Lying about taxes, or in any other way trying to skirt the investigation of the government, is, to put it lightly, a risky move. The IRS is fairly unforgiving when taxes are filed incorrectly, so how do you think it will react to corruption?
Illegally interfering, or even threatening to interfere with an investigation can land a taxpayer in a lot of trouble. The following definition of the Omnibus Clause explains the process of what will happen if there is interference or an attempt to corrupt an investigation by the taxpayer.
The Omnibus Clause
The Omnibus Clause is the second portion of 26 U.S.C. § 7212(a) and it prohibits the use of force or any corrupt act which interferes or attempts to interfere with the administration of the Internal Revenue Code. United States v. Bostian, 59 F.3d 474, 477 (4th Cir. 1995); United States v. Popkin, 943 F.2d 1535, 1539 (11th Cir. 1991).
The first portion of this statute is known as the Officer Clause. See United States v. Przybyla, 737 F.2d 828, 829 (9th Cir. 1984). The Officer Clause makes it illegal to use force or threats to interfere with or intimidate any agents or officers acting in their duties under the IRC. As the Officer Clause is more specific, it is not as frequently charged, so the focus of this section will be on the Omnibus Clause.
The Omnibus Clause requires that some action be taken, and generally occurs after a tax return has been filed and the taxpayer is attempting to obstruct an investigation or civil audit. The attempt does not actually need to be successful. Croteau, 819 F.3d01293 at 1308.
For example, CI agents have visited John Doe, and he knows that they are looking into his tax records. John Doe, concerned about the outcome, offers up the incorrect records in an attempt to throw them off the trail. The CI agents realize these are the wrong records, and request the correct ones. John Doe could still be charged with an attempt to interfere with the internal revenue laws.
How does the Government Prove an Attempt to Interfere with Internal Revenue Laws?
In order to successfully prove that the Defendant violated the Omnibus Clause under this statute, the Government has to prove each of an essential set of facts, called elements, beyond a reasonable doubt. See supra. How are Charges Selected? United States v. Marashi, 913 F.2d 724, 735-36 (9th Cir. 1990); United States v. Williams, 875 F.2d 846, 849 (11th Cir. 1989).
The three elements for this clause are that the Defendant:
- endeavored; and
- to obstruct or impede the due administration of the Internal Revenue Code.
For the other tax crimes we’ve looked at, the Defendant’s actions have to be willful. In the case of attempting to interfere with internal revenue laws under the Omnibus Clause, the specific intent of “corruptly” takes the place of willful. See United States v. Floyd, 740 F.3d 22, 31 (1st Cir. 2014). To prove that the defendant acted corruptly under this statute, the Government has to show that he or she intended to obtain some type of unlawful advantage or benefit. United States v. Popkin, 943 F.2d 1535, 1540 (11th Cir. 1991). The benefit does not have to be for the defendant himself. The defendant can still act corruptly if the intended benefit is for another person. See id.
There is no requirement that the action taken is unlawful, it only matters that the defendant hoped to obtain an unlawful benefit through the action. See id. The defendant may corruptly endeavor to impede an IRS action by threatening to do something, such as filing lawsuits without merit. See United States v. Miner, 774 F.3d 336, 347-48 (6th Cir. 2014). If the actions taken are only to harass or annoy the IRS agent, this may not rise to the level of “corrupt” under the statute. United States v. Reeves, 752 F.2d 995, 999 (5th Cir. 1985).
The Omnibus Clause refers to a crime of attempt. This means the defendant doesn’t have to be successful in actually completing the act- it is enough that he or she attempted to do it. The element of endeavored is officially defined as, “any effort . . . to do or accomplish the evil purpose that section was intended to prevent.” Osborn v. United States, 385 U.S. 323 (1966).
While the courts have not specifically answered the question of whether a failure to do something, such as in the crimes of omission, could be could be considered an endeavor, the Tax Division’s policy is that the Omnibus Clause should generally not be based upon an omission, including a failure to file a tax return. CTM 17.03.
Obstruct or Impede the Due Administration of the Internal Revenue Code
The Supreme Court broke down this third element further, and held that essentially, the Government has to prove two sub-elements. These sub-elements were taken from the words “due administration of the Internal Revenue Code.” See Marinello v. United States, 138 S. Ct. 1101 (2018). The Supreme Court found that this language referred only to “specific, targeted acts of administration,” rather than a general routine procedure done with all taxpayers, such as a review of tax returns. Id.
Following this decision, the Government must also prove that:
- there was a targeted administrative IRS action which the Defendant either knew of or could reasonably see coming; and
- there was some relationship connecting acts- a “nexus”- between the defendant’s attempt to interfere with IRS action and the targeted action that was occurring or reasonably foreseeable. Id.
In other words, a conviction under the Omnibus Clause will only hold up if the Defendant’s attempt was related to his knowledge or awareness of the possibility of some specific IRS administrative proceeding, such as the administrative investigation we discussed previously. Civil audits will also count as the required specific administrative proceeding. on and the targeted action that was occurring or reasonably foreseeable. See Id. The Supreme Court didn’t provide a list of what actions would not count as specific administrative proceeding, but “routine, day-to-day work carried out in the ordinary course by the IRS, such as the review of tax returns” would not meet the standard. See Id. at 1110.
In the legal world, a nexus is defined as a relationship in time, causation, or logical relationship connecting acts. In the case of the Omnibus Clause, the nexus requirement is defined as having the “‘natural and probable effect’ of interfering with the due administration of justice.” United States v. Wood, 6 F.3d 692, 695 (10th Cir. 1993).
The idea behind this requirement is if the defendant was unaware of the fact that there was any proceeding to obstruct, or that his or her actions could obstruct an IRS administrative proceeding, the defendant would not have the intent required.
The Government also has to show that the case was charged and will be tried in the right place. See supra For an Omnibus Clause offense, the proper venue is in the judicial district where the defendant committed the corrupt endeavor to interfere with an IRS administrative proceeding. However, the Government should not bring charges in the place where the IRS was carrying out the proceeding if this is not the same place where the attempt to gain an unlawful advantage was made. United States v. Marsh, 144 F.3d 1229 (9th Cir. 1998).
Statute of Limitations
The statute of limitations for interference with the administration of the Internal Revenue Laws is six years. The six years begins on the date of the last action the defendant took that can be considered a corrupt endeavor to impede and impair the due administration of the tax code. 26 U.S.C. § 6531(6); United States v. Adams, 955 F.3d 238, 251 (2d Cir. 2020).
The general rule is that tax crimes have a three-year statute of limitations, but there is an exception for the “the offense described in section 7212(a) (relating to intimidation of officers and employees of the United States).” 26 U.S.C. § 6531. While the exception only specifically mentions the Officer Clause, the courts have stated that the example given in the parenthesis is meant to explain the exception rather than limit it to the first clause, making the six-year statute of limitations applicable to the Omnibus Clause as well. See United States v. Workinger, 90 F.3d 1409 (9th Cir. 1996).
What is the Punishment for Interfering with Internal Revenue Laws?
Punishment for a crime varies based on the specific facts of the case as well as the Defendant’s criminal history. However, the law allows defendants convicted of interfering with internal revenue laws to be given up to three years in prison and a $5,000.00 fine. 26 U.S.C. § 7212(a). If the defendant committed the crime by only threatening to use force, the maximum penalty is one year in a prison and a $3,000.00 fine. See id.
If you are charged with a violation of the Omnibus Clause, it is extremely important to contact a defense lawyer who knows tax law. Once the Omnibus Clause is laid down, it has gone beyond the taxpayer paying only a financial restitution – a prison sentence is now on the table.
The IRS does not go easy on people who violate the tax code, and they especially don’t go easy on people who corruptly interfere with their investigation.
If you are in this position or want more information, call me. With my resources and experience, I can help make a case that will defend you.