Eight Circuit Denies Claim for Restitution Reduction for Unconvicted Wife's Alleged Share of Tax Liability (5/8/13)

In United States v. Perry, 714 F.3d 570 (8th Cir. 2013), here, the defendant was convicted for four counts of evasion (Section 7201) for years in which he received kick backs.  The taxpayer raised a number of garden-variety points on appeal, and all were rejected by the Court of Appeals.  I address only one today because I had not seen it before and thought students might find it interesting.  Apparently, during the years he took the kickbacks and failed to pay report and pay the taxes, the defendant was married and filed a joint return with his wife.  The sentencing court required that he pay restitution (principal and interest) on the tax liability as a condition of supervised release.  That liability, of course, was a joint and several liability (unless the wife qualified for innocent spouse relief, which was not indicated in the case).  But, if the defendant had to pay the restitution, then his wife would have to pay nothing on their joint and several liability.  That annoyed him because, he claimed, they were now divorced and she benefited from the income and taxes not paid and equitably should pay some (meaning, in the context in which he raised the claim, the amount of the award for restitution should be decreased).

Here is the entire discussion of the claim and the Eighth Circuit's resolution:

4. Finally, Perry argues the district court should have "split" his restitution tax liability because it is "grossly unfair" to permit ex-wife Tammy to reap more than half the benefits from their joint tax evasion in the subsequent divorce, while making Perry repay the IRS's entire loss. This is not an issue of law because the restitution statutes only grant authority to "apportion liability" among multiple defendants, and Tammy was not a co-defendant. See 18 U.S.C. § 3664(h). Therefore, we question whether the district court had discretion to order Perry to pay an amount of restitution less than the IRS's entire tax loss; joint filers are jointly and severally liable for income tax deficiencies. See 26 U.S.C. § 6013(d)(3). But even if the court had such discretion, it was not abused. Noting that the IRS may seek recovery of taxes owed from either Tammy or Perry, the district court eliminated any risk of double recovery by expressly providing that "[t]he restitution amount attributable to the tax deficiency shall be reduced by any portion of the tax deficiency received by the Internal Revenue Service from Tammy Perry, Mr. Perry's ex-wife." That was an eminently fair ruling.

Of course, if the wife were an innocent spouse, the defendant would have to foot the entire tax, interest and penalties anyway.  But, if she were not an innocent spouse and if the IRS chases the restitution first, both under general remedies and the relatively new Code provisions permitting immediate assessment of tax restitution against a defendant, the IRS will move against the husband and collect it all if it can.  (See my blog on the new Code provisions, New Statute for Civil Effect of Restitution in Tax Cases (at Least Title 26 Crimes of Conviction) (Federal Tax Crimes 2/11/11), here.)