contemporaneous intent requirement

Issues

Michael Boulware was convicted of filing false tax returns, tax evasion, and conspiracy to make false statements to a federally insured financial institution in Hawaii District Court in 2001. He appealed his conviction to the Ninth Circuit on various grounds multiple times. In his current appeal, he argues that the funds he diverted from his closely held corporation, Hawaiian Isles Enterprises, qualified under Sections 301 and 316 of the U.S. Tax Code as a non-taxable return of capital. If this is true, he argues, the government failed to meet its burden of proof in showing a tax deficiency because it did not establish that the funds Boulware diverted were taxable as income. However, the Ninth Circuit upheld his conviction based on its decision in United States v. Miller, which established that in a criminal tax evasion case, a defendant must show not only that a diversion of funds meets the requirements in the Tax Code to be a non-taxable return of capital, but also that the shareholder and/or corporation intended it to be one at the time the diversion was made. Since Boulware could not make this showing, he failed to demonstrate that the diversion qualified as a nontaxable return of capital under Miller. Boulware has challenged his conviction and argues that the Miller "contemporaneous intent" requirement has no basis in the statutory text of the Tax Code and creates a disparity in treatment of defendants in civil and criminal tax cases, and for these reasons should be overturned. The Supreme Court, in answering the question of what requirements must be fulfilled for a diversion to qualify as a return of capital, will resolve a conflict in positions between the Second and the Ninth Circuits.

Questions as Framed for the Court by the Parties

Additional Resources