Collateral Estoppel in Civil Tax Fraud Cases Subsequent to Criminal Conviction

To secure compliance with federal income tax laws, Congress has provided both criminal and civil penalties. Fines and imprisonment are imposed under section 7201 of the Internal Revenue Code if the Government can prove beyond a reasonable doubts a willful attempt to evade or defeat taxation. Section 6653(b) authorizes, as a civil sanction, a fifty per cent addition upon findings by the Commissioner of fraudulent underpayment. These findings, if challenged by the taxpayer, need only be sustained by a preponderance of the evidence. Because of the similarity between the acts condemned by sections 7201 and 6653(b), conviction under section 7201 is frequently followed by a civil addition based on section 6653(b). The successive application of these sections has given rise to collateral estoppel problems. Although collateral estoppel operates to preclude relitigation of matters of law and fact actually at issue in a prior suit between the same parties and upon which the prior judgment ultimately rested, the Government\u27s greater burden of proofing a section 7201 criminal prosecution prevents the taxpayer from maintaining that an acquittal under section 7201 should preclude a section 6653(b) civil penalty. As the Supreme Court has pointed out, failure to prove a violation beyond a reasonable doubt should not estop the Government to attempt to prove one by a preponderance of the evidence. However, when a taxpayer is convicted in the criminal prosecution, the question of whether collateral estoppel should be applied in a subsequent civil suit has caused a recent split of judicial opinion. Collateral estoppel was applied ,in Tomlinson v. Lefkowitz and John W. Amos but not in Moore v. United States