Opinion
Docket No. 3,792.
Decided July 29, 1969.
Appeal from Recorder's Court of Detroit, Traffic and Ordinance Division, Richard M. Maher, J. Submitted Division 1 February 5, 1969, at Detroit. (Docket No. 3,792.) Decided July 29, 1969.
Gregory M. Pillon was found guilty of wilful refusal to pay city taxes. Defendant appeals. Affirmed.
Robert Reese, Corporation Counsel, and Joseph Maisano, Assistant Corporation Counsel, for plaintiff.
Gregory M. Pillon, in propria persona.
Defendant-appellant Gregory M. Pillon filed income tax returns with the city of Detroit pursuant to his obligation under § 21-8-5(a), Detroit city code, for the years 1963 and 1965 showing a total tax due for the two years of approximately $65 but would not pay the taxes due. Defendant was found guilty in the recorder's court of the city of Detroit of wilful refusal to pay the taxes due which is a misdemeanor subject to a fine of $500 and imprisonment for a period not exceeding 90 days.
Sections 21-8-11(d)(2) and 21-8-17 of the Detroit city code are part of the income tax regulations of the city of Detroit which complement ordinance No. 694-F, passed by the Common Council of the city of Detroit on April 26, 1962, effective May 1, 1962. This ordinance, which was amended by ordinance No. 736-F, effective February 26, 1963, ordinance No. 789-F, effective May 16, 1963, and ordinance No. 847-F, effective March 12, 1964, remained in force from July 1, 1962 to December 31, 1964. The sections of said ordinance complemented by the foregoing regulations provide as follows:
"Recoverable as Debts. All taxes imposed by this division together with any interest and penalties thereon, shall be recoverable by the City as other debts are recoverable, in any court of record." Section 8(D)(1), Ordinance No. 694-F (§ 21-8-11(d)(2) Detroit city code).
"Penalties. In addition to any interest and penalties otherwise assessed under this division, any person who shall fail, neglect or refuse to make any return required by this ordinance, or any taxpayer who shall wilfully fail, neglect, or refuse to pay the tax, penalties and interest required by this ordinance, or any person who shall refuse to permit the controller or any agent or employee appointed by the controller in writing, to examine his books and records, or who shall knowingly make any incomplete, false or fraudulent return, or who shall attempt to do anything whatever to avoid the full disclosure of the amount of income to avoid the payment of the whole or any part of the tax, shall be guilty of a misdemeanor and shall be subject to a fine not exceeding 90 days or both such fine and imprisonment for each offense. Such fine or penalty shall be in addition to any other penalty imposed by any other section of this ordinance." Section 10, ordinance No. 694-F (§ 21-8-17) Detroit city code.
Sections 21-8-32, 21-8-40 of the code of the city of Detroit relate to §§ 81-89, and § 99 of ordinance No. 900-F. Ordinance No. 900-F was enacted by the Common Council of the city of Detroit on September 15, 1964 under authority of Act No. 284, Public Acts of 1964 (MCLA §§ 141.501- 141.699). This ordinance affects income tax years subsequent to December 31, 1964. § 99 of ordinance No. 900-F (§ 21-8-40 city code; MCLA § 141.699), provides as follows:
"Each of the following violations of this ordinance is a misdemeanor and is punishable, in addition to the interest and penalties provided under the ordinance, by a fine not exceeding $500, or imprisonment for a period not exceeding 90 days or both:
"(a) Wilful failure, neglect or refusal to file a return required by the division.
"(b) Wilful failure, neglect or refusal to pay the tax, penalty or interest imposed by the division.
"(c) Wilful failure of an employer to withhold or pay to the city a tax as required by the division.
"(d) Refusal to permit the city or an agent or employee appointed by the administrator in writing to examine the books, records and papers of a person subject to the division.
"(e) Knowingly filing an incomplete, false or fraudulent return.
"(f) Attempting to do or doing anything whatever in order to avoid full disclosure of the amount of income or to avoid payment of any or all of the tax."
Defendant, an attorney, does not attempt to challenge the constitutionality of the tax nor does he deny his obligation to pay the tax. He asserts that criminal sanctions may not be used to enforce payment of taxes. He also contends that although he refused to pay for the purpose of testing the legality of the penalty, his conduct cannot be termed "wilful" for penal purposes.
The constitutionality of this city income tax was upheld by the Supreme Court of this State in Dooley v. City of Detroit (1963), 370 Mich. 194, before defendant's refusal to pay his taxes.
According to the defendant, "wilfulness" when used in a criminal statute requires some "evil intent" or "bad purpose." He claims this intent was not evil because he had visions of poor persons unable to pay their taxes being imprisoned for failing to pay under the ordinance. We agree that some element of a "bad purpose" must be present to make the conduct subject to criminal sanctions. We conclude, however, that it is a sufficiently "bad purpose" that a taxpayer deliberately not pay the tax due when he knew he ought to pay. We are supported in our conclusion by the federal cases dealing with similar provisions in the federal income tax (Internal Revenue Code of 1954, § 7203). We would call particular attention to United States v. Litman (CA 3, 1957), 246 F.2d 206, cert den 355 U.S. 869 ( 78 S Ct 118, 2 L Ed 2d 75), where a jury instruction as to "bad purpose" quite similar to our standard was upheld, and also the case of United States v. Murdock (1933), 290 U.S. 389 ( 54 S Ct 223, 78 L Ed 381), wherein the standard of wilfulness under the federal tax statutes was given full examination.
The United States Supreme Court said there, p 394. "The word is also employed to characterize a thing done without ground for believing it is lawful or conduct marked by careless disregard whether or not one has the right so to act". The conduct of the appellant in refusing to pay the tax which he admits is due certainly comes within the meaning of "bad purpose" in the concept of wilfulness under the ordinance even if his avowed purpose in challenging the constitutionality of the penalty might be considered by some to be laudable.
Defendant asserts that he refused to pay his tax and began his quixotic campaign to challenge the penalty section because he had visions of troops of poor people, who were unable to pay their taxes, being imprisoned for the failure to pay. In this, defendant has misconstrued the scope and coverage of the ordinance, for as the city-appellee asserts, mere nonpayment of a tax is not made a crime by the ordinance, particularly where inability is because of conditions beyond the taxpayer's own control. The nonpayment penalty provisions in the federal income tax code have consistently been interpreted that way and we certainly agree. See United States v. Palermo, (ED Pa, 1957) 152 F. Supp. 825, note 9. See also, Spies v. United States (1943), 317 U.S. 492, ( 63 S Ct 364, 87 L Ed 418).
We do not impose, however, the restriction on the enforcing authority of a proof of ability to pay as a necessary element of a conviction for "wilful neglect, failure, or refusal to pay income tax". We believe that inability to pay may more properly be pled as a defense, but, in any event, we see it as only one indication of intent not as a controlling element of the proof. But see United States v. Palermo, (CA 3, 1958), 259 F.2d 825 .
The appellant never asserted any inability to pay the approximately $65 due. He admitted his purpose in not paying was to be convicted so that he might challenge the penalty sections which he claims are in conflict with Const 1963, art 1, § 21.
"§ 21. No person shall be imprisoned for debt arising out of or founded on contract, express or implied, except in cases of fraud or breach of trust."
We do not find it so. Initially we would point out that Const 1908, art 2, § 20, which was in effect through 1963, did not forbid imprisonment for debt where the money was to be collected by public officers. The constitutional convention comments as found in 2 Official Record, Constitutional Convention 1961, p 3365 (1 MCLA p 752, 1 Stat Ann 1965 Rev p 427) indicate that although this specific language was dropped, it was considered excess verbiage and no change in prior law was intended.
Const 1963, art 1, § 21, adopted the prior law which was that such provisions prohibit imprisonment for a debt only where it arises from a contract. People v. White (1884), 53 Mich. 537. See Dallos v. Garras (1943), 306 Mich. 313. Imprisonment for nonpayment of taxes then is not prohibited by Const 1963, art 1, § 21, for as the Michigan Supreme Court said in Thompson v. Auditor General (1933), 261 Mich. 624, 641: "Taxes are not contractual obligations of the taxpayer to the state. Taxation is a method of raising revenue to support the government." We find, therefore, that Const 1963, art 1, § 21 has no application to the penalty sections of the uniform city income tax act as adopted by the city of Detroit in the ordinance before this Court.
We are encouraged to make this finding by the fact that similar provisions in the constitutions of other states have consistently been interpreted in a like manner. The rule is stated in 51 Am Jur, § 980, p 857.
Cousins v. State (1894), 50 Ala. 113 (20 Am Rep 290); McCaskell v. State (1875), 53 Ala. 510: Davies v. Hot Springs (1920), 141 Ark. 521 ( 217 S.W. 769); Re Diehl (1908), 8 Cal.App. 51 ( 96 P. 98); Re Nowak (1921), 184 Cal. 701 ( 195 P. 402); McCool v. State (1864), 23 Ind. 127; Smith v. State (1864), 23 Ind. 132; Western U. Teleg. Co. v. Franklin (1913), 93 Neb. 704 ( 141 N.W. 819); Lowrie v. State Bd. of Registration (1917), 90 N.J.L. 54 ( 99 A 927); Ex parte Flynn (1920), 23 Ohio NPNS 113 (31 Ohio Dec 538); Voelkel v. Cincinnati (1925), 112 Ohio St. 374 ( 147 N.E. 754, 40 ALR 73); Charleston v. Oliver (1881), 16 S.C. 47; Deadwood v. Allen (1896), 9 S.D. 221 ( 68 NW 333); State v. Thompson (1910), 25 S.D. 148 ( 125 N.W. 567); South v. State (1913), 72 Tex Crim Rep 381 ( 162 S.W. 510); Salt Lake City v. Christensen (1908), 34 Utah 38 (17 LRA [NS] 898, 95 P. 523); State v. Seattle Taxicab Transfer Co. (1916), 90 Wn. 416 ( 156 P. 837).
"A tax is not a debt in the sense of an obligation incurred by contract, express or implied, and therefore is not within the meaning of constitutional or statutory provisions abolishing or prohibiting imprisonment for debt, and a statute or ordinance which punishes the nonpayment thereof by fine or imprisonment is not in conflict with that prohibition".
This same rule has been upheld in the federal courts whether faced with state or federal matters. The district court in United States v. Palermo, supra, made this clear when it said (p 828), "it has been repeatedly held that neither the 13th Amendment nor any other Constitutional or statutory provision prevents imprisonment for nonpayment of taxes".
See Porth v. Broderick (CA 10, 1954), 214 F.2d 925, and cases there cited. Carrollo v. United States (CA 8, 1944), 141 F.2d 997; Freeman v. United States (1910), 217 U.S. 539 ( 30 S Ct 592, 54 L Ed 874); United States v. Smith (WD Mich, 1945), 62 F. Supp. 594; Moore v. Mitchell (2 Cir, 1929), 30 F.2d 600, 602 (65 ALR 1354). 28 USCA § 2007, cited by defendant, merely prevents imprisonment for debt "in any State wherein imprisonment for debt has been abolished." See Low v. Durfee (CC Mass. 1880), 5 F 256; Stuart v. Reynolds (CA 5, 1913), 204 F 709, 717-719; Freed v. Central Trust Co. (CA 7, 1914), 215 F 873, 876, 877.
As we have found that the trial court could properly have found that the defendant "wilfully refused" to pay the taxes due and that imprisonment for nonpayment of taxes does not violate the provision of the Michigan Constitution which prohibits imprisonment for debt, we are left with his vague assertions that the imposition of criminal as well as civil sanctions for nonpayment of a tax denies due process under both state and federal constitutions. The appellant would have us attempt to limit the means of collection of the tax to the civil remedies and penalties provided. This we do not have power to do, for the power to devise means of enforcing collection and payment of taxes is vested in the legislative departments just as certainly as the power to impose the tax. Thompson v. Auditor General, supra; Spies v. United States, supra. The state legislature of Michigan by PA 1964, No 284, MCLA §§ 141.501- 141.699 (Stat Ann 1969 Cum Supp §§ 5.3194[1]-5.3194[109]) unequivocally authorized both civil and criminal enforcement of the collection of city income tax. The defendant contends that because a recalcitrant "taxpayer" might be subjected to both the civil and criminal penalties, the ordinance somehow denies him due process. The principle that criminal sanctions may be had in addition to all other sanctions, in an accumulation of collection enforcement weapons, has been approved by the United States Supreme Court, Helvering v. Mitchell (1937), 303 U.S. 391 ( 58 S Ct 630, 82 L Ed 917); Spies v. United States, supra, and we approve of it here. The determination whether or not to have criminal sanctions for nonpayment and whether they should be accumulative or not is entirely within legislative discretionary power. The legislature of this State has made a decision to allow the imposition of the penalties and the city of Detroit has adopted the criminal sanctions by ordinance. As they have acted within their proper scope of their discretionary powers, this Court has no power to intervene. The defendant was found by the trial court to have wilfully not paid Detroit city income taxes for the years 1963 and 1965 on his own admissions. We find no merit in defendant's contentions regarding the constitutionality of any of the ordinances mentioned. Therefore, we affirm the conviction.
The Michigan legislature has not specifically made nonpayment of state income tax a crime. It has, however, made not filing a return criminal when done wilfully. CL 1948, § 207.118 (Stat Ann 1960 Rev § 7.308). The legislature has imposed, however, both criminal and civil penalties on nonpayment by a wholesaler of gasoline tax. CL 1948, § 207.118a (Stat Ann 1960 Rev § 7.308(1)). In connection with that tax, some support is given to our finding that mere nonpayment of city income tax does not subject to criminal sanctions, by OAG 1933-1934, p 21, where it states that although it is criminal not to pay over the gasoline tax, if inability to pay is due to circumstances beyond control of taxpayer then he is not guilty of any criminal offense.
Affirmed.
All concurred.