The National Law Journal recently called Marinello v. United States one of eight “major SCOTUS cases to watch” this term. Law360 referred to it as one of the top tax cases to watch in the second half of 2017. Cause of Action Institute filed an amicus brief in this case, advocating for a narrow reading of the obstruction statute at issue to ensure no one could be charged under it without knowing that he is committing a felony.  In Marinello v. United States, the Supreme Court will decide the scope of conduct that constitutes obstruction of the tax code. While Supreme Court buffs and tax attorneys have certainly taken notice of the case, the Court’s ruling could have serious ramifications for all taxpayers.

The tax code sets forth a statutory scheme for the collection of taxes by the IRS. It governs the everyday financial actions of all Americans, and requires that individuals file tax returns, pay income taxes, and register corporate entities appropriately. The tax code both gives the IRS the power to levy taxes and creates criminal sanctions to make sure people pay what they owe. Most of these criminal code provisions are fairly straight forward. For example, the failure to file a tax return, while knowing that you had a legal obligation to do so, is a crime. So is the willful failure to pay taxes that are due and owing to the government.

But the criminal provision that the government applied in Mr. Marinello’s case is anything but straightforward. Under 26 U.S.C. § 7212(a), it is a felony to corruptly or by force or threats of force intimidate or impede any IRS employee working in their official capacity or “in any other way corruptly or by force or threats of force…obstruct[] or impede[]…the due administration of [the tax code].”  Conviction under this statute allows an extra three years of imprisonment above and beyond failure to file a tax return. For many years, the Department of Justice took the position, and even told the courts, that this statute applied only in cases where actual physical force or threats of force were used.[1] For example, it is not surprising that under this statute, it would be a crime to use violence against an IRS agent to stop him from investigating your tax liability.  

But recently, federal prosecutors have expanded their view of what conduct constitutes obstruction of the tax code.

Mr. Marinello owned and operated a courier company in Buffalo, New York as a solopreneur. He was charged with failure to file tax returns for eight years and offered to plead guilty to these eight misdemeanor counts. However, the government added a felony count to the indictment, charging Mr. Marinello with obstructing the IRS’s administration of the tax code. The government asserted, and a jury ultimately found, that Mr. Marinello obstructed the IRS’s ability to collect and levy taxes when he failed to maintain corporate books, threw away business records, and failed to give his accountant complete business records. In its original indictment, the government even asserted that Mr. Marinello’s failure to file tax returns, a separate crime in the indictment, could also constitute obstruction of the tax code. Most of the obstruction charge was based on things Mr. Marinello didn’t do, not affirmative acts. And even the affirmative acts, like throwing away receipts, were done years before the government ever started an investigation into his tax deficiency and there was never an allegation that Mr. Marinello had a legal duty to preserve such receipts.

The crux of the government’s obstruction case was that Mr. Marinello did all these acts and omissions “corruptly,” in order to help him avoid paying taxes. While the Second Circuit affirmed his conviction, two judges issued a blistering dissent, stating that “if this is the law, nobody is safe.”[2] Indeed, recognizing the potential vagueness problems that could arise from such a broad interpretation of the obstruction statute, the Sixth Circuit requires that a person must know about an IRS action or investigation before he can be charged with obstruction of the tax code.[3] In other words, throwing away documents and failing to give information to an accountant could only count as obstruction if the defendant knew the IRS was investigating. Without this limiting principle, otherwise normal activity by taxpayers and small business owners could later be charged by the government as obstruction with just an allegation that the conduct helped the defendant avoid tax liability. 

Mr. Marinello appealed his case to the Supreme Court in March of 2017. The Supreme Court typically agrees to hear only up to about 2-3% of the cases that are presented to it. On the last day of the spring term the Court agreed to hear the case against those long odds.

In a recent string of cases, the Supreme Court has routinely cabined criminal statutes where the outer bounds of statutory interpretation threaten vagueness and fail to provide fair notice to ensure that everyone indicted under a statute knows he was violating the law.[4] These mens rea requirements are essential to our criminal law jurisprudence. As such, the Supreme Court has never left the outer bounds of a statute up to prosecutorial discretion.[5] The government’s current broad interpretation of the tax code’s obstruction statute runs counter to these principles and threatens all taxpayers.

This case has the attention of the legal community, but every taxpayer should be paying attention as well. Would the average American know that not doing something—like not giving their accountant a record showing their recent $200 profit from an eBay sale of their old record collection—was felony obstruction of the IRS’s administration of the tax code? Certainly, the taxpayer might know that this $200 is probably revenue and that he should probably report it to his accountant. And in this scenario, the failure to send this income to his accountant would, at least plausibly, impede the IRS’s ability to levy and collect taxes on that money in the future. But this is the constitutional weakness with the government’s current overly broad interpretation of the obstruction statute—it doesn’t actually require that the taxpayer know, for instance, that not reporting $200 to his accountant would then or later obstruct or impede any IRS agent’s “administration of the tax code” in a manner that could constitute a felony.

Marinello is an important case for those concerned with the Government’s propensity to bring charges against people who likely do not know innocent behavior constituted a crime.

You can read the amicus brief here or learn more about the case in our other blog posts, here and here.


[1] United States v. Williams, 644 F.2d 696, 699 n. 12 (8th Cir. 1981) (stating that “[a]t one time the Government contended that § 7212 applied only to conduct involving force or threats of force”) (citing United States v. Henderson, 386 F. Supp. 1048, 1055–56 (S.D.N.Y.1974)).

[2] United States v. Marinello, 855 F.3d 455 (2d Cir. 2015) (Jacobs, J., dissenting).

[3] United States v. Kassouf, 144 F.3d 952 (6th Cir. 1998); United States v. Miner, 774 F.3d 336 (6th Cir. 2014).

[4] Seee.g., McDonnell v. United States, 136 S. Ct. 2355, 2367 (2016); Yates v. United States, 135 S. Ct. 1074 (2015); Arthur Andersen LLP v. United States, 544 U.S. 696 (2005); United States v. Aguilar, 515 U.S. 593 (1995).

[5] United States v. Sun-Diamond Growers, 526 U.S. 398, 408, 412 (1999) (declining to rely on “the Government’s discretion” to protect against overzealous prosecutions).