## Facts

- Morton J. Owrutsky, a Maryland attorney, regularly represented clients in civil and criminal tax matters before the IRS.
- For tax years 1974–1979, Owrutsky had sufficient income to require filing federal income tax returns but repeatedly filed late, often by years.
- Some years resulted in refunds (1974–1976), and other years reported no tax liability (1977–1979).
- The Treasury Department initiated disciplinary proceedings seeking to disbar Owrutsky from practice before the IRS for willfully failing to file timely returns.
- At the administrative hearing, Owrutsky attributed delays to missing information from a real-estate partner’s poor recordkeeping.
- The Administrative Law Judge (ALJ) found Owrutsky’s explanation not credible, found he knew of the filing obligation and deadlines, and concluded the repeated late filings were a voluntary, intentional violation of a known legal duty.
- The Secretary of the Treasury adopted the ALJ’s decision and ordered disbarment.
- The district court reversed, reasoning that lack of tax due and entitlement to refunds negated willfulness.
- The Secretary appealed.

## Issues

1. Whether substantial evidence supported the Secretary’s finding that Owrutsky willfully failed to timely file federal income tax returns (a voluntary, intentional violation of a known legal duty) warranting disbarment from practice before the IRS.
2. Whether the absence of tax liability (or entitlement to refunds) defeats a finding of willfulness for late filing in Treasury disciplinary proceedings.
3. Whether the district court improperly substituted its judgment for the agency’s factfinding and credibility determinations on judicial review.

## Decision

- The Fourth Circuit reversed the district court.
- The court held that substantial evidence supported the Secretary’s determination that Owrutsky’s repeated late filings were willful.
- The court held that owing no tax or being due refunds does not negate willfulness where the practitioner knowingly violates the duty to file on time.
- The court reinstated the Secretary’s disbarment order and emphasized deference to agency credibility findings and record-supported disciplinary determinations.

## Legal Principles

- “Willfulness” in the failure-to-file context means a voluntary, intentional violation of a known legal duty.
- The legal duty to file a timely federal income tax return exists regardless of whether the taxpayer ultimately owes additional tax or is due a refund.
- On judicial review of Treasury practitioner discipline, courts must uphold the agency’s action when supported by substantial evidence and may not reweigh evidence or disregard ALJ credibility determinations absent a basis in the record.

## Conclusion

The Fourth Circuit reinstated Treasury’s disbarment of a tax attorney who filed six consecutive years of personal returns late, holding that substantial evidence supported a finding of willful noncompliance and that the absence of tax due or the presence of refunds does not defeat willfulness when the duty and deadlines are known.


Owrutsky v. Brady, 925 F.2d 1457 (4th Cir. 1991)