Knowledge of tax-related proceeding necessary for obstruction conviction

By James A. Beavers, J.D., LL.M., CPA, CGMA

The Supreme Court held that to convict a taxpayer who was indicted for violating Sec. 7212(a) for corruptly obstructing or impeding the due administration of the Code, the government must prove that the taxpayer was aware of a pending tax-related proceeding, such as a particular investigation or audit, or could reasonably foresee that such a proceeding would commence.


Between 2004 and 2009, the IRS opened, closed, and then reopened an investigation into the tax activities of Carlo Marinello. In 2012, the government indicted Marinello, charging him with violations of several criminal tax statutes including the Omnibus Clause of Sec. 7212(a), which forbids a taxpayer from:

corruptly or by force or threats of force (including any threatening letter or communication) obstruct[ing] or imped[ing], or endeavor[ing] to obstruct or impede, the due administration of [the Internal Revenue Code].

The government claimed that Marinello had violated the Omnibus Clause because he had engaged in at least one of a number of specified activities, including "failing to maintain corporate books and records," "failing to provide" his tax accountant "with complete and accurate" tax "information," "destroying . . . business records," "hiding income," and "paying employees . . . with cash."

The trial judge instructed the jury that, to convict Marinello of violating the Omnibus Clause, it must find unanimously that he engaged in at least one of the specified activities, that the jurors need not agree on which one, and that he did so "corruptly," meaning "with the intent to secure an unlawful advantage or benefit, either for [himself] or for another." The judge, however, did not instruct the jury that it must find that Marinello knew he was under investigation and intended corruptly to interfere with that investigation. The jury subsequently convicted Marinello on all counts.

Marinello appealed his conviction to the Second Circuit. He argued, among other things, that a violation of the Omnibus Clause requires the government to show that the defendant had tried to interfere with a "pending IRS proceeding," such as a particular investigation. The appeals court disagreed. It held that a defendant need not possess " 'an awareness of a particular [IRS] action or investigation.' "

Marinello petitioned the Supreme Court for certiorari, again arguing that the Omnibus Clause requires the government to prove a defendant was aware of "a pending IRS action or proceeding, such as an investigation or audit," when he "engaged in the purportedly obstructive conduct." In light of a split of opinion among the circuits on this point, the Court granted Marinello's petition.

The Supreme Court's decision

The Supreme Court held that to convict a defendant under the Omnibus Clause, the government must prove the defendant was aware of a pending tax-related proceeding, such as a particular investigation or audit, or could reasonably foresee that such a proceeding would commence.

As the Court explained, in Aguilar, 515 U.S. 593 (1995), it had interpreted a similarly worded statute, 18 U.S.C. Section 1503(a), which made it a felony "corruptly or by threats or force, or by any threatening letter or communication, [to] influenc[e], obstruc[t], or imped[e], or endeavo[r] to influence, obstruct, or impede, the due administration of justice." In Aguilar, the Court adopted a nexus requirement, under which the government must prove the defendant's act had a relationship in time, causation, or logic with the judicial proceedings.

The Court stated it had set forth two important reasons in Aguilar for adopting the nexus requirement. The first was that it had "traditionally exercised restraint in assessing the reach of a federal criminal statute . . . out of deference to the prerogatives of Congress." The second was "out of concern that 'a fair warning should be given to the world in language that the common world will understand, of what the law intends to do if a certain line is passed.' " The Court found that both reasons applied with similar strength to Marinello's case.

Regarding the exercise of restraint, the Court observed that the statutory words "obstruct or impede" are broad and could refer to a wide range of actions. However, the words suggest an object of the action, which in this case was the "due administration of" the Code. The Court stated that the word "administration" could be read literally to also refer to a wide range of acts, but it was best viewed to refer more narrowly to specific, targeted acts of administration rather than every conceivable act involved in the Code's administration.

The Court found that the statutory text confirmed this interpretation. The Omnibus Clause is in the middle of a sentence referring to efforts to "intimidate or impede any officer or employee of the United States acting in an official capacity." The first part of the sentence containing the Omnibus Clause also refers to "force or threats of force," which are defined as "threats of bodily harm to the officer or employee of the United States or to a member of his family." Furthermore, Sec. 7212(b) refers to the "forcibl[e] rescu[e]" of "any property after it shall have been seized under" the Code. Thus, the Court concluded that subsections (a) and (b) of Sec. 7212 refer to corrupt or forceful actions taken against individual identifiable persons or property.

Accordingly, the Court found that, in context, the Omnibus Clause logically serves as a "catchall" for the obstructive conduct the subsection sets forth, not for every violation that interferes with routine administrative procedures such as the processing of tax returns, receipt of tax payments, or issuance of tax refunds. It also noted that the legislative history supported this interpretation, stating it found "nothing in the statute's history suggesting that Congress intended the Omnibus Clause as a catchall applicable to the entire Code" (slip op. at 6).

The Court further maintained that the broader context of the full Code also weighed against a broad reading. According to the Court, interpreting the Omnibus Clause to apply to all Code administration could transform the Code's numerous misdemeanor provisions into felonies, making them redundant or perhaps the subject of plea bargaining. While some overlap in criminal provisions is inevitable, in the Court's view, a broad reading would result in an unprecedented degree of overlap and redundancy, particularly because it would render other provisions in the same enactment superfluous.

Regarding fair warning to taxpayers, the Court found that a broad reading of the Omnibus Clause could result in a similar lack of fair warning and related kinds of unfairness that had led the Court to its narrow interpretation of the statute in Aguilar. The government claimed that the "corrupt state of mind" requirement will cure any over-breadth problem, but the Court found it "difficult to imagine" a scenario when that requirement would make a practical difference in the context of federal tax prosecutions because a taxpayer that "willfully" violates the Code can always be found to have acted "corruptly."

The Court also reasoned that relying on prosecutorial discretion to narrow the otherwise wide-ranging scope of a criminal statute's general language places too much power in the prosecutor's hands. Doing so could lead to nonuniform execution of prosecutorial power, which would tend to undermine the necessary public confidence in the criminal justice system. Thus, the Court found that it could not "construe a criminal statute on the assumption that the Government will 'use it responsibly.'"


A dissent in the case made the equally plausible argument that the language of Sec. 7212(a) means what it says, i.e., that the Omnibus Clause applies to a taxpayer's obstructing or impeding the entire Code. The Code, the dissent pointed out, authorizes the IRS to "calculate, assess, and collect taxes" (dissenting opinion, slip op. at 1), and the dissent would have held that the Omnibus Clause forbids "corrupt efforts to impede the IRS from performing any of these activities" (id.).

Besides countering the majority's statutory interpretation and its related contextual arguments, the dissent asserted that the majority's reliance on Aguilar was misplaced because the nexus requirement in Aguilar was based on the specific history of the statute involved in the case, whereas that same statutory history was not present with regard to Sec. 7212.

In addition, in response to the majority's contention that a broad reading of the statute would result in unbridled prosecutorial discretion, the dissent quoted from the Supreme Court's opinion in Bisceglia, 420 U.S. 141, 146 (1975): "[T]he authority vested in tax collectors may be abused, as all power is subject to abuse. However, the solution is not to restrict that authority so as to undermine the efficacy of the federal tax system."

Marinello, No. 16-1144 (U.S. 3/21/18)

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