The U.S. Supreme Court is making it easier for taxpayers who divert money from their own companies to defend themselves when the Internal Revenue Service hauls them into court.

The unanimous decision came in the case of Honolulu businessman Michael Boulware, who failed to pay taxes on millions of dollars that he transferred from his company, Hawaiian Isles Enterprises.

Boulware was convicted on tax charges in July 2005 and sentenced to five years in prison.

At his criminal trial, Boulware was blocked by a federal court from arguing that the money he took out was simply a return of capital that he had invested in his own unprofitable company and that the funds were therefore not taxable.

To make that argument, the court said, Boulware had to first show that at the time he moved the money out of the company, he intended the transactions as a return of capital.

Justice David Souter said that Boulware should have been allowed to make the argument to the jury.

The 9th U.S. Circuit Court of Appeals in San Francisco, which covers federal courts in nine states, ruled against Boulware.

The 2005 trial in U.S. District Court in Honolulu was actually a retrial, held after the 9th Circuit Court overturned an earlier 2001 conviction of Boulware.

He was accused of trying to evade an estimated $4.5 million to $5.5 million in taxes from 1989 to 1997.

Former state Rep. Nathan Suzuki, who prepared Boulware's tax returns, invoked the Fifth Amendment and refused to testify at Boulware's first trial.

But Suzuki pleaded guilty and received a three-year federal sentence in 2005 for helping to create secretly held corporations and overseas bank accounts to hide Boulware's assets.

Suzuki's role in the federal tax fraud conspiracy included using resources at his state Capitol office as part of the scheme. Suzuki represented the Moanalua and Salt Lake area from 1992 to 2002.

In the retrial, Suzuki, who is serving his prison term, was granted immunity and testified as a prosecution witness.