For Carl J. Marinello II, the omnibus clause, or “uber” clause, in Code section 7212(a) had the effect of turning his failures to file tax returns over a period of years from misdemeanors into a felony. Marinello’s conviction was upheld by the Second Circuit, and the U.S. Supreme Court granted certiorari. The case was argued before the court on Wednesday.

At stake is not only Marinello’s possible incarceration, but the impact of many “catchall” residual clauses in federal statutes designed to apply to conduct that might not be covered by the specific language in the rest of the statute.

The phrase in question states, “Whoever corruptly or by force… endeavors to intimidate or impede any officer… of the United States acting in an official capacity under this title [the Tax Code] or in any other way corruptly or by force… endeavors to obstruct or impede the due administration of this title, shall, upon conviction thereof, be fined no more than $5,000, or imprisoned not more than 3 years, or both…”

Supreme Court
U.S. Supreme Court Andrew Harrer/Bloomberg via Getty Images

”It’s been called the one-man conspiracy statute,” said Nathan Hochman, a partner in Morgan Lewis’s Tax Practice group, and former head of the Tax Division of the Department of Justice.

“Normally you need two or more people for a conspiracy, but not with section 7212,” he said.

Marinello owned and operated a freight service that couriered items between the United States and Canada. Between 1992 and 2010, Marinello did not keep business records or file personal or business tax returns. He shredded many of the bank records and didn't withhold payroll taxes. He was indicted by a grand jury on nine counts of tax-related offenses, and a jury found him guilty on all counts. Eight of the counts were misdemeanors under Code section 7203 for willfully failing to file personal income and corporate tax returns for the years 2005 through 2008. The remaining count charged him with violating Code sections 7212(a)’s residual clause. The district court instructed the jury that proof beyond a reasonable doubt of any one of the eight obstructive acts alleged in the indictment, including omissions, would be sufficient to find Marinello guilty under section 7212(a).

Marinello appealed to the Second Circuit arguing that guilt under the residual clause requires knowledge of a pending IRS action or investigation. He urged the court to adopt the Sixth Circuit’s interpretation of Code section 7212(a), which held that the reference to “due administration of this title” requires some pending IRS action, such as a subpoena or audit, of which the defendant was aware. The Second Circuit rejected the Sixth Circuit’s interpretation, holding that the statute covers any corrupt act or omission that obstructs or impedes any activity under the tax code.

A dissent from Marinello’s request for a rehearing en banc (by the full court) observed that such a broad reading of the statute “had cleared a garden path for prosecutorial abuse.”

In his petition for certiorari, noted that under the Second Circuit’s interpretation, “a defendant who does not maintain records at a time when the IRS does not have a pending action against him—let alone undertaking an action of which he is aware—can nonetheless be convicted of a felony of obstructing the administration of the Tax Code.”

“An aggressive prosecutor could use almost any act or omission—the failure to keep a receipt, the decision to be paid in cash, the choice to use a particular method of bookkeeping—as the basis of an obstruction charge under this interpretation,” the petition stated.

It is unclear how the Court will rule, according to Hochman.

“We don’t know if they granted certiorari in order to give the government more power, or to rein it in,” he said.

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Roger Russell

Roger Russell

Roger Russell is senior editor for tax with Accounting Today, and a tax attorney and a legal and accounting journalist.