Yesterday, the Court heard oral argument in Kawashima v. Holder, a case involving the immigration consequences of filing a false tax return.
As explained in our argument preview, the question in the case is whether filing a false tax return counts as an “aggravated felony” for purposes of a statute that subjects an immigrant convicted of an “aggravated felony” to deportation. The statute defines “aggravated felony” to include any offense that “(i) involves fraud or deceit in which the loss to the victim or victims exceeds $10,000; or (ii) is described in section 7201 of title 26 (relating to tax evasion) in which the revenue loss to the government exceeds $10,000.”
Representing petitioners Akio and Fusako Kawashima was Thomas J. Whalen, of Eckert Seamans Cherin & Mellot, LLC. Whalen attempted to make two basic arguments. First, he argued that filing a false tax return does not necessarily amount to “fraud or deceit” because the government is not required to prove any intent to deceive to establish a false return violation. Several Justices questioned whether that was true or consequential. Justices Scalia and Ginsburg suggested that making a false statement on a tax return is inherently deceitful. And Justice Kennedy pointed out that the government has to prove that the violation was willful, which requires showing that the taxpayer knew that the statement was false. But that is not the same thing as proving that the statement was fraudulent or deceitful, Whalen argued, because to prove fraud or deceit the government must also show that the taxpayer intended to induce the government to rely on the false statement. And, he asserted, the government does not need to prove that reliance to get a conviction under the tax statute – it is enough to show that the statement was knowingly false. But Justice Sotomayor seemed unconvinced: the obvious purpose of filing a false tax return is to mislead the government about the extent of one’s tax liability. Whalen responded that an intent to induce reliance is nonetheless the key distinction between filing a false tax return and tax evasion.
Second, Whalen argued that the structure of the statute indicated that Congress intended that the only tax offense that qualifies as an “aggravated felony” is the one expressly listed in subsection (ii): tax evasion. Justice Scalia suggested that Congress may have added the special mention of tax evasion because it is possible to engage in tax evasion without committing fraud or deceit, for example by admitting a tax liability but openly refusing to pay it. Whalen asserted, however, that this would not amount to tax evasion because fraud or deceit is “inherent” in the crime of tax evasion.
Arguing for the government, Assistant to the Solicitor General Curtis E. Gannon began by insisting that Whalen was incorrect in his assertion that fraud is required to prove tax evasion. An “evasion of assessment” case, he explained, may inherently involve fraud, because the taxpayer is hiding or misreporting assets. But an “evasion of payment” case, as in Justice Scalia’s hypothetical, need not involve any fraud or deceit.
Justice Kagan asked why it was, then, that under the Tax Court’s precedent a person convicted of tax evasion is collaterally estopped from later contesting a subsequent civil fraud claim by the government. If a tax evasion conviction does not necessarily imply that the court found an intent to defraud, it would seem that a taxpayer should be allowed to contest a subsequent civil fraud claim notwithstanding the conviction. Gannon responded that it was not clear that the Tax Court would apply this rule to an “evasion of payment” case that did not necessarily require proof of fraud.
Justice Kagan also expressed some doubt that Congress enacted a separate provision specifically addressing tax evasion because it had in mind some small hypothetical set of tax evasion cases that did not involve fraud or deceit. But, Gannon countered, there are other examples in the code where Congress adopted a similar approach, tolerating some overlap of provisions in order to ensure full coverage. Later in the argument Justice Kagan returned to the point, asking Gannon if he could cite any cases in which a tax evasion conviction did not involve actual fraud. Gannon could not.
Justice Breyer, following up on the first argument made by the Kawashimas, asked whether filing a false tax return wasn’t more akin to perjury than fraud or deceit, because the government is not actually required to prove reliance, even if reliance is likely. Gannon replied that Congress need not abide by traditional tort law definitions in criminal statutes, and here the word “deceit” need not be read to require an intent to induce reliance, only an intent to create a false impression, which is necessarily the case in a false tax report case.
Justices Ginsburg and Breyer also worried aloud that taking a broad view of “fraud” and “deceit” would convert a wide range of minor offenses, particularly state law misdemeanors, into “aggravated felonies” with very serious immigration consequences. For example, Justice Breyer asked, what about perjury? Gannon noted that the crime must still result in a loss of more than $10,000, so most perjury convictions will not qualify.
Picking up on the monetary loss provisions, Justice Scalia noted that the fraud and deceit provision referred to a “loss to the victim” while the tax evasion provision referred to a “loss to the government.” If Congress contemplated that both provisions would apply to tax offenses, why not refer to the government’s losses in the first provision as well? Gannon replied that the fraud and deceit provision is more general and its broader language easily encompasses both governmental and private victims.
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