• In a ruling that no doubt will breathe new life into the “tax protestor” movement, the United States Supreme Court ruled that taxpayers cannot be guilty of a criminal violation of the tax law for taking positions based on ignorance or a misunderstanding of the law, or a sincere belief that they are not violating the law.

The tax law imposes criminal penalties upon a taxpayer “who willfully attempts in any manner to evade or defeat” the federal income tax. A commercial airline pilot who failed to pay taxes or file returns for several years was prosecuted on several counts of willfully violating the law. He maintained that he could not be convicted of willfully violating the law since he had a good faith belief that he was not a taxpayer and that wages are not taxable. The taxpayer’s beliefs arose from his own study of the constitution and federal tax law, and from information he received while attending several seminars sponsored by a tax protestor group. The trial court convicted the taxpayer on several counts of criminal tax evasion. It concluded that only “objectively reasonable” misunderstandings of the law negate the “willfulness” requirement, and that the taxpayer’s belief that wages are not taxable was not objectively reasonable. A federal appeals court upheld the convictions, and the taxpayer appealed to the United States Supreme Court. In a surprise ruling, the Supreme Court agreed with the taxpayer that he could not be convicted of willfully violating the law if he sincerely believed that wages are not taxable, even if this belief was not “objectively reasonable.” The Court made three very important qualifications. First, it emphasized that a jury may evaluate the sincerity of a taxpayer’s professed beliefs. But, if a jury concludes that a taxpayer sincerely and in good faith did not understand the law or believed that he was not violating it, then he cannot be guilty of criminal conduct. Second, the Court noted that “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.” This would not negate willfulness. And third, the Court noted that federal tax law imposes various civil penalties even in the event of a good faith mistake as to the law. Two Justices dissented, noting that “it is incomprehensible to [us] in this day, more than 70 years after the institution of our present federal income tax system … [that] any taxpayer of competent mentality can assert as his defense to charges of statutory willfulness the proposition that the wage he receives for his labor is not income, irrespective of a cult that says otherwise and advises the gullible to resist income tax collections.” The dissenters predicted that the Court’s decision “will encourage taxpayers to cling to frivolous views of the law in the hope of convincing a jury of their sincerity. If that ensues, I suspect we have gone beyond the limits of common sense.” Cheek v. United States, S. Ct. (1991).

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