305 371-8101

Failure to Pay Over Tax Does Not Require Proof of Ability to Pay

U.S. v. BLANCHARD,  618 F.3d 562,  (6th Cir. 2010)

Blanchard was convicted in the United States District Court for the Eastern District of Michigan of failure to account for and pay payroll taxes, 26 U.S.C. 7202 and making and causing the making of a false tax refund claim, (18 U.S.C. 287). He was sentenced to 22 months imprisonment.

Blanchard appealed and argued that the government failed to prove he had funds to pay the tax or that he had a bad motive and intent to disobey the law.  He also argued that the statute of limitations was 3 years and it had expired.

The Court found that  willfulness was repudiated in Pomponio. Insofar as United States v. Poll, 521 F.2d 329 (9th Cir. 1975) may be interpreted as requiring the government to prove that defendant had the money to pay taxes when due Poll is inconsistent with Pomponio.

Under the United States Supreme Court's decision, "willfulness" simply means a voluntary, intentional violation of a known legal duty.

Thus, in order to secure a conviction under 26 U.S.C. 7202, the Government must demonstrate that such a violation occurred, but there is no additional requirement that it show beyond a reasonable doubt that a defendant has sufficient funds to meet his obligations.

Federal Courts of Appeals have looked to the plain language of 26 U.S.C. 6531 in concluding that a willful failure "to pay" taxes includes a willful failure "to pay over" withheld taxes. In the words of the United States Court of Appeals for the Third Circuit, under a plain reading of this statute, violations of 26 U.S.C. 7202 are subject to a six-year statute of limitations under ?6531(4). Specifically, 26 U.S.C. 7202 makes it an offense for an employer to willfully fail to account for and pay over to the IRS taxes withheld from employees.

Given that 6531 pertains to failing to pay any tax, failure to pay third party taxes as covered by 7202 constitutes failure to pay any tax, and thus, is subject to the six-year statute of limitations under 6531(4). It would be inconsistent for Congress to have prescribed a six-year limitation period for the misdemeanor offense defined in 26 U.S.C. 7203 while providing only a three-year limitation period for the felony offense defined in 7202.