More on the Confrontation Clause and Tax Liabilities of Out of Court Witnesses

United States v. Jewell, ___ F.3d ___ (8th Cir. 2010), discussed in the last two blogs, is a jewel of many facets. This one is near and dear to my heart.  The issue is whether, in proving the crime of tax evasion which requires a tax due and owing, the Government can introduce the tax returns and resulting tax liabilities of other taxpayers who are not before the court so that they can be confronted as to the claims of tax loss for their taxes, an essential element of the crime. I have discussed this issue previously here (with a downloadable memo on the subject).

The key facts in Jewell are that the defendant, a tax lawyer, assisted husband and wife in evading the husband and wife's taxes.  As is often the case, one spouse was the principal player in the scheme, and in this case it was the husband, Carl Evans.  The Court summarized the proof of tax evasion as follows (case citation and quotation marks omitted):

The elements of tax evasion are willfulness, the existence of a tax deficiency, and an affirmative act constituting evasion or attempted evasion of the tax.  [Carl] Evans testified at trial that Jewell concocted the venture capital agreement as a means of significantly reducing the amount of personal income tax reported by Carl and Patricia Evans in the tax year 2000. An IRS agent testified the difference between the tax liability the Evanses actually paid in 2000 and the amount they should have paid resulted in a tax deficiency of $ 737,436. This evidence was clearly sufficient for a reasonable jury to have found the government presented evidence to satisfy all three elements of aiding and abetting tax evasion.

The defendant argued that the proof was insufficient to establish the tax due and owing.  The Jewell court responded with this jewel (perhaps overdoing the metaphor) at fn 6:

n6 Jewell also claims the evidence was insufficient because the admission of the Evanses' 2000 tax return violated Crawford v. Washington, 541 U.S. 36 (2004). Jewell contends a tax return is "testimonial" because it is signed by taxpayers under penalty of perjury. The government offered the tax returns prior to trial as business records, and Jewell did not object to them except as to relevancy, so we review this claim for plain error only. We find no plain error. Because Carl Evans testified, Jewell had an opportunity to challenge the accuracy of the tax returns. In addition, in United States v. Garth, 540 F.3d 766 (8th Cir. 2008), abrogated on other grounds, United States v. Villareal-Amarillas, 562 F.3d 892 (8th Cir. 2009), we rejected the argument that admission of tax returns, even as to non-testifying witnesses, violated Crawford. Id. at 778 (noting Crawford did not consider business records to be testimonial, and that the defendant stipulated the tax returns were business records).

Note that the Jewell Court encountered several problems with Jewell's Confrontation claim. His counsel's failure to object real time at trial made it subject to the plain error rule. More importantly, one of the taxpayers did in fact testify and could have been fully cross-examined on the of the tax liability in question. Finally, the Eighth Circuit is correct that, in Garth, it had held that tax returns are not testimonial as to the non-testifying taxpayers. I therefore serve up the cryptic discussion from Garth (p. 778):

[Garth] argues her rights under the Confrontation Clause were violated when the district court admitted tax returns of non-testifying witnesses. We review de novo alleged violations of the Confrontation Clause. United States v. Heppner, 519 F.3d 744, 751 (8th Cir. 2008), cert. filed, 08-5334 (U.S. July 12, 2008) [cert. denied, 129 S. Ct. 250, 172 L. Ed. 2d 188 (2008)]. The Confrontation Clause applies only to testimonial statements, such as prior testimony at a preliminary hearing, former trial, or before a grand jury and statements made in the course of police interrogations. Crawford v. Washington, 541 U.S. 36, 68, 124 S. Ct. 1354, 158 L. Ed. 2d 177 (2004). "'Testimony,' in turn, is typically '[a] solemn declaration or affirmation made for the purpose of establishing or proving some fact.'" Id. at 51 (quoting 2 N. Webster, An American Dictionary of the English Language (1828)). The Court observed, "Most of the hearsay exceptions covered statements that by their nature were not testimonial -- for example, business records or statements in furtherance of a conspiracy." Id. at 56; see also id. at 76 (Rehnquist, C.J., concurring in the judgment) ("[T]he Court's analysis of 'testimony' excludes at least some hearsay exceptions, such as business records and official records."). Garth stipulated at trial that the tax returns were business records to avoid the "need to bring in a business records witness[]." She makes no attempt, in her brief, to argue that the tax returns were testimonial. And, in fact, the returns were not prepared for litigation, as is expected of testimonial evidence. See United States v. Torres-Villalobos, 487 F.3d 607, 613 (8th Cir. 2007) (holding that warrants of deportation were "properly characterized as non-testimonial official records that were prepared independent of this litigation" and were not prepared "to prove facts for use in future criminal prosecutions.") Consequently, the admission of tax returns did not violate Garth's right to confront her accusers.

I am not persuaded. Tax returns are quintessentially testimonial. Taxpayers are required to sign under oath to reinforce that the Government needs the truth and will rely upon the oath to establish the truth until and unless an audit proves the contents of the return are not truthful and then the Government may prosecute for tax perjury -- yes, that's perjury, of the tax perjury variety in Section 7206(1) -- if they are not truthful. Perjury is the punishment for false testimonial statements.  Beyond being quintessential "testimony" in this respect, I had thought that Crawford made clear that some exception to exclusion of hearsay does not alone suffice to meet Confrontation concerns, yet the Eighth Circuit seems to suggest that the business record exception suffices. In this regard, I think the Garth court reads the Crawford majority's passing comment to business records far too broadly:  merely because some business records may not be testimonial does not mean that all are not testimonial and thus pass Confrontation scrutiny.  The Crawford court was going back to basics of constitutional interpretation which, I doubt, would read into the Confrontation guaratee a business records exception created to address hearsay issues for what is plainly testimonial statements in a tax return.  And what does preparation for litigation have to do with whether or not statements made under oath are testimonial and prosecutable for perjury?  Perhaps the Court's final holding is that the Garth did not timely raise the objection, but it seems to me that the error in Garth is plain and the holding is wrong. At least I have seen nothing in the reasoning of the defendant losses on this issue that is persuasive to me. But, then, I am not the judge.

Of course, the taxpayer's testimony in Jewell does satisfy the Confrontation concerns because only a single couple's tax returns were involved and the principal of those taxpayers -- Carl Evans -- did testify and was subject to confrontation to the extent the defendant and his counsel chose to confront him.