Pleas and Sentencing p1

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Updated July 2001

      Notice regarding significant tax-related amendments to Sentencing

      Guidelines, effective November 1, 2001

5.01 GENERALLY

5.02 GENERAL APPLICATION PRINCIPLES

      5.02[1] Select the Appropriate Guidelines Manual

      5.02[2] Guideline Calculation

5.03 CALCULATING THE BASE OFFENSE LEVEL IN TAX CASES

      5.03[1] The Base Offense Level

            5.03[1][a] Section 7201

            5.03[1][b] Section 7203

            5.03[1][c] Section 7206(1)

            5.03[1][d] Section 7206(2)

            5.03[1][e] Section 7212(a)

            5.03[1][f] Sections 286 and 287

            5.03[1][g] Section 371

      5.03[2] Specific Offense Characteristics

            5.03[2][a] Illegal Source Income

            5.03[2][b] Sophisticated Concealment

            5.03[2][c] Substantial Portion of Income Derived From Criminal Scheme

            5.03[2][d] Business of Preparing or Assisting in Preparation of Tax Returns

            5.03[2][e] Planned or Threatened Use of Violence

            5.03[2][f] Encouragement of Others to Violate Tax Code

5.04 RELEVANT CONDUCT

5.05 ROLE IN THE OFFENSE

      5.05[1] Aggravating Role in the Offense

      5.05[2] Mitigating Role in the Offense

      5.05[3] Abuse of Position of Trust or Use of a Special Skill

5.06 OBSTRUCTION OF JUSTICE

5.07 GROUPING

5.08 ACCEPTANCE OF RESPONSIBILITY

      5.08[1] Acceptance of Responsibility: In General

      5.08[2] Timely Government Assistance

5.09 DEPARTURES

      5.09[1] Departures for Aggravating or Mitigating Circumstances

      5.09[2] Departure Based on Substantial Assistance to Authorities

5.10  WAIVER OF APPEAL OF SENTENCE IN PLEA AGREEMENTS

5.11 TAX DIVISION POLICY

5.12  PLEA AGREEMENTS

      5.12[1] Plea Agreements and Major Count Policy for Offenses 

      Committed Before 
November 1, 1987

      5.12[2] Plea Agreements and Major Count Policy for Offenses  

      Committed After 
November 1, 1987

      5.12[3] Nolo Contendere Pleas.

      5.12[4] Alford Pleas

      5.12[5] Statements by Government Counsel at Sentencing; Agreeing to Probation

      5.12[6] Compromise of Criminal Liability/Civil Settlement

5.13 TRANSFER FROM DISTRICT FOR PLEA 
AND
 SENTENCE

5.14 INTERSTATE AGREEMENT ON DETAINERS

5.15 SENTENCING POLICIES

      5.15[1] Departures from the Guidelines

      5.15[2] Costs of Prosecution

      5.15[3]  Government Appeal of Sentences

5.16  RESOLUTION OF CIVIL LIABILITY DURING THE CRIMINAL CASE

      5.16[1]  As Part of a Plea Agreement

      5.16[2]  Payment of Taxes as Acceptance of Responsibility

N.B. On May 1, 2001 , the United States Sentencing Commission transmitted to Congress, as part of its Economic Crime Package, a series of enacted amendments to the United States Sentencing Guidelines Manual that will have a profound impact on sentencing in criminal tax and other white collar cases. Included in this Economic Crime Package are amendments consolidating the theft, property destruction and fraud guidelines into a new guideline, USSG § 2B1.1 (Theft, Property Destruction and Fraud) and providing a new loss table for the consolidated guideline and a new tax loss table. These amendments become effective on November 1, 2001 , absent prior, contrary congressional action. With respect to criminal tax sentencing, the amendments: (1) provide a new tax table (USSG § 2T4.1) with significantly higher offense levels at both the lower and upper ends of the table; (2) conform the "sophisticated concealment" specific offense characteristic of the tax guidelines (USSG §§ 2T1.1(b)(2), 2T1.4(b)(2)) with the "sophisticated means" enhancement of the fraud (Part F) guidelines, including a floor offense level of 12; and (3) address several issues related to the determination of tax loss. The changes to the determination of "tax loss" include a new special instruction at USSG § 2T1.1(c)(1)(D) to resolve the so-called "Harvey/Cseplo" circuit conflict in favor of the Cseplo position regarding the determination of tax loss in a case in which the defendant under-reports income on both individual and corporate tax returns. The clarifying change provides that, in these circumstances, the tax loss is the aggregate tax loss from the offenses taken together. The Commission's resolution of the conflict reflects its conclusion that, in cases of corporate diversion, the Cseplo method more accurately reflects the seriousness of the total harm caused by these offenses. The November 1, 2001 amendments also include new language to application note 1 to USSG § 2T1.1 providing an exception to the general rule excluding interest and penalties from the definition of "tax loss." In willful evasion of payment cases under 26 U.S.C. § 7201 and willful failure to pay cases under 26 U.S.C. § 7203 only, interest and penalties will now specifically be included in the definition of "tax loss." The Commission acknowledges that the nature of these cases is such that the interest and penalties often greatly exceed the assessed tax amount constituting the bulk of the harm associated with these offenses.

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                         5.01 GENERALLY

      The Sentencing Reform Act of 1984 (Title II of the Comprehensive Crime

Control Act of 1984) created the United States Sentencing Commission (Commission)

as an independent agency in the judicial branch.  The Commission's task was the

development of guidelines to further the basic purposes of criminal punishment: 

deterrence, incapacitation, just punishment, and rehabilitation.  Accordingly,

the Commission promulgated the United States Sentencing Guidelines (USSG) which

became effective on 
November 1, 1987
, and apply to all offenses committed on or

after that date.  Courts have recognized that the guidelines also apply to any

offense involving a continuing course of conduct that began before November 1,

1987, but continues thereafter.  

United States

 v. Dale, 991 F.2d

819, 853 (D.C. Cir. 1993) (citing cases);  United States v. Gaudet,

966 F.2d 959, 961-62 (5th Cir. 1992).

      In compliance with the mandate of the Act, the Commission created

categories of offense behavior and offender characteristics.  The Commission

prescribed guideline ranges that specify an appropriate sentence for each class

of convicted persons determined by coordinating the offense behavior categories

with the offender characteristic categories.  When the guidelines require

imprisonment, the range must be narrow, with the maximum range not exceeding the

minimum by more than the greater of 25 percent or six months.  28 U.S.C.

§ 994(b)(2). 

      The guidelines contain three types of text: (1) the actual guideline

provisions; (2) the policy statements; and (3) commentary.  The guidelines

themselves are binding on the sentencing court unless the court finds the

presence of an aggravating or mitigating factor of a kind or to a degree not

given adequate consideration by the Commission.  Mistretta v. United

States, 488 

U.S.

 361, 391 (1989).  Likewise, policy statements are

binding on federal courts.  Williams v. 
United States
, 503 

U.S.

193, 200-01 (1992).  The Supreme Court held that  "[c]ommentary in the Guidelines

Manual that interprets or explains a guideline is authoritative unless it

violates the Constitution, or a federal statute, or is inconsistent with, or a

plainly erroneous reading of, that guideline."  

United States

 v.

Stinson, 508 

U.S.

 36, 38 (1993).  Thus, all three varieties of text are

binding on a sentencing court. 

      The Commission has the authority to submit guideline amendments each year

to Congress between the beginning of a regular Congressional session and May 1. 

Such amendments automatically take effect 180 days after submission unless

legislation is enacted to the contrary.  28 U.S.C. § 944(p).  The Commission

has amended the guidelines regularly since their initial promulgation.

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               5.02 GENERAL APPLICATION PRINCIPLES

5.02[1]  Select the Appropriate Guidelines Manual

      Section 1B1.11(a) mandates that a court "shall use the Guidelines Manual

in effect on the date that the defendant is sentenced."  

United States

 

v. Fitzgerald, 232 F.3d 315, 318 (2d Cir. 2000);  

United States

 v. Zagari, 111 F.3d 307, 323 (2d Cir. 1997);  

See 

United States

 v. Bailey, 123 F.3d 1381, 1403-1406 (11th 

Cir. 1997). The same is true of policy statements.  

United States

 v. 

Schram, 9 F.3d 741, 742 (9th Cir. 1993).  If the court determines, 

however, that the use of that Manual would viola te the ex post facto 

clause, the court "shall use the Guidelines Manual in effect on the date 

that the offense was committed. " USSG §1B1.11(b)(1).[FN1] Fitz gerald, 

232 F.3d at 318-19; Zagari, 111 F.3d at 323; United States v. Nelson, 

36 F.3d 1001, 1003 (10th Cir. 1994).  Thus, if the sentencing guideline in 

effect at the time the offense was committed is more favorable to the 

defendant than the guideline in effect at the time of sentencing, the court 

must apply the more favorable guideline.  

United States

 v. Chasmer, 

952 F.2d 50, 52 (3d Cir. 1991).  Generally, for ex post facto 

purposes, the completion date of the offense controls the version of the 

Sentencing  Guidelines to be applied.  USSG §1.1.11, comment (n.2);  

Bailey, 123 F.3d at 1406; Zagari, 111 F.3d at 324; United 

States v. Cooper, 35 F.3d 1248, 1251 (8th Cir. 1994),  vacated, 

514 

U.S.

 1094 (1995), reinstated, 63 F.3d 761 (8th Cir. 1995).  When 

a revised edition of the guidelines is applied to offenses that predate and 

postdate the revision, the Fourth Circuit has determined that such use does 

not violate the ex post facto clause.  

United States

 v. Lewis, 

235 F.3d 215, 217-18 (4th Cir. 2000), petition for cert. filed 69 USLW 3702 

(Apr 17, 2001)(No. 00-1605).  See also United States v. Sullivan, 

2001 WL 777000, *2-3 (10th Cir. 
July 11, 2001
).

      Section 1B1.11 establishes the "one book" rule.  This rule provides that

the "Guidelines Manual in effect on a particular date shall be applied in its

entirety."  USSG §1B1.11(b)(2).  This rule provides that a court cannot pick

and choose or apply guidelines sections piecemeal.  See USSG

§§1B1.11(b)(2) and 1B1.11, comment. (backg'd). 

Fitzgerald, 232 F.3d at 319; United States v. Keller, 58

F.3d 884, 890 (2d Cir. 1995) ("A version of the sentencing guidelines is to be

applied in  its entirety.  A sentencing court has no authority to pick and

choose, taking one provision from an earlier version of the guidelines and

another from a later version."); Nelson, 36 F.3d at 1003-04;

United States

 v. Springer, 28 F.3d 236, 237 (1st Cir. 1994); 

United States

 v. Lance, 23 F.3d 343, 344 (11th Cir. 1994). 

However, some courts have disapproved of the one book rule.  See 

United States

 v. Ortland, 109 F.3d 539, 546 (9th Cir. 1997); 

United States

 v. Seligsohn, 981 F.2d 1418, 1424 (3d Cir. 1992).

      When a court applies an earlier edition of  the guidelines Manual, the

court also must apply subsequent amendments to the extent that such amendments

represent merely clarification rather than substantive changes. 

USSG §1B1.11(b)(2); 

United States

 v. Isabel, 980 F.2d 60, 62

(1st Cir. 1992); 

United States

 v. Caballero, 936 F.2d 1292, 1299

n.8 (D.C. Cir. 1991); United States v. Perdomo, 927 F.2d 111, 116-

17 (2d Cir. 1991);United States v. Howard, 923 F.2d 1500, 1504 n.4

(11th Cir. 1991).  Some offenses, such as conspiracy, escape, and

continuing criminal enterprise, are continuing offenses.  For continuing

offenses, the guidelines apply if the offense continues until after the effective

date of the guidelines.  Thus, in these so-called "straddle cases," there is no

ex post facto violation in applying guidelines which were

in effect when the last affirmative act occurred rather than an earlier version

which was in effect when the conspiracy began, even though the later version

specified a higher offense level for the same conduct.  

United States

 v.

Hirschfeld, 964 F.2d 318, 325 (4th Cir. 1992); 

United States

 v.

Stanberry, 963 F.2d 1323 (10th Cir 1992); 

United States

 v. 

Walton, 908 F.2d 1289, 1299 (6th Cir.1990); 

United States

 v. 

Walker

, 885 F.2d 1353, 1354 (8th Cir. 1989).  Note, however, that one 

court has found that acts occurring after November 1987 which merely cover 

up a conspiracy and, thus, are not done in furtherance of the conspiracy, do 

not extend the life of a conspiracy or make the guidelines applicable to the 

conspiracy.  

United States

 v. Crozier, 987 F.2d 893, 902 (2d Cir. 

1993).

5.02[2]  Guideline Calculation

      After determining which guidelines Manual applies to the case, the attorney

should next follow the steps outlined in the Manual in order to calculate the

appropriate guideline range:

            (a)   Determine the applicable offense guideline section from

                  Chapter Two.  See § Section 1B1.2  (Applicable

                  Guidelines).  The Statutory Index (Appendix A) provides a

                  listing to assist in this determination.

            (b)   Determine the base offense level and apply any appropriate

                  specific offense characteristics contained in the particular

                  guideline in Chapter Two in the order listed.

            (c)   Apply the adjustments related to victim, role, and obstruction

                  of justice from Parts A, B, and C of Chapter Three.

            (d)   If there are multiple counts of conviction, repeat steps (a)

                  through (c) for each count.  Apply Part D of Chapter Three to

                  group the various counts and adjust the offense level

                  accordingly.

            (e)   Apply the adjustment as appropriate for the defendant's

                  acceptance of responsibility from Part E of Chapter Three.

            (f)   Determine the defendant's criminal history category as

                  specified in Part A of Chapter Four.  Determine from Part B of

                  Chapter Four any other applicable adjustments.

            (g)   Determine the guideline range in Part A of Chapter Five that

                  corresponds to the offense level and criminal history category

                  determined above.

            (h)   For the particular guideline range, determine from Parts B

                  through G of Chapter Five the sentencing requirements and

                  options related to probation, imprisonment, supervision

                  conditions, fines, and restitution.

            (I)   Refer to Parts H and K of Chapter Five, Specific Offender

                  Characteristics and Departures, and to any other policy

                  statements or commentary in the guidelines that might warrant

                  consideration in imposing sentence. 

            (j)   Check to make sure that the calculation complies with

                  Department of Justice policies.  For example, compute the

                  possible guideline range for each count of an indictment or

                  information prior to accepting a plea to a single count to

                  ensure that the plea is consistent with the Tax Division's

                  major count policy.[FN2]

See USSG §1B1.1.

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      5.03 CALCULATING THE BASE OFFENSE LEVEL IN TAX CASES 

      Consistent with the overall plan of the sentencing guidelines, each tax

guideline begins with a base offense level.  The starting point for a tax crime

usually rests upon the dollar amount of the tax loss under the tax table at USSG

§2T4.1.  Most guidelines also contain "specific offense characteristics"

which allow the base offense level to be increased on the basis of certain

aggravating facts.  Further, the sentencing court determines the total offense

level by making any adjustments described in USSG §1B1.1.  See

Section 5.04, infra.  Following the determination of the total offense

level, the court refers to the corresponding zone in the sentencing table.  The

sentencing table has four zones, three of which, Zones A through C, permit the

court to render a variety of sentences, ranging from probation to split sentences

to simple incarceration.

5.03[1]  The Base Offense Level

       Part T of Chapter Two of the Sentencing Guidelines contains the provisions

governing most tax crimes.  In determining the starting point for the base

offense level, most guidelines in Part T of Chapter Two refer to the amount of

the "tax loss" attributable to the defendant.  Once the sentencing court

determines the total tax loss attributable to a defendant, the tax loss table

contained in §2T4.1 then provides the base offense level of the defendant. 

United States v. Powell, 124 F.3d 655, 663 n.7 (5th Cir.

1997).[FN3] 

      Under the guidelines as they existed prior to 
November 1, 1993
, the

determination of the tax loss depended upon the definition in the particular

offense guideline.  For example, §2T1.1 defined tax loss for the purposes

of tax evasion, whereas §2T1.3 defined tax loss for the purposes of the

filing of a false return.  On 
November 1, 1993
, however, the guidelines were

amended in order to consolidate several tax guidelines (sections 2T1.1, 2T1.2,

2T1.3 and 2T1.5) into §2T1.1.  Moreover, this amendment adopted a uniform

definition of tax loss, contained within §2T1.1(c).  The stated reason for

this amendment was to eliminate "the anomaly of using actual tax loss in some

cases and an amount that differs from actual tax loss in others."  USSG App. C,

Amend. 491, p. 338; see also 

United States

 v. Minneman, 143

F.3d 274, 282 (7th Cir. 1998)(noting that 
November 1, 1993
 amendment sought "to

adopt a 'uniform definition of tax loss' where none had previously

existed")(quoting USSG App. C, Amend. 491).  Accordingly, now §2T1.1 alone

defines tax loss.  Further, §2T1.1 now applies to tax evasion, willful

failure to file returns, supply information or pay tax, and willful filing of

fraudulent or false returns, statements, or other documents.

      Section 2T1.1 currently provides that, if there is a tax loss, the base

offense level derives from §2T4.1, the tax table, according to the amount

of tax loss.  §2T1.1(a)(1).  Otherwise, the base offense level is 6. 

§2T1.1(a)(2).  "Although the definition of tax loss corresponds to what is

commonly called the 'criminal figures,' its amount is to be determined by the

same rules applicable in determining any other sentencing factor."  §2T1.1,

comment. (n.2).  Section 2T1.1 currently provides special instructions which, for

the purposes of offenses involving attempted income tax evasion and filing false

returns or statements, define tax loss as "the total amount of the loss that was

the object of the offense (i.e., the loss that would have resulted had the

offense been successfully completed)."  §2T1.1(c)(1).  "The sentencing

guidelines do not require proof of 'but-for' causation for calculating tax loss." 

United States

 v. Andra, 218 F.3d 1106, 1107-08 (9th Cir. 2000). 

Section 2T1.1 also defines tax loss for failure to file offenses,

§2T1.1(c)(2), failure to pay offenses, §2T1.1(c)(3), and offenses

involving an improperly claimed refund,  §2T1.1(c)(4).  Section 2T1.1

further describes "presumptions" which a court should employ when calculating the

tax loss in various situations involving tax evasion offenses, false return or

statement offenses, and failure to file a return offenses.  §2T1.1(c)(1)

Notes (A)-(C); §2T1.1(c)(2) Note.  Specifically, these presumptions provide

that the tax loss should equal a certain percentage of the unreported gross

income, false credits claimed against tax, or improperly claimed deductions or

exemptions at issue, "unless a more accurate determination of the tax loss can

be made."  §2T1.1(c)(1) Notes (A)-(C); §2T1.1(c)(2) Note.

      The commentary to §2T1.1 explains that these presumptions are not

binding, but rather serve as general formulas:

            In determining the tax loss attributable to the offense, the court

            should use as many methods as set forth in subsection (c) and this

            commentary as are necessary given the circumstances of the

            particular case.  If  none of the methods of determining the tax

            loss set forth fit the circumstances of the particular case, the

            court should use any method of determining the tax loss that appears

            appropriate to reasonably calculate the loss that would have

            resulted had the offense been successfully completed.

§2T1.1, comment. (n.1).  Likewise, the commentary states that a court should

use an applicable presumption, unless one of the parties "provides sufficient

information for a more accurate assessment of tax loss."  Id; see

also United States v. Barski, 968 F.2d 936, 937 (9th Cir.

1992)(rejecting due process challenge to tax loss presumption contained within

now-deleted §2T1.3; presumption did not establish irrebuttably that tax loss

was 28 percent of unreported taxable income, but merely established "the legally

operative fact as the amount of unreported income").  Ultimately, "[i]n

some instances, such as when indirect methods of proof are used, the amount of

the tax loss may be uncertain; the guidelines contemplate that the court will

simply make a reasonable estimate based on the available facts."  §2T1.1,

comment. (n.1); see also 

United States

 v. Bryant, 128 F.3d

74, 75-76 (2d Cir. 1997)(per curiam)(relying on §2T1.1 commentary to uphold

tax loss estimation for defendant convicted of assisting in the preparation of

numerous false returns; estimation included tax loss extrapolated from unaudited

returns).

      When the parties contest the amount of tax loss, the sentencing court must

hold an evidentiary hearing to resolve factual issues, unless the court presided

over a trial and may base its findings upon the trial record.  United

States v. 

Marshall

, 92 F.3d 758, 760 (8th Cir. 1996).

      In determining the tax loss, a court may consider both charged and

uncharged conduct.  

United States

 v. Bove, 155 F.3d 44, 47-48 (2d

Cir. 1998); 

United States

 v. Noske, 117 F.3d 1053, 1060 (8th Cir.

1997); 

United States

 v. Meek, 998 F.2d 776, 781 (10th Cir. 1993). 

A court also may account for acquitted conduct when calculating the tax loss. 

United States

 v. Kelly, 147 F.3d 172, 178 (2d Cir. 1998);

see generally United States v. Watts, 519 

U.S.

 148,

157 (1997)(per curiam)(guideline range may rest on uncharged conduct or conduct

underlying acquitted charges, if conduct is based upon preponderance of

evidence).  Further, a court may compute tax loss by including tax loss from

years barred by the statute of limitations.  

United States

 v.

Valenti, 121 F.3d 327, 334 (7th Cir. 1997); 

United States

 v.

Pierce, 17 F.3d 146, 150 (6th Cir. 1994).  Moreover, a court may include

state tax losses in the tax loss computation, if the state tax loss constitutes

relevant conduct under §1B1.3.  

United States

 v. Fitzgerald,

232 F.3d 315, 320-21 (2d Cir. 2000) (adding federal, state, and local tax losses

proper application of guidelines where all part of relevant conduct to offense

of conviction under § 1B1.3(a)(2)); Powell, 124 F.3d at 664-65 

(when computing tax loss arising from federal motor fuel excise tax scheme,

district court properly considered state excise tax loss).  (Note, Chapter

3 of this manual  contains a Tax Division Memorandum addressing the subject of 

inclusion of  state tax  loss in tax loss computation for federal tax offenses

under the Sentencing Guidelines.)

      Generally, the tax loss computation is not confined to the amount which the

government actually lost in taxes, United States v. Tandon, 111

F.3d 482, 490 (6th Cir. 1997); 

United States

 v. Kraig, 99 F.3d

1361, 1370-71 (6th Cir. 1996); 

United States

 v. Hunt, 25 F.3d 1092,

1095-96 (D.C. Cir. 1994); 

United States

 v. Lorenzo, 995 F.2d 1448,

1459-60 (9th Cir. 1993), or the amount of tax money which the 
IRS
 actually could

recover.  

United States

 v. Clements, 73 F.3d 1330, 1339 (5th Cir.

1996); 

United States

 v. Brimberry, 961 F.2d 1286, 1292 (7th Cir.

1992).  Likewise, the tax loss is not reduced by payment of taxes after

notification of an investigation, Tandon, 111 F.3d at 490;

United States

 v. Gassaway, 81 F.3d 920, 921-22 (10th Cir. 1996),

or by payment before sentencing.  

United States

 v. Mathis, 980 F.2d

496, 497 (8th Cir. 1992); 

United States

 v. Pollen, 978 F.2d 78, 90-

91 (3d Cir. 1992); see also §2T1.1(5) in Guidelines

versions subsequent to 1992 (stating that "[t]he tax loss is not reduced by any

payment of tax subsequent to the commission of the offense").  Ultimately, the

tax loss is based upon the loss intended by the defendant,

Clements, 73 F.3d at 1339, 
United States
 v. 

Moore

,

997 F.2d 55, 59-62 (5th Cir. 1993), regardless of whether the intended loss

occurred or was realistic.  

Moore

, 997 F.2d at 61;

Lorenzo, 995 F.2d at 1459-60.  See § 2T1.1 (Nov. 2000).

      A court, however, may not base the tax loss for sentencing purposes upon

civil tax liability.  Pierce, 17 F.3d at 150; Meek,

998 F.2d at 783; see also 
United States
 v. 

Harvey

, 996 F.2d 919,

922 (7th Cir. 1993)(interpreting United States  v. Daniel, 956 F.2d

540, 544 (6th Cir. 1992), as indicating that civil tax liability is not an

adequate substitute for "tax loss").  

      Likewise, a tax loss calculation cannot include penalties or interest,

§2T1.1, comment (n.1); Powell, 124 F.3d at 663,

although, prior to 
November 1, 1989
,  tax loss did include interest. 

USSG App. C, Amend. 220; see also 

United States

 v.

McLaughlin, 126 F.3d 130, 139 (3d Cir. 1997)(Sentencing Commission did

not exceed its statutory authority by including interest on unpaid taxes in tax

loss computation under 1988 guidelines).  At least three courts have observed

that, by failing to include interest and penalties, the guidelines fail to

"reflect accurately the criminal behavior," but have held that the plain language

of the guidelines prohibit a sentencing court from including penalties and

interest in the  tax loss computation.  

United States

 v.

Hunerlach, 197 F.3d  1059, 1069-70 (11th Cir. 1999); United

States v. Hopper, 177 F.3d 824, 831-32 (9th Cir. 1999), cert. denied

sub nom. McKendrick v. United States, 528 

U.S.

 1163 (2000);

United States v. Pollen, 978 F.2d 78, 91 n.29 (3d Cir. 1992).[FN4]

      The sentencing court may calculate the total tax loss by accounting for

conduct which occurred during both guideline and pre-guideline years. 

Pierce, 17 F.3d at 150; United States v. Kienenberg,

13 F.3d 1354, 1357 (9th Cir. 1994); 

United States

 v. Higgins, 2

F.3d 1094, 1097 (10th Cir. 1993).  If a defendant is convicted of both guideline

and pre-guideline offenses, the district court has discretion to sentence the

defendant to consecutive terms of imprisonment.  

United  States

 v.

Scarano, 76 F.3d 1471, 1478 (9th Cir. 1996); 

United States

 v.

Preston
, 28 F.3d 1098, 1099 (11th Cir. 1994); Pollen, 978

F.2d at 91-92; 

United States

 v. Hershberger, 962 F.2d 1548, 1550-52

(10th Cir. 1992); 

United States

 v. Ewings, 936 F.2d 903, 910 (7th

Cir. 1991); 
United States
 v. 

Lincoln

, 925 F.2d 255, 257 (8th Cir.

1991); 

United States

 v. Garcia, 903 F.2d 1022, 1025 (5th Cir.

1990); 
United States
 v. 
Watford
, 894 F.2d 665, 668-70 (4th Cir.

1990).

      A circuit split exists regarding how to compute the tax loss when the

offense or offenses at issue have caused an understatement of both corporate and

individual income.  In 

United States

 v. Cseplo, 42 F.3d 360 (6th

Cir. 1994), the defendant, who skimmed funds from his corporation and then failed

to declare that income on his personal returns, was convicted of filing false

corporate tax returns, in violation of § 7206(1), and of attempting to evade

his individual income taxes, in violation of § 7201.  

Id.

 at

361.  Applying the pre-November 1, 1993 version of the guidelines, the

Cseplo court held that the sentencing court properly aggregated the

corporate and individual tax losses when computing total tax loss, and that the

proper method of determining total tax loss in such situations is to add 34% of

the understated corporate income to 28% of the understated individual income. 

Id.

 at 362-64.  The sentencing court had not reduced the amount of

the understated individual income by an amount equal to 34% of the understated

corporate income, a sum representing the amount which the corporation would have

paid in federal taxes, if it had filed accurate returns.  The Sixth Circuit

dismissed the concerns of the defendant that this method produced an artificially

high tax loss computation by observing:

      By choosing to falsify both returns, Cseplo made the deliberate 

      decision to produce separate harm to the government with respect to 

      both tax liabilities.  The fact that Cseplo might have been able to 

      claim a corporate salary deduction had he paid himself these moneys 

      honestly and openly does not relieve him from the responsibility for 

      creating the separate tax losses through the illegal course of conduct 

      he chose in this case.

Id.

 at 365.

      The Second and Seventh Circuits, however, have adopted a tax loss

methodology different from that of the Sixth Circuit.  Those circuits have ruled