The Criminality of Tax Planning

Abstract

In recent years, the federal government has adopted an aggressive prosecution policy that targets tax advisors who help their clients evade taxes. Increased prosecutions coupled with the present-day sophistication of tax practice call for a critical examination of the willfulness standard applied to tax advisors who use the Code and Treasury regulations as part of their regular practices. This is something no previous legal scholarship has done. To establish willfulness, the government must show that a person accused of a tax crime intentionally violated a known legal duty. Because knowledge of illegality is an element of the government's tax evasion case, prosecutors must negate a defendant's claim of ignorance or misunderstanding of the law, which is evaluated subjectively. The mistake of tax law defense and the knowledge of illegality standard are anomalies since ignorance of the law usually is not an excuse. The Supreme Court, however, has said that tax law is special due to the need to protect average citizens from prosecution for innocent mistakes made due to the complexity of the tax laws. The same high standard of willfulness that applies to average citizens also applies to tax professionals. This Article aims to do two primary things. First, it demonstrates that consideration should be given to broadening the current willfulness standard as it is applied to tax advisors. Second, it evaluates the suitability of Samuel Buell and Lisa Kern Griffin's work on "consciousness of wrongdoing" as one possible approach to consider. Beyond tax scholars and practitioners, this Article may resonate with those interested in criminal law generally and white collar crime in particular, as well as those interested in issues ofprofessional responsibility.