Ignorance is Bliss, Especially for the Tax
(presented for educational purposes)
Copyright (c) 1993 Northwestern School of Law
Journal of Criminal Law & Criminology
Comedian Steve Martin, in an old stand-up routine, tells his audience
that by following his simple plan, they can have a million dollars and
never pay taxes. Step one, he advises, is to get a million dollars. Step
two, naturally, is to not pay taxes. The beauty of the strategy,
however, rests in step three. When the Internal Revenue Service agent
comes to your door asking why you have not paid taxes, Martin says,
simply smile and say, "I forgot." n1
Although Martin was joking, under current Federal tax law, his plan
succeeds. "Forgetting" to pay your taxes actually constitutes
a valid defense to a charge of criminal tax evasion. n2 Other defenses
include believing that wages are not income or that paper currency is
not money. n3 Forget what your criminal law professor taught you.
Ignorance of the law is an excuse in tax crimes, and the only joke is on
the Internal Revenue Service.
The Internal Revenue Service ("IRS") may assess criminal
charges on taxpayers who willfully evade the payment of income taxes. n4
In Cheek v. United States, the United States Supreme Court interpreted
"willfully" as the taxpayer's actual knowledge that his
actions violate the law. n5 One who avoids taxes can avoid conviction by
demonstrating his truly held belief that he owes no taxes. n6 Moreover,
the jury may not consider the reasonableness of this belief. n7
The Supreme Court's interpretation of "willfulness" in
Cheek created a huge tax loophole. This comment argues that Congress
must close the Cheek loophole by modifying the Internal Revenue Code.
The law should hold a taxpayer in "willful" violation of the
tax code if he either subjectively intends to break the law or if, under
an objective standard, he unreasonably relies upon a mistaken belief
about the tax law. Part I traces the development of the
"willfulness" doctrine, discussing the traditional rule that
ignorance of the law is no defense to a crime, the split in the circuit
courts regarding the interpretation of "willfulness," and the
Supreme Court's decision in Cheek. Part II examines the post-Cheek
application of the doctrine to tax evasion and to other white collar
crimes. Part III argues that the law should require a taxpayer's
mistaken belief that he does not owe taxes to be both objectively
reasonable and truly held to serve as a defense.
I. Development of the "Willfulness Doctrine"
a. The Law of Ignorance and Mistake
A mistake of law occurs, for example, when one person shoots and
kills another, believing that murder is not a crime. n8 A mistake of
fact, on the other hand, occurs if that same person knows that murder is
illegal, but pulls the trigger anyway under the mistaken belief that the
gun is not loaded. n9 When a taxpayer miscalculates her income, she
makes a mistake of fact, but if she believes, for instance, that the
Internal Revenue Code does not tax capital gains, she operates under a
mistake of law. In most cases, enormous legal consequences hinge on
whether the defendant made a mistake of fact or a mistake of law.
Generally, mistake of law is no defense to a criminal act, while mistake
of fact is a valid defense if the error is both reasonable and honest.
n10 The tax law, however, renders the distinction meaningless, because
either type of mistake exculpates the defendant if honestly, even though
unreasonably, made. n11 The tax law's failure to distinguish between
mistakes of law and fact represents a significant departure from
traditional criminal law.
"Ignorantia legis neminem excusat," or "ignorance of
the law excuses no man" ranks among the most familiar maxims of
law. n12 This rule usually applies regardless of the severity of the
crime, and even if the entire community holds the mistaken belief. n13
Commission of a crime requires both a criminal act and a criminal
intent, although the defendant need not specifically intend to break the
law. n14 Simply intending to commit the criminal act satisfies the
intent requirement in all but a small class of offenses in which the
mental element is part of the crime itself. n15
There are numerous reasons why the law has not historically allowed
ignorance to excuse a criminal act. Protecting the public safety and
welfare requires the presumption that each person knows the law. n16
Justice Oliver Wendell Holmes made the following observation:
Public policy sacrifices the individual to the general good. It is
desirable that the burden of all should be equal, but it is still more
desirable to put an end to robbery and murder. It is no doubt true that
there are many cases in which the criminal could not have known that he
was breaking the law, but to admit the excuse at all would be to
encourage ignorance where the law-maker has determined to make men know
and obey, and justice to the individual is rightly outweighed by the
larger interests on the other side of the scales. n17
By establishing the rule that each citizen "must know what the
law is and act at his peril," n18 the law encourages knowledge in
an arena where ignorance is extremely harmful. Without this policy, said
one court, "a person accused of crime could shield himself behind
the defense that he was ignorant of the law which he violated and
immunity from punishment would in most cases result.... The plea would
be universally made, and would lead to interminable questions incapable
of solution." n19
b. Specific intent crimes
Some crimes require specific intent, or knowledge of violation of the
law, as an essential element. In specific intent crimes, ignorance or
mistake can serve as a defense if it negates the required mental state.
n20 Certain statutes, including the Internal Revenue Code, expressly
criminalize only "willful," "knowing," or
"purposeful" conduct. n21 Such statutes, however, have
received different treatment from the courts depending on the nature of
the regulated activity.
For example, in United States v. International Minerals &
Chemical Corp., n22 the Supreme Court held that a shipper could
"knowingly" violate a regulation without knowledge of the
regulation's existence. n23 The defendant, International Minerals, was
charged with shipping sulfuric and hydrofluosilicic acid interstate
without proper shipping papers, in violation of Interstate Commerce
Commission regulations. n24 International Minerals made no mistake of
fact; it knew the shipment contained corrosive materials. n25 Rather,
International Minerals contended that it was unaware of the regulation,
and the question before the Court was, therefore, whether to allow the
mistake of law as a defense. n26 A divided Court did not permit
ignorance of the regulation to be a defense to its violation. n27
Because of the involvement of dangerous materials, "the probability
of regulation is so great that anyone who is aware that he is in
possession of ... or dealing with the materials must be presumed to be
aware of the regulation." n28 The majority reached the holding over
the dissent of Justices Stewart, Harlan, and Brennan, who argued that a
defendant cannot "knowingly" violate a regulation if the
defendant is not aware of the terms of the regulation or that the
activity violates the regulation. n29 According to the dissent, the
majority opinion ignored the statute's use of the word
c. "willfulness" in tax law
The Internal Revenue Code uses the word "willful"
liberally. n31 Before the Court addressed the issue in Cheek v. United
States, several circuit courts formulated their own interpretations of
the willfulness component of tax crime.
The Fifth and Tenth Circuits applied a subjective test, which asked
whether a tax crime defendant truly believed his actions complied with
the law. In United States v. Phillips, n32 a taxpayer defended himself
on the grounds that he truly believed his wages were not income. n33 The
trial court had instructed the jury as follows:
A mistake of law must be objectively reasonable to be a defense. If
you find that the defendant did not have a reasonable ground for his
belief, then regardless of the defendant's sincerity of belief, you may
find that he did not have a good faith misunderstanding of the
requirements of the law. n34
The trial court convicted the defendant under this instruction, but
the Tenth Circuit reversed and remanded for a new trial. n35 The court
reasoned that by requiring a "willful" violation, Congress did
not intend to impose criminal liability on those who rely on their good
faith belief that they need not file a tax return. n36 For this reason,
the Tenth Circuit stated, courts should use a subjective standard when
evaluating a defendant's claim that he did not know he was breaking the
law. n37 Thus, prosecutors must prove that tax evasion defendants
subjectively intended to disobey the law.
The subjective intent standard of Phillips paralleled decisions in
several other circuits. n38 The circuits following the subjective
standard have carefully distinguished between those taxpayers who
misunderstand the law and those who understand but disagree with it. n39
A taxpayer who is unaware of the law may assert ignorance as a defense,
but a taxpayer who merely disagrees with the law may not. n40
Before the Supreme Court decided Cheek, the Seventh Circuit took a
different approach n41 by permitting only honest and reasonable mistakes
as a defense to a tax evasion charge. n42 The Seventh Circuit applied an
objective test to the taxpayer's mistaken "belief." n43 If a
reasonable person would realize the groundlessness of the belief, the
court may impose criminal sanctions. n44 A defendant's honest but
unreasonable belief that he owed no taxes was held to be no defense to
tax evasion. n45 If a court found the defendant's belief unreasonable as
a matter of law, the sincerity of the belief became irrelevant. n46 In
such a case, the court was not obligated to accept evidence
demonstrating that the defendant actually held the mistaken belief. n47
Under the Seventh Circuit's pre-Cheek approach, courts determined the
reasonableness of a belief on a case by case basis. n48 In United States
v. Buckner, n49 however, the court accepted the prosecutor's list of
five defenses which would always be considered unreasonable, or, in
Judge Easterbrook's words, "sanction bait." n50 The prima
facie unreasonable defenses included the belief that the Sixteenth
Amendment, establishing income taxes, was never properly ratified, that
wages are not income, that tax laws are unconstitutional, that filing a
return is self-incriminating and therefore privileged by the Fifth
Amendment, and that federal reserve notes are not income. n51 The court
noted that a mistake could be reasonable only if there was a genuine
dispute about the law. n52
These five rejected defenses are all common defense tactics of tax
protestors. n53 The Seventh Circuit developed the objective standard to
combat what it perceived as abuse of the legal system by the tax protest
movement. n54 It vigorously defended its standard, even in the face of
criticism from other circuits, n55 in part out of its desire to deprive
tax protestors of their favorite weapons. The subjective standard
followed in other circuits deferred to the "true beliefs" of
the defendant, an approach the Seventh Circuit simply refused to accept.
As Judge Easterbrook wryly noted, "some people believe with great
fervor preposterous things that just happen to coincide with their
The tax protest movement frustrated the increasingly impatient
Seventh Circuit with creative but absurd defenses. In United States v.
Witvoet, n57 for example, the defendant argued that he did not pay taxes
because "tax experts" advised him that payment of income tax
was "purely voluntary" and in some cases, illegal. n58 One of
these experts called himself a C.P.A., a designation not for
"certified public accountant," but for "citizen's
protection agent." n59 In United States v. Davenport, n60 the
defendant gave several reasons for not paying his taxes. First,
"ninety-eight percent of federal reserve notes were bogus."
n61 Second, tax laws only applied to government workers and corporate
officers. n62 Finally, the defendant reasoned that wages were not income
because income tax is based on "net receipts after deduction of all
expenses." n63 The Seventh Circuit rejected all of these beliefs as
objectively unreasonable. n64
d. The Cheek Decision
In 1991, the United States Supreme Court addressed the conflict
between the circuits in Cheek v. United States. n65 In Cheek, the Court
faced the task of defining "willfully," and determining
whether a defendant taxpayer could use an honest but unreasonable
mistake of law as a defense. n66
John L. Cheek, an American Airlines pilot, stopped filing income tax
returns in 1980. n67 Additionally, he claimed as many as sixty
withholding allowances on his W-4 forms. n68 The IRS charged Cheek with
six counts of willfully failing to file a federal income tax return in
violation of United States Code Section 7203, n69 and three counts of
willfully attempting to evade federal income taxes, in violation of
United States Code Section 7201. n70
Representing himself at trial, Cheek testified that in 1978, he began
following the advice of a group which believed, among other things, in
the unconstitutionality of income taxes. n71 Cheek claimed he had not
acted willfully because he had sincerely believed the teachings of this
group. n72 Cheek also claimed to believe that wages were not income and
that he was not a "person" as defined by the Internal Revenue
The district judge instructed the jury that "willfulness"
meant a "voluntary and intentional violation of a known legal duty,
a burden that could not be proved by showing mistake, ignorance, or
negligence." n74 The court also instructed the jury that a
reasonable, good faith mistake of law would negate willfulness, but mere
disagreement with the law would not. n75 When the jury requested
clarification of the good faith requirement, the judge instructed that
"an honest but unreasonable belief is not a defense and does not
negate willfulness." n76 Under this standard, the jury found Cheek
Cheek appealed, arguing that the district court erred by giving the
jury an objective reasonableness instruction. n78 The Seventh Circuit,
following its own precedent, upheld the instruction. n79 Because the
Seventh Circuit's interpretation of "willfully" in the tax
code conflicted with the interpretation of other circuits, the Supreme
Court granted certiorari. n80
The Supreme Court began by noting the traditional principle that
ignorance of the law provides no defense and the corresponding
presumption that every person knows the law because the law is
"definite and knowable." n81 The Court said, however, that the
growing volume and complexity of statutes and regulations, including the
Internal Revenue Code, raised questions about the soundness of this
premise. n82 Consequently, the Court long ago determined that Congress
used the word "willfully" in the tax code to carve an
exception to the traditional principle. n83 The Court recalled its sixty
year old statement from United States v. Murdock:
Congress did not intend that a person, by reason of a bona fide
misunderstanding as to his liability for the tax, as to his duty to make
a return, or as to the adequacy of the records he maintained, should
become a criminal by his mere failure to measure up to the prescribed
standard of conduct. n84
Since Murdock, the Court had defined "willfully," in the
context of the tax code, as a "voluntary, intentional violation of
a known legal duty." n85
Cheek argued that by allowing the jury to consider the objective
reasonableness of his beliefs, the district court's instruction was
inconsistent with the Murdock interpretation. n86 The Supreme Court
agreed, stating that the jury should have determined whether the
prosecution had proved Cheek's awareness of his duty to file a return
and pay taxes. n87 The objective reasonableness of his claimed belief or
misunderstanding was completely irrelevant to this question. n88 No
matter how unreasonable a jury might find Cheek's belief that the
Internal Revenue Code did not treat wages as income, if they found that
Cheek truly held such a belief, they must acquit him. n89
The Court rejected Cheek's claim that he believed income tax laws
violated the Constitution. n90 This belief, said the Court, was not an
innocently mistaken belief about the content of the law, but a studied
conclusion that the law was invalid. n91 In other words, Cheek did not
make a mistake about the law; he simply disagreed with it. n92
Over the dissent of Justices Blackmun and Marshall, who feared that
the majority opinion would "encourage taxpayers to cling to
frivolous views ... in the hope of convincing a jury of their
sincerity," n93 the Court vacated and remanded the case. n94 The
Seventh Circuit, the majority held, erred by allowing objective
reasonableness to enter the calculation. n95 Thus, Cheek demands a
purely subjective inquiry into the taxpayer's mental state to determine
whether the defendant willfully violated the tax code. n96
II. "Willfulness" After Cheek
Commentators have given Cheek mixed reviews. One commentator hails
the decision for striking "a sensible balance between disciplined
regard for the dictates of precedent and awareness of practical policy
ramifications." n97 The Seventh Circuit approach, he argues, would
have "benefitted judicial economy at the expense of logic and
consistency." n98 Another commentator, however, contends that the
Supreme Court's narrow interpretation of "willfulness"
emasculates the Internal Revenue Code by making it virtually impossible
to convict tax evaders. n99
Cheek has raised new questions as the circuits struggle to determine
the scope of Cheek's definition of "willfulness." Circuit
courts have construed Cheek narrowly in some cases but broadly in
A. Application of Cheek to Tax Cases in the Courts of Appeals
The Second Circuit gives Cheek its broadest reading. n101 In United
States v. Regan, n102 the Second Circuit relied on Cheek to reverse a
district court decision. n103 In Regan, an investment firm entered into
several stock sale and repurchase agreements with other investment
houses in order to recognize tax losses on stock which had depreciated
in value. n104 The defendants improperly recognized tax losses, they
claimed, because they mistakenly believed that their transactions fell
outside the scope of Internal Revenue Code Section 1058, which provides
for nonrecognition of gains or losses under certain circumstances. n105
The defense produced witnesses who testified that the firm's
interpretation of section 1058 was reasonable, but the district court
ruled as a matter of law that the firm's interpretation was incorrect.
n106 Citing Cheek, the Second Circuit reversed, holding that the only
relevant issue was whether the defendant's belief was held in good
faith. n107 The district court erred by not giving the jury a specific
good faith instruction. n108 The appellate court reasoned that although
the district court had given a "generalized" good faith
instruction, the defendant-appellants, who were charged with sixty-four
counts of tax, securities, and mail fraud, were entitled under Cheek to
a clear instruction that a genuine, though incorrect, belief required an
acquittal on the tax evasion charges. n109
In United States v. Pabisz, n110 the Second Circuit again reversed a
district court decision. n111 Defendant Ronald Pabisz, an electrician,
conducted his own legal research n112 and concluded that the law did not
require him to file income tax returns or pay taxes. n113 As in Regan,
an unclear jury instruction proved fatal. n114 The Second Circuit
concluded that the given instruction could have "seriously misled
the jury into believing that Pabisz's good faith beliefs could negate
the element of willfulness only if those beliefs were objectively
reasonable." n115 The court should have instructed the jury to
consider whether Pabisz subjectively believed he was not obligated to
pay taxes. n116
Unlike Cheek, however, the Second Circuit distinguishes between
reckless ignorance and deliberate ignorance. While deliberate ignorance
undercuts a good faith defense in the Second Circuit, reckless ignorance
does not. n117 The Second Circuit upheld a district court's instruction
that "reckless ignorance of the tax law does not constitute willful
intent to violate the law." n118
In United States v. Fletcher, n119 the Second Circuit permitted the
jury to rely on some objective factors when determining the defendant's
actual beliefs. n120 Because a jury cannot easily determine a
defendant's subjective belief, the trial court permitted the jury to
consider the defendant's education and training. n121 The defendant, an
attorney with an accounting background, argued that such an instruction
"invited a jury to infer his knowing membership in the conspiracy
from what he ought to have known about the tax law." n122 The
Second Circuit, however, upheld the instruction in its entirety,
reasoning that the trial court's instruction adequately warned the jury
that the Fletchers were guilty only if they knew their actions violated
the law. n123
Other circuits have applied the Cheek rule differently. The Fifth
Circuit, like the Second Circuit, permits a jury to consider the basis
for the defendant's good faith belief. The Fifth Circuit reasons that
the Supreme Court's Cheek decision "clearly anticipated and
condoned the jury's consideration of the bases upon which the defendant
claims to have held his subjective belief." n124 This rationale
recognizes the practical difficulty in distinguishing between subjective
and objective beliefs.
The Tenth Circuit, on the other hand, may actually prohibit the
defendant from introducing evidence demonstrating the basis of his
subjective beliefs. In United States v. Fingado, n125 the defendant
testified that he sincerely believed he was not required to file tax
returns. n126 He based his belief on materials he received at a seminar,
a newspaper article, and a book entitled The Big Bluff, Tax Tyranny in
the Guise of the Law, The Constitution v. The Tax Collector. n127 The
district court, however, did not allow the jury to review the contents
of the book n128 and the circuit court affirmed, a result which one
commentator called "distinctly unfair." n129
According to Cheek, true ignorance of the tax law is a defense. n130
Under the Tenth Circuit's interpretation of Cheek, however, as in the
Second Circuit, true ignorance of the tax law is a defense only if the
ignorance is not deliberate. n131 Under a deliberate ignorance
instruction, n132 the question is no longer simply "what did the
defendant actually know?" but also "was the defendant
deliberately ignorant?" With the inquiry into "deliberate
ignorance," the Tenth Circuit has transformed Cheek's holding. A
taxpayer who truly does not know he is breaking the law can still be
found guilty if the jury decides that he purposely avoided learning the
law. n133 This arguably sensible standard n134 limits the application of
Cheek. According to the Tenth Circuit, ignorance of the law alone does
not excuse the defendant from tax evasion. A taxpayer must also have
never declined an opportunity to become knowledgeable. n135
As a practical matter, the court must give the jury something on
which to base its determination other than the defendant's testimony
that he truly believed he complied with the law. Under Cheek, however,
the court must carefully instruct the jury to ultimately inquire into
what the defendant actually believed. n136 If the court permits the jury
to consider evidence which does not directly relate to the taxpayer's
state of mind, the jury may inappropriately answer the wrong question.
For example, in a case in which the court admits into evidence the
defendant's background as an accountant, the jury should consider that
information only to the extent it bears on that particular defendant's
beliefs. This inquiry comes perilously close to the improper question of
whether it is reasonable for an accountant to be unaware of the tax rule
A proper instruction also makes it clear that a taxpayer may assert a
good faith misunderstanding, but not a good faith disagreement with the
law, as a defense. n137 If a defendant honestly holds a mistaken belief
about the obligations imposed by the tax law, he has not acted
B. Application of Cheek to Non-Tax Crimes
The Supreme Court once said that " "willful' is a word of
many meanings, its construction often being influenced by its
context." n139 Judge Learned Hand has called it "one of the
most troublesome words in a statute." n140 The word so bedeviled
the drafters of the Model Penal Code that they purposely excluded it.
n141 In spite of this judicial trepidation, the term
"willfully" appears throughout the criminal law, raising the
question of whether the Supreme Court's definition of
"willfulness" in Cheek has any application outside of tax
cases. Although non-tax cases frequently cite Cheek, generally only
those charged with tax crimes have enjoyed the full protection of
Cheek's ignorance defense.
In United States v. Dockray, n142 the government charged the
defendant with mail and wire fraud, an offense requiring proof of intent
to defraud. n143 In defense, Dockray claimed that he acted in good
faith. n144 He asked the judge to specifically instruct the jury that if
they found that he truly, even if mistakenly, believed he was acting
properly, they should find him not guilty. n145 The district court
explained the requirement of intent to defraud to the jury, but did not
use the words "good faith." n146 The First Circuit affirmed,
recognizing the good faith defense in mail fraud cases but holding that
the words "good faith" were not magical and not required in
the jury instruction. n147 The court said Cheek did not control because
the issue in the instant case was whether the existence of the good
faith defense had been adequately conveyed to the jury, a point which
Cheek did not address. n148
One commentator asserts that in Dockray, the First Circuit took a
"half step" in its "aggressive effort to limit the rule
of Cheek" to tax evasion cases. n149 The court completed this step
in United States v. Donovan. n150 In Donovan, the government charged a
bank president with willfully failing to file currency transaction
reports, which the law requires whenever a bank accepts any cash deposit
exceeding $ 10,000. n151 The defendant argued that Cheek established a
purely subjective test for every white collar crime which includes
willfulness as an element of the offense. n152 Consequently, he asked
for a Cheek jury instruction which would require the jury to exonerate
him if they found that he honestly did not know that his failure to
report the transaction violated the currency transaction report filing
requirement, regardless of the reasonableness of his belief. n153
Rejecting the defendant's argument, the court explicitly stated that
Cheek applies only to tax crimes. n154 Calling Donovan's interpretation
of Cheek "distorted," the First Circuit noted that
"nowhere in Cheek, or in the Court's earlier opinions involving
criminal prosecutions under the tax laws, is there any indication that a
purely subjective standard should be used in evaluating state-of-mind
defenses in prosecutions under other federal statutes." n155 In
Cheek, the Court "crafted a narrow exception, limited to tax cases,
in which subjective mistake of law can constitute an absolute
defense." n156 The Donovan court believed that Cheek's rationale -
that tax laws were complicated and difficcult to understand - did not
apply to the bank's filing requirements. n157
Thus, as subsequent non-tax decisions make clear, Cheek created a
specific, narrow exception to the traditional common law principle that
ignorance is no defense. Ignorance of the law is still no defense -
unless the crime is tax evasion.
III. The Need for an Objective Standard
From a stare decisis perspective, the Supreme Court correctly decided
Cheek. Supreme Court cases have long supported the notion that, in the
tax law, "willfulness" means knowledge that one's activity
violates the law. n158 The Seventh Circuit, believing that the Supreme
Court cases of Murdock, n159 Bishop, n160 and Pomponio n161 did not
preclude an objective reasonableness instruction, n162 was clearly an
aberration among the circuit courts, the rest of which applied a purely
subjective standard. In Cheek, the Supreme Court clarified its position
on the impropriety of an objective reasonableness instruction. n163 At
the very least, the Cheek decision was consistent with previous Supreme
Court interpretations of "willfulness."
Although the Supreme Court has clearly defined willfulness, this
definition is not necessarily optimal in terms of benefits to society
and fairness to individual taxpayers. n164 So far, this Comment has
attempted only to chronicle the development and application of the
"willfulness" doctrine in federal tax law, before and after
the Supreme Court's decision in Cheek. In this section, however, this
Comment argues that the Seventh Circuit's pre-Cheek approach is superior
to the present state of the law. Before a defendant should be permitted
to claim mistake or ignorance as a defense, the law should require her
to demonstrate that her mistaken belief or lack of knowledge was
objectively reasonable. An unreasonable belief, even if sincerely held,
should not serve as a defense to tax evasion.
Under this proposal, a taxpayer's mistaken belief would excuse the
taxpayer from criminal liability only if the belief is both objectively
reasonable and sincerely held. Similar to a negligence standard, the law
would presume the taxpayer to have at least a minimal knowledge of the
tax law. This standard would not require taxpayer expertise or even
familiarity with all aspects of tax law. It simply presumes that all
Americans are aware that taxes exist and insists they take basic steps
to learn the fundamentals, such as reading the IRS tax form
Using an objective reasonableness standard would bring tax law into
alignment with other areas of criminal law. Also, an objective standard
is fair to the defendant, it better prevents flagrant abuse of the tax
system, and it would improve tax compliance. Congressional action, in
the form of either replacing or redefining the word
"willfully" in the Internal Revenue Code, could effectively
realize the advantages that an objective approach would generate without
upsetting a long line of Supreme Court jurisprudence.
A. The Objective Standard Provides Consistency
Our fundamental sense of fair play insists that we treat similar
situations similarly. The law, in its pursuit of justice, places a great
premium on consistency. One of the oldest and best known principles of
the American legal system is that ignorance of the law cannot serve as a
defense for a criminal act. n165 As drafted by Congress and interpreted
by courts, the Internal Revenue Code contains an unnecessary and
ill-advised exception to this principle for tax crimes.
In Cheek, the Supreme Court failed to provide a logical basis on
which to distinguish tax evasion from other types of crime, where
citizens are presumed to know the law and act at their peril. Even if
the courts could provide a distinction between common law crimes such as
murder and more modern regulatory crimes, they have failed to provide a
justification for applying one standard of willfulness to tax cases and
a different standard of willfulness to other white collar crime cases.
The Supreme Court argues that the great complexity of the tax code
justifies the tax crime exception. n166 However, complex laws govern
other white collar crimes, and in these cases, the law does not excuse
ignorance. Cheek gives special treatment to "ignorant" tax
evaders. n167 Donovan makes clear that Cheek's subjective test applies
only to tax crimes. n168 Other white collar crime defendants can
"willfully" violate a law even if they truly, subjectively
believe they are faithfully complying with it. n169 Thus,
"willfully" means one thing to a tax defendant and something
else to a defendant accused of a different white collar crime.
The courts should not excuse taxpayer ignorance because of the
complexity of the tax code. Other white collar crime statutes can be
equally complex. n170 In Donovan, a bank president claimed to
misunderstand the currency transaction recording requirements of 31
U.S.C. 5313(a); n171 in Cheek, an airline pilot claimed to misunderstand
the law which says income is taxable. n172 While some provisions of the
Internal Revenue Code are extremely complicated, the basic concepts of
taxation that apply to most taxpayers are not. As one commentator
writes, "if anything, the laws relating to money laundering,
securities, and other "white-collar' areas are more esoteric and
more difficult to comprehend than the comparatively straightforward
requirements concerning the reporting of wages as income and the payment
of taxes." n173
Tax statutes and white collar crime statutes arguably differ in one
important respect: the types of people attempting to comply with them.
Individuals who must comply with securities laws or bank recording
regulations, for instance, usually possess some technical expertise as a
result of their vocation. Individuals who must comply with tax laws
often have no business background. This argument, however, does not
justify the use of different standards. Courts should hold an individual
responsible for knowing the laws governing that individual's sphere of
activity. The bank president bears the responsibility of operating a
bank and complying with applicable laws, and the ordinary citizen bears
the responsibility of paying taxes and following the Form 1040
The criminal law currently applies the subjective standard only in
tax cases, even though the special treatment of tax defendants has no
logical foundation. The disparate treatment of tax crime defendants and
other white collar crime defendants is unfair because it is based on
transparent distinctions. Using an objective standard in both instances
would make the law more consistent, and therefore more just.
B. The Objective Standard Provides Fairness
John Cheek's Seventh Circuit brief analogizes his indoctrination into
a tax protest group to the foibles of a naive fraud victim who is taken
in by a smooth-talking "con man." n174 Cheek compares the tax
protestors who persuaded him that their beliefs were true to
"snake-oil salesmen of lore" and argues that he "bought
their desert real estate and their wellness potions." n175 Unlike
the sucker who buys snake-oil, however, John Cheek and the others
directly benefitted from being "taken in." Because he
benefitted, the law need not sympathize with him as though he were a
victim. Cheek and other tax protestors more closely resemble a person
who buys a new color television set from the back of a truck in an alley
for twenty dollars. Despite suspicions about the legitimacy of the sale
and the television's origin, the purchaser keeps the television and
Critics of the pre-Cheek Seventh Circuit objective standard contend
that it unfairly punished taxpayers who made innocent, honest mistakes.
Even though the objective standard only punishes unreasonable mistakes,
critics fear that the courts will jail "honest and sincere persons
whose legal sophistication fails to reach some judicially-created
standard." n176 The judicially created standard of reasonableness,
however, can be set at a level which ensures that those who make an
effort to reach it will succeed. The fishnet can be dropped low enough
to capture only the bottom-dwellers.
An objective standard would impose a duty on taxpayers to know the
fundamental concepts of the tax law. It would not require the taxpayer
to understand all the nuances of the tax code. The law would simply
presume that all citizens know that a tax system exists which requires
taxpayers to pay income taxes, just as it presumes that everyone who
drives a car knows the traffic laws. For example, a taxpayer's honestly
held but mistaken belief that she may deduct all of her capital losses
would qualify as reasonable; n177 John Cheek's honestly held but
mistaken belief that wages are not income would not.
The presumption that citizens are aware of tax filing requirements
does not unduly burden taxpayers. If death and taxes are the only two
sure things in life, it seems only natural to presume that adults are
aware of each.
In his brief, Cheek criticized the Seventh Circuit for using a
standard under which taxpayers with questions or confusion about their
tax obligations act at their peril. n178 Forcing taxpayers to act at
their peril is, if anything, an advantage of the Seventh Circuit
objective approach. When faced with an objective standard, a taxpayer
who is uncertain about his obligations under the law will either
carefully read his instructions, seek advice from a professional or
obtain free assistance from the IRS. If the same confused taxpayer is
not forced to act "at his peril," instead of taking steps to
inform himself, he may simply assume that the correct answer to his tax
question is the one which most reduces his tax liability.
Congress should give the taxpayer the benefit of the doubt, defining
reasonableness broadly so as to allow all but the most outrageous
mistakes as a defense. In practice, almost nobody would fall into the
crack between the objective and subjective standards. There is the
discomforting possibility, however, that under the objective standard a
taxpayer who truly wanted to do the right thing could make an honest
mistake which is deemed unreasonable - and by implication, criminal - by
There are two safeguards, however, which would prevent this
unfortunate result. The first is IRS discretion in deciding which
taxpayers to prosecute. The objective standard gives the IRS a powerful
weapon because the standard makes it easier to convict tax evaders.
Because the IRS operates with limited resources of time and money,
however, it probably will not try to use this weapon in marginal cases,
where the taxpayer's mistake looks honest even if it does not look
The second safeguard is that in practice, the same outcome will
usually result regardless of the chosen standard. Even when the court
instructs the jury to use the subjective standard and to determine what
the defendant actually believed, the jury often uses an objective
standard anyway. Under Cheek, juries may consider the reasonableness of
the belief, but only as it pertains to the ultimate issue of the
defendant's subjective belief. n179 As the Court put it, "the more
unreasonable the asserted beliefs or misunderstandings are, the more
likely the jury will consider them to be nothing more than simple
disagreement with known legal duties." n180 When the jury tries to
look into the defendant's mind, the reasonableness of the claimed
beliefs will inevitably enter the calculation.
At worst, the objective standard would create uncertainty.
"Reasonableness" is impossible to define clearly and could
vary, depending on the particular case and jury. As one court said,
however, "uncertainty is a fact of legal life. "The law is
full of instances where a man's fate depends on his estimating rightly,
that is, as the jury subsequently estimates it, some matter of degree.'
In Cheek, the Supreme Court quoted an earlier case which said,
"it is not the purpose of the law to penalize frank differences of
opinion or innocent errors made despite the exercise of reasonable
care." n182 This statement implies that when reasonable care is not
exercised, the law may penalize even innocent errors. An objective
standard does precisely that, without unfairly burdening taxpayers.
C. The Objective Standard Prevents Abuse of The System
This analysis has, until this point, assumed that the defendant
taxpayer truly holds an unreasonable belief about his income tax
obligations. One of the most compelling reasons to move away from the
subjective standard of Cheek, however, is to enable effective
prosecution of those who do not "truly" hold their mistaken
beliefs - those who either consciously cheat on their taxes or
intentionally avoid learning the applicable rules and then feign
ignorance when caught. Most taxpayers do not realize that the
"ignorance of the law is no excuse" maxim does not apply to
tax law. n183 As a result, the ignorance defense is most often invoked
by sly taxpayers who are well aware of the heavy burden the government
bears in tax crime prosecution. n184
The objective standard would add another hurdle for manipulative
taxpayers to clear before the law exonerates them. The Seventh Circuit
used the objective approach, in large part, for this reason. The Cheek
decision, in overruling the Seventh Circuit, invites abuse.
Allowing ignorance as a defense without regard to reasonableness
creates undesirable incentives. The law encourages taxpayer ignorance,
because the prosecution can use a taxpayer's knowledge against him. n185
In Cheek, the Court noted that the jury could consider evidence showing
that Cheek was aware of his tax obligations. n186 This would include
evidence that the taxpayer knew of the relevant Internal Revenue Code
provisions, court decisions rejecting the taxpayer's interpretations,
IRS rulings, and the contents of the personal income tax return forms
and instructions. n187 Under this rule, a taxpayer wishing to pay as few
taxes as possible should ignore all mail from the IRS. The IRS could
later use the fact that the defendant read the 1040 instructions as
evidence of the taxpayer's subjective awareness of the law. n188 As a
result, a taxpayer who reads the instructions and still makes a mistake
will have difficulty demonstrating ignorance. n189 A taxpayer who is
truly confused about the rules would be better off taking a wild guess,
filing a return, and later pleading ignorance if the guess proves
inaccurate. Under the subjective standard, having knowledge of the tax
law can only work against a defendant. Consequently, this standard
creates an enormous disincentive for a taxpayer to learn about tax
The objective standard, on the other hand, provides an incentive for
the taxpayer to learn. To escape criminal liability, the taxpayer need
not hold completely accurate beliefs, but she must hold reasonable
beliefs. A taxpayer who generally familiarizes herself with the tax
rules, understands her obligation to file a return, and makes an honest
attempt to comply should have little difficulty meeting this standard.
As the Seventh Circuit summarized this principle, "if the legal
system either refuses to recognize a mistake of law as a defense (the
usual rule) or accepts only a reasonable mistake as a defense (our rule
in tax cases), this leads people to learn and comply with the law."
The subjective standard also encourages defendants to lie to the
jury. Since the case focuses on the defendant's state of mind at the
time of the alleged transgression, the defendant's personal testimony
becomes extremely important. Although the subjective standard permits
the jury to consider objective factors, n191 the jury must ultimately
determine what the taxpayer actually believed. Because corroborating
evidence on this question is understandably hard to produce, the jury
might not demand any, and instead place great weight on the defendant's
explanation. A skillful liar thus has a better chance of acquittal in a
tax case than in non-tax criminal cases, where the prosecution has
greater opportunity to present evidence contradicting the defendant's
The nature of tax crime especially tempts a defendant to lie, not
only because it is in the offender's best interest and is likely to
work, but because, in the offender's mind, it is easy to justify from a
moral standpoint. Tax evaders often rationalize non-compliance on the
grounds that the government wastes tax dollars anyway, that loopholes
unfairly allow others to avoid taxes, or that failure to comply does not
really hurt anyone. n192 Ordinarily law-abiding citizens, whose personal
moral codes would prevent them from committing other crimes or lying
about it afterwards, might intentionally violate tax laws and then lie
to a jury without even flinching.
The objective standard allows the jury to evaluate a defendant's
testimony against a backdrop of reasonableness. As the Seventh Circuit
explains, "the reasonableness requirement is intended to give the
jury a method by which they can distinguish between a bona fide
misunderstanding of the law and obdurate refusal to acknowledge ... what
the law indeed does require." n193 Thus, the defendant needs more
than a convincing lie to avoid punishment. In addition to convincing a
jury that his mistaken belief was truly held, a taxpayer using this
defense must convince the jury that the belief was reasonable.
In addition to encouraging ignorance of the law and deception, the
subjective standard encourages people to lie to themselves. n194 If a
taxpayer can convince herself that her view of the tax law, no matter
how mistaken, is correct, she technically has not committed a crime. In
many cases, this self-persuasion will not prove too difficult a task.
Most taxpayers are probably all too eager to believe whatever
interpretation will reduce their taxes the most. As the Seventh Circuit
summarized, "limiting the ignorance defense in tax cases is
essential because the desire to keep as much of one's income as possible
would supply an irresistible temptation to be obtuse about the law, if
obtuseness eliminated the duty to pay." n195
Critics of the objective standard have argued that the Seventh
Circuit fashioned its doctrine solely out of frustration with the tax
protest movement. n196 While this charge may have merit, it does not
follow that the Seventh Circuit standard is improper. On the contrary,
destruction of the tax protest movement is an advantage of the objective
standard. The fact that the development of the doctrine might have been
driven by the Seventh Circuit's desire to discourage "tax
protest" n197 makes it no less desirable in other circumstances.
By some estimates, there are over 13,000 tax protestors in the United
States. n198 They call themselves "great American heroes,"
n199 and they conduct seminars to teach their followers, among other
things, that the Sixteenth Amendment is unconstitutional. n200 They
instruct followers to claim hundreds of dependents on their W-4s,
thereby preventing income from being withheld n201 and to file frivolous
tax returns. n202 They encourage followers to obtain a jury trial so
that sympathetic jury members will acquit after the jurors themselves
are indoctrinated into the tax protest movement n203 during the course
of the trial. n204 True "tax protestors" are not really
ignorant of the law; they simply disagree with it. Because disagreement
with the law is not a defense under Cheek, n205 the tax protestor should
in theory be found guilty under either the objective or subjective
standard. In practice, however, tax protestors are much more difficult
to convict under the subjective standard. Since the reasonableness of
the "mistake" is irrelevant under the subjective standard, a
defendant tax protestor can escape conviction by successfully feigning
Tax protestors hold various beliefs about taxation, few of which are
objectively reasonable. One defendant, for instance, said he failed to
pay taxes because he believed that IRS agents were "Satan's little
helpers." n206 Whatever their belief, tax protestors do not pay
taxes and jam court dockets with frivolous litigation. Tax protestors
drain judicial resources which could be better spent elsewhere. Tax
dollars are lost at both ends: revenues lost because protestors do not
pay taxes, and revenues spent bringing them to justice. n207
Tax protestors thrive under a subjective standard. They wither,
however, under a standard which requires their beliefs to be reasonable.
n208 An objective standard gives the IRS an effective tool in its
pursuit of those tax evaders who routinely shirk their tax
responsibilities. If the law defines reasonableness broadly enough,
truly innocent taxpayers will not be convicted.
The case of John L. Cheek illustrates the need for an objective
standard. A sophisticated commercial airline pilot claims to believe
that his wages are not income and that he has over fifty dependents.
n209 Were these beliefs objectively reasonable? Certainly not. Were they
truly held? Given the fact that for most of his adult life, Cheek had
properly filed his tax returns, it is hard to believe that he was
genuinely unaware of his obligations. A more plausible explanation is
that John Cheek was nothing more than a tax protestor who disagreed with
the tax laws. At least two district court jurors, however, were
convinced that he sincerely held his unreasonable beliefs. n210 Under a
subjective standard, Cheek would have probably been acquitted at the
As Justice Blackmun suggests in the Cheek dissent, there are certain
things that every person of minimum intellectual competence knows. n211
The dispute in Cheek did not involve complex tax law, but "the
income tax law in its most elementary and basic aspect: Is a wage earner
a taxpayer and are wages income?" n212 If Cheek could escape
criminal sanctions, it is difficult to conceive of a defendant who would
D. The Objective Standard Would Improve Tax Compliance
The "tax gap" statistic refers to the difference between
the revenues actually collected by the IRS and the revenues which the
IRS would collect if every citizen filed an accurate tax return. n213
According to IRS estimates, the gap in the United States is over $ 80
billion annually. n214 Using an objective standard would help to bridge
The Internal Revenue Code views criminal sanctions as merely the
"capstone" n215 of an elaborate enforcement system which
utilizes a variety of civil remedies, including fines and penalties.
n216 The IRS may apply these penalties to taxpayers who do not comply
with the law, even if the taxpayer did not act "willfully" as
defined by the Supreme Court. In a "voluntary" n217 compliance
system like the one in the United States, the law must give taxpayers
strong incentives to comply.
Empirical evidence suggests that criminal punishment serves as a
powerful deterrent to tax evasion. n218 Given the infrequency of IRS
audits and the correspondingly high probability that a tax evader will
escape detection, the law should make the consequences for those who are
caught especially dire. Civil penalties have questionable deterrent
effect, since they merely involve a financial transaction between the
transgressor and the IRS. A potential tax evader may perceive his choice
as either dutifully paying now or paying only when and if he gets
caught. Although financial penalties are levied on top of the amount the
tax evader would have paid had he complied, n219 tax evasion becomes a
rational gamble. Facing the possibility of imprisonment and the stigma
of a criminal label, however, the risk calculus changes.
Because revenue collection in a voluntary system depends so heavily
on taxpayer cooperation, the law should not allow ignorance as a
defense. n220 An objective standard encourages taxpayers to learn and
follow the law. If a taxpayer knows the IRS is watching and will press
criminal charges unless he acts reasonably, he will be all the more
inclined to look up the rule in question. Under a purely subjective
standard, where ignorance is bliss, that same taxpayer may simply assume
that the rule works in his favor. After all, what he does not know
cannot hurt him.
One commentator has suggested that the Internal Revenue Code
incorporate a standard of "recklessness." n221 Under this
approach, a taxpayer could be prosecuted even if he did not behave
willfully. n222 This standard, however, encounters many of the same
pitfalls as the subjective standard. A "recklessness" standard
still accepts ignorance of the law as a defense unless the taxpayer was
reckless. n223 Therefore, it still provides inappropriate incentives for
a taxpayer to avoid knowledge of the law, so long as the taxpayer's
avoidance of knowledge never crosses the line into
"recklessness." Moreover, it would continue to unduly hamper
the prosecution of tax protestors. John Cheek's beliefs, for example,
were unreasonable, but was he reckless? The "recklessness"
standard offers an unnecessary and potentially confusing compromise.
The recklessness standard attempts to accommodate the honest, but
unreasonable, taxpayer who would be guilty under an objective standard.
A taxpayer, however, should have an affirmative duty to obtain a
reasonable understanding of his income tax obligations. A truly
"honest" taxpayer will do more than just refrain from
recklessness. A truly honest taxpayer will take her income tax
responsibilities seriously enough to read the Form 1040 instructions and
conscientiously follow them each year.
In United States v. Cheek, the Supreme Court made it clear that the
traditional maxim "ignorance of the law is no defense" does
not apply to tax crimes. n224 A taxpayer may behave outrageously, even
to the point of not paying any taxes, without criminal penalty, as long
as the taxpayer subjectively believes he is obeying the law. n225
The message to would be tax evaders is clear: If you don't know
anything about taxes, you can't be guilty of tax crime. Don't learn,
because knowledge can only be used against you. If an armed robbery
defendant cried "I forgot armed robbery was illegal," n226
society would scornfully convict him. Failing to convict in such a case
would allow that individual's beliefs to trump the law itself. n227 Yet
the tax defendant who pleads, "I didn't know that my wages were
income" escapes punishment. n228 His belief becomes reality. Under
the current, subjective standard of willfulness, it is not a crime to
avoid paying taxes as long as the taxpayer does not believe it is a
crime. The tax law to which most Americans attempt to faithfully adhere
is robbed of its power. A standard of objective reasonableness, when
used in careful conjunction with the standard of subjective belief, can
untwist this perversity. Congress should redefine the willfulness
standard to include taxpayers who avoid filing returns or file
inaccurately in reliance upon objectively unreasonable mistakes.
While some areas of the tax law are complicated, the fundamental
concept is really quite simple: Those who earn income must pay taxes.
The IRS, in fact, tries to simplify the tax laws and even provides free
assistance to those who request it. n229 The tax law is not complex
enough to justify a departure from one of the oldest and most sensible
principles of common law. Ignorance should not be rewarded; it should be
punished. Ignorance should not be bliss; it should be perilous.
Mark C. Winings
n1. Steve Martin, You can be a Millionaire, on Comedy is not Pretty!
(Warner Bros. 1979).
n2. See Cheek v. United States, 498 U.S. 192, 202-03 (1991). In
Cheek, the United States Supreme Court held that a good faith belief
that one is not violating the law negates willfulness, a required
element of criminal tax evasion.
n4. I.R.C. 7201 (1988). Section 7201 penalizes attempts to evade or
defeat tax in the following manner:
Any person who willfully attempts in any manner to evade or defeat
any tax imposed by this title or the payment thereof shall, in addition
to other penalties provided by law, be guilty of a felony and, upon
conviction thereof, shall be fined not more than $ 100,000 ($ 500,000 in
the case of a corporation), or imprisoned not more than 5 years, or
both, together with the costs of prosecution.
n5. Cheek, 498 U.S. at 201.
n7. Id. at 203.
n8. See Wayne R. LaFave & Austin W. Scott, Jr., Criminal Law 406
(2d ed. 1986).
n10. See Rollin M. Perkins, Ignorance and Mistake in Criminal Law, 88
U. Pa. L. Rev. 35 (1939). Perkins further distinguishes between mistake
of law and ignorance. "Ignorance implies a total want of knowledge
in reference to the subject matter. Mistake admits a knowledge, but
implies a wrong conclusion." Id. at 35. Perkins notes that this
distinction has been widely ignored by courts. This Comment treats
mistake of law and ignorance of law as equivalent.
n11. See, e.g., Cheek, 498 U.S. at 203.
n12. Mark D. Yochum, Ignorance of the Law is No Excuse Except for Tax
Crimes, 27 Duq. L. Rev. 221, 221 (1989).
n13. Perkins, supra note 10, at 37.
n14. LaFave & Scott, supra note 8, at 223-24.
n15. Id. at 133-34.
n16. Perkins, supra note 10, at 40-41.
n17. Yochum, supra note 12, at 222 n.4 (quoting Holmes, The Common
Law 48 (1881)).
n18. Perkins, supra note 10, at 38 (quoting Needham v. State, 32 P.2d
92, 93 (1934)).
n19. Id. at 41 (quoting People v. O'Brien, 31 P. 45, 47 (1892)).
n20. Section 2.04(1) of the Model Penal Code states:
Ignorance or mistake as to a matter of fact or law is a defense if:
(a) the ignorance or mistake negatives the purpose, knowledge, belief,
recklessness or negligence required to establish a material element of
the offense; or (b) the law provides that the state of mind established
by such ignorance or mistake constitutes a defense.
Model Penal Code 2.04(1) (1985).
n21. See supra note 4 for the full text of 7201.
n22. 402 U.S. 558 (1971).
n23. Id. at 565.
n24. The specific regulation was 49 C.F.R. 173.427. Id. at 559.
n25. Id. at 560.
n27. Id. at 563.
n28. Id. at 565.
n29. Id. at 567 (Stewart, J., dissenting).
n30. Id. at 568 (Stewart, J., dissenting).
n31. See, e.g., I.R.C. 7201 (1988) ("Any person who willfully
attempts in any manner to evade or defeat any tax imposed by this title
or the payment thereof shall ... be guilty of a felony ...."). See
also I.R.C. 7202 (1988) ("Any person required under this title to
collect, account for, and pay over any tax imposed by this title who
willfully fails to collect or truthfully account and pay over such tax
shall ... be guilty of a felony ...."); I.R.C. 7203 (1988)
("Any person required under this title to pay any estimated tax ...
or make a return, keep any records, or supply any information, who
willfully fails to meet these requirements is guilty of a misdemeanor
...."); I.R.C. 7206(1) (1988) ("Any person who ... willfully
makes and subscribes any return, statement, or other document, which ...
is made under the penalties of perjury, and which he does not believe to
be true and correct as to every material matter ... shall be guilty of a
felony ...."). Similarly, I.R.C. 7207 (1988) provides that a
taxpayer who "willfully delivers or discloses to the Secretary any
... tax document, known by him to be fraudulent or to be false as to any
material matter, shall be fined not more than $ 10,000 ($ 50,000 in the
case of a corporation) or imprisoned not more than 1 year, or
n32. 775 F.2d 262 (10th Cir. 1985).
n33. Id. at 263.
n35. Id. at 264.
n38. See United States v. Whiteside, 810 F.2d 1306 (5th Cir. 1987);
United States v. Aitken, 755 F.2d 188 (1st Cir. 1985); United States v.
Kraeger, 711 F.2d 6 (2nd Cir. 1983); Cooley v. United States, 501 F.2d
1249 (9th Cir. 1974), cert. denied, 419 U.S. 1123 (1975); Yarborough v.
United States, 230 F.2d 56 (4th Cir.), cert. denied, 351 U.S. 969
(1956); Battjes v. United States, 172 F.2d 1 (6th Cir. 1949).
n39. See, e.g., United States v. Whiteside, 810 F.2d 1306 (5th Cir.
1987) (holding that district court properly instructed jury to apply
n40. Id. at 1311.
n41. This Comment argues that the pre-Cheek Seventh Circuit standard
is superior to the current system and should be adopted. See infra Part
n42. See United States v. Buckner, 830 F.2d 102 (7th Cir. 1987);
United States v. Danvenport, 824 F.2d 1511 (7th Cir. 1987); Coleman v.
Commissioner, 791 F.2d 68 (7thCir. 1986); United States v. Bressler, 772
F.2d 287 (7th Cir. 1985), cert. denied, 474 U.S. 1082 (1986); United
States v. Witvoet, 767 F.2d 338 (7th Cir. 1985); United States v. Moore,
627 F.2d 830 (7th Cir. 1980), cert. denied, 450 U.S. 916 (1981).
n43. Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir. 1986).
n45. United States v. Witvoet, 767 F.2d 338 (7th Cir. 1985).
n46. United States v. Buckner, 830 F.2d 102, 103-04 (7th Cir. 1987).
n48. Id. at 104.
n49. 830 F.2d 102 (7th Cir. 1987).
n50. Id. at 103.
n52. Id. at 104. As an example of a "reasonable" mistake,
the court said that a person who sold his blood might not believe that
the sale is taxable, since there is no direct precedent. However,
"clinging to a proposition that has been unanimously rejected by
numerous courts is not a "reasonable' mistake." Id.
n53. Id. See infra Part III.A. for a description and discussion of
n54. See, e.g., Miller v. United States, 868 F.2d 236, 240 (7th Cir.
1989); Coleman v. Commissioner, 791 F.2d 68, 69 (7th Cir. 1986) (both
upholding assessment of civil penalty on tax protestor defendant for
filing frivolous return).
n55. See Buckner, 830 F.2d at 103 ("Although the standard of
objective reasonableness has been challenged by other circuits, we have
reaffirmed it.") (citation omitted).
n56. Coleman v. Commissioner, 791 F.2d 68, 69 (7th Cir. 1986).
n57. 767 F.2d 338 (7th Cir. 1985).
n58. Id. at 339.
n60. 824 F.2d 1511 (7th Cir. 1987).
n61. Id. at 1513.
n63. Id. In 1978, Davenport sent a letter to the IRS explaining how
he was computing his taxes:
Nowhere in the instruction booklet could I find a computation table
that ideally conforms to my particular demands.... Ex-President Richard
M. Nixon and cohorts has sic had access to such a table apparently, in
that he based his taxes on less than one half of one percent .005
percent sic .... This is the formula I am basing my taxes on since the
Constitution of the United States of America requires that taxes be
levied equal to all.
Id. at 1512.
John Hyde, an attorney and fellow member of the Citizens for Just
Taxation testified on behalf of Davenport. In the following excerpts
from testimony contained in an appendix to the Davenport case, Hyde
recalls a conversation between himself and the defendant:
He said ... Leviticus calls for a system of honest weights and
measures ... the Bible speak sic of money as the fruit of the earth,
substances from the earth. And that's why we use gold and silver.... I
said ... your income tax is a tax not on value, but on excess value....
It's a tax on net receipts after deduction of all expenses. I said, so
the question of whether you have received anything, receive value that
can constitute a profit or a gain, gets right down to the nub of what
the heck is value. Money of gold and silver has unquestioned value.
Id. at 1519-20.
n64. Id. at 1519.
n65. 498 U.S. 192, 198-99 (1991).
n67. Id. at 194.
n69. See supra note 31 for the text of 7203.
n70. See supra note 4 for the full text of 7201.
n71. Id. at 195-96.
n72. Id. at 196.
n73. Id. at 197 n.5.
n74. Id. at 196.
n76. Id. at 197.
n77. Id. at 198.
n80. Id. at 198-99.
n81. Id. at 199.
n82. Id. at 199-200.
n83. Id. at 200.
n84. Id. at 200 (quoting United States v. Murdock, 290 U.S. 389, 396
n85. Cheek, 498 U.S. at 200 (quoting United States v. Bishop, 412
U.S. 346, 360 (1973)).
n86. Id. at 201.
n88. Id. at 202.
n90. Id. at 204.
n91. Id. at 205.
n92. The Court noted that taxpayers who know the law but disagree
with it have access to mechanisms through which they can challenge the
law. A taxpayer can pay taxes according to the law and then challenge
the law in court. Id. at 206.
n93. Id. at 210 (Blackmun, J., dissenting).
n94. Id. at 207.
n95. Id. at 206-07.
n97. Dwight W. Stone, II, Note, Cheek v. United States: Finally, A
Precise Definition of the Willfulness Requirement in Federal Tax Crimes,
51 Md. L. Rev. 224, 224 (1992).
n99. See Walter T. Henderson, Jr., Comment, Criminal Liability Under
the Internal Revenue Code: A Proposal to Make the "Voluntary"
Compliance System a Little Less "Voluntary", 140 U. Pa. L.
Rev. 1429, 1436 (1992).
n100. See, e.g., United States v. Regan, 937 F.2d 823 (2d Cir. 1991)
(broad interpretation of Cheek); United States v. Fingado, 934 F.2d 1163
(10th Cir. 1991), cert. denied, 112 S. Ct. 320 (1991) (narrow reading of
n101. David Spears, Good Faith Defense One Year After "Cheek',
N.Y.L.J., June 2, 1992, at 1, 5.
n102. 937 F.2d at 823.
n103. Regan, 937 F.2d at 827.
n104. Id. at 825.
n105. Id. at 825-26.
n106. Id. at 826.
n108. Id. at 827.
n110. 936 F.2d 80 (2d Cir. 1991).
n111. Id. at 84.
n112. Pabisz read several Supreme Court cases, studied the Internal
Revenue Code, wrote letters to three Congressmen and contacted the IRS.
Additionally, he accompanied his friends to meetings of a group which
questioned the legal obligation of taxpaying. Id. at 81.
n114. The instruction provided:
The issue for you is was the defendant reasonable in having a good
faith belief that the income tax law did not apply to him, or did he
willfully evade the assessment of taxes? This issue of intent as to the
defendant is one which the jury must determine from consideration of all
the evidence in the case bearing on defendant's state of mind.
Surprisingly, defense counsel agreed to this instruction.Id. at 82.
n115. Id. at 83.
n117. United States v. Fletcher, 928 F.2d 495, 502 (2d Cir. 1991).
n119. Id. at 495.
n120. Id. at 502.
n121. Id. at 501.
n123. Id. at 503.
n124. United States v. Barnett, 945 F.2d 1296, 1299 (5th Cir. 1991).
n125. 934 F.2d 1163 (10th Cir. 1991).
n126. Id. at 1164.
n129. Spears, supra note 101, at 5.
n130. Cheek v. United States, 498 U.S. 192, 206 (1991).
n131. See Fingado, 934 F.2d at 1166 (10th Cir. 1991); Fletcher, 928
F.2d at 502 (2d Cir. 1991).
n132. In Fingado, the Tenth Circuit upheld the "deliberate
The element of knowledge may be satisfied by inferences drawn from
proof that a defendant deliberately closed his eyes to what would
otherwise have been obvious to him. A finding beyond a reasonable doubt
of a conscious purpose to avoid enlightenment would permit an inference
of knowledge. Stated another way, a defendant's knowledge of a fact may
be inferred from willful blindness to the existence of the fact.
n134. In Part III, this Comment argues that the court should impose a
duty to learn on taxpayers.
n135. Fingado, 934 F.2d at 1166.
n136. Cheek v. United States, 498 U.S. 192, 202-03 (1991).
n137. United States v. Barnett, 945 F.2d 1296, 1298 (5th Cir. 1991).
n139. Spies v. United States, 317 U.S. 492, 497 (1943).
n140. Yochum, supra note 12, at 224 n.12 (quoting Model Penal Code
2.02(10) comment n.47).
n142. 943 F.2d 152 (1st Cir. 1991).
n143. Id. at 154.
n145. Id. at 154 n.1.
n146. Id. at 154.
n148. Id. at 156.
n149. Spears, supra note 101, at 5.
n150. 984 F.2d 493 (1st Cir. 1993).
n151. Id. at 494.
n152. Id. at 500.
n158. See, e.g., United States v. Pomponio, 429 U.S. 10 (1976);
United States v. Bishop, 412 U.S. 346 (1973); United States v. Murdock,
290 U.S. 389 (1933).
n159. 290 U.S. 389 (1933).
n160. 412 U.S. 346 (1973).
n161. 429 U.S. 10 (1976).
n162. United States v. Davenport, 824 F.2d 1511, 1518 (7th Cir.
n163. Cheek v. United States, 498 U.S. 192, 202-03 (1991).
n164. Yochum, supra note 12, at 233.
n165. Id. at 221.
n166. See Cheek, 498 U.S. at 199-200.
n168. United States v. Donovan, 984 F.2d 493, 500 (1st Cir. 1993).
n170. Spears, supra note 101, at 6.
n171. Donovan, 984 F.2d at 494.
n172. Cheek v. United States, 498 U.S. 192, 194 (1991).
n173. Spears, supra note 101, at 6.
n174. See Brief for Petitioner, Cheek v. United States, 882 F.2d 1263
(7th Cir. 1990) (No. 89-658).
n177. Capital losses may be deducted only to the extent of capital
gains, plus the lesser of $ 3000 or the excess of losses over gains.
I.R.C. 1211(b) (1988).
n178. Brief for Petitioner, Cheek (No. 89-658).
n179. Cheek v. United States, 498 U.S. 192, 202 (1991).
n181. United States v. Coleman, 791 F.2d 68, 71 (7th Cir. 1985)
(quoting Nash v. United States, 229 U.S. 373, 377 (1913)).
n182. Spies v. United States, 317 U.S. 492, 496 (1943), quoted in
Cheek, 498 U.S. at 205.
n183. Yochum, supra note 12, at 227.
n185. See United States v. Buckner, 830 F.2d 102, 103 (7th Cir.
n186. Cheek v. United States, 498 U.S. 192, 202 (1991).
n188. Henderson, supra note 99, at 1444.
n190. United States v. Buckner, 830 F.2d 102, 103 (7th Cir. 1987).
n191. Cheek v. United States, 498 U.S. 192, 202 (1991).
n192. Henderson, supra note 99, at 1432 n.11 (citing Quint C. Thurman
et al., Neutralization and Tax Evasion: How Effective Would a Moral
Appeal Be in Improving Compliance to Tax Laws?, 6 Law & Pol'y 309,
n193. United States v. Davenport, 824 F.2d 1511, 1518 (7th Cir. 1987)
(quoting United States v. Bressler, 772 F.2d 287, 291 n.2 (7th Cir.
n194. Buckner, 830 F.2d at 103.
n196. See Brief for Petitioner, Cheek v. United States, 882 F.2d 1263
(7th Cir. 1990) (No. 89-658). The brief argues that "for a court to
deal so harshly and summarily with the "tax protester movement' is
dangerous indeed because the innocently gullible are caught in the same
Buckner net as the cynically willful violators." Id.
n197. The Seventh Circuit is not opposed to the holding of the belief
that taxes are unconstitutional or unfair; it is interested in
interpreting the law. "The government may not prohibit the holding
of these beliefs, but it may penalize people who act on them."
United States v. Coleman, 791 F.2d 68, 69 (7th Cir. 1985). If people
have grievances with the tax law, they must choose other forums in which
to express them. Id. at 71.
n198. Miller v. United States, 868 F.2d 236, 239 (7th Cir. 1989).
n199. Id. at 240.
n201. Yochum, supra note 12, at 228 n.31.
n202. Miller, 868 F.2d at 240. "Frivolous" tax returns are
specifically addressed in I.R.C. (1989). Id. at 238 n.1. Additionally,
courts may use Fed. R. Civ. P. 11 to sanction those who make frivolous
arguments. Id. at 238 n.3.
n203. The Miller court quoted the following passage from The Law that
Never Was, the tax protest "manifesto," written by two tax
protestors in 1985:
The tax protestor will be the great American hero of 1985 just as in
1776. It was tax protestors, not any political party, or judge or
prosecutor who gave us our Republican form of government. The tax
protest is more American than baseball, hot dogs, apple pie or
Id. at 240.
n205. Cheek v. United States, 498 U.S. 192, 203 (1991).
n206. Stone, supra note 97, at 230 n.55 (quoting United States v.
Mann, 884 F.2d 532, 534 n.1 (10th Cir. 1989)).
n207. United States v. Coleman, 791 F.2d 68, 71 (7th Cir. 1985).
n209. Cheek, 498 U.S. at 194.
n210. Id. at 198 n.6.
n211. Id. at 210 (Blackmun, J., dissenting).
n212. Id. at 209.
n213. Henderson, supra note 99, at 1431 n.7.
n215. Yochum, supra note 12, at 225 (quoting Spies v. United States,
317 U.S. 492, 497 (1943)).
n217. "Voluntary" does not mean optional, but rather that
the tax system depends on taxpayer honesty. Professor Mark Yochum
defines the term "voluntary" in the following manner:
"Voluntary" is a fictive locution meaning a gun is not
pointed at the payor by the collector. Compliance is achieved through
simplicity in calculations and payment, through honesty and altruism of
our citizens, and through the uneasy feeling, purposefully engendered by
the tax collector, that his baleful eye watches us all always, his
strong arm ready to nab a transgressor for a penalty or worse.
Id. at 223.
n218. See Steven Klepper & Daniel Nagin, Tax Compliance and
Perceptions of the Risks of Detection and Criminal Prosecution, 23 Law
& Soc. Rev. 209 (1989).
n219. Chapter 68 of the Internal Revenue Code provides the rules for
the assessment of penalties. The penalties vary depending on the type of
violation and whether the taxpayer is an individual or a corporation,
but for non-fraud violations the penalties are relatively small. For
example, the penalty for an individual failing to file cannot exceed 25%
of the tax owed. I.R.C. 6651 (a)(1) (1988). The penalty for negligence
or disregarding rules or regulations is 5% of the underpayment. I.R.C.
6653(a) (1988). The penalties for violations involving fraud are
greater. See I.R.C. 6653(b) (1988).
n220. Yochum, supra note 12, at 223.
n221. See Henderson, supra note 99, at 1436 n.28.
n224. Cheek v. United States, 498 U.S. 192, 201-02 (1991).
n226. Steve Martin continues his joke with this example. See Martin,
supra note 1.
n227. LaFave & Scott, supra note 8, at 425.
n228. See Cheek, 498 U.S. at 201-02.
n229. Yochum, supra note 12, at 223.