Jenner & Block

Jenner & Block Team Wins High-Profile Dispute Over IRS Felony Tax Obstruction Statute

On March 21, 2018, the US Supreme Court ruled 7-2 in favor of a firm client in Marinello v. United States, a high-profile IRS tax obstruction statute case. 

The firm represented the petitioner, Carlo Marinello, on a pro bono basis.  Mr. Marinello challenged a Second Circuit decision upholding his felony conviction for obstructing an IRS investigation. The government read the statute to criminalize any “corrupt” act that ultimately hinders the administration of the tax code. 

Partner Matthew Hellman argued against the government’s interpretation in December 2017, asserting that the obstruction statute should be interpreted like other obstruction statutes—to apply when the defendant specifically intends to obstruct a known government proceeding, like an audit or investigation, and not merely the regular processing of tax returns.

“Under the Second Circuit’s construction, any action that could make the IRS’s ability to assess and collect taxes more difficult—say throwing away an old business receipt or asking for a tip in cash—could be the basis of a felony obstruction charge if alleged by a prosecutor to be ‘corrupt,’” according to the firm’s writ of certiorari, which added that the clause “is so broad that it swallows up other tax crimes.  It is difficult, for example, to conceive of any act of tax evasion or tax fraud that could not also be charged as tax obstruction on the Second Circuit’s reading."

In the Court’s opinion, Justice Breyer wrote that administration of the tax code, “does not cover routine administrative procedures that are near-universally applied to all taxpayers, such as the ordinary processing of income tax returns.  Rather, the clause as a whole refers to specific interference with targeted governmental tax-related proceedings, such as a particular investigation or audit.” 

The Second Circuit decision was reversed and remanded, meaning that Mr. Marinello’s conviction for obstruction is overturned.

Numerous media outlets covered the decision, including The National Law Journal, National Public Radio and Bloomberg Law, among others. Associated Press also reported on the case, with its stories appearing in The New York Times, The Washington Post and The Wall Street Journal.  Law360 named the firm a “Legal Lion” for its win in the case.

Partner Geoffrey M. Davis provided tax controversy counsel and Partner David Bitkower provided criminal law counsel. The team also included Associates Corinne M. Smith and Michael E. Stewart and SEO Fellow Imara McMilan.  Former associate Emma Simson assisted with the petition.  The Jenner & Block Supreme Court and Appellate clinic at the University of Chicago Law School assisted in the case.

To read the argument transcript, please click here.