US Appeals Court Rules That Taxes Are Property Under Mail Fraud Statute

by Glen Shapiro, for LawAndTax-News.com, New York

02 February 2004

The 2nd US Circuit Court of Appeals last week ruled that taxes constitute property under US mail and wire fraud statutes, meaning that the government can prosecute individuals and businesses which try to defraud federal, state, or foreign authorities of taxes.

The verdict was delivered in the case of Fountain v. United States. Former New York police officer, John Fountain attempted, unsuccessfully, to smuggle cigarettes from Canada, through an Indian reservation, and then back to Canada, thus depriving the Canadian authorities of substantial tax revenue.

Following a Supreme Court ruling in the case of Cleveland v. United States, in which it was decided that unissued state video licenses did not constitute property under mail and wire fraud statutes, Mr Fountain changed his plea, arguing that the ruling should also apply to taxes.

However, delivering its verdict last week, the Appeals Court announced that the Cleveland decision represented a "limited alteration" to wire fraud laws, and that it simply decided that licenses were not the property of the state, with no alteration to the status of taxes.

"While a liqor license might not constitute property in the hands of the state, the sales taxes that the government can anticipate collecting from transactions in alcohol are property under the mail and wire fraud statutes. This result accords with the manner in which the government's right to collect taxes has historically been treated even outside the context of the mail and wire fraud statutes," Judge Robert Katzmann wrote on behalf of the Appeals Court panel.

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