United States v. Clifton, 127 F.3d 969, 10th Cir. (1997)
United States v. Clifton, 127 F.3d 969, 10th Cir. (1997)
PUBLISH
OCT 17 1997
PATRICK FISHER
TENTH CIRCUIT
Plaintiff-Appellee,
DARRELL CLIFTON,
No. 96-5018
Defendant-Appellant.
Clerk
Defendant Darrell Clifton underreported his taxable income for the years 1988-90.
A jury convicted Defendant on three counts of subscribing to materially false income tax
returns, in violation of 26 U.S.C. 7206(1). Rather than submitting the element of
materiality to the jury as United States v. Gaudin, 515 U.S. 506 (1995) required, the
district court decided the element as a matter of law. On appeal, Defendant complains for
the first time that the district courts decision constitutes reversible error. We exercise
jurisdiction under 28 U.S.C. 1291. Because Defendant did not object at trial, we review
the district courts decision only for plain error under Fed. R. Crim. P. 52(b). Applying
Johnson v. United States, 117 S. Ct. 1544 (1997), we hold that the error did not seriously
affect the fairness, integrity or public reputation of judicial proceedings. Accordingly, we
affirm.
I.
Section 7206(1) proscribes filing a federal tax return which the taxpayer does not
believe to be true and correct as to every material matter. Because materiality is an
element of a 7206(1) offense, see United States v. Samara, 643 F.2d 701, 703 (10th Cir.
1981) ( 7206(1) requires proof of a false statement, willfully made, of a material matter),
Defendant had the right to have the jury decide materiality. As the Supreme Court
instructed us in Gaudin, 515 U.S. at 511:
The Constitution gives a criminal defendant the right to demand that a jury
find him guilty of all the elements of the crime with which he is charged;
one of the elements in the present case is materiality; [defendant] therefore
had a right to have the jury decide materiality
Despite Gaudin, the government suggests that materiality under 26 U.S.C.
7206(1) remains a question of law for the court. In Gaudin, the Court addressed
materiality under 18 U.S.C. 1001, which proscribes the making of false statements to
the government. The Court defined a material statement under 1001 as having a
natural tendency to influence, or capable of influencing, the decision of the
decisionmaking body to which it was addressed. Gaudin, 515 U.S. at 509. The Court
concluded that materiality under 1001 was a mixed question of law and fact for the jury.
Id. at 511-15. In comparison, we have defined materiality under 7206(1) as information
necessary in order that the taxpayer . . . compute his tax correctly. United States v.
Strand, 617 F.2d 571, 574 (10th Cir. 1980) (internal quotations omitted). The
government contends that this definition makes the element of materiality in this case
purely a question of law for the court because Defendants failure to report taxable
income caused his tax returns to be inaccurate. See United States v. Klausner, 80 F.3d
55, 58-61 (2d Cir. 1996) (holding that materiality under 7206(2) was a question of law
for the court because false itemized deductions necessarily resulted in an inaccurate
computation of tax). We do not agree.
Rather, we agree with the Ninth Circuits recent pronouncement in United States v.
Uchimura,
F.3d
Courts syllogism [in Gaudin] renders the fact/law distinction irrelevant--the only
pertinent inquiry is whether materiality is an essential element of the crime. This must
be so because even where the facts are undisputed, a criminal defendant still has the right
to insist that the jury find each and every element of the crime beyond a reasonable doubt.
Otherwise, directed verdicts for the government would be permissible. See Sullivan v.
Louisiana, 508 U.S. 275, 280 (1993).
To be sure, a jury usually will find a failure to report income material because such
failure usually will affect the computation of tax. But as the Ninth Circuit recognized:
[J]ust because a jury usually would agree with such a statement does not
mean that a jury must agree with it, as a matter of law. Even if any failure
to report income is material in most circumstances, it is not necessarily
material in all circumstances, since the materiality of an underreporting of
income necessarily depends upon the facts of each case.
Uchimura, 1997 WL 573130 at *3. For instance, if a taxpayers allowable deductions
exceed taxable income in a taxable year, no income tax will be due for that year.
Therefore, taxpayers failure to report all taxable income will not affect the computation
of tax, which in turn might very well affect the jurys deliberations on the element of
materiality. For these reasons, we hold that materiality in a 7206(1) prosecution is an
element of the crime which the district court must submit to the jury, unless of course
We note that Defendants first trial, which occurred prior to the Supreme Courts
decision in Gaudin, ended with a hung jury. Defendants second trial, however, occurred
a month after the Court decided Gaudin. Thus, Defendant was not necessarily unaware of
his right to have the element of materiality submitted to the jury. Nevertheless, we will
give Defendant the benefit of the doubt in this instance. Had Defendant intentionally
relinquished or abandoned a known right, his failure to object would constitute waiver
and we would lack discretion to notice it under Fed. R. Crim. P. 52(b). See United States
v. Olano, 507 U.S. 725, 732-33 (1993).
1
overwhelming and essentially uncontroverted, the error did not seriously affect the
fairness, integrity, or public reputation of judicial proceedings:
Indeed, it would be the reversal of a conviction such as this which would
have that effect. Reversal for error, regardless of its effect on the judgment,
encourages litigants to abuse the judicial process and bestirs the public to
ridicule it. No miscarriage of justice will result here if we do not notice the
error, and we decline to do so.
Johnson, 117 S. Ct. at 1550 (internal citations and quotations omitted).
While the district courts failure to submit the element of materiality to the jury in
this case constitutes error which is plain under Gaudin, see Johnson, 117 S. Ct. at 1549,
we, like the Court in Johnson, need not determine whether the error affected Defendants
substantial rights because Defendant has not persuaded us that the error seriously affected
the fairness, integrity, or public reputation of judicial proceedings. Defendant stipulated
at trial that he underreported his taxable income for the years 1988-90 by $30,000,
$40,000, and $76,000 respectively. Defendant did not dispute owing additional tax as a
result. Surely then, the taxable income Defendant omitted from his federal income tax
returns was necessary to a correct computation of tax, and thus material.
Accordingly, the judgment of the district court is
AFFIRMED.