E.D. Michigan Notes Split Re Statute of Limitations for Violation of Federal Tax Evasion Statute

Per U.S. v. Blanchard, Slip Copy, 2007 WL 1976359 (E.D.Mich. Jul 03, 2007) (NO. CRIM. 05-80355-1, CRIM. 05-80355-2):

The issue as to whether the general three year statute of limitations or the six year statute of limitations of § 6531(4) applies to violations of § 7202 is a novel one in this Circuit. However, numerous other courts have examined the issue. The court in United States v. Block, 497 F.Supp. 629 (D.Ga.1980) stated the issue succinctly: "The question presented is quite simply one of statutory interpretation. The question is: Does 26 U.S.C. § 6531(4), which establishes a six-year period of limitations for 'the offense of willfully failing to pay any tax,' apply to failure to 'pay over' third party taxes in violation of 26 U.S.C. § 7202?" Block, 497 F.Supp. at 632-33. Courts considering this question have reached different conclusions; some Courts have found that the general three-year statute of limitations applies, see Block, 497 F.Supp. 629; United States v. Brennick, 908 F.Supp. 1004 (D.Mass.1995), however the overwhelming majority of courts have found that the six-year statute of limitations applies. See United States v. Adam, 296 F.3d 327, 332 (5th Cir.2002); United States v. Gilbert, 266 F.3d 1180, 1186 (9th Cir.2001); United States v. Musacchia, 900 F.3d 493, 499-500 (2d Cir.1990); United States v. Porth, 426 F.2d 519, 522 (10th Cir.1970); United States v. Creamer, 370 F.Supp.2d 715 (N.D.Ill.2005).

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Contrary to the statutory interpretation presented in the cases of Brennick and Block, the Court of Appeals for the Third Circuit examined the language of the statute in United States v. Gollapudi, 130 F.3d 66 (3d Cir.1997), and concluded that the six year statute of limitations applied:

Under a plain reading of this statute, we find it clear that violations of § 7202 are subject to a six-year statute of limitations under § 6531(4). Specifically, 26 U.S.C. § 7202 makes it an offense for an employer to willfully fail to "account for and pay over" to the IRS taxes withheld from employees. Given that § 6531 pertains to "failing to pay any tax," the District Court correctly found that the failure to pay third-party taxes as covered by § 7202 constitutes failure to pay "any tax," and thus, is subject to the six-year statute of limitations under § 6531(4). Gollaapudi, 130 F.3d at 70 (emphasis added) (citations omitted).

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In holding that a six year statute of limitations applies to violations of 26 U.S.C. § 7202 this Court joins the chorus of courts that have already addressed this issue. See United States v. Adam, 296 F.3d 327, 332 (5th Cir.2002) (finding that the Defendant had "not shown a persuasive reason for creating a split among the circuits on this issue, and because we believe the plain language of § 6531(4) encompasses § 7202, we conclude that the district court correctly determined that the six-year statute of limitations applies to § 7202."); United States v. Gilbert, 266 F.3d 1180, 1186 (9th Cir.2001) ("Based on the holdings of the other three circuits, we find the six-year statute of limitations under § 6531(4) applies to § 7202."); United States v. Musacchia, 900 F.3d 493, 499-500 (2d Cir.1990), vacated on other grounds, 955 F.2d 3 (2d Cir.1990), but reaffirmed by United States v. Evangelista, 122 F.3d 112, 119 (2d Cir.1997) ("[W]e hereby reaffirm the holding of the original Musacchia opinion that 'a six year statute of limitations applies to the offense defined by 26 U.S.C. § 7202' "); United States v. Porth, 426 F.2d 519, 522 (10th Cir.1970) (finding that § 7202 was "clearly within the six-year exception to the general three-year statute of limitations of § 6531"); United States v. Creamer, 370 F.Supp.2d 715 (N.D.Ill.2005) ("[T]hese 'third party taxes' [United States v.] Block, 497 F.Supp. at 632, are still taxes, and section 6531(4) clearly applies to 'any tax.' We would have to ignore the plain meaning of 'pay any tax' in order to exempt from its coverage withholding taxes, which, despite their method of payment, are still taxes that must be paid."), partially vacated on other grounds, Case No. 04-CR-281-1, 2006 WL 2037326 (N.D. Ill. Apr 04, 2006)).