United States v. Robert W. Flitcraft and Rebecca A. Flitcraft
58 A.F.T.R.2d (RIA) 6147, 803 F.2d 184, 21 Fed. R. Serv. 1190 (1986)
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Rule of Law:
For criminal tax offenses requiring proof of 'willfulness,' a defendant's good-faith misunderstanding of the law is a valid defense, regardless of whether that misunderstanding was objectively reasonable.
Facts:
- Rebecca Flitcraft served on a federal jury and provided the lone vote for acquittal, resulting in a mistrial.
- Following the mistrial, federal investigators began looking into potential juror tampering and discovered the Flitcrafts' tax situation.
- The investigation revealed that Robert W. Flitcraft and his wife Rebecca had not filed federal income tax returns for 1981 and 1982.
- In 1982, the Flitcrafts also filed withholding exemption certificates with their employers, falsely claiming they were exempt from federal income tax.
- Robert Flitcraft testified that he had read legal cases and articles which convinced him that his wages were not 'income' but rather an even exchange for his time, meaning he owed no tax.
- Rebecca Flitcraft stated that she trusted her husband's research and his conclusion that they were not required to file returns or pay income tax.
- Evidence showed that Robert Flitcraft had been a member of a tax protest group.
Procedural Posture:
- Robert and Rebecca Flitcraft were indicted for willful failure to file tax returns under 26 U.S.C. § 7203 and willful filing of a false withholding exemption certificate under 26 U.S.C. § 7205.
- A trial was held before a United States magistrate.
- The magistrate excluded documentary evidence offered by the Flitcrafts but permitted them to testify orally about the materials they claimed to have relied on.
- The magistrate instructed the jury that to serve as a defense, the Flitcrafts' beliefs about tax law had to be 'objectively reasonable.'
- A jury found the Flitcrafts guilty on all counts.
- The Flitcrafts appealed their conviction to the United States District Court, which affirmed the judgment of the magistrate's court.
- The Flitcrafts, as appellants, then appealed the district court's decision to the United States Court of Appeals for the Fifth Circuit, with the United States as the appellee.
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Issue:
Does a jury instruction in a criminal tax case, which states that a defendant's good-faith misunderstanding of the law must be 'objectively reasonable' to be a valid defense against the element of 'willfulness,' constitute a plain error misstatement of the law?
Opinions:
Majority - Johnson, Circuit Judge
Yes. A jury instruction requiring a defendant's misunderstanding of tax law to be 'objectively reasonable' is an erroneous statement of law, as the correct standard for willfulness is subjective. The Supreme Court defines 'willfulness' in criminal tax statutes as the 'intentional violation of a known legal duty.' This definition establishes a subjective standard, meaning the government must prove the defendant was aware of their legal obligation. Consequently, a defendant's bona fide, or good-faith, misunderstanding of the law is a valid defense, even if that misunderstanding is objectively unreasonable. The trial court's instruction that the Flitcrafts' beliefs must be objectively reasonable and could not be contrary to 'settled law' effectively removed their only defense from the jury's consideration, amounting to an impermissible directed verdict for the government and constituting plain error.
Analysis:
This decision reaffirms the high bar for proving 'willfulness' in specific intent crimes, particularly in the complex area of tax law. It solidifies the precedent that the standard for a defendant's knowledge of the law is subjective, not objective. The ruling protects defendants from being convicted based on what a 'reasonable person' would have known, focusing instead on the defendant's actual state of mind. This is significant in tax protest cases, as it allows for a defense based on a genuine, albeit legally incorrect, belief, forcing the prosecution to prove the defendant intentionally and knowingly violated the law rather than simply being mistaken or misguided.
