Robert Lawrence was prosecuted for failing to file tax returns in United States v. Lawrence, 2006 TNT 153-15, No. 06-10019 (U.S.D.C. C.D. Ill.), but the United States withdrew the charges and moved to dismiss the case after discovering that the tax calculations in the indictment were incorrect.
Some tax protesters claim that the case is some kind of evidence that the "Paperwork Reduction Act defense" will work because the government moved to dismiss the indictment after Lawrence had raised the PRA defense. It turns out that the timing of the events was a coincidence and, as explained below, Lawrence actually lost the court ruling on the PRA defense.
In response to a motion by Lawrence for legal fees from the government, the government explained that, in preparing for trial, it had discovered errors in the calculations of some of the taxes alleged to have been owed by Lawrence and that the amounts actually owed were less than what was claimed in the indictment. The judge refused to allow the government to amend the indictment, and so the government decided to dismiss the indictment rather run the risk that the jury would not convict Lawrence when it learned that the government itself could not accurately calculate his tax liabilities. In ruling for the government on the issue of legal fees, the judge stated that “In light of the cases that had addressed the PRA of 1980, as of the time that Lawrence was prosecuted, the Government had good reason to believe that the PRA defense (even based on the amended PRA of 1995) would not provide someone who failed to pay income taxes with a valid defense,” and referred to the possibility that a court might rule that the Paperwork Reduction Act of 1995 is a valid defense for failing to pay taxes as “unlikely.” The court therefore concluded that “Lawrence’s argument that the Government should have known that this [PRA defense] was the law at the time that Lawrence was prosecuted is ridiculous.” United States v. Lawrence, 2006 TNT 153-15, No. 06-10019 (U.S.D.C. C.D. Ill. 7/31/2006).
The PRA defense suffered still another blow when Lawrence made the mistake of raising the argument in an appeal to the United States Court of Appeals for the Seventh Circuit. The purpose of his appeal was to try to obtain a reversal of the trial court's refusal to order the government to compensate him for the legal fees he incurred. In the appeal, Lawrence contended that the government's conduct against him had been "vexatious, frivolous, or in bad faith."
In March of 2007 the United States Court of Appeals for the Seventh Circuit rejected both the PRA argument and the request for compensation. In the decision, the Court stated:
-"According to Lawrence, the Paperwork Reduction Act of 1995 (PRA) required the Internal Revenue Service to display valid Office of Management and Budget (OMB) numbers on its Form 1040 [ … ]. Lawrence argues that the PRA by its terms prohibits the government from imposing a criminal penalty upon a citizen for the failure to complete a form where the information request at issue does not comply with the PRA. Lawrence never explains how this argument is even relevant to the three counts involving tax evasion, but even as to the other three counts, it must fail [ … ] Lawrence's brief represents an attempt to prove that the PRA could present a valid defense to the criminal charges. Yet Lawrence conceded at oral argument that no case from this circuit establishes such a proposition, and in fact Lawrence cites no caselaw from any jurisdiction that so holds. In contrast, the government referenced numerous cases supporting its position that the PRA does not present a defense to a criminal action for failure to file income taxes [ … ] Lawrence provides no explanation of how government conduct can be vexatious, frivolous, or in bad faith when there is no law contrary to it."
—from page 2 of the Judgment, docket entry 39, March 26, 2007, United States v. Lawrence, No. 06-3205, United States Court of Appeals for the Seventh Circuit (italics added).