Lead Opinion
Opinion
Defendant Johnny Ardean Hagen was convicted of three counts of willfully making and subscribing a tax return without belief in its material truth, a felony. (Rev. & Tax. Code, former § 19405, subd. (a)(1).)
Factual and Procedural Background
The convictions relate to tax returns for the years 1988, 1989 and 1990. During that time defendant Johnny Ardean Hagen (Johnny) was employed as an officer of the California Highway Patrol. His wife, defendant Patricia Hagen (Patricia), was the office manager of an insurance agency. As part of her ordinary duties, Patricia deposited cash received from clients into the agency’s trust account and recorded the amount of cash so deposited. These deposits were made about once a week. In June of 1990, David Deveny, who owned and operated the insurance agency, noticed a discrepancy between recent revenues and bank deposits. He then compared the agency’s records of cash receipts against the records of cash bank deposits.
The Hagens deposited virtually all their wages, which were paid by check, into a joint checking account at Hemet Federal Savings and Loan Association. In addition, they made cash deposits into this account of $19,694 in 1988, $36,690 in 1989, and $14,277 in the first six months of 1990. Johnny personally made five cash deposits of $1,000 or larger in 1989-1990.
Both of the Hagens wrote checks on the account, Johnny’s totaling more than $40,000 in the two and one-half years in question. The couple’s disbursements from their savings and loan account exceeded deposits by check to the account by over $15,000 in 1988, $11,000 in 1989, and $24,000 in 1990. In addition, Johnny bought a horse trailer in April 1989 for about $4,000, paying in cash, and in October 1989 paid $2,100 in cash for a teller’s check from their savings and loan. In 1988 through June 30, 1990, the Hagens made no cash withdrawals from the savings and loan’s automated teller machines.
On their state and federal tax returns, the Hagens reported income of $55,238 in 1988, $56,673 in 1989, and $64,573 in 1990. In 1988, they reported interest income and a state tax refund in addition to their employment wages; in 1990 they reported an individual retirement account (IRA) distribution and unemployment compensation received by Patricia, as well as wages from employment. Their tax preparer testified that as part of his standard interview he had asked the Hagens, “Is there any other income?” Nonetheless, the Hagens did not report any other income, including any income from theft.
Deveny confronted Patricia with evidence of the missing money on July 11, 1990. Patricia said she “couldn’t have taken that much,” but admitted she might occasionally have taken money for gas. She said she did not want to, or could not, go to prison. A week later, Deveny met with both Hagens. Johnny asked Deveny how they could solve the “problem” and offered to assign Deveny a deed to real property in Mariposa, an offer Deveny declined. Still later, Patricia told Deveny she was cashing in an IRA and would send him the proceeds; however, he never received any such money.
In defense, Patricia testified that others, especially including Deveny, had access to and collected the cash receipts, and that she merely deposited the cash she was given and recorded that amount, without checking it against receipt records. Patricia, however, was unable to explain the large cash deposits she and her husband made to their checking account or to identify the source of cash for the $4,000 horse trailer. Johnny did not testify.
Johnny and Patricia were each convicted of three counts of filing a false tax return. (Former § 19405(a)(1).) Patricia was also convicted of grand theft, with a finding that the property taken exceeded $100,000 in value. (Pen. Code, §§ 487, 12022.6.) The jury was unable to reach a verdict on the grand theft charge against Johnny, and the court declared a mistrial on that count.
The Court of Appeal affirmed the judgments. The court rejected defendants’ contention the trial court erred by instructing the jury with CALJIC No. 1.20, which, following the language of Penal Code section 7, defines “willfully” as simply “with a purpose or willingness to commit the act or to make the omission in question.” In doing so, the appellate court expressly disagreed with the decision in People v. Smith (1984)
' We granted Johnny’s petition for review.
Discussion
I. The Meaning of “Willfully” in Former Section 19405(a)(1)
Former section 19405(a)(1) punished as a felon any person who “[w]illfully makes and subscribes any return, statement, or other document, that contains or is verified by a written declaration that it is made under the penalties of perjury, and that he or she does not believe to be true and correct as to every material matter.” (Stats. 1993, ch. 826, § 6, repealed by Stats. 1994, ch. 1243, § 58; see now § 19705, subd. (a)(1) [same].)
Prior to the decision in this case, the only published appellate decision construing “willfully” in former section 19405(a)(1) was People v. Smith, supra,
Section 7206(1) of the Internal Revenue Code (26 U.S.C. § 7206(1)) is virtually identical to our former section 19405(a)(1) and present section 19705, subdivision (a)(1). It punishes as a felon any person who “[w]illfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of pequry, and which he does not believe to be true and correct as to every material matter . . . .” (Int.Rev. Code, § 7206(1).)
In United States v. Bishop (1973)
In United States v. Pomponio (1976)
Most recently, in the case of a man who claimed to believe that wages are not income and that he therefore was not obliged to pay taxes or file returns, the high court explained that, under the Bishop-Pomponio definition, such a good faith belief, even if objectively unreasonable, would indeed negate the required element of willfulness. (Cheek v. United States (1991)
We conclude the Court of Appeal in Smith was correct in adopting the Bishop-Pomponio definition of willfulness. As noted, former section 19405(a)(1) was substantially identical to Internal Revenue Code section 7206(1), the federal criminal tax statute at issue in those cases. Our Legislature has generally followed the federal statutes in designing California’s personal income tax system, making federal decisions interpreting substantially identical statutes unusually strong persuasive precedent on construction of our own laws. (Holmes v. McColgan (1941)
The present case involves allegedly willful understatement of income on California personal income tax returns. The income required to be reported under California tax law, however, is generally defined by incorporation of federal tax law. (See §§ 17071 [“Gross income shall be defined by Section 61 of the Internal Revenue Code.” (Fn. omitted.)], 17072, subd. (a) [“Section 62 of the
Moreover, the same considerations of legislative intent that guided the United States Supreme Court in its interpretation of “willfully” apply to state law as well. Like the filing of a federal return, the filing of a California personal income tax return is an act demanded by law of most California residents. By virtue of this and other reporting requirements, millions of Californians are subject to, and must attempt to conform to, a myriad of state laws and regulations (in addition to the many federal laws incorporated into state law). Most taxpayers cannot be expected to have special expertise in the area of tax law, and that many taxpayers, without intending to disobey the law, will occasionally err out of ignorance or a good faith misunderstanding of the law’s requirements is inevitable. California law, like its federal model, provides a graduated scheme of civil penalties and misdemeanor and felony punishment to deter both honest mistakes and willful fraud. (See §§ 19131-19184, 19701-19706.) Our Legislature would have no more reason than Congress to impose the heaviest of these punishments— felony criminal liability—on a taxpayer who misstated information because of legal ignorance or a good faith misunderstanding. Rather, we think it likely the Legislature, like Congress, intended to use these graduated penalties to “separate the purposeful tax violator from the well-meaning, but easily confused, mass of taxpayers.” (Bishop, supra,
Our view of the legislative intent is buttressed by the absence of any apparent legislative dissatisfaction with the federal definition adopted in Smith, supra,
The Attorney General offers three main reasons for not following the federal definition of willfulness, i.e., intentional violation of a known legal duty. First, the Attorney General argues that Penal Code section 7 provides a contrasting definition of “willfully” applicable to penal statutes generally, and in particular to the crime of perjury (Pen. Code, § 118), which is closely related to the offense defined by former section 19405(a)(1). The Court of Appeal, similarly, reasoned that section 19405(a)(1) “is a perjury statute” and that the Penal Code section 7 definition of “willfully” applies “to the general crime of perjury defined in Penal Code section 118 and to the more specific crime of perjury committed in the course of filing a tax return defined in [former section 19405(a)(1)].” The standard criminal law instruction defining willfulness (CALJIC No. 1.20), given in this case, employs the language of Penal Code section 7.
Penal Code section 7 provides definitions for various terms used “in this code,” applicable “unless otherwise apparent from the context.” Subdivision 1 of the section defines “willfully” as “implfying] simply a purpose or willingness to commit the act, or make the omission referred to. It does not require any intent to violate law, or to injure another, or to acquire any advantage.” Courts have sometimes drawn from this paragraph guidance for interpretation of penal statutes, including those appearing in other codes. (See, e.g., People v. Bell (1996)
Contrary to the Attorney General’s argument, one of the statutory contexts in which willfulness has been held to mean more than simply volitional action is the crime of perjury, to which former section 19405(a)(1) was, we agree, closely related. In a perjury prosecution based on the defendant’s having allegedly made an unqualified statement of a matter he did not know to be true (Pen. Code, § 125), this court held the “willfully” element of Penal Code section 118 applies and requires proof the defendant made such statement “with the consciousness that he did not know that it was true, and with the intent that it should be received as a statement of what was true in fact.” (People v. Von Tiedeman (1898)
Second, the Attorney General observes that former section 19405(a)(1) contained explicit language setting out a wrongful intent element, to wit, that the taxpayer “does not believe [the return, statement, or other document] to be true and correct as to every material matter.” (Ibid.; see now § 19705, subd. (a)(1).) Therefore, to quote the Attorney General’s brief, “the statute does not impose strict liability. The average citizen would recognize, irrespective of his or her sophistication in tax matters, that it is wrong to subscribe a false return. . . . Consequently, there is no reason to expand the intent requirement to include mistakes of law.” Allowing mistake or ignorance of law as a defense to tax fraud under former section 19405(a)(1), the Attorney General asserts, would “substantially undercut the ability of the State to enforce its tax laws.”
The Attorney General’s argument is itself substantially undercut by its failure to account
Nor is it clear that former section 19405(a)(l)’s other mens rea requirement—lack of belief in the truth and correctness of the return—adequately serves, by itself, to identify in all cases those taxpayers whose misstatements are most blameworthy. Lack of belief in the return’s correctness may not be precisely equivalent to knowledge of its falsity; the prosecutor in a given case might at least argue that a taxpayer who recklessly failed to discover the truth regarding information demanded on a return and who, for that reason, did not know the return to be false, nonetheless did not “believe [the return] to be true and correct.” (See Bishop, supra,
Finally, the Attorney General argues the federal definition of willfulness articulated in Bishop and Pomponio does not illuminate the term’s meaning in former section 19405(a)(1), because those decisions were rendered after former section 19405(a)(1) was adopted. As mentioned earlier, however, in 1933 the high court interpreted “willfully,” in a criminal tax statute, as requiring proof of “bad faith or evil intent” and, hence, as precluding prosecution for a misstatement or omission arising from a bona fide mistake of law. (Murdock, supra, 290 U.S. at pp. 396-398 [
We therefore conclude that willfulness, as an element of the offense prohibited by former section 19405(a)(1), requires the prosecution to prove the defendant made the perjurious statement in voluntary, intentional violation of a known legal duty. The claim of prejudicial instructional error in this case will be discussed in part III, post.
II. Former Section 19401(a) as a Lesser Included Offense of Former Section 19405(a)(1)
Former section 19401(a) (repealed and reenacted as section 19701, subdivision (a)) provided misdemeanor punishment for any person who, “[wjith or without intent to evade [the state income tax laws], fails to file any return or to supply any information required under this part, or who, with or without such intent, makes, renders, signs, or verifies any false or fraudulent return or statement, or supplies any false or fraudulent information.” (Stats. 1984, ch. 1490, § 36, p. 5234, repealed by Stats. 1993, ch. 31, § 24 and reenacted as § 19701, subd. (a), Stats. 1993, ch. 31, § 26.)
The Court of Appeal held former section 19401(a) was not a lesser included offense of former section 19405(a)(1) because the latter statute does not require that the information in the return, statement or other document actually be false, but only that the taxpayer “does not believe [it] to be trae and correct as to every material matter.” Thus a taxpayer who thought he or she was filing a false return, but who in fact had completed the return accurately, would (assuming other elements were satisfied) have violated former section 19405(a)(1) but not former section 19401(a), which requires either omission of required information or the inclusion of false information. On this reasoning, the test for lesser included offenses is not met: “An offense is necessarily included within a charged offense ‘if under the statutory definition of the charged offense it cannot be committed without committing the lesser offense, or if the charging allegations of the accusatory pleading include language describing the offense in such a way that if committed as specified the lesser offense is necessarily committed.’ [Citation.]” (People v. Toro (1989)
We disagree with the lower court’s reading of former section 19405(a)(1). Although the statute does not explicitly require falsity, its language, history and purpose all suggest it was not intended to punish the purely subjective state of intending to lie on one’s tax return. First, if falsity were not an element, the only act or omission required under the statute would be the filing of a completed tax return, an act not only innocent in itself, but one our tax law actually demands of most Californians. Although Johnny is not precisely correct that the Court of Appeal’s interpretation would leave the statute without any actus reus, for the Legislature to punish as a felony the mere doing of a required act with a bad state of mind would appear unusual, to say the least.
In addition, we observe that the taxpayer, to violate former section 19405(a)(1), must lack belief in the return’s truth or correctness as to a “material” matter. The test for materiality in this context has been variously
As previously noted, the offense described in former section 19405(a)(1) is closely related to the crime of perjury. In common with perjury as prohibited by Penal Code section 118, it requires a statement made under penalty of perjury, materiality, willfulness, and knowledge of falsity (in Penal Code section 118) or lack of belief in the truth of the matter asserted (in former section 19405(a)(1)). Former section 19405(a)(l)’s predecessor statute, former section 18431.1, originally provided that any person who willfully made or subscribed a return without believing it true and correct as to every material matter “shall be subject to the penalties prescribed for perjury by the Penal Code of this State.” (Stats. 1945, ch. 645, § 91, p. 1285.) As defined in Penal Code section 118, the general crime of perjury requires proof of falsity. (People v. Di Giacomo (1961)
Neither this court, interpreting former section 19405(a)(1), nor the United States Supreme Court, interpreting Internal Revenue Code section 7206(1), has addressed the question whether violation of either law requires a.showing of falsity. Many state and federal courts, however, have either held or assumed falsity is required, relying either on the relationship of these statutes to the crime of perjury or simply on common sense. For example, in Kolaski v. United States (5th Cir. 1966)
The Attorney General also argues that former section 19401(a) is not included within former section 19405(a)(1) because former section 19401(a) requires a false “return or statement,” while former section 19405(a)(1) applies, additionally, to a false statement made in any “other document.” This argument fails to take into account that former section 19401(a) also punishes anyone who “supplies any false or fraudulent information.” A violation of former section 19405(a)(1) committed by subscribing any false “document” under penalty of perjury would also constitute the supplying of false or fraudulent information in violation of former section 19401(a).
For these reasons, we conclude that falsity or inaccuracy of the return, statement or other document is an element of the offense prohibited in former section 19405(a)(1) and that the misdemeanor offense, former section 19401(a), is therefore necessarily included therein. In the next part we address, inter alia, whether an instruction on the lesser included offense was required in this case.
III. Application to This Case
As we held earlier, by charging the jury with CALJIC No. 1.20 rather than the federally derived Smith definition of willfulness, the trial court misdescribed an element of the charged crime. Misdescription of an element of a charged offense is subject to harmless error analysis and does not require reversal if the misdescription was harmless beyond a reasonable doubt. (Chapman v. California (1967)
The court’s instructions, although they misdefined willfulness, did not in any way restrict the evidence the jury could consider as to that element of the crime. In convicting the Hagens on each count of violating former section 19405(a)(1), the jury necessarily found they failed to report as income the money Patricia embezzled from her employer, cash they had both deposited in their joint checking account. The jury
For the same reason, the evidence was clearly sufficient to support a finding of willfulness. Johnny’s repeated, large and unexplained cash deposits and purchases, his joint control and use of the couple’s checking account, the sizable excess of the couple’s disbursements over their reported income, and Johnny’s offer to deed Deveny real property in recompense for the theft—an offer made in July 1990, before Johnny signed his 1990 tax return—provide ample proof Johnny knew of the unreported stolen funds when he signed his returns. The Hagens were asked if they had additional income and said nothing. Since it has long been settled law that embezzled funds are taxable income (see James v. United States (1961)
Johnny cites to Smith, supra,
Finally, we conclude that, although former section 19401(a) is a lesser included offense of former section 19405(a)(1), the trial court in this case was
The record here contains no substantial evidence of the lesser offense. In order to find Johnny violated former section 19401(a), but not former section 19405(a)(1), the jury would have had to conclude, beyond a reasonable doubt, that he underreported income on his tax returns, while, at the same time, having reasonable doubt as to whether he harbored both of the mental elements of former section 19405(a)(1): willfulness and a lack of belief in the returns’ accuracy. As already discussed, the evidence provided no basis for reasonable doubt as to willfulness: nothing in the record supports a theory of good faith mistake or ignorance as to the legal duty to report income. Nor was there any substantial evidence from which the jury could have concluded Johnny believed the statement of income on his returns to be complete. Johnny personally made many large cash deposits and purchases with funds not reported as income, wrote checks on the couple’s joint checking account and offered, before signing his 1990 return, to make a form of restitution to the embezzlement victim. The resulting strong inference he knew of the unreported income was uncontradicted by any direct or circumstantial evidence he lacked such knowledge. A reasonable jury could not have concluded, based on this record, that Johnny failed to report the stolen money as income, but did so nonwillfully or in the belief his statements of income were accurate. No instruction on the lesser included offense described in former section 19401(a) was therefore required.
During deliberations, the jury asked the court: “With respect to the Special Verdict counts II, III, IV for Johnny Hagen, does the lack of knowledge of the alleged embezzled funds by Patty entitle Johnny to be found not guilty of the above stated verdicts even though he may be guilty of counts II, HI, IV with respect to unreported income which is considered other than embezzled [?]” The special verdict forms the jury referred to were requested by the defense and asked the jury to state whether the tax counts (as distinguished from the grand theft count) were committed with respect to the embezzled money. The jury ultimately found all the tax counts did involve the stolen money. Johnny argues the jury’s question shows the jury doubted “whether all the elements of the charged offense were present,” thereby obliging the court to instruct “at that point, if not sooner,” on the lesser offense. We disagree. The jury’s concern was apparently with the requirements for affirmative findings on the requested special verdicts, not with the elements of the charged tax violations themselves. The question, moreover, is ambiguous as to whether it concerns possible ignorance of the embezzlement itself or only of the unreported embezzled income. Finally, the jury’s
Disposition
The judgment of the Court of Appeal is affirmed.
George, C. J., Baxter, J., Chin, J., and Brown, J., concurred.
Notes
Hereafter former section 19405(a)(1). All further unspecified statutory references are to the Revenue and Taxation Code. After the commission of these offenses, section 19405(a)(1) was repealed and reenacted as section 19705, subdivision (a)(1). (Stats. 1994, ch. 1243, §§ 58, 61.)
Hereafter former section 19401(a), since repealed and reenacted as section 19701, subdivision (a). (Stats. 1993, ch. 31, §§ 24, 26.)
Repealed and reenacted as section 19706. (Stats. 1993, ch. 31, §§ 24, 26.)
The concurring justice implies our agreement with the United States Supreme Court’s interpretation of the statutory language is a deviation from the “ ‘ “emphatic postulate . . . that ignorance of a law is no excuse for a violation thereof.” ’ ” (Conc. opn. of Mosk, J., post, at p. 674, quoting Hale v. Morgan (1978)
Johnny contends that, in addition to its error in instructing with CALJIC No. 1.20, the trial court erred in failing to instruct, pursuant to the standard perjury instruction (CALJIC No. 7.21), that former section 19405(a)(1) requires proof of “specific intent to declare falsely under penalty of perjury.” (Cf. People v. Viniegra (1982)
The Attorney General concedes that former section 19405(a)(1) appears to be modeled on the predecessor of Internal' Revenue Code section 7206(1), the virtually identical federal statute interpreted in Bishop and Pomponio, but emphasizes that the statute construed in Murdock was not the predecessor of Internal Revenue Code section 7206(1) but, rather, a misdemeanor statute punishing willful omissions, such as failure to file a return or supply required information. (Murdock, supra,
The counts of the information charging violation of former section 19405(a)(1) were generally in the language of the statute and hence did not expressly allege falsity of the returns. We are concerned, therefore, only with the offense as defined by statute and not as charged.
The Attorney General asserts the federal courts “disagree” on this issue. None of the four cases he cites against inclusion of a falsity element so holds, however; they merely fail to mention falsity in reviewing the elements of the offense. In two of the decisions, moreover, the offense prohibited in Internal Revenue Code section 7206(1) is nonetheless referred to as filing or subscribing a “false” tax return. (U.S. v. McCord (5th Cir. 1994)
As with the federal cases, however, a number of California decisions have assumed falsity is required. (See, e.g., People v. Superior Court (Dorsey) (1996)
Our conclusion here does not, as the author of the concurring and dissenting opinion claims, contradict our statement, in part I of the discussion, ante, that the two mental elements of former section 19405(a)(1) may not be perfectly coextensive. (Conc, and dis. opn. of Kennard, J., post, at pp. 681-682.) No contradiction exists between the statement that two elements of an offense are, in general, not identical or coextensive, and the statement that on the facts of a particular case the jury could not reasonably find one without finding the other.
Despite the lack of any evidence suggesting Johnny failed to report the stolen funds because of ignorance or mistake as to the tax law, and despite the fact his attorney raised no such claim to the court or jury at any point in the trial (in his closing statement, counsel instead argued only that the prosecution had not proven Johnny knew about the money at all), Justice Kennard supposes the jury, if instructed on the lesser offense, might have decided Johnny knew about the money but believed he was not required to report it because it was illegally obtained. (Cone, and dis. opn. of Kennard, J., post, at p. 683.) On the evidence in this case, this would have been pure speculation, in which a reasonable juror would have no cause to engage. In any event, on these facts such a jury finding, even if possible, was certainly not reasonably probable; for that reason, any error in failing to instruct on the lesser offense was harmless. (People v. Breverman (1998)
Concurrence Opinion
J. I concur in the result.
I agree with the majority that former Revenue and Taxation Code section 19401 (all further unspecified statutory references are to the Revenue and Taxation Code) is necessarily included in former section 19405, subdivision (a)(1) (hereafter former section 19405(a)(1)). I further agree that failure to give such an instruction under the peculiar facts of this case was not reversible error. And I agree that former section 19405(a)(1) is not intended to punish as a felon the taxpayer who innocently or negligently makes a false statement on his tax return. But like the Attorney General, I do not agree that it is correct to incorporate into former section 19405(a)(1) the additional element that the taxpayer must commit a “voluntary, intentional violation of a known legal duty.” (Maj. opn., ante, at p. 666.) The literal terms of the statute themselves define with sufficient precision the proper mental state requirements, and there is no need to add an additional requirement that is not only without basis in the language of the statute but is contrary to well-established legal principles.
Penal Code section 7, paragraph 1 states that “unless otherwise apparent from the context: [^] . . . [t]he word ‘willfully,’ when applied to the intent with which an act is done or omitted, implies simply a purpose or willingness to commit the act, or make the omission referred to. It does not require any intent to violate the law, or to injure another, or to acquire any advantage.” The reason for this “default” interpretation of the term “willfully” is readily apparent. “ ‘It is an emphatic postulate of both civil and penal law that ignorance of a law is no excuse for a violation thereof. Of course it is based on a fiction, because no man can know all the law, but it is a maxim which the law itself does not permit anyone to gainsay. . . . The rule rests on public necessity; the welfare of society and the safety of the state depend upon its enforcement. ... [If permitted] the plea [of ignorance] would be universally made, and would lead to interminable questions incapable of solution. Was the defendant in fact ignorant of the law? Was his ignorance of the law excusable? The denser the ignorance the greater would be the exemption from liability.’ ” (Hale v. Morgan (1978)
Former section 19405(a)(1) punished as a felon the taxpayer who “[willfully makes and subscribes any return, statement, or other document, that contains or is verified by a written declaration that it is made under the penalties of perjury, and that he or she does not believe to be true and correct as to every material matter.” (As amended by Stats. 1993, ch. 826, § 6, repealed by Stats. 1994, ch. 1243, § 58; see now § 19705, subd. (a)(1) [same].) Thus, former section 19405(a)(1) contains an explicit two-part mental state requirement. First, the taxpayer must act “willfully” {ibid..), which, as noted, generally means simply with a “purpose or willingness to commit the act.” (Pen. Code, § 7.) Second, the taxpayer must also make and subscribe a return or other document made under penalty of perjury that he or she “does not believe to be true and correct as to every material matter.” (Former § 19405(a)(1).) Accordingly, former section 19405(a)(1) already encompasses only those who act with bad intent—i.e., an intent to supply the government with materially false tax information. Thus, although I
The majority almost concede as much. (See maj. opn., ante, at p. 665.) But they state that it is not “clear that former section 19405(a)(l)’s other mens rea requirement—lack of belief in the truth and correctness of the return— adequately serves, by itself, to identify in all cases those taxpayers whose misstatements are most blameworthy. Lack of belief in the return’s correctness may not be precisely equivalent to knowledge of its falsity; the prosecutor in a given case might at least argue that a taxpayer who recklessly failed to discover the truth regarding information demanded on a return and who, for that reason, did not know the return to be false, nonetheless did not ‘believe [the return] to be true and correct.’ [Citation.] A taxpayer, moreover, might knowingly omit information from a tax return in the mistaken belief that he or she was not required to report that information. Such a taxpayer, arguably, would not believe the return to be entirely ‘true and correct.’ He or she would also have acted ‘willfully’ under the Penal Code section 7 definition, but not under the federal tax crime definition. . . . [W]e believe applying the latter definition accords with the probable object of former section 19405(a)(1); our Legislature, like the federal Congress, most likely did not intend to treat such a taxpayer as harshly as one who, knowing of a duty to report, intentionally fails to do so.” {Ibid.)
Of the two problems the majority identify in the above paragraph in interpreting the phrase “does not believe to be true and correct as to every material matter,” I will address the second one first. If a taxpayer omits information from a tax return in the belief that he or she was not required to report that information, then presumably he or she would still believe the return to be “true and correct as to every material matter.” In other words, in that instance, the taxpayer would believe that the information submitted on the return was true and correct and would believe that the omitted information was legitimately omitted.
The first problem identified by the majority is of the “taxpayer who recklessly failed to discover the truth regarding information demanded on a return and who, for that reason, did not know the return to be false, [but] did not ‘believe [the return] to be true and correct.’ ” (Maj. opn., ante, at p. 665, italics added.) This problem merits more careful consideration. “Recklessness” generally signifies action in spite of subjective awareness of a grave risk. (See People v. Estrada (1995)
Moreover, when the Legislature has seen fit to criminalize a specific intent to evade the law in the tax statutes, it has done so explicitly. Thus, former section 19406 (now section 19706), part of the same statutory scheme as former section 19405(a)(1), punishes “any person [who] . . . willfully fails to file any return or to supply any information with intent to evade any tax imposed by” specified provisions. Thus the Legislature made “intent to evade the law” an element of the crime through the explicit use of that term, not through the unconventional use of the term “willfully.” Indeed, if “willfully” meant the same in former section 19406 as it did in former section 19405(a)(1), then there would have been no need to include the phrase “intent to evade any tax” in the former section 19406.
I recognize that in so interpreting former section 19405(a)(1), I am at variance with United States Supreme Court’s interpretation of a virtually identical federal statute. But as the majority acknowledge, the interpretation in question did not come about until 1973 in United States v. Bishop (1973)
There were two United States Supreme Court decisions prior to 1945 that interpreted “willfully” in the context of federal tax statutes to require a bad purpose. In United States v. Murdock (1933)
In Spies v. United States (1943)
Thus, both Murdock and Spies concern statutes that sanctioned omissions and failures to perform statutory duty, and the court was concerned to make clear that it was not the intent of Congress to make felonious those omissions and failures because of inadvertence and negligence. Both cases acknowledged that the meaning of “willful” depended on the context of the statute. Neither case dictates that the term must be understood in other than its usual sense when the statute in question criminalizes affirmative acts of material deception in sworn legal documents. Therefore, there is no reason to believe that the Legislature in
It is true that there is a virtue to having our tax law consistent with federal law. As the majority state, quoting Holmes v. McColgan (1941)
Because I conclude there was no instructional error, I, like the majority, would affirm the judgment of the Court of Appeal.
Concurrence Opinion
This case presents two questions of general significance:
1. What is the meaning of the term “willfully” in former section 19405, subdivision (a)(1), of the Revenue and Taxation Code (now section 19705, subdivision (a)(1), of the same code; hereafter former section 19405(a)(1))?
2. Is the misdemeanor offense defined in former section 19401, subdivision (a), of the Revenue and Taxation Code (now section 19701, subdivision (a), of the same code; hereafter former section 19401(a)) an offense necessarily included within the offense defined in former section 19405(a)(1)?
The majority resolves the first issue by holding, in part I of its opinion, that a defendant acts “willfully,” as that term is used in former section 19405(a)(1), only if the defendant voluntarily and intentionally violates a known legal duty. (Maj. opn., ante, at pp. 660, 666.) The majority resolves the second issue by holding, in part II of its opinion, that the misdemeanor offense defined in former section 19401(a) is an offense necessarily included within the offense defined in section 19405(a)(1). (Maj. opn., ante, at p. 670.) To reach the latter conclusion, the majority also holds that the felony offense defined in former section 19405(a)(1) requires, as one of its elements, that the information in the tax return, statement, or other document be actually false. (Maj. opn., ante, at pp. 667, 670.) I agree with each of these holdings.
But I disagree with most of the majority opinion’s part III, in which the majority applies these holdings to determine whether in this proceeding defendant Johnny Ardean Hagen was properly convicted of the felony offense defined in former section 19405(a)(1). Here, the majority concludes: (1) the trial court’s error in misdescribing for the jury the mental state required by former section 19405(a)(1) was harmless and does not require reversal of Hagen’s convictions (maj. opn., ante, at pp. 670-671); (2) the evidence at trial is sufficient to support a finding that defendant had the required mental state (id. at pp. 671-672); and (3) in light of the evidence, the trial court was not required to instruct the jury on the necessarily included misdemeanor offense defined in former section 19401(a) (maj. opn., ante, at pp. 672-673).
I agree that sufficient evidence was presented at trial to support a jury determination that defendant Johnny Hagen acted with the required mental state of willfulness. But
I
Former section 19405(a)(1) states that a person commits a felony if that person “[wjillfully makes and subscribes any return, statement, or other document, that contains or is verified by a written declaration that it is made under the penalties of perjury, and that he or she does not believe to be true and correct as to every material matter.” (As amended by Stats. 1993, ch. 826, § 6 and repealed by Stats. 1994, ch. 1243, § 58; see now § 19705, italics added.) The majority correctly construes the term “willfully” in former section 19405(a)(1) as meaning that in committing the proscribed act— making and subscribing a materially false tax return—the person voluntarily and intentionally violated a known legal duty.
In this case, the jury’s verdict convicting defendant Johnny Hagen of three counts of violating former section 19405(a)(1) was based on his failure to report as income, on three consecutive joint state income tax returns for himself and his wife, certain funds that his wife had embezzled from her employer. The jury returned these verdicts after the trial court, in its instructions to the jury, failed to correctly explain the meaning of “willfully” in former section 19405(a)(1). The trial court told the jury that “willfully” in this context means “with a purpose or willingness to commit the act or to make the omission in question.” Under the court’s instruction, the jury was not required to determine whether Hagen knew he had a legal duty, when preparing and executing each of the joint state income tax returns, to report embezzled funds as income. Under the court’s instruction, it was sufficient that Hagen intentionally signed and submitted a return that failed to include the embezzlement proceeds in the reported income.
As the majority recognizes, the trial court’s instruction is erroneous because it misdescribes an element of the offense. As the majority also recognizes, this misdescription of an element of the offense is federal constitutional error subject to the harmless error standard that the United States Supreme Court enunciated in Chapman v. California (1967)
As I have explained in separate opinions in previous cases, there are three common circumstances in which a reviewing court may conclude that a jury verdict is “surely unattributable to the error” in misdescribing an element of an offense. These circumstances are: “(1) when the jury has necessarily resolved the omitted factual question under other properly given instructions, (2) when some factual finding the jury has made is the functional equivalent of a finding on the omitted factual question (because no rational jury could find the fact actually found without also finding the omitted fact), and (3) when the defendant admitted or affirmatively conceded the omitted factual question.” (People v. Breverman (1998)
None of these circumstances is present here. No jury instruction correctly presented to the jury the question whether defendant Johnny Hagen knew, when reporting income on his state income tax returns, that he had a legal duty to include stolen funds that he or his wife had received. The jury
To justify its harmless error conclusion, the majority first observes, accurately, that the court instructed the jury to find defendant Johnny Hagen guilty of the offense defined in former section 19405(a)(1) only if Hagen, when he signed and submitted the tax returns, “did not believe [the returns] to be true and correct as to every material matter.” The majority then reasons, correctly, that in light of this instruction, the jury’s guilty verdict necessarily includes a finding that Hagen did not believe the tax returns were true and correct as to every material matter. Finally, the majority asserts, incorrectly, that this implied finding necessarily implies a further finding that Hagen knew of his legal duty to report the embezzlement proceeds. (Maj. opn., ante, at pp. 670-671 [stating that “had the jury harbored reasonable doubt as to whether the Hagens knew of their reporting obligation, it would not have found beyond a reasonable doubt that they did not believe their returns to be true and correct as to every material matter”].) Stated another way, the majority apparently bases its conclusion that the instructional error was harmless on the proposition that a finding that Hagen did not believe the tax returns were true and correct as to every material matter is the functional equivalent of a finding that Hagen knew he had a legal duty to report embezzlement proceeds as income on his state tax returns.
That proposition is, as the majority elsewhere acknowledges, false: intentionally signing a tax return while lacking a belief that a tax return is true and correct as to every material matter is not functionally equivalent to voluntarily and intentionally violating a known legal duty. The majority correctly explains the relationship this way: “Lack of belief in the return’s correctness may not be precisely equivalent to knowledge of its falsity; the prosecutor in a given case might at least argue that a taxpayer who recklessly failed to discover the truth regarding information demanded on a return and who, for that reason, did not know the return to be false, nonetheless did not ‘believe [the return] to be true and correct.’ [Citation.] A taxpayer, moreover, might knowingly omit information from a tax return in the mistaken belief that he or she was not required to report that information. Such a taxpayer, arguably, would not believe the return to be entirely ‘true and correct.’’ ” (Maj. opn., ante, at p. 665, italics added.) Thus, the majority, to justify its conclusion that the instructional error was harmless, is forced to contradict its own reasoning.
The most that can be said here is that the prosecution presented circumstantial evidence from which a reasonable juror could have inferred that defendant Johnny Hagen
I disagree also with the majority’s conclusion that the trial court did not have to instruct the jury on the misdemeanor offense defined in former section 19401(a) as an offense necessarily included within the offense charged (that is, violation of former section 19405(a)(1)) because “[t]he record here contains no substantial evidence of the lesser offense.” (Maj. opn., ante, at p. 672.) To find defendant Johnny Hagen guilty of the misdemeanor, the jury would have had to find beyond a reasonable doubt that he underreported income on his tax returns while at the same time entertaining a reasonable doubt that he acted willfully or without believing that the returns were accurate. (Ibid.) Unlike the majority, I conclude that a reasonable juror could make these findings on the evidence presented.
In a criminal prosecution for a tax offense containing the element of willfulness, the government has the burden of proving “that the law imposed a duty on the defendant, that the defendant knew of this duty, and that he voluntarily and intentionally violated that duty.” (Cheek v. United States (1991)
The record here contains no direct evidence that defendant Johnny Hagen was aware of tax statutes, regulations, court decisions, administrative rulings, or tax form instructions stating that illegally obtained funds were reportable as income for tax purposes. The evidence on this issue was entirely circumstantial. Hagen had been employed by the California Highway Patrol for over 20 years, but there was no evidence that his duties ever included investigation of tax offenses or that he had ever received any training in that area. On the contrary, it appears that he served as a patrol officer, not an investigator.
The record shows that the tax returns that formed the basis of Johnny Hagen’s convictions were prepared by a fellow California Highway Patrol officer, Richard Contreras, based upon documents and information that Hagen and his wife supplied to Contreras during an interview. There is no evidence that Contreras explained to them during the interview that illegally obtained funds were reportable income or that he explained the concept of reportable income in a way that would necessarily have included such funds. Contreras testified he asked Hagen and his wife to tell him “all the income that they received from various jobs or interest or dividends, other income, business income.” He could not remember the exact words he used. He usually asked his clients to tell him about “all income” or “any other income,” but he may have inquired about wages and “whatever other income outside of that that was earned in that particular year.” (Italics
As a result of some highly publicized prosecutions, the requirement that illegally obtained funds be reported as income for tax purposes is widely known. (Cf. Bucy, Criminal Tax Fraud: The Downfall of Murderers, Madams and Thieves (1997) 29 Ariz. St. L.J. 639.) But this knowledge is not universal, and I do not consider it beyond the realm of reasonable possibility that a California Highway Patrol, officer who performed only patrol duties would be unaware of this duty. Likewise, defendant Johnny Hagen’s failure to discuss the question with a fellow officer who prepared his taxes may suggest, but does not conclusively demonstrate, that he was either aware of the duty to report embezzled funds or aware of a high probability that the embezzled funds were reportable income and consciously avoided obtaining actual knowledge of his obligation. It is reasonably possible that Hagen construed his fellow officer’s statements as meaning that reportable income included only certain gifts and funds that were lawfully earned, and not funds obtained unlawfully.
Considering all of the relevant circumstantial evidence, a reasonable juror could have inferred that defendant Johnny Hagen knew he had a legal obligation to report all income, including theft proceeds, but the circumstantial evidence was not so strong or overwhelming as to make this inference inescapable or to preclude a reasonable juror from rejecting the inference and giving Hagen the benefit of a reasonable doubt. Thus, the state of the evidence at trial was such that a reasonable juror could have found Hagen guilty of the lesser but not the greater offense. This being so, the trial court through its instructions should have given the jury the option of convicting Hagen on the lesser offense.
II
In this case, the jury that found defendant Johnny Hagen guilty of violating section 19405(a)(1) was never asked to determine whether Hagen voluntarily and intentionally violated a known legal duty when he executed the false tax returns. Although the evidence at trial was sufficient to permit a reasonable juror to infer that he did, the federal Constitution, as authoritatively construed by the United States Supreme Court, does not permit a reviewing court to substitute its assessment of the strength of the evidence for a missing jury determination on an ultimate fact necessary for a criminal conviction. Accordingly, I would reverse the judgment of the Court of Appeal and remand the matter to that court with directions to reverse Hagen’s convictions so that his guilt or innocence of the charged offense might be determined by a properly instructed jury. In the alternative, if the prosecution so elected, Hagen’s convictions should be reduced to the necessarily included misdemeanor offense defined in former section 19401(a). (See Pen. Code, § 1260; In re Brown (1998)
The petitions of both respondent and appellants for a rehearing were denied January 20, 1999. Kennard, J., was of the opinion that the petition of appellants should be granted.
In a footnote (maj. opn., ante, at p. 671, fn. 10), the majority insists there is no contradiction. The majority claims that “[n]o contradiction exists between the statement that two elements of an offense are, in general, not identical or coextensive, and the statement that on the facts of a particular case the jury could not reasonably find one without finding the other.” But the majority never explains, so far as I can determine, what specific evidence in the trial of this case takes it out of the general rule that a finding of one mental element (lack of belief that the return is true and correct) does not compel a finding of the other (voluntary and intentional violation of a known legal duty). Specifically, the majority identifies no evidence that would preclude a reasonable juror from finding both that Johnny Hagen lacked a belief that his federal tax returns were entirely true and correct (because he knew he had not included the illegally obtained funds when listing his income) and that Johnny Hagen did not intentionally violate a known legal duty (because he did not know that he had a legal duty to report illegally obtained funds).
The only evidence the majority mentions in this connection is the testimony of the Hagens’ tax preparer, Richard Contreras, that he asked Johnny and Patricia Hagen about “other income” and that they failed to mention the illegally obtained funds. But Johnny Hagen’s failure to discuss these funds with a fellow California Highway Patrol officer is readily explainable by an unwillingness to risk criminal prosecution for the misapropriation; it does not necessarily imply knowledge of the legal duty to report the misappropriated funds as income on federal tax returns.
In a footnote (maj. opn., ante, at p. 673, fn. 11), the majority states that it “would have been pure speculation” for a jury to conclude that Johnny Hagen “knew about the money but believed he was not required to report it because it was illegally obtained.” This conclusion would require speculation, according to the majority, because of “the lack of any evidence suggesting Johnny failed to report the stolen funds because of ignorance or mistake as to the tax law.” (Ibid.) The main flaw in the majority’s reasoning is its assumption that Johnny Hagen had the burden of coming forward with affirmative evidence of his own ignorance of the relevant legal duty. Because knowledge of the legal duty was an element of the offense, it was the prosecution’s burden to prove Johnny had that knowledge. Thus, to obtain a favorable verdict Johnny did not need to persuade the jury that he entertained the mistaken belief; he needed only to raise a reasonable doubt in the jurors’ minds that he had the required knowledge of the legal duty to report illegally obtained funds as income on federal tax returns. Given the inconclusive state of the prosecution’s evidence on this issue, a reasonable and properly instructed juror might have entertained such a reasonable doubt.