 offenses cannot be covered by the first prong either.  They base this argument on ordinary principles of statutory construction.

First, petitioners argue that the use of the term “revenue loss” in the second prong of the statute indicates Congressional intent that the term “loss to the victim or victims” in the first prong does not include a revenue loss to the government.  The purposeful use of different terms in each section seems to imply such an intent.  Furthermore, the response that this difference simply reflects a different purpose for each prong (one that focuses on governmental loss and one that does not) ultimately supports petitioners’ overall argument that the first prong was not intended to reach losses to the government such as through non-section 7201 tax crimes.

Second, petitioners posit that interpreting tax crimes to fall into the first statutory prong would render the second superfluous.  As we previously discussed, this seems to be a strong argument.  At a minimum, it would be odd for Congress to place one tax crime in a specific statutory provision and all other tax crimes in a vague and broad provision that covers many other offenses.  And the analysis in Leocal v. Ashcroft, 543 U.S. 1 (2004) (cited by petitioners) strongly implies that Congress should not be considered to have intended that meaning.

Finally, petitioners argue that the reference in the second prong to “tax evasion” helps to define (and limit) the scope of the term “fraud or deceit” in the first prong and that the sentencing guidelines support this view.  Petitioners’ analysis in this respect is largely based on the application of the interpretative canon that the specific limits the more general.  Because terms like “revenue loss” and “tax evasion” are used in the second prong, it is not appropriate — under petitioners’ application of this canon — to read those terms into the first prong. Petitioners’ reliance on the sentencing guidelines seems to be a stretch given that there is no direct support for the premise that Congress actually considered these guidelines when formulating the aggravated felony definition.  (Petitioners argue that Congress “likely” considered same given the timeline of adoption of the various provisions.)

In the alternative, the Kawashimas argue that their pleas did not involve fraud or deceit (and thus could not be included in the first prong anyway) and that, even if they might be included in that prong, the whole scheme is so confusing that the rule of lenity should apply to exempt them from a strict application.  The first argument relies on the elemental approach to the determination of whether a crime is an aggravated felony as applied by the Court in Nijhawan v. Holder, 555 U.S. 1131 (2009) and earlier rulings.  Under that approach, courts are supposed to determine whether the relevant factors for aggravated felony purposes (here, among others, fraud or deceit) were necessarily elements of the crime for which the defendant was convicted and not to focus on the specific conduct committed by the specific defendant.  See also Leocal, 543 U.S. at 7.  Because the elements of section 7206 do not require a finding of fraud or deceit (petitioners characterize it, not altogether unfairly, as a tax perjury statute), under this “elements and nature” approach, a section 7206 offense cannot amount to an aggravated felony under the first prong of 8 U.S.C. §1101(a)(43)(M).  This second argument is a Hail Mary and implicitly relies on the confusing state of the immigration law in this area as demonstrated in the rest of petitioners’ brief.  While immigration rules are ludicrously complex in this area, so is much of criminal law.  Unless the members of the Court are prepared to hold that any issue complex enough to find its way into their hands is necessarily unclear or confusing enough to give rise to the rule of lenity, it would seem an odd way to resolve the case (although a refusal by the Court to apply ludicrously complex rules might convince Congress to be more rational in drafting statutes).

The Solicitor General’s brief generally tracks the petitioners’ arguments in substance but not in order.  The government takes issue with the petitioners’ assertion that section 7206 does not require an element of fraud or deceit by focusing more on the dictionary definition of deceit than the historic application of section 7206 in jurisprudential context.  As to the question of fraud, the government attempts to equate material falsehoods (required for section 7206) with fraud (or at least deceit).  This appears to be a difficult argument to sustain unless the Court is prepared to depart from principles that are fairly well settled in the lower courts.  The Tax Court and several Circuit Courts of Appeals have held that a conviction under section 7206 does not necessarily trigger fraud penalties or the fraud period of limitations in the civil side of the Internal Revenue Code.  See, e.g., Wright v. Commissioner, 84 T.C. 636 (1985).  It is hard to reconcile the government’s argument with these authorities.  Perhaps the best way to distinguish these authorities is on the basis that the material falsehoods at issue did not amount to a showing that the taxpayer intended to prepare a fraudulent return (i.e., to commit tax evasion) and that the aggravated felony test asks the (different) question of whether any fraud was conducted against a “victim.”  The logical problem with this argument is that it assumes that there is some other way for the government to suffer a loss than the fraudulent return.  If the fraud has to be linked to the loss, then the interpretation of section 7206 in cases like Wright seems inconsistent with the government’s argument in its brief.

The government attacks petitioners’ specific-over-general argument on the basis that the second prong does not by its terms encompass all tax offenses (it refers only to section 7201, the capstone tax offense).  While this is true, it raises the question of why Congress would have isolated one tax offense from all of the others (assuming all of the others are included in the first prong).  This, in turn, drives into petitioners’ superfluity argument.  On that question (where much of the merit rests in our opinion), the government starts with the premise that Congress sometimes wishes to be superfluous.  It then argues that the failure of the second prong to cover all tax offenses (as opposed to section 7201) would render that prong ambiguous.  This argument seems baseless.  The only way prong one is rendered ambiguous by petitioners’ argument is if you are predisposed to assume that all tax offenses are either in prong one or in prong two.  If you come to the statutory interpretation exercise without that excess luggage, it is perfectly natural for prong two to deal with the sole exemplar of a tax offense that is an aggravated felony and for prong one to include no tax offenses at all.  (This is arguably the most natural reading of the provision).  The government’s efforts to force ambiguity into prong one by arguing that Congress might have wanted to make really, really, really sure that a tax statute — section 7201 — that for all time has stood as the capstone of tax fraud/evasion would be interpreted as involving fraud or deceit seem to us a bit of a stretch.

The government finishes by focusing on the legislative disconnect between the aggravated felony rules and the sentencing guidelines (fairly chastising petitioners for failing to prove a direct connection).  It also dismisses the applicability of the rule of lenity on the ground that mere ambiguity is insufficient to trigger that rule (the case law indicates the ambiguity must be grievous).  Finally, the government notes that the agency never formally addressed the question of whether non-section 7201 tax crimes can be aggravated felonies.  In the government’s view the agency should be allowed to do so on any remand and any such decision should be accorded Chevron deference.  As mentioned above, we doubt that the Court will resolve the case on either of these bases.

Petitioners’ reply brief is due October 31, and the case is scheduled for oral argument on November 7.

Government Acquiesces in Beard Petition for Certiorari

The government has now filed its response to the taxpayer’s petition for certiorari in Beard, the first of the Intermountain cases to reach the Supreme Court.  As expected, the government filed an “acquiescence,” meaning that it told the Court that the Seventh Circuit had correctly ruled against the taxpayer, but the government agreed that it is appropriate for the Supreme Court to hear the case in order to resolve the conflict in the circuits.   In the words of the response, “[a]lthough the decision below is correct, . . . [i]n light of the square circuit conflict, and the importance of the uniform administration of federal tax law, the petition for a writ of certiorari should be granted.”

It is very likely that the Supreme Court will agree to hear the case in light of the government’s acquiescence.  The Court does not issue orders on certiorari petitions over its summer recess, but will sometimes issue them during the week before the Court’s formal return on the first Monday in October.  Look for an order granting certiorari to issue on September 26 or soon thereafter.

Beard – Government Response to Petition for Cert

Taxpayer Seeks Rehearing in Salman Ranch

While we wait to see what the government will say to the Supreme Court on the Intermountain issue, litigation continues in the courts of appeals.  (The government’s response to the certiorari petition in Beard is currently due on July 27.)   The taxpayer has filed a petition for rehearing en banc in Salman Ranch.  It is hard to imagine that the Tenth Circuit will head down that road when it appears that the Supreme Court will address the issue.  Salman Ranch, however, does present one wrinkle not present in the other cases — namely, whether the government was precluded by collateral estoppel from relitigating the issue against this taxpayer because Salman Ranch had prevailed in the Federal Circuit on the same issue in another tax year.  The Tenth Circuit panel ruled that collateral estoppel did not apply because, in light of the issuance of the regulations, it was not true that the “applicable legal rules remain unchanged.” 

The petition for rehearing, as well as the other briefs in this case, are linked below.

Salman Ranch – Taxpayer Petition for Rehearing

Salman Ranch – Government Opening Brief

Salman Ranch – Taxpayer Response Brief

Salman Ranch – Government Reply Brief

Tenth Circuit Sides With Government on Intermountain Issue

The Tenth Circuit, after a long period of deliberation, has reversed the Tax Court in Salman Ranch.  (Opinion linked here.)  This now makes the score 3-2 in favor of the government in the series of appeals that have spread to most circuits.  See our original report here.

The Tenth Circuit’s opinion closely tracks the reasoning of the Federal Circuit in Grapevine.  The court first looked at the Supreme Court’s decision in Colony and concluded that it should not be read as holding that the statute unambiguously supports the taxpayer’s position.  (The Tenth Circuit did note its disagreement with the Seventh Circuit’s conclusion in Beard that the statute unambiguously resolves the issue in the government’s favor.)   Having found that Colony was not an obstacle to the issuance of valid Treasury regulations, the court proceeded to apply the Chevron test to the regulations and, like the Federal Circuit, ruled that the regulations surmounted the relatively low bar of being a reasonable interpretation of the statute.  The Tenth Circuit stated:  “Although we are not convinced the IRS’s interpretation is the only permissible one or even the one we would have adopted if addressing this question afresh, we are satisfied that it is a ‘permissible construction’ within the mandate of Chevron.” 

The Salman Ranch case presented one interesting wrinkle not found in the other Intermountain cases.  The Salman Ranch partnership had already prevailed on the identical issue in the Federal Circuit for a different tax year.  See Salman Ranch Ltd. v. Commissioner, 573 F.3d 1362 (Fed. Cir. 2009).  Ordinarily, that decision would have collateral estoppel effect in other litigation on the same issue between the same parties, and therefore it would have controlled the outcome in the Tenth Circuit.  The Tenth Circuit ruled, however, that there was no collateral estoppel effect because the “rules” had changed in the interim — because of the issuance of the new regulations.  The Federal Circuit had observed in Grapevine that the Chevron doctrine gives “regulatory agencies, not the courts, primary responsibility to interpret ambiguous statutory provisions.”  The Tenth Circuit’s decision goes that statement one better with respect to the power of agencies to make law, at least in this particular context.  It potentially gives regulatory agencies more power than even Congress to change the law, as Congress usually does not act retroactively when it enacts new legislation to overturn a court decision.  Without retroactive effect, new legislation would not destroy the collateral estoppel effect of a court decision.

If the taxpayer wishes to seek rehearing, the petition would be due on July 18.  By that time, the issues could be on their way to the Supreme Court because the government’s deadline for seeking certiorari in Home Concrete, the most advanced of these cases, is July 5.

Cert Granted in Kawashima

The Supreme Court this morning granted certiorari in one case, Kawashima v. Holder, on which we have been reporting for some time.  See our original post here.  As we observed in our report on the cert petition, the Court always has the option of limiting its grant of certiorari to a subset of the questions presented in the petition, and it has exercised that option here.  The Court will resolve only the first question presented — namely, whether violations of 26 U.S.C. 7206 (subscribing to a false statement on a tax return) are “aggravated felonies” that can justify deportation of a resident alien.  The Kawashimas argue that only tax evasion convictions under section 7201 are aggravated felonies, and the courts of appeals have divided on the issue.  Now the Supreme Court will resolve the dispute. 

The case will now be briefed over the summer and argued in the fall of 2011, with a decision likely in the spring of 2012.  The Kawashimas’ opening brief is due July 7.

United States Opposes Certiorari in Kawashima

After four extensions, the government finally filed its response to the petition for certiorari in Kawashima.  As we previously reported (see here and here), that petition raises a question on which the courts of appeals are in conflict — whether a tax offense other than tax evasion can be an “aggravated felony” for purposes of the immigration laws, which would justify deportation of a resident alien.  Maybe the government was spending all that extra time considering whether to “acquiesce” in the petition and invite the Supreme Court to resolve the conflict, or maybe it was just taking its sweet old time.  In any event, the government has filed a brief urging the Court to deny certiorari. 

The brief in opposition acknowledges that there is a conflict in the circuits, terming it “a narrow disagreement.”  But the government argues that there is no need for the Court to resolve that disagreement.  In particular, the government argues that the Court’s recent decision in Nijhawan v. Holder, 129 S. Ct. 2294 (2009), supports the government’s position and, since the Third Circuit’s contrary decision was issued before Nijhawan, “the narrow disagreement in the courts of appeals may be resolved without further intervention of this Court.”  On the merits, the government resists the petition’s statutory construction analysis by arguing that “fraud or deceit” is not necessarily an element of tax evasion under 26 U.S.C. § 7201.  If it is not, then theoretically 8 U.S.C. §1101(a)(43)(M)(ii) is not superfluous, as the petition argues.

In their reply brief, petitioners vigorously contest the government’s premise that “fraud or deceit” is not necessarily an element of tax evasion under 26 U.S.C. § 7201 by analyzing the structure of the Code’s criminal tax provisions.  Among other things, petitioners state that the government’s “reasoning defies logic:  the greater offense [section 7201] does not necessarily involve ‘fraud or deceit,’ but the lesser offense [section 7206] necessarily does.”  With respect to the government’s assertion that this circuit conflict does not warrant the Supreme Court’s attention, petitioners maintain that the need to stop unlawful deportations presents a compelling reason for Supreme Court review.

The Court is likely to act on the petition on May 16.

Kawashima Brief in Opposition

Kawashima Reply Brief in Support of Petition

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