In 2018 the Supreme Court of the United States (SCOTUS) has essentially narrowed the ability of prosecutors to pursue criminal tax charges. The change was part of a recent holding, Marinello v. United States, where SCOTUS stated that obstruction charges for these types of tax cases are only successful if the taxpayer is aware of a pending tax-related issue or could reasonably foresee such an issue. SCOTUS also said the government would need to show a connection between the taxpayer’s allegedly illegal act and the government’s investigation in order to build a successful obstruction charge.

Before this holding, prosecutors had a great deal of discretion when it came to moving forward with criminal tax charges. Tax practitioners are looking to see how this holding and changes to the United States Justice Department’s Criminal Tax Manual (CTM) will impact criminal tax charges in the future, particularly regarding the Omnibus Clause.

What is the Omnibus Clause?

The Omnibus Clause is a part of tax law that basically allows the prosecution of tax crimes whenever a taxpayer obstructs tax law. For example, Internal Revenue Service (IRS) agents may use this to build a case against a taxpayer that is not forthcoming during an audit or attempts to hide sources of income.

How has SCOTUS’ recent decision impacted the application of this clause?

The ruling has led to changes in the CTM. The manual includes language stating that prosecutors should use this clause for “acts of commission and not acts of omission.” It is important to be aware of these changes if facing an audit or other allegation of a tax crime. The updated CTM provides transparency to the public about when the Department of Justice (DOJ) can use the Omnibus Clause to pursue charges.

Those who find themselves attempting to navigate these questions are not alone. Federal law allows you to have legal counsel represent your interests when facing questions from the DOJ or IRS. The attorneys at Goldburd McCone are familiar with these matters and can help to better ensure your legal rights are protected throughout the process.