     07-3682-cr
     United States v. Ellett
 1
 2                       UNITED STATES COURT OF APPEALS
 3
 4                             FOR THE SECOND CIRCUIT
 5
 6                                August Term 2007
 7
 8
 9   (Argued: May 16, 2008                           Decided: May 23, 2008)
10
11                              Docket No. 07-3682-cr
12
13   - - - - - - - - - - - - - - - - - - - -x
14
15   UNITED STATES OF AMERICA,
16
17                     Appellee,
18
19               - v.-
20
21   JAMES ELLETT,
22
23                     Defendant-Appellant.
24
25   - - - - - - - - - - - - - - - - - - - -x
26
27         Before:             JACOBS, Chief Judge; MINER, Circuit
28                             Judge; MCAVOY, District Judge.1
29
30
31         Defendant-Appellant James Ellett appeals from the

32   judgment of the United States District Court for the

33   Northern District of New York (Hurd, J.), convicting him,

34   after a jury trial, of four counts of income tax evasion and

35   one count of failure to file an income tax return .          We hold


           1
            The Honorable Thomas J. McAvoy of the United States
     District Court for the Northern District of New York,
     sitting by designation.
1    that due process did not require that Ellett be given the

2    opportunity to litigate his tax position civilly or

3    administratively before being prosecuted for tax evasion.

4    Affirmed.

 5                              RONALD JAY COHEN, Cohen, Estis &
 6                              Associates, LLP, Goshen, NY, for
 7                              Defendant-Appellant.
 8
 9                              PAUL D. SILVER, Assistant United
10                              States Attorney (Glenn T.
11                              Suddaby, United States Attorney,
12                              Northern District of New York,
13                              on the brief; Sara Lord, Brenda
14                              K. Sannes, Assistant United
15                              States Attorneys, of counsel),
16                              United States Attorney’s Office
17                              for the Northern District of New
18                              York, Albany, NY, for Appellee.
19
20
21   PER CURIAM:
22
23       Defendant-Appellant James Ellett appeals from the

24   judgment of the United States District Court for the

25   Northern District of New York (Hurd, J.), convicting him,

26   after a jury trial, on five tax counts.    On appeal, Ellett

27   contends that due process required that he be given the

28   opportunity to litigate his tax position civilly or

29   administratively before being prosecuted for tax evasion.

30   We reject that argument in this opinion.   In a separate

31   summary order filed today, we reject Ellett’s other


                                  2
1    challenges to his conviction.2     We therefore affirm the

2    judgment below.

3

4                              BACKGROUND

5        Ellett was indicted in the Northern District of New

6    York on September 14, 2006 for three counts of income tax

7    evasion for tax years 2000-2002, in violation of 26 U.S.C. §

8    7201.    A superseding indictment filed on February 2, 2007

9    added two counts: tax evasion for tax year 2003, in

10   violation of 26 U.S.C. § 7201, and misdemeanor failure to

11   file for tax year 2004, in violation of 26 U.S.C. § 7203.

12   The district court rejected Ellett’s requests to dismiss the

13   superseding indictment.

14       The evidence at trial showed that beginning in 1989

15   Ellett worked as a skilled mechanic at a public gas and

16   utility company.   He received wages and overtime


          2
            In the summary order we reject arguments concerning:
     (1) the exclusion of legal materials that Ellett claims to
     have relied upon in forming the view that tax laws were
     invalid; (2) the exclusion of an IRS agent’s tax worksheets
     and the denial of an adjournment to allow the defense to
     review another agent’s calculations; (3) the admission of
     evidence of Ellett’s prior federal and state tax history;
     (4) the alleged violation of Brady v. Maryland, 373 U.S. 83
     (1963); (5) the delayed filing of the superseding
     indictment; and (6) the tone and volume used in delivering
     the jury charge.
                                    3
1    compensation and regularly filed federal and state income

2    tax returns until 1994.   That year, at a co-worker’s urging,

3    Ellett read Vultures in Eagle’s Clothing: Lawfully Breaking

4    Free From Ignorance Related Slavery (1997), a publication by

5    Lynne Meredith that instructs readers how to “LAWFULLY

6    STOP!!! PAYING INCOME TAXES” based on fanciful analyses of

7    the tax laws.

8        From May 1996 through tax year 2004, Ellett filed an

9    “In Lieu of Form W-4” form (modeled after a sample form

10   included in Vultures), which directed his employer to

11   withhold zero dollars from his income.   Thus, although

12   Ellett earned between $64,000 and $102,000 per year in the

13   period 2000-03, his federal withholding was zero.   In the

14   latter half of 2004, at the IRS’s instruction, Ellett’s

15   employer began withholding taxes from his wages, with the

16   result that $8,251 was withheld for 2004 on income of

17   $73,376.   Ellett did not file federal income tax returns for

18   the 2003 and 2004 tax years.   In all, Ellett failed to pay

19   over $64,000 in federal income taxes from 2000 through 2004.

20       Ellett sought to persuade the jury that the prosecution

21   did not prove the willfulness element of tax evasion,

22   because he sincerely believed that, as a native of one of


                                    4
1    the 50 states who worked for a private employer, he was

2    exercising a “nontaxable right” to engage in labor.       Ellett

3    testified that he formulated this belief by reading portions

4    of Vultures in Eagle’s Clothing at least one hundred times

5    and by spending hours researching the topic in a law

6    library.    On cross-examination Ellett conceded that he knew

7    any tax professional would have disagreed with him (so he

8    never consulted one) and that he was aware that the Supreme

9    Court has upheld the constitutionality of the federal income

10   tax.

11          The government undertook to prove willfulness by

12   showing that the IRS had notified Ellett that his legal

13   position had been “rejected repeatedly as frivolous and

14   without merit by the federal courts.”    Other evidence showed

15   that the New York State Department of Taxation informed

16   Ellett that his legal position was “obviously incorrect” and

17   that it “has been rejected and deemed frivolous by the Tax

18   Appeals Tribunal and federal courts.”

19          The jury found Ellett guilty on all five counts of the

20   superseding indictment.    The district court denied Ellett’s

21   motions for judgment of acquittal and for a new trial, and

22   on August 10, 2007, sentenced Ellett principally to 18


                                    5
1    months’ imprisonment.

2

3                             DISCUSSION

4        Ellett argues that due process required that he be

5    given the opportunity to litigate his tax position civilly

6    or administratively before being prosecuted for tax evasion.

7        “The elements of tax evasion [under 26 U.S.C. § 7201]

8    are willfulness, the existence of a tax deficiency and an

9    affirmative act of evasion, all of which the government must

10   prove.”   United States v. Plitman, 194 F.3d 59, 65 (2d Cir.

11   1999); see United States v. Helmsley, 941 F.2d 71, 97 (2d

12   Cir. 1991) (explaining that the jury must “find a

13   substantial tax deficiency”).

14       The government therefore was required to establish the

15   existence of a substantial tax deficiency beyond a

16   reasonable doubt.   To do that, Ellett contends, the

17   government was first required to adjudicate his income tax

18   exemption claim either civilly or administratively.    It is

19   undisputed that the Internal Revenue Service never formally

20   audited Ellett and that the United States Tax Court

21   therefore has never ruled on what Ellett believes to be the

22   central legal issue of this case, namely, whether a citizen


                                     6
1    of one of the 50 states who works for a private employer is

2    subject to the federal income tax.

3        Ellett misunderstands the tax deficiency element of tax

4    evasion.    A tax deficiency arises by operation of law the

5    date a tax return is due but not filed; no formal demand or

6    assessment is required.   See 26 U.S.C. § 6151(a) (“[W]hen a

7    return of tax is required under this title or regulations,

8    the person required to make such return shall, without

9    assessment or notice or demand from the Secretary . . . pay

10   such tax at the time and place fixed for filing the return .

11   . . .” (emphasis added)); id. § 6072(a) (requiring annual

12   tax returns to be filed on or before April 15).   Tax

13   liability therefore comes into being as of April 15.    A tax

14   deficiency notice “merely reminds the taxpayer of his duty

15   to pay a tax debt already due[, it] does not create that

16   liability.”   United States v. Voorhies, 658 F.2d 710, 714

17   (9th Cir. 1981) (internal quotation marks and alterations

18   omitted).

19       Accordingly, the government is not required to obtain a

20   civil or administrative determination of a tax deficiency in

21   order to establish the existence of a substantial tax

22   deficiency beyond a reasonable doubt.   We join the First,


                                    7
1    Sixth, Seventh and Ninth Circuits in holding that due

2    process does not require the government to adjudicate tax

3    disputes civilly or administratively before proceeding to

4    criminal prosecution for tax evasion.      See United States v.

5    Daniel, 956 F.2d 540, 542 (6th Cir. 1992); United States v.

6    Hogan, 861 F.2d 312, 315-16 (1st Cir. 1988); United States

7    v. Dack, 747 F.2d 1172, 1174-75 (7th Cir. 1984); Voorhies,

8    658 F.2d at 715 (per curiam).       Ellett’s criminal prosecution

9    was not unlawfully premature.

10

11                            CONCLUSION

12       For the foregoing reasons, and for the additional

13   reasons discussed in our accompanying summary order, we

14   affirm the judgment of conviction below.




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