On March 21, 2018, the United States Supreme Court reversed a decision by the Second Circuit Court of Appeals1 which had upheld Marinello’s conviction of obstruction under the Omnibus Clause contained in IRC § 7212(a). In reversing the conviction, the Supreme Court held that the government must demonstrate that the taxpayer interfered with a targeted governmental tax-related proceeding, such as an audit or investigation, to convict an individual of obstruction or impeding the due administration of the tax code under the omnibus clause. The Supreme Court’s opinion “is a victory for fairness and fair warning when it comes to the application and interpretation of broadly worded provisions of federal criminal statutes,” states Lawrence Hill at Winston & Strawn LLP.2

Background

In 2012, defendant Marinello was charged in a superseding indictment with corruptly endeavoring to obstruct and impede the due administration of the Internal Revenue laws, in violation of 26 U.S.C. § 7212(a) (count one), and willfully failing to file individual and corporate tax returns for calendar years 2005 through 2008, in violation of 26 U.S.C. § 7203 (Counts Two through Nine). At trial, defense counsel conceded that Marinello did not file his tax returns, but argued that Marinello could not be convicted on count one – the Omnibus Clause – because he lacked the requisite criminal intent under section 7212(a), in as much as he did not “corruptly” obstruct or impede the administration of the Internal Revenue Code. The jury convicted Marinello on all counts. Marinello moved for a judgment of acquittal or a new trial and argued, in part, that the phrase “the due administration of this title” in section 7212(a) refers exclusively to pending IRS investigations, and that a defendant may be convicted under the Omnibus Clause statute only if he knowingly interferes with such an investigation.

Marinello argued that he should be acquitted because there was no evidence that he had become aware of the IRS’s investigation until his June 2009 interview with an IRS agent, which occurred after the conduct alleged in the superseding indictment had already taken place. The district court rejected Marinello’s argument, concluding that knowledge of a pending IRS investigation was not an essential element of the crime under the Omnibus Clause in section 7212(a). On appeal, the Second Circuit Court of Appeals affirmed. Because of a split within the circuits, the Supreme Court granted certiorari.3

Analysis

Section 7212(a) criminalizes certain “[a]ttempts to interfere with [the] administration of internal revenue laws.” The statute provides:

[w]hoever [1] corruptly or by force or threat of force (including any threatening letter or communication) endeavors to intimidate or impede any officer or employee of the United States acting in an official capacity under this tile, or [2] in any other way corruptly or by force or threats of force (including any threatening letter or communication) obstructs or impedes, or endeavors to obstruct or impede, the due administration of this title, shall, upon conviction thereof, be [fined or imprisoned, or both].

(Emphasis added.)

The second clause of section 7212(a), the “Omnibus Clause,” is a catch-all provision that criminalizes “any other way” of corruptly obstructing or impeding the due administration of the Internal Revenue Code. At the Supreme Court, Marinello argued that the statutory phrase, “the due administration of this title” under the Omnibus Clause refers exclusively to pending IRS investigations or proceedings, of which the defendant must have knowledge in order to corruptly obstruct or impede.

In interpreting the meaning of the omnibus clause, Justice Breyer, who delivered the majority opinion, concluded that the “due administration of [the Tax code]” under the statute does not cover routine administrative procedures “that are near-universally applied to all taxpayers.” According to the Court, the omnibus clause requires specific interference with a tax investigation or audit – that a taxpayer’s actions must have a relationship in time, causation, or logic with a tax investigation or audit.4 The Court found support in both the language of the statute as well as its legislative history.

First focusing on the language of the statute, the Court acknowledged that the Omnibus Clause contains the verbs “obstruct” and “impede,” which the Court said suggests an object – here, the object is the “due administration of this title.” While this could mean every act performed by the IRS, the Court concluded it was best limited to only some acts because the Omnibus Clause appears in the middle of a statutory sentence that refers specifically to efforts to corrupt or forceful actions taken against identifiable persons or property. The Court found further support in the legislative history. The House Reports stated that the Omnibus Clause provided for “the punishment of treats or threatening acts against agents of the Internal Revenue Service” and “will also punish the corrupt solicitation of an internal revenue employee.” Likewise, the Senate Report stated that section 7212 “covers all cases where the officer is intimidated or injured; that is, where corruptly, by force or threat of force, directly or by communication, an attempt is made to impede the administration of the internal-revenue laws.”

The Court also referenced policy concerns for limiting the scope of the Omnibus Clause. The Court stated that it “traditionally exercised restraint in assessing the reach of a federal criminal statute, both out of deference to the prerogatives of Congress and 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 rejected the Government’s broad interpretation of the Omnibus Clause because the code creates numerous misdemeanors, which would “potentially transfer many, if not all, of those misdemeanor provisions into felonies, making the specific provisions redundant.” The Court was further troubled by a broad interpretation that would also risk the lack of fair warning and related kinds of unfairness that led the Supreme Court in Aquilar to exercise interpretive restraint. Thus, under Marinello, to secure a conviction under the Omnibus Clause, the government must show the following:

  1. That there is a nexus between the defendant’s conduct and a particular administrative proceeding, such as an investigation or audit, and
  2. That the proceeding was pending at the time the defendant engaged in the obstructive conduct or, at the lease, was then reasonably foreseeable by the defendant.