                            NOT RECOMMENDED FOR PUBLICATION
                                   File Name: 16a0507n.06

                                                No. 15-3744
                                                                                                  FILED
                                                                                           Aug 26, 2016
                             UNITED STATES COURT OF APPEALS                            DEBORAH S. HUNT, Clerk
                                  FOR THE SIXTH CIRCUIT

UNITED STATES OF AMERICA,                                       )
                                                                )
        Plaintiff-Appellee,                                     )
                                                                )
v.                                                              )       ON APPEAL FROM THE
                                                                )       UNITED STATES DISTRICT
JOHN J. JOHNSON,                                                )       COURT FOR THE SOUTHERN
                                                                )       DISTRICT OF OHIO
        Defendant-Appellant.                                    )
                                                                )
                                                                )



BEFORE:          MOORE, ROGERS, and SENTELLE,* Circuit Judges.

        ROGERS, Circuit Judge. Although they cause much hardship to defendants, not all

prosecutions that turn out to be baseless are pursued with malicious intent. In this case, the

Government indicted John Johnson on April 16, 2013, for making a material false statement on

his 2006 federal income tax return. A dispute arose between the parties whether the statute of

limitations expired on April 15, 2013, or April 17, 2013. The district court resolved the matter in

favor of the Government, and, after a five-day trial, the jury convicted Johnson. On appeal to

this court, Johnson again argued that the statute of limitations expired one day before the

indictment issued, this time citing more persuasive authorities. The Government conceded that

Johnson had the correct view of the issue. After we accepted the Government’s concession and

instructed the district court to dismiss the indictment, United States v. Johnson, 599 F. App’x

*
  The Honorable David B. Sentelle, United States Circuit Judge for the District of Columbia Circuit, sitting by
designation.
No. 15-3744, United States v. John Johnson


242 (6th Cir. 2015), Johnson filed an application with the district court under the Hyde

Amendment, which permits an award of attorney’s fees and other litigation expenses to the

prevailing party in a federal criminal case if, among other requirements, the Government’s

position was vexatious, frivolous, or in bad faith. Johnson now appeals the district court’s order

denying his application. While the expenses that Johnson incurred while defending the time-

barred prosecution are unfortunate, the district court did not abuse its discretion in denying relief

under the Hyde Amendment and in finding that the Government’s position was not vexatious,

frivolous, or in bad faith.

        Johnson filed his 2006 federal income tax return in February 2007, well before the

general statutory deadline of April 15, see 26 U.S.C. § 6072(a). However, the six-year statute of

limitations for criminal prosecutions relating to early-filed returns like Johnson’s begins to run

from “the last day prescribed for the filing thereof,” rather than from the date actually filed. See

26 U.S.C. §§ 6513(a), 6531. Because of the day of the week on which April 15 fell in 2007, it

was not immediately apparent which day was “the last day prescribed for the filing” of 2006 tax

returns. In 2007, April 15 fell on a Sunday. The next day, April 16, 2007, was a legal holiday.

Accordingly, pursuant to 26 U.S.C. § 7503, federal income tax returns for 2006 were still

“considered timely” if filed on April 17, 2007—“the next succeeding day” after April 15 that

was “not a Saturday, Sunday or a legal holiday.” Thus, the parties and the district court debated

which date was “the last day prescribed for the filing” of federal income tax returns for 2006:

Was it April 17, 2007, the last day on which returns could be filed and still be “considered

timely,” see § 7503? Or April 15, 2007, the general “prescribed” deadline for filing federal

income tax returns, see § 6072(a)?




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No. 15-3744, United States v. John Johnson


        In arguing for the April 15 date before the district court, Johnson cited the

abovementioned statutes as well as the Supreme Court’s decision in United States v. Habig, 390

U.S. 222 (1968), in which the Court held that the statute of limitations for returns filed after the

deadline pursuant to an extension ran from the date actually filed, rather than from the

unextended date on which the returns were originally due to be filed.1 Id. at 224–25. Despite

Johnson’s arguments, the district court sided with the Government, reasoning that because “the

last day for filing the 2006 tax return in 2007 is the date upon which the statute of limitations

commences to run” and because “the last day for filing 2006 tax returns was April 17, 2007,” it

was “obvious” that the indictment was filed within the statutory limit. The district court also

denied Johnson’s motion for reconsideration.

        When Johnson renewed his argument on appeal, he cited for the first time the Internal

Revenue Manual, which directly supports his position. See No. 14-3760, Johnson’s Br. at 26-27.

Johnson cited § 9.1.3.6.3 of the manual, which states that “the statutory due date [of April 15]

remains unchanged” when the due date falls on a Saturday, Sunday, or legal holiday, meaning

that “the calculation of the statute of limitations . . . should use the statutory due date regardless

of the day of the week on which that date falls.” Johnson also cited § 25.6.1.6.15 of the manual,

which states that “[f]or example, a Form 1040 received on Friday, April 13 is deemed filed on

Sunday, April 15.” See No. 14-3760, Johnson’s Br. at 26. The Government, in response,

confessed error and indeed provided even more support for Johnson’s position. See No. 14-

3760, Government’s Br. at 9–10 (citing Kabotyanski v. IRS, 2007 WL 526603 (E.D.N.Y. Feb.

13, 2007); Weisbart v. IRS, 2004 WL 528442 (E.D.N.Y. Mar. 15, 2004); Hannahs v. United



1
  In Habig, the Court accepted the Government’s argument that to hold otherwise would mean that the statute of
limitations would—anomalously—start running before the criminal act occurred. 390 U.S. at 224–25. Such an
anomaly would not occur in the context of the Government’s original argument in this case.

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No. 15-3744, United States v. John Johnson


States, 1995 WL 230461 (W.D. Tenn. Jan. 30, 1995); Rev. Rul. 2003-41, 2003-1 C.B. 814; Rev.

Rul. 81-269, 1981-2 C.B. 243).

       After we instructed the district court to dismiss the indictment in light of the

Government’s concession, Johnson, 599 F. App’x 242, Johnson moved in the district court for

fees and expenses pursuant to the Hyde Amendment, Pub. L. No. 105–119, § 617, 111 Stat. 2519

(1997), reprinted in 18 U.S.C. § 3006A, Historical & Statutory Notes. The district court denied

the application, finding that Johnson did not show that the Government’s position was vexatious,

frivolous, or in bad faith. The district court reasoned that the Government’s position was not

frivolous, because it concerned a legal issue of first impression and because the district court

initially accepted the Government’s position.         The district court next rejected Johnson’s

argument that the Government’s failure to disclose the Internal Revenue Manual provisions

showed that the Government’s position was vexatious or in bad faith, because the Government

was not obligated to present the manual, which is not controlling law, to the court. Finally, the

district court rejected Johnson’s argument that the Government’s bad faith was evidenced by the

fact that it pursued inconsistent factual theories in the separate prosecutions against Johnson and

his brother, because “[t]he Government may bring the same or similar action against two

separate defendants for the same or similar conduct.”

       The district court did not abuse its discretion in denying Johnson’s Hyde Amendment

application and in finding that the Government’s position was not vexatious, frivolous, or in bad

faith. First, the Government’s position was not frivolous, because the Government advanced a

cognizable argument, based on a reasonable interpretation of the applicable statutes, regarding a

matter of first impression about which reasonable jurists might disagree. “[F]or the purpose of

the Hyde Amendment[, a] frivolous position is one lacking a reasonable legal basis or where the



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No. 15-3744, United States v. John Johnson


government lacks a reasonable expectation of attaining sufficient material evidence by the time

of trial.” United States v. Heavrin, 330 F.3d 723, 729 (6th Cir. 2003). Here, the Government’s

argument to the district court on the open question of when the statute of limitations expires for

early-filed federal income tax returns in cases where April 15 falls on a Saturday, Sunday, or

legal holiday was not lacking a reasonable legal basis.         It was not unreasonable for the

Government, on the basis of the statutes alone, to interpret “the last day prescribed for the filing

thereof” as meaning the last day on which the filing of a return could be “considered timely.”

       The conclusion that the Government’s position was not frivolous finds support in United

States v. Isaiah, 434 F.3d 513 (6th Cir. 2006), in which we held that the Government’s position

regarding statutory interpretation is not frivolous for the purposes of the Hyde Amendment when

the relevant statutes are “not entirely clear” and the Government’s argument is “at least arguably

supported by this circuit’s case law.” Id. at 520-521. The statutes in this case are similarly

unclear. The text of 26 U.S.C. §§ 6513, 6531, and 7503 does not clearly answer which date was

“the last day prescribed for the filing” of federal income tax returns (which is perhaps why the

IRS felt the need to provide guidance on this issue in its revenue rulings and manual).

Additionally, no published case foreclosed the Government’s position, and while the Internal

Revenue Manual that Johnson cites may be entitled to some level of deference by courts, see

Atrium Medical Center v. U.S. Department of Health & Human Services, 766 F.3d 560, 567 (6th

Cir. 2014), it is not binding on courts, as it “do[es] not have the force and effect of law,” Valen

Mfg. Co. v. United States, 90 F.3d 1190, 1194 (6th Cir. 1996) (citation omitted). Further, even

though the Government ultimately conceded that its original interpretation was incorrect, the

Government’s position was at least arguably supported by the text of 26 U.S.C. §§ 6513, 6531,

and 7503, so much so that the district court was convinced. Indeed, the fact that the district court



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No. 15-3744, United States v. John Johnson


accepted the Government’s position is strong evidence that the Government’s position was not

so lacking in legal basis as to be frivolous and that the issue is debatable among reasonable

jurists. Ultimately, even though the Government later abandoned it, the Government’s position

before the district court had some support in the law and did not sink to the level of frivolity.

       Second, the district court did not abuse its discretion in concluding that the Government’s

position was neither vexatious nor pursued in bad faith, because Johnson has not shown that the

Government harbored an improper purpose in prosecuting him. The Government’s position is

vexatious when it is without reasonable or probable cause or excuse and when the case was

prosecuted “for the purpose of irritating, annoying, or tormenting the opposing party,” Heavrin,

330 F.3d at 729, and the Government acts in bad faith when it “conscious[ly] do[es a] wrong

because of dishonest purpose or moral obliquity” and has “a state of mind affirmatively

operating with furtive design or ill will,” United States v. True, 250 F.3d 410, 423 (6th Cir.

2001). Thus, both “vexatious” and “bad faith” require a showing that the Government acted with

an improper mental state. See Heavrin, 330 F.3d at 729 (citing United States v. Knott, 256 F.3d

20, 29 (1st Cir. 2001); United States v. Sherburne, 249 F.3d 1121, 1126 (9th Cir. 2001)).

       In arguing that the Government’s position was vexatious and in bad faith, Johnson claims

that “[t]he government knew that its internal Manuals committed the government to the view that

the statute of limitations period on the charge against John Johnson expired on April 15, 2013.”

However, Johnson does not point to any evidence showing that the prosecutors in charge of his

case did, in fact, know about the manual’s provisions. Instead, Johnson relies on a type of

constructive knowledge, arguing that because the IRS and the Department of Justice are both

part of the federal government, the prosecutors in his case “knew” that the Internal Revenue

Manual adopted a position opposite to the one for which they argued. Contrary to Johnson’s



                                                 -6-
No. 15-3744, United States v. John Johnson


arguments, this type of constructive knowledge does not suffice, because the intent required by

the vexatious and bad-faith standards is a malicious intent. Johnson has not shown that the

Government’s failure to cite the manual was anything more than an oversight, rather than a

malicious attempt to circumvent the IRS’s policies. In retrospect, particularly in light of the

harmful consequences of prosecuting a time-barred crime, the prosecutors obviously should have

gotten a more definitive determination of the Government’s ultimate position on the statute-of-

limitations issue. However, even if this is evidence of regrettable sloppiness or negligence, that

is not sufficient for Hyde Amendment liability.

        If the prosecutors had personal knowledge of the incorrectness of their view but

advanced it nonetheless, such as in the Eleventh Circuit case United States v. Adkinson, 247 F.3d

1289, 1293 (11th Cir. 2001), Johnson would have a much easier time proving vexation or bad

faith. Indeed, this case provides a scenario opposite from that in Adkinson. Here, when Johnson

first cited the manual, the Government conceded error, rather than continuing to advance a

position that it thought was meritless. Such a concession illustrates the Government’s good faith.

In sum, because Johnson has no evidence to support the idea that the Government pursued its

statute-of-limitations theory knowing that it was contradicted by the Internal Revenue Manual,

the district court did not abuse its discretion in finding that the Government’s failure to cite the

manual did not show that the Government’s position was vexatious or in bad faith.

       Johnson’s next argument—that the Government’s position was vexatious and in bad faith

because the Government adopted an inconsistent theory of prosecution in his brother’s case—is

likewise unpersuasive. Johnson complains that the district court prevented him from introducing

the indictment from his brother’s prosecution, in which the Government attributed the income at

issue to the brother rather than to Johnson. However, as Johnson himself acknowledges, we have



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No. 15-3744, United States v. John Johnson


held that the Government is not barred from adopting inconsistent factual positions against

different defendants. Stumpf v. Robinson, 722 F.3d 739, 750 (6th Cir. 2013) (en banc). Johnson

has not shown that the Government had an improper purpose in pursuing different theories of

prosecution. As we reasoned in Stumpf, “[t]he mere fact that the [Government] argued for

different inferences in different cases” does not make the Government’s actions unlawful. Id.

Accordingly, that the Government undertook an action that it is permitted to do—pursue

different theories of prosecution against different defendants—does not demonstrate the

improper purpose required to prove that the Government’s position was vexatious or in bad faith.

Thus, because the Government was permitted to pursue different theories of prosecution against

the two brothers, the district court did not abuse its discretion when it concluded that the

Government’s adopting of inconsistent theories of prosecution does not demonstrate that the

Government’s position was vexatious or in bad faith.

       Johnson also argues that the Government’s position was vexatious and in bad faith

because it purportedly circumvented the plea agreement in his brother’s related prosecution and

failed to turn over exculpatory evidence unrelated to the statute-of-limitations issue. Neither of

these arguments was made to the district court. Accordingly, because “issues not presented to

the district court but raised for the first time on appeal are not properly before this court,” J.C.

Wyckoff & Associates v. Standard Fire Ins. Co., 936 F.2d 1474, 1489 (6th Cir. 1991), we do not

address them here.

       Finally, Johnson argues that the district court erred by ruling on his Hyde Amendment

application without an evidentiary hearing and before he had an opportunity to ask for one.

Although the district court ruled quickly, Johnson could have asked for a hearing in his original

application or filed a motion for reconsideration making such a request after the district court



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No. 15-3744, United States v. John Johnson


denied his application. He did neither. Because the Hyde Amendment permits an expansion of

the record only for “good cause shown,” see Pub. L. No. 105–119, § 617, a district court does not

abuse its discretion where, as is the case here, it rules on a Hyde Amendment application without

an evidentiary hearing when no motion for such a hearing was ever made. See United States v.

Truesdale, 211 F.3d 898, 907 (5th Cir. 2000).        Further, good cause is not shown for an

evidentiary hearing when the applicant seeks to bolster his claims that the prosecution acted in

bad faith but does not present any evidence to support his allegations of bad faith. United States

v. Capener, 608 F.3d 392, 406 (9th Cir. 2010). As outlined above, Johnson’s claims that the

Government’s position was vexatious and in bad faith are unsubstantiated. Therefore, a remand

for an evidentiary hearing is not warranted.

       For the foregoing reasons, we affirm the district court’s denial of Johnson’s Hyde

Amendment application.




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