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Civil Liability for Conduct that is Acquitted in Criminal Case (11/20/21)

The Kyle Rittenhouse acquittal on all counts is in the news.
 Acquittal or conviction (on some or all
counts) was sure to become a political charged phenomenon.  I don’t deal with the political issues here.
I respond to a question I was asked yesterday as to whether Rittenhouse’s acquittal
absolves him of potential civil liability related to the same conduct for which he
was acquitted and specifically address the criminal tax analog of the
phenomenon.

For a discussion of the nontax answer, I point readers to
this discussion:  Euguene Volokh, Could
Kyle Rittenhouse Be Sued for Negligence?
(The Volokh Conspiracy 11/20/21), here.  Professor Volokh answers the question succinctly
at the beginning of the blog post:

A criminal acquittal doesn’t preclude a civil lawsuit out of
the same claims. First, the acquittal resolves only that guilt couldn’t be
proved beyond a reasonable doubt (requiring, say, a >90% confidence level);
the standard for civil liability is preponderance of the evidence (which
requires just >50%, or perhaps ≥50%, if the injury is easily proved and the
burden is then shifted to the defendant to prove self-defense).

A similar phenomenon plays out in the criminal tax
area.  A criminal tax evasion acquittal
does not prevent the imposition of the civil fraud penalty in § 6663.  And, for the same reason:  the burden of proof for the civil fraud penalty is less than for the criminal penalty. so that acquittal is not issue or claim preclusive for the civil fraud penalty.  Civil liability for the civil fraud penalty
requires that the Government prove civil fraud liability by clear and
convincing evidence, a burden that as articulated is less burdensome (so to
speak) for the Government than the beyond a reasonable doubt standard.

 Here is the key paragraph from my Federal Tax Procedure Book
(2021 Practitioner Edition), p. 333 here (footnotes omitted from the quote but
may be viewed at the link here):

If the taxpayer is acquitted of the tax evasion charge,
however, the IRS may still assert the civil fraud penalty (the acquittal is not
preclusive that there was no civil fraud). 
Why?  A finding of not guilty is
not necessarily a finding of innocence; it is only a finding that the
government failed to prove guilt beyond a reasonable doubt.  In an ensuing civil tax case, the government
must establish fraud only by clear and convincing evidence, a substantially
lesser burden than the beyond a reasonable doubt requirement for criminal
conviction.  Accordingly, the IRS may and
usually does assert the civil fraud penalty when the taxpayer has been
acquitted.

Most civil liability exposures relate to liabilities such as
negligence discussed above that require proof of liability by a preponderance
of the evidence.  Liability for the civil fraud penalty requires proof by clear and convincing
evidence, a standard that falls somewhere between beyond a reasonable doubt (the
criminal conviction standard) and preponderance of the evidence.  For discussion of the difficulties in
articulating these standards, particularly in jury instructions useful to a
jury, see discussion in my book pp. 331-332,
here, particularly at n. 1414 and pp.601-602.

This blog post is cross-posted on my Federal Tax Procedure Blog here.

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