A divided Ninth Circuit yesterday reversed a tax evasion conviction in United States v. Kayser, No. 06-50178 (9th Cir. 5/31/07).  The majority (Ikuta & Reinhardt) held that the district judge erred by not giving the taxpayer’s proposed jury instruction:

Kayser asked the district court to approve the following jury instruction: “If the defendant had unclaimed deductions which would have offset his tax liability such that there was no tax due and owing, then there is no tax deficiency.” The government argued that this instruction was unwarranted because Kayser had introduced no evidence of previously “unclaimed” deductions. The government also argued that Kayser’s theory of defense was improper under United States v. Miller, 545 F.2d 1204 (9th Cir. 1976), which the government read as precluding Kayser from arguing that the business deductions he reported on Aspen Ventures’ returns could be used to negate his individual tax deficiency.

The district court agreed with the government and declined to give the requested instruction. The district court noted that the evidence did not support the instruction and also implicitly agreed with the government’s argument that Miller precluded the theory of defense in this case. …

We thus conclude that the requested jury instruction was supported by law and had sufficient foundation in the evidence. Because the district court erred in declining to instruct the jury on Kayser’s theory of defense, we reverse Kayser’s conviction.

Judge Kozinski wrote a caustic dissent:

The majority begins its analysis by dutifully reciting a wellestablished rule: “A defendant may negate the element of tax deficiency in a tax evasion case with evidence of unreported deductions.” … But it then jumps the rails by removing the word “unreported” and allowing a defendant to escape a criminal tax conviction by recharacterizing reported deductions. … Even if this new rule were permissible, defendant did not present evidence that could support such an instruction. For both these reasons, I respectfully dissent. …

Kayser did not provide sufficient proof to enable a rational jury to find that he had enough allowable deductions to reduce his 2000 personal tax liability to zero. Nor could he, given that he needed these same deductions to shelter his 1999 income. Under these circumstances, the district court did not abuse its discretion in refusing to give the instruction. …  Indeed, it did exactly what a district court should do when a party proposes an instruction that’s not supported by the evidence. …

In reversing defendant’s conviction, the majority creates a defense against criminal tax liability that conflicts with established circuit precedent. And it does so unnecessarily, as defendant has fallen far short of meeting his burden to warrant the erroneous instruction. The majority thus eviscerates the evidentiary standard for proposed jury instructions by forcing a district court to give an instruction that’s only supported by generalities and hypothetical possibilities. I must part company with my colleagues in both of these precarious endeavors.