1. Taxation--income tax--compensation for labor--constitutionality
The trial court did not err in an attempting to evade and defeat the imposition and
payment of North Carolina Individual Income Tax case by denying defendants' identical pretrial
motions to dismiss the charges against them, because: (1) it is constitutional to tax an
individual's compensation for labor; (2) taxing income is not an unconstitutional capitation tax;
(3) defendants failed to make an argument in support of their contention that this action was
commenced by the Department of Revenue rather than by the State thus violating Article IV, §
13 of the North Carolina Constitution, and defendants' contention is a misstatement of what in
fact occurred; (4) paying income tax is not a violation of the prohibition against involuntary
servitude; and (5) N.C.G.S. §§ 105-236(7) and 105-236(9) are not too vague and general as to be
ambiguous.
2. Taxation--attempting to evade and defeat imposition and payment of individual
income tax_-sufficiency of evidence
The trial court did not err in an attempting to evade and defeat the imposition and
payment of North Carolina Individual Income Tax case by denying defendants' motion to
dismiss the charges against them at the close of all evidence, because the evidence was sufficient
to establish that: (1) defendants willfully attempted to evade or defeat a tax or its payment in
violation of N.C.G.S. § 105-236(7) when defendants filed returns in 1993 and 1994 indicating
tax liability and then subsequently filed amended tax returns which listed their taxable income as
zero without including exemptions and deductions which warranted a conclusion that no taxes
were owed, and defendants also filed returns in 1995 and 1996 indicating they owed no taxes
without deductions and exemptions to justify their claim; and (2) defendant husband willfully
failed to file income tax returns for years 1997, 1998, 1999, and 2000 despite the fact that his
gross income exceeded his federal and state exemption allowances in violation of N.C.G.S. §
105-236(9).
Attorney General Roy Cooper, by Assistant Attorney General
Michael D. Youth, for the State.
Tammy K. Sinnott and David M. Sinnott, Pro Se.
McGEE, Judge.
Tammy Kay Sinnott (Tammy Sinnott) and David Michael Sinnott(David Sinnott) (collectively defendants) were convicted on 29 May
2002 of attempting to evade and defeat the imposition and payment
of North Carolina Individual Income Tax for the calendar years
1993, 1994, 1995, and 1996, in violation of N.C. Gen. Stat. § 105-
236(7). In addition, David Sinnott was also convicted of failing
to file a North Carolina Tax Return for calendar years 1997, 1998,
1999, and 2000, in violation of N.C. Gen. Stat. § 105-236(9).
Defendants appeal.
The evidence presented by the State at trial tends to show
that defendants have been residents of North Carolina since at
least 1989. In calendar years 1993 through 2000, defendants earned
wages which exceeded the applicable federal exemption amounts.
Accordingly, defendants were required to file both federal and
North Carolina individual income tax returns.
For calendar year 1993, defendants filed a joint state tax
return on 24 January 1994, declaring their taxable income to be
$39,883.00 with a tax liability of $2,579. Subsequently,
defendants filed an amended 1993 return on 24 February 1997,
declaring their taxable income to be zero. However, defendants
listed no itemized deductions warranting a taxable income of zero.
Essentially, defendants were claiming entitlement to a refund of
the tax paid for 1993.
For calendar year 1994, defendants again filed a joint state
tax return on 14 February 1995, declaring their taxable income to
be $47,669 with a tax liability of $3,125. Similarly, on 23
February 1997, defendants filed an amended 1994 return declaring
their taxable income to be zero even though the deductions andexemptions did not justify such a change. Again, defendants were
claiming a refund.
For calendar year 1995, defendants filed a joint state tax
return on 15 February 1997 declaring their taxable income to be
zero with no evidence of deductions and exemptions legitimizing
their claim. Thus, defendants were asking for a refund of the tax
withheld in 1995.
For calendar year 1996, defendants filed a joint state tax
return on 19 February 1997 declaring zero as their taxable income.
They failed to submit evidence of deductions and exemptions
entitling them to zero tax liability. Once again, defendants were
asking for a refund of the tax withheld for the year 1996.
For calendar years 1997, 1998, 1999, and 2000, David Sinnott's
gross income exceeded his federal and state exemption allowances
and necessitated that he file both federal and state tax returns.
David Sinnott failed to file a state tax return for these four
years by the applicable deadlines.
[1] Defendants first argue that the trial court erred by
denying their identical pre-trial motions to dismiss the charges
against them on constitutional grounds. Defendants made these
motions pursuant to N.C. Gen. Stat. § 15A-954, claiming that the
criminal statutes which they were charged with violating, N.C. Gen.
Stat. § 105-236(7) and (9), were facially unconstitutional and
unconstitutional as applied to each of them. Within this overall
argument, defendants specifically make the following constitutional
arguments: (1) that the State's claim that defendants' compensation
for labor is taxable as income violates Article I, § 1 of the NorthCarolina Constitution and the Bill of Rights because it is a tax
upon the fruits of one's labor, (2) that a tax on one's labor is a
capitation tax in violation of Article V, § 1 of the North Carolina
Constitution and Article I, § 9 of the United States Constitution,
(3) that the action commenced against defendants was in violation
of Article IV, § 13 of the North Carolina Constitution because it
was an action by the Department of Revenue rather than the State,
(4) that taxing compensation for labor violates the prohibition
against slavery and involuntary servitude in Article I, § 17 of the
North Carolina Constitution and the Thirteenth Amendment to the
United States Constitution, and (5) that the applicable statutes
are vague and ambiguous and thus violate the due process clause in
Article I, § 19 of the North Carolina Constitution and the
Fourteenth Amendment to the United States Constitution. For the
reasons stated below, we find these arguments to be without merit.
Defendants' first argument is meritless because it is well-
settled that it is constitutional to tax an individual's
compensation for labor. This proposition was asserted in Lonsdale
v. Commissioner, 661 F.2d 71 (5th Cir. 1981) where the federal court
of appeals summarized the appellants' arguments by stating the
following:
The first category of contentions may be
summarized as that the United States
Constitution forbids taxation of compensation
received for personal services. This is so,
appellants first argue, because the exchange
of services for money is a zero-sum
transaction, the value of the wages being
exactly that of the labor exchanged for them
and hence containing no element of profit.
This contention is meritless. The
Constitution grants Congress power to tax
"incomes, from whatever source derived. . . ." U.S. Const. amend. XVI. Exercising
this power, Congress has defined income as
including compensation for services. 26
U.S.C. § 61(a)(1). Broadly speaking, that
definition covers all "accessions to wealth."
See Commissioner v. Glenshaw Glass Co., 348
U.S. 426, 431, 75 S.Ct. 473, 477, 99 L.Ed. 483
(1955). This definition is clearly within the
power to tax "incomes" granted by the
sixteenth amendment.
Lonsdale, 661 F.2d at 72. Defendants in the case before us seem to
be asserting an argument similar to the one asserted by the
appellants in Lonsdale. Lonsdale was followed in 1984 by a
district court in the Fourth Circuit in the case of Scull v. United
States, 585 F. Supp. 956, 963 (E.D. Va. 1984). The plaintiffs in
Scull reported their taxable income as zero and were assessed a
penalty. The plaintiffs reported this amount because they claimed
"that money received as wages is not taxable as income because it
constitutes an exchange of labor for compensation." Scull, 585 F.
Supp. at 963. In response, the district court cited Lonsdale and
a multitude of other cases and stated, "[t]his position is clearly
frivolous and is asserted in an effort to avoid the payment of
taxes. The Internal Revenue Code explicitly provides that gross
income includes compensation for services. 26 U.S.C. § 61(a)(1).
Furthermore, the position the plaintiffs assert has been rejected
repeatedly by the courts as frivolous." Id.
Similarly, a bankruptcy court in the Fourth Circuit cited
Lonsdale and stated, "[w]ages are income; to argue otherwise is to
make a meritless contention." In re Hall, 174 B.R. 210, 213
(Bkrtcy. E.D. Va. 1994). Although these decisions are not binding
on our Court, we follow the reasoning asserted therein and hold
that taxing compensation for labor is constitutional. Defendants' second argument that taxing income is an
unconstitutional capitation tax is also without merit. In Ficalora
v. Commissioner, 751 F.2d 85 (2d Cir. 1984), cert. denied, 471 U.S.
1005, 85 L. Ed. 2d 162 (1985), the appellant argued that the income
tax is a non-apportioned direct tax and that Congress does not have
the constitutional power to impose such a tax. The Second Circuit
disagreed and held that Congress did possess the authority and
cited Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429, 39 L. Ed.
759, reh'g, 158 U.S. 601, 39 L. Ed. 1108 (1895), overruled on other
grounds, South Carolina v. Baker, 485 U.S. 505, 524, 99 L. Ed. 2d
592, 611 (1988). Ficalora, 75 F.2d at 87. "'[T]he conclusion
reached in the Pollock Case did not in any degree involve holding
that income taxes generically and necessarily came within the class
of direct taxes on property[.]'" Hale v. Iowa State Bd. of
Assessment and Review, 302 U.S. 95, 107, 82 L. Ed. 72, 80 (1937)
(quoting Brushaber v. Union P. R. Co., 240 U.S. 1, 16-17, 60 L. Ed.
493, 501 (1916)).
Similarly, in In re Becraft, 885 F.2d 547 (9th Cir. 1989), the
Ninth Circuit noted the "patent absurdity and frivolity" of an
argument that a direct non-apportioned income tax is not allowed.
Becraft, 885 F.2d at 548. The court upheld the validity of federal
income tax laws stating that "[f]or over 75 years, the Supreme
Court and the lower federal courts have both implicitly and
explicitly recognized the Sixteenth Amendment's authorization" of
such a tax. Id. By analogy, a state income tax does not run afoul
of the prohibition against capitation taxes. Accordingly, this
argument is without merit. Defendants fail to make an argument in support of their third
contention within this assignment of error. Defendants merely
state that this action was commenced by the Department of Revenue
rather than by the State and thus violates Article IV, § 13 of the
North Carolina Constitution. Accordingly, since no authority is
cited and no reason or argument is stated, this contention is
deemed abandoned pursuant to N.C.R. App. P. 28(b)(6). We note that
not only is no argument asserted, defendants' contention is a
misstatement of what in fact occurred. Defendants assert that the
Department of Revenue commenced the action by serving warrants on
4 February 2002. However, even though a special agent with the
Department of Revenue is listed as the complainant on the warrants,
the fact remains that this action was instituted by the State of
North Carolina as the caption indicates. Further, it is obvious
that the State is the party opposing defendants in that an
assistant attorney general prosecuted the case.
Defendants' fourth argument that paying income tax is a
violation of the prohibition against involuntary servitude is also
without merit. Again, due to a lack of state case law, we turn to
federal law for guidance. In Porth v. Brodrick, 214 F.2d 925 (10th
Cir. 1954), the Tenth Circuit affirmed the trial court's dismissal
of the taxpayer's suit. The taxpayer argued that Congress' power
to collect income taxes violated the prohibition against
involuntary servitude. The court responded by stating, "[i]f the
requirements of the tax laws were to be classed as servitude, they
would not be the kind of involuntary servitude referred to in the
Thirteenth Amendment." Porth, 214 F.2d at 926. Multiple othercases have come to this same conclusion and summarily dismissed
this argument. See Ginter v. Southern, 611 F.2d 1226, 1229 (8th
Cir. 1979), cert. denied, 446 U.S. 967, 64 L. Ed. 2d 827 (1980);
Kasey v. Commissioner, 457 F.2d 369, 370 (9th Cir.), cert. denied,
409 U.S. 869, 34 L. Ed. 2d 120 (1972); Abney v. Campbell, 206 F.2d
836, 841 (5th Cir. 1953), cert. denied, 346 U.S. 924, 98 L. Ed. 417
(1954). We agree with the reasoning of these cases and find
defendants' argument to be without merit.
Defendants' final contention within this assignment of error
is that the statutes under which defendants were prosecuted are so
vague and general as to be ambiguous. Defendants argue that N.C.
Gen. Stat. § 105-236(7) fails to describe what conduct constitutes
willfully, what constitutes an attempt to evade, and what amounts
to aiding and abetting. Similarly, defendants argue that N.C. Gen.
Stat. § 105-236(9) fails to state who is required to file, fails to
specify to whom the statute applies, and fails to explain what
constitutes willfully.
"[T]he test for determining whether a statute is vague, as set
forth by us in Vehaun, is whether the statute gives a 'person of
ordinary intelligence a reasonable opportunity to know what is
prohibited, so that he may act accordingly.'" State v. Blackmon,
130 N.C. App. 692, 700, 507 S.E.2d 42, 47, cert. denied, 349 N.C.
531, 526 S.E.2d 470 (1998) (quoting State v. Elam, 302 N.C. 157,
161-62, 273 S.E.2d 661, 664-65 (1981)).
Principles of "due process" require
courts to declare a criminal statute
unconstitutionally vague if the statute fails
to clearly define what is prohibited. Grayned
v. City of Rockford, 408 U.S. 104, 33 L.Ed. 2d
222, 92 S.Ct. 2294 (1972); State v. Evans, 73N.C. App. 214, 326 S.E. 2d 303 (1985). A
statute is "void for vagueness" if it forbids
or requires doing an act in terms so vague
that men of common intelligence must
necessarily guess at its meaning and differ as
to its application. Coates v. Cincinatti, 402
U.S. 611, 29 L.Ed. 2d 214, 91 S.Ct. 1686
(1971); In re Burrus, 275 N.C. 517, 169 S.E.
2d 879 (1969), affirmed 403 U.S. 528, 29 L.Ed.
2d 647, 91 S.Ct. 1976 (1971). Only a
reasonable degree of certainty is necessary,
mathematical precision is not required.
Grayned v. City of Rockford, supra; State v.
Martin, 7 N.C. App. 532, 173 S.E. 2d 47
(1970).
State v. Worthington, 89 N.C. App. 88, 89, 365 S.E.2d 317, 318
(1988).
The subsections of N.C. Gen. Stat. § 105-236 which are at
issue are as follows:
(7) Attempt to Evade or Defeat Tax._Any
person who willfully attempts, or any
person who aids or abets any person to
attempt in any manner to evade or defeat
a tax or its payment, shall, in addition
to other penalties provided by law, be
guilty of a Class H felony.
. . .
(9) Willful Failure to File Return, Supply
Information, or Pay Tax._Any person
required to pay any tax, to make a
return, to keep any records, or to supply
any information, who willfully fails to
pay the tax, make the return, keep the
records, or supply the information, at
the time or times required by law, or
rules issued pursuant thereto, shall, in
addition to other penalties . . . .
N.C. Gen. Stat. § 105-236(7) and (9)(2003).
Regarding subsection (7), defendants take issue with the term
"willfully" and with what conduct constitutes an attempt to evade
or defeat a tax. Although this language has not been addressed
specifically in N.C. Gen. Stat. § 105-236(7) and (9), a challengewas mounted against a statute containing similar language in
another context. N.C. Gen. Stat. § 14-202.1 (2003) punishes
criminally one who "[w]illfully takes or attempts to take . . ."
indecent liberties with a child. The appellants in Blackmon
asserted a challenge based on the claim that N.C. Gen. Stat. § 14-
202.1 was unconstitutionally void for vagueness. This Court upheld
this statute despite the challenge. Blackmon, 130 N.C. App. at
699-700, 507 S.E.2d at 47. Likewise, we hold that the statute in
the case before us withstands the constitutional vagueness
challenge.
Defendants also contend that "aids and abets" is
unconstitutionally vague. However, defendants cite no authority
and make no argument for this proposition. Accordingly, this
argument is deemed abandoned pursuant to N.C.R. App. P. 28(b)(6).
With respect to subsection (9), defendants primarily argue
that the statute does not specify to whom it applies. The
subsection refers to "[a]ny person required to pay any tax, to make
a return . . . ." Defendants correctly assert that subsection (9)
does not specify who must file a return. However, this provision
is merely one which provides for penalties for those who fail to
comply. One must look to a different provision within the
Individual Income Tax Act (N.C. Gen. Stat. § 105-133 et seq.) to
determine which individuals are required to file returns. The
applicable provision is N.C. Gen. Stat. § 105-152 (2003).
Subsection (a) is entitled "Who Must File," and it delineates
exactly who must file an income tax return. Thus, N.C. Gen. Stat.
§ 105-236(9) does not fail for vagueness simply because it fails toreference which individuals are required to file income tax
returns.
Defendants also take issue with the term "willfully" contained
in subsection (9). Again, the analysis from Blackmon is
instructive and we hold that the statute in the case before us
withstands the constitutional vagueness challenge.
[2] Defendants next argue that the trial court erred by
denying their motion to dismiss at the close of the State's
evidence. "Upon defendant's motion for dismissal, the question for
the Court is whether there is substantial evidence (1) of each
essential element of the offense charged, or of a lesser offense
included therein, and (2) of defendant's being the perpetrator of
such offense. If so, the motion is properly denied." State v.
Powell, 299 N.C. 95, 98, 261 S.E.2d 114, 117 (1980). "Substantial
evidence is that amount of 'relevant evidence that a reasonable
mind might accept as adequate to support a conclusion.'" State v.
Armstrong, 345 N.C. 161, 165, 478 S.E.2d 194, 196 (1996) (quoting
State v. Vick, 341 N.C. 569, 583-84, 461 S.E.2d 655, 663 (1995)).
"The evidence must be viewed in the light most favorable to the
State, and the State must receive every reasonable inference to be
drawn from the evidence. Any contradictions or discrepancies
arising from the evidence are properly left for the jury to resolve
and do not warrant dismissal." State v. King, 343 N.C. 29, 36, 468
S.E.2d 232, 237 (1996) (citations omitted).
The evidence at trial showed that in 1993 and 1994, defendants
filed returns indicating tax liability and then subsequently filed
amended returns which listed their taxable income as zero. However, these amended returns failed to include exemptions and
deductions which warranted a conclusion that no taxes were owed.
Similarly, in 1995 and 1996, defendants filed returns indicating
they owed no taxes without deductions and exemptions to justify
their claim. In addition, Nancy Yokely (Yokely), a special agent
with the Department of Revenue, testified as to a conversation she
had with Tammy Sinnott regarding the payment of taxes. Yokely
testified that Tammy Sinnott claimed to not owe taxes because she
and her husband had no source of income and the income tax was a
duty tax. Tammy Sinnott further claimed that she would not file
any returns until she was given proof that she had to file. This
evidence is sufficient to establish that defendants willfully
attempted to evade or defeat a tax or its payment in violation of
subsection (7).
In addition, the evidence tended to show that David Sinnott
failed to file an income tax return for years 1997, 1998, 1999, and
2000 despite the fact that his gross income exceeded his federal
and state exemption allowances and necessitated that he file a
return in each of those years. This evidence, coupled with the
testimony by Yokely, is sufficient to establish that David Sinnott
willfully failed to file income tax returns in violation of
subsection (9). Accordingly, the trial court did not err in
failing to dismiss the charges. This assignment of error is
overruled.
No error.
Judges HUNTER and GEER concur.
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