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VOL. 133 | NO. 59 | Thursday, March 22, 2018

Supreme Court Limits Reach of Tax Crime Statute

By JESSICA GRESKO, Associated Press

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WASHINGTON (AP) – The Supreme Court ruled Wednesday to make it harder for the federal government to use a section of tax law to convict someone of obstruction.

The government had interpreted a section of the tax code to give it a broad ability to charge someone with obstructing or impeding the work of the Internal Revenue Service. It argued that someone could violate the statute by doing something intended to obstruct the IRS' work, like shredding records, even if the person wasn't under investigation at the time or was under investigation but didn't know it.

But the Supreme Court ruled 7 to 2 to limit the application of the statue. The justices said that to convict someone, the government must show a connection between the obstructive action the person takes and a particular investigation or audit that was pending, or at least reasonably foreseeable.

The court's majority opinion pointed out problems with reading the law broadly.

"Interpreted broadly, the provision could apply to a person who pays a babysitter $41 per week in cash without withholding taxes, leaves a large cash tip in a restaurant, fails to keep donation receipts from every charity to which he or she contributes, or fails to provide every record to an accountant. Such an individual may sometimes believe that, in doing so, he is running the risk of having violated an IRS rule, but we sincerely doubt he would believe he is facing a potential felony prosecution for tax obstruction," Justice Stephen Breyer wrote for court.

Justice Clarence Thomas and Justice Samuel Alito dissented.

The case the justices ruled in involves New York resident Carlo J. Marinello II, who owned and managed a freight service that took items between the United States and Canada.

Marinello, now 71, was charged with failing to file personal or corporate tax returns for the years 2005 through 2008. Prosecutors alleged that during that time he shredded and discarded business records and hid business income in personal accounts, among other things. A jury ultimately convicted him of nine tax-related offenses, eight misdemeanors and a felony. He was ordered to pay more than $350,000 and spend three years in prison.

Marinello challenged his felony conviction, arguing that he could only be convicted under the statute he'd been charged with violating if he knowingly interfered with a pending IRS investigation.

Marinello's attorney, Matthew S. Hellman, said Wednesday after the court issued its opinion that Marinello has already served his sentence for the misdemeanors he was convicted of and will not serve any additional time.

Copyright 2018 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 101 603 9,602
MORTGAGES 92 538 10,616
FORECLOSURE NOTICES 3 40 1,289
BUILDING PERMITS 215 1,282 20,958
BANKRUPTCIES 51 408 6,108
BUSINESS LICENSES 20 154 3,939
UTILITY CONNECTIONS 31 124 2,892
MARRIAGE LICENSES 21 111 2,021