Leatherwood v. State

Gilbert, C. J., delivered the opinion of the Court. It is written that "Freedom is Not Free.” 1 In fact, to remain "free” often costs dearly. Not only must a military force be maintained, local, State, and federal governments operated, but schools, fire protection and police protection must all be supported. For its part, the State government may not simply print a form of currency to pay for the operation of the various State agencies, all of which exist for the benefit of all the people of the State.

Consequently, to obtain adequate funds to carry out its mission, the State imposes divers taxes. One type of tax that the State of Maryland has utilized since 1940 2 is the progressive income tax. Md. Ann. Code art. 81, § 294, provides in part: "(a) Individuals generally. — (1) Every individual resident of this State, and every individual not a resident of this State receiving income derived from sources within this State, other than fiduciaries, who is required to file a federal income tax return under the provisions of § 6012 (a) of the Internal Revenue Code, as amended from time to time, or whose federal income together with any ⁶⁸⁵ modification additions contained in § 280 (b) of this subtitle exceed the limits provided by said § 6012 (a), shall file with the Comptroller a return in such form as the Comptroller shall prescribe, and shall attach to said return a copy of the statement received from his employer showing his compensation, salary or wages and the Maryland income tax withheld therefrom. (2) Notwithstanding any other provision of this section to the contrary, the income level at which a dependent taxpayer must file a tax return is determined under the provisions of § 6012 (a) (1) (A) (i) of the Internal Revenue Code, as amended from time to time, together with any modifications contained in § 280 of this subtitle.

(3) Notwithstanding any other provisions of this subtitle to the contrary, any individual not required to file an income tax return to this State in accordance with the provisions of this subsection, shall not be liable for any income tax otherwise due under this subtitle. Such individual, by filing a return in such form as prescribed by the Comptroller, shall be entitled to a refund of all income taxes either withheld or paid as an estimated tax under the provisions of § 312 of this subtitle.” The appellant, Clarence E. Leatherwood, Jr., filed the prescribed tax form for each of the years 1977, 1978, and 1979. Yet, in none of the forms did he report any income whatsoever, but instead, indicated that he objected to revealing his income. He elected to stand behind the protective garb of the Fifth Amendment To the Constitution of the United States. 3 ⁶⁸⁶ Needless to say, the Comptroller was not enraptured with the returns filed by the appellant.

Attempts were made to have Mr. Leatherwood file completed reports, but those efforts failed. Mr. Leatherwood, however, indicated that he would be willing to file the reports if the State could show him how he could do so without disclosing either the amount of his income or the source. Understandably, the Comptroller did not avail himself of Mr. Leatherwood’s invitation, nor could he have successfully done so. Finally, the matter of appellant’s non-disclosure of income and failure to file completed tax returns found its way to the State’s Attorney for Anne Arundel County.

Three criminal informations were issued by the prosecution. Mr. Leatherwood was charged with two counts of perjury in connection with each of his 1977, 1978, and 1979 Maryland Income Tax Returns, one count in each of failure to file by reason of refusing to report his 1977,1978, and 1979 income, respectively, and one count in each of wilfully failing to file his 1977, 1978, and 1979 State Income Tax Returns, respectively. At the conclusion of the State’s case, Judge Bruce C. Williams, in the Circuit Court for Anne Arundel County, granted a judgment of acquittal on both perjury counts. Ultimately, the case went to the jury, which returned a verdict of guilty to count three of each information.

Following the imposition of sentence, Leatherwood appealed to this Court. We shall consider the two questions put to us by the appellant in the reverse order to that posed by him, inasmuch as his second issue, if availing, would be dispositive of the appeal.

I

"Is the Maryland Income Tax Statute unconstitutional since it constitutes an ⁶⁸⁷ imper missive delegation of legislative responsibility under the Maryland Constitution?” Md. Ann. Code art. 81, § 280, provides in pertinent part: "(a) In general. — The taxable net income of an individual taxpayer of this State shall be that taxpayer’s federal adjusted gross income as defined in the laws of the United States, as amended from time to time and in effect for the corresponding taxable year, with the modifications and less the deductions and personal exemptions provided in this subtitle.” Leatherwood recognizes that the Court of Appeals has held that "[t]he State’s adoption of the Federal definition of income does not constitute a delegation oflegislative authority. ..,” Katzenberg v. Comptroller of the Treasury, 263 Md. 189, 200 , 282 A.2d 465 (1971). He asserts, however, that the conclusion reached by this State’s highest court "is unsupported by the cited authority and should be re-examined.” In short, we are asked to overrule Katzenberg and declare the State income tax law to be unconstitutional. To follow that course, we would have to ignore three other subsequent cases decided by the Court of Appeals, scilicet: Comptroller v. Diebold, 279 Md. 401 , 369 A.2d 77 (1977); Evans v. Comptroller of the Treasury, Income Tax Division, 273 Md. 172 , 328 A.2d 272 (1974); Marco Associates, Inc. v. Comptroller of the Treasury, 265 Md. 669 , 291 A.2d 489 (1972). Marco quoted from Katzenberg that: " 'It is undoubtedly true that the General Assembly, had it seen fit to do so, could have imposed a tax on the taxpayer’s gross income, without considering the source from which it came, whether it be earnings, investment income or profits realized from the sale of capital assets, and without granting exemptions, allowing deductions or permitting any other adjustments.

If it could validly do this, and we ⁶⁸⁸ think it could, there is no reason to doubt that it could select some other figure, objectively, arrived at, upon which the tax could be based, Tawes v. Strouse, 182 Md. 508, 512-13 , 35 A.2d 233 (1943). It did this when it chose to base the tax on the figures for adjusted gross income and taxable income, as developed by the federal returns. 263 Md. at 205-206 .’ ” 265 Md. at 677 . Evans said, in 273 Md. at 175 : "Finally, we consider Evans’ contention that Maryland cannot constitutionally use as a basis for State income taxes the adjusted gross income figure developed by a taxpayer’s federal income tax return. The use of the taxpayer’s federal adjusted gross income is mandated by Code art. 81, § 280 (a).

As we noted in Katzenberg v. Comptroller, supra, 263 Md. at 204-05 , 282 A.2d at 473 , '[t]his is a formula or yardstick objectively derived which initially takes no account of the source, nature or composition of the funds... .’” Diebold stated: "[W]e have held that the Maryland income tax law is to be construed in a fashion conformable to the Internal Revenue Code to which it is inextricably keyed, Marco Associates, Inc. v. Comptroller, . . . [supra]; Katzenberg v. Comptroller,... [supra].” 279 Md. at 408-09 . We think it clear that the Court of Appeals has had ample opportunity to review its Katzenberg holding and that it has repeatedly upheld the constitutionality of the Maryland income tax law. If an appellate court is to retrace the path trod by the Court of Appeals and conclude that the income tax law of this State is unconstitutional, it is the Court of Appeals that must make the journey, not this Court. On the basis of the prior, well-reasoned and unambiguous decisions of the Court of Appeals, we have no hesitancy in ⁶⁸⁹ declaring that the Maryland State Income Tax Law is constitutional and does not contain, with respect to section 280, an unlawful delegation of legislative authority.

II

"The trial judge’s instructions to the jury were legally insufficient and clear error since they misstated [the] scope of the Fifth Amendment privilege and failed to indicate that an erroneous but good faith reliance on the Fifth Amendment would preclude a finding of willfulness.” Undoubtedly, the Fifth Amendment to the federal constitution 4 protects against compelled self-incrimination. 5 The amendment, however, does not protect against every conceivable question that may be put to an accused, but only those that tend to incriminate him. Pyles v. State, 25 Md. App. 263 , 334 A.2d 160 , cert. denied, 276 Md. 748 (1975). Leatherwood’s 1979 State Income Tax Return showed that he answered the questions: "Your occupation”; "Spouse’s Social Security Number”; "Spouse’s Occupation”; "Your filing status,” i.e., "Single,” "Married filing joint return or spouse had no income,” "Married filing combined separate returns on this form,” "Married filing separately,” "Exemptions” and "Other exemptions allowed by Maryland” with the words: "Object. Self-Incrimination.” When Leatherwood was called by his counsel to testify, he said he inspected cars for a used car dealer.

He was audited by the Internal Revenue Service for the tax year 1974. As a result of that audit, I.R.S. allegedly informed him that he owed an additional $1,700 federal income taxes. Later, I.R.S. ⁶⁹⁰ advised him that they owed him "three hundred odd dollars.” Finally, his indebtedness was determined to be "two hundred seventy odd dollars.” He claimed that his "reaction” to the I.R.S. "duress” caused him to have "nervous tension,” and that he "was afraid of them.” Leatherwood further told the jury that there was a connection between I.R.S. and the State Income Tax Division.

He said they "have reciprocal agreements for information. And they exchange information that’s on your 1040 form.” He had no objection to paying State income taxes, but he refused to divulge the amount of his income. The appellant had read a number of magazine articles and newspaper accounts about I.R.S. harassment of taxpayers and government control of individuals through the offices of I.R.S. Leatherwood relied particularly upon page 14 of a publication titled: Citizen’s Guide to Individual Rights Under the Constitution of the United States of America. 6 The language of that article that Leatherwood believed controlling in his tax matters reads: "Government regulations which required registration of items such as highly dangerous weapons or narcotics which were a crime to possess also have been invalidated on the grounds that they require information which may be used in criminal prosecution against the person who registers the item in question. However, one is not excused from fíling a tax return because it is incriminatory: the privilege must be asserted on the return or it will be waived. ” (Emphasis supplied.) Leatherwood reported that he did not intend to evade or defeat the payment of Maryland income taxes.

He said, "I mean, if I can uh, if I can pay income tax without giving up my rights under the constitution [not to reveal the amount of income], I’ll be glad to.” ⁶⁹¹ On cross-examination, he again stated that he was "afraid of the IRS” because he had gone "through a, a trying situation with . .. [an] audit.” He was also "afraid” that he would be charged with "a crime” if he completed the