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

that the total tax loss resulting from individual and corporate returns should

be computed by 1) taxing the unreported corporate income at the 34% rate; 2)

deducting the amount of corporate tax liability from the total unreported income

received by the individual from the corporation; and 3) finally taxing the

remaining unreported individual income at the 28% rate.  See United

States v. Martinez-Rios, 143 F.3d 662, 672 (2d Cir. 1998); United

States v. Harvey, 996 F.2d 919, 921 (7th Cir 1993); see also

United States v. Bove, 155 F.3d 44, 47 (2d Cir. 1998)(in case

governed by post-November 1, 1993 guidelines, remanding defendant convicted under

§7206(1) for resentencing in light of tax loss methodology adopted by Second

Circuit in Martinez-Rios); 

United States

 v. Bhagavan,

116 F.3d 189, 192 (7th Cir. 1997)(affirming methodology announced by Seventh

Circuit in 

Harvey

 for cases involving understatement of both

corporate and individual tax); United States v. Wu, 81 F.3d 72, 74-

75 (7th Cir. 1996)(affirming methodology of 

Harvey

).

      When the Second Circuit chose to follow the tax loss methodology first

announced by the Seventh Circuit in 

Harvey

, rather than the

methodology of the Sixth Circuit in Cseplo, it described and

analyzed the different approaches of the two circuits by stating the following:

      The Guidelines are silent on this precise issue, and the two

courts of appeals that have considered it have reached opposite

conclusions.  In 

Harvey

, supra, the Seventh Circuit adopted the 

approach urged by 

Martinez

, reasoning that the other method "over states the 

revenue lost to the Treasury."  

Harvey

, 966 F.2d at 921.  In 

contrast, the Sixth Circuit in Cseplo, supra, employed the 

method used by the District Court here, based on its view that the 

Harvey

 method did not adequately account for the fact that two 

separate crimes--personal tax evasion and corporate tax evasion--were 

committed.  See Cseplo, 42 F.3d at 364.

            We agree with the Seventh Circuit's approach, primarily because 

      it bases the calculation on a better approximation of the tax revenue 

      lost to the federal treasury.  Although, as we have acknowledged, the 

      1991 Guidelines do not call for a tax loss calculation based 

      exclusively on the amount of tax liability that the defendant would 

      have incurred had he reported his income truthfully, we think that the 

      1991 Guidelines' punitive purposes are adequately served by denying 

      defendants the benefit of legitimate but unclaimed deductions.

Martinez-Rios, 143 F.3d at 672 (citations omitted).[FN5]

      The circuit split described above, however, involves only how to

aggregate corporate and individual tax loss.  Each of the opinions involved in

this circuit split still share the common recognition that corporate and

individual tax loss should be aggregated in some manner.  See,

e.g., United States v. Furkin, 119 F.3d 1276, 1281 n.1 (7th

Cir. 1997) (confirming that, under 

Harvey

, tax loss

calculation must account for both corporate and individual tax loss created by

single transaction); Bhagavan, 116 F.3d at 192 (stating the same);

Wu, 81 F.3d at 74-75 (holding the same); cf. 

United States

v. Dale, 991 F.2d 819, 856 (D.C. Cir. 1993)(defendant who skimmed

corporate receipts is liable for understatement of personal as well as corporate

income).  Likewise, and pursuant to the 
November 1, 1993
 amendments, the

commentary to §2T1.1 now specifies that, "[i]f the offense involves both

individual and corporate tax returns, the tax loss is the aggregate tax loss from

the offenses taken together."  §2T1.1, comment. (n.7).[FN6]

      As noted, the current version of §2T1.1 contains presumptions which

provide that the tax loss for an evasion, false claim, or failure to file offense

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.  There are few cases

which interpret or apply this "more accurate definition of the tax loss"

language.  When discussing the possible retroactive application of the post-

November 1, 1993
 guidelines, the Second Circuit suggested in dicta that the "more

accurate definition of the tax loss" language requires a tax loss analysis which

gives the defendant the benefit of legitimate but unclaimed deductions. 

See Martinez-Rios, 143 F.3d at 671.  According to the Second Circuit, 

the post-November 1, 1993 guidelines therefore "tend[] to produce smaller 

tax loss figures" than the pre-November 1, 1993 guidelines, which do not 

permit consideration of legitimate but unclaimed deductions.  

Id.

 

Similarly, the Seventh Circuit has ruled that the current definition of 

tax loss contained within §2T1.1(c) represents a substantive change, 

rather than a clarifying amendment, in part because the effect of the 

definition "is a lowering of offense levels when proper proof is produced.  

Under the new definition, which allows the court to inquire into the actual 

tax burden, the authority of the court is expanded to accept proof showing a 

lesser amount of taxes owed."  

United States

 v. Minneman, 143 F.3d 

274, 283 (7th Cir. 1998).       

      In contrast, the Sixth Circuit has stated in dicta that, "[a]ll the 

[more accurate determination of the tax loss] phrase does, as far as we can 

see, is tell the sentencing court not to calculate the tax loss on the basis 

of a 28 percent tax rate for individual taxpayers and a 34 percent tax rate 

for corporate tax payers if a more accurate determination can be made."  

See Cseplo, 42 F.3d at 364.  The Sixth Circuit has suggested 

that the "more accurate determination of the tax loss" language merely 

accounts for the possibility of differing tax brackets.  

Id.

  The 

Sixth Circuit also has expressed a general policy against allowing a 

defendant convicted of tax violations to receive every benefit of 

traditional tax assessment principles during sentencing, noting that "[i]f 

[a defendant's] unorthodox maneuvers resulted in a higher aggregate tax 

liability than would have existed otherwise, that is a risk [he] chose to 

run when he broke the law."  

Id.

 at 365 n.6; cf. United 

States v. Ladum, 141 F.3d 1328, 1343 (9th Cir. 1998) (defendant claimed 

that illegal source income enhancement under §2T1.1(b)(1) was 

inapplicable because he had not realized more than $10,000 from illegal gun 

sales, once costs of goods and doing business were accounted for; court 

rejected claim by citing commentary to §2T1.1 regarding tax loss and 

declaring that "nothing in the Guidelines requires the government to 

determine and deduct the portion of overhead expenses fairly allocable to 

gun sales"); 

United States

 v. Mueller, 74 F.3d 1152, 1160 (11th Cir. 

1996)(under post-November 1, 1993 version of §2T1.1(c), reference to 

unreported gross income within special instructions regarding tax loss 

literally means unreported gross income, rather than unreported 

adjusted gross income).

      Regardless of the precise meaning of the phrase "more accurate

determination of the tax loss," the pre-November 1, 1993 guidelines generally

prevent defendants from reducing the tax loss by relying upon deductions which

they could have claimed if they had filed a legitimate return.  For example, in

United States

 v. Parrott, 148 F.3d 629, 631-32 (6th Cir. 1998), the

defendant pleaded guilty to filing a false 1990 tax return and stipulated in his

plea agreement to a tax loss exceeding $70,000.  At sentencing, the defendant

attempted to reduce this amount of tax loss by invoking certain farm losses which

he had not claimed in his original returns.  

Id.

 at 632.  The

Parrott court upheld the refusal of the district court to reduce

the tax loss on the basis of the unclaimed deductions, ruling that, because the

tax loss calculation under §2T1.3 was not based necessarily upon the net of

concealed income less unclaimed deductions, there was a factual basis to support

the stipulated amount of tax loss.  

Id.

 Further, in

Harvey

, 996 F.2d at 920, the Seventh Circuit declared that the

method under the prior guidelines of simply multiplying the amount of gross

income at issue by either 28 percent or 34 percent provides a "rough and ready

calculation [which] applies the highest marginal rate to the amount of concealed

income, disregarding deductions that would have been available had the taxpayer

filed an honest return."  Likewise, in 

United States

 v. Valentino,

19 F.3d 463, 464-65 (9th Cir. 1994), the Ninth Circuit rejected the claim of a

defendant convicted of filing a false tax return that he was entitled to an

evidentiary hearing at sentencing in order to show that there was no tax loss

because unclaimed depreciation deductions would have exceeded the understated

income at issue.  Upholding the finding of the district court that the only fact

which mattered under the 1992 guidelines was how much income the defendant had

concealed, the Valentino court stressed that now-deleted commentary

to §2T1.1 explained that the methodology for calculating tax loss under

§2T1.3 was designed "to make irrelevant the issue of whether the taxpayer

was entitled to offsetting adjustments that he failed to claim." 

Id.

 at 465.  Moreover, in Wu, 81 F.3d at 74-75, the

tax loss calculation of $1.4 million was based upon both corporate and personal

tax loss resulting from funds which the defendant had skimmed from his closely-

held corporation.  The defendant argued that this tax loss was too high because,

in the "real world," owners of closely-held corporations distribute corporate

profits through salary and other methods which minimize or eliminate the

corporate tax liability.  

Id.

 at 74.  Although the Seventh Circuit

agreed with the defendant's description of how owners of closely-held

corporations file legitimate returns, the court declined "to make it the

responsibility of the United States Courts to comb the books of convicted tax

evaders seeking ways in which they could have lowered their tax liability and

their sentences.  Unfortunately for [the defendant], it is simply not our role

to play 'Monday Morning Tax Advisor.'" 

Id.

      Finally, even if a sentencing court permits a defendant to attempt to

reduce the amount of tax loss attributable to his offense by introducing evidence

of unclaimed expenses or deductions, the court ultimately may reject the

assertions of the defendant based upon the particular facts.  See United

States v. Valenti, 121 F.3d 327, 333-34 (7th Cir. 1997)(upholding refusal

of sentencing court to give defendant convicted of tax evasion and failing to

file tax returns credit for asserted legitimate business expenses when sentencing

court determined that testimony of defendant was speculative and incredible);

see also United States v. Noske, 117 F.3d 1053, 1060 (8th

Cir. 1997)(defendants convicted of tax fraud conspiracy under 18 U.S.C. §371

were not entitled to charitable deductions for sham distributions to "nonprofit"

corporation); cf. Minneman, 143 F.3d at 279 (upholding

granting of government's motion in limine prohibiting defendant from introducing

at trial evidence of legitimate business expenses which he could have claimed,

unless defendant first established that he knew at time of filing that deductions

were available).

      5.03[1][a]  Section 7201

      Prior to the 
November 1, 1993
, amendments, §2T1.1(a) indicated that

the base offense level in evasion cases corresponded to the offense level

provided by §2T4.1, the tax table, based upon the amount of tax loss.  This

former version of §2T1.1(a) further defined tax loss in evasion cases as

"the greater of: (A) the total amount of tax that the taxpayer evaded or

attempted to evade; and (B) the 'tax loss' defined in §2T1.3."   Now-deleted

§2T1.3(a) in turn defined tax loss as "28 percent of the amount by which the

greater of gross income and taxable income was understated, plus 100 percent of

the total amount of any false credits claimed against tax.  If the taxpayers is

a corporation, use 34 percent in lieu of 28 percent."  Now-deleted commentary to

§2T1.1 explained the import of the reference to the tax loss definition

contained within §2T1.3:

      The guideline refers to §2T1.3 to provide an alternative minimum 

      standard for the tax loss, which is based upon a percentage of the 

      dollar amounts of certain misstatements made in returns filed by the 

      taxpayer.  This alternative standard may be easier to determine, and 

      should make irrelevant the issue of whether the taxpayer was entitled 

      to offsetting adjustments that he failed to claim.

§2T1.1, comment. (n.4)(November 1, 1992).  Similarly, commentary to now-

deleted §2T1.3 indicated that one goal of the tax loss methodology contained

within that guideline was to "avoid[] complex problems of proof."  §2T1.3,

comment. (backg'd)(November 1, 1992).

      As noted supra, however, §2T1.1 was amended on November 1,

1993.  Section 2T1.1 now provides that, if there is a tax loss, the base offense

level for tax evasion offenses 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).  Rather than referring to the definition of tax loss

contained within now-deleted §2T1.3, the current version of §2T1.1

defines tax loss for the purposes of evasion offenses 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). 

Section 2T1.1 further describes presumptions which a court should employ when

calculating the tax loss in various situations involving tax evasion offenses. 

Generally, these presumptions provide that the tax loss should equal 28% of the

unreported gross income or improper deductions or exemptions at issue (unless the

taxpayer is a corporation, in which case the applicable percentage is 34%), plus

100% of any falsely claimed credits against tax.  §2T1.1(c)(1) Notes (A)-

(C).  These percentages apply "unless a more accurate determination of the tax

loss can be made."  

Id.

      5.03[1][b]  Section 7203    

      Prior to an amendment which took effect on 
November 1, 1993
, USSG

§2T1.2 governed the base offense level for cases involving willful failure

to file a return, supply information, or pay tax in violation of 26 U.S.C.

§7203.  Again, tax loss governed the base offense level: §2T1.2(a)

provided either a base offense level of 1 level less than the level from the tax

table, §2T4.1, corresponding to the tax loss or a base offense level of 5,

if there was no tax loss.  For purposes of violations of this section, tax loss

was defined as "the total amount of tax that the taxpayer owed and did not pay,

but, in the event of a failure to file in any year, not less than 10 percent of

the amount by which the taxpayer's gross income for that year exceeded $20,000." 

§2T1.2(a).  Section 2T1.2 provided the alternative measure of the tax loss,

10 percent of gross income over $20,000, because of the potential difficulty in

determining the amount a taxpayer owed.  §2T1.2, comment. (backg'd.). 

Finally, §2T1.2(c) explicitly indicated that USSG §2S1.3 governed

violations of §7203 which involved failures to report monetary transactions.

      Pursuant to the 
November 1, 1993
 amendment, however, §2T1.2 was

deleted.  Section 2T1.1, the guideline provision which applies to the majority

of tax crimes, now governs the base offense level for violations of §7203

which involve a willful failure to file a return, supply information, or pay tax. 

§2T1.1; USSG Appendix A.  Sections  2T1.1 (c)(2) and (3) define tax loss for

offenses involving the failure to file a return or pay tax as "the amount of tax

that the taxpayer owed and did not pay;" however, "[i]f the offense involved

failure to file a tax return, the tax loss shall be treated as equal to 20% of

the gross income (25% if the taxpayer is a corporation) less any tax withheld or

otherwise paid, unless a more accurate determination of the tax loss can be

made."  §§2T1.1(c)(2), Note.  The guideline commentary indicates that

sentencing courts should employ the above tax loss formula in cases in which the

tax loss may not be "reasonably ascertainable," but should disregard the formula

if either party provides sufficient information for a more accurate assessment

of the tax loss.  §2T1.1, comment. (n.1).

      In 

United States

 v. Valenti, 121 F.3d 327, 333-34 (7th Cir.

1997), the district court employed this formula when sentencing a defendant for

having failed to file returns and concluded that the tax loss simply equaled

twenty percent of the defendant's unreported gross income.  The defendant

objected that this method failed to produce the most accurate assessment of the

tax loss, and that the district court had failed to account for his evidence of

his legitimate business expenses.  

Id.

  The Valenti

court rejected this claim and upheld the sentence imposed under

§2T1.1(c)(2), noting that the district court had found that the defendant's

evidence was speculative and incredible, that the government had tried to measure

the business expenses accurately, and that it was likely that the defendant had

gotten off easy because additional unreported income probably existed. 

Id.

 at 334.

      Finally, §2S1.3, the guideline governing a failure to report a

monetary transaction, continues to apply to §7203 violations involving such

conduct.  §2S1.3; USSG App. A.

      5.03[1][c]  Section 7206(1)

      Prior to the 
November 1, 1993
 amendments, now-deleted §2T1.3 governed

the base offense level of §7206(1) violations.  Section 2T1.3 indicated that

the base offense level in such cases was the  level provided by §2T4.1, the

tax table, corresponding to the tax loss "if the offense was committed in order

to facilitate the evasion of a tax."  §2T1.3(a)(1).  Otherwise, the base

offense level was 6.  §2T1.3(a)(2).  Section 2T1.3 defined tax loss as "28

percent of the amount by which the greater of gross income and taxable income was

understated, plus 100 percent of the total amount of any false credits claimed

against tax.  If the taxpayers is a corporation, use 34 percent in lieu of 28

percent."  §2T1.3(a).  Commentary to §2T1.3 explained why the provision

generally focused the base offense level for fraudulent or false return offenses

on the amount of  the false statement:

      Existence of a tax loss is not an element of these offenses. 

      Furthermore, in instances where the defendant is setting the 

      groundwork for evasion of a tax that is expected to become due in the 

      future, he may make false statements that underreport income that as 

      of the time of conviction may not yet have resulted in a tax loss.  In 

      order to gauge the seriousness of these offenses, the guidelines 

      establish a rule for determining a "tax loss" based on the nature and 

      magnitude of the false statements made.  Use of this approach also 

      avoids complex problems of proof and invasion of privacy when returns 

      of persons other than the defendant and codefendants are involved.

§2T1.3, comment. (backg'd).

      As noted supra, however, §2T1.1 now governs offenses involving

fraudulent or false returns because amendments effective November 1, 1993 deleted

§2T1.3.  Section 2T1.1 currently provides that the base offense level for

fraudulent or false return offenses is the level from §2T4.1, the tax table,

corresponding to the amount of tax loss.  §2T1.1(a)(1).  Otherwise, the base

offense level is 6.  §2T1.1(a)(2).  As with offenses involving tax evasion,

§2T1.1 now defines tax loss for the purposes of fraudulent or false return

offenses 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).  Section 2T1.1 further describes presumptions

which a court should employ when calculating the tax loss in various situations

involving fraudulent or false return offenses.  Generally, these presumptions

provide that the tax loss should equal 28% of the unreported gross income or

improperly claimed deductions or exemptions at issue (unless the taxpayer is a

corporation, in which case the applicable percentage is 34%), plus 100% of any

falsely claimed credits against tax.  §2T1.1(c)(1) Notes (A)-(C).  These

percentages apply "unless a more accurate determination of the tax loss can be

made."  

Id.

      The section regarding the calculation of base offense levels for tax

offenses in general, see Section 5.03[1], supra, outlines in detail

the principles which currently govern the calculation of the base offense level

under §2T1.1 for violations of §7206(1).  As previously explained,

see supra, the tax loss calculation under now-deleted §2T1.3

disregarded deductions which would have been available had the taxpayer filed an

honest return.  

United States

 v. Valentino, 19 F.3d 463, 465 (9th

Cir. 1994)(noting that now-deleted commentary to §2T1.1 provided that the

tax loss standard under §2T1.3 was designed "to make irrelevant the issue

of whether the taxpayer was entitled to offsetting adjustments that he failed to

claim"); United States v. Harvey, 996 F.2d 919, 920 (7th Cir.

1993)(§2T1.3 provides "rough and ready calculation" for tax loss which

disregards deductions which would have been available, had defendant filed an

honest return).

      5.03[1][d]  Section 7206(2)

      Section 2T1.4 governs the sentencing of defendants who have aided,

assisted, procured, counseled, or advised tax fraud.  Pursuant to a November 1,

1993 amendment, §2T1.4 provides that  the base offense level is the level

from §2T4.1, the tax table, corresponding to the amount of tax loss. 

§2T1.4(a)(1).  Otherwise, the base offense level is 6.  §2T1.4(a)(2). 

This provision defines tax loss as "the tax loss, as defined in §2T1.1,

resulting from the defendant's aid, assistance, procurance or advice." 

§2T1.4(a).[FN7]  If the defendant advises others to violate their tax

obligations by filing returns which have no support in the tax law (such as by

promoting a tax shelter scheme), and if such conduct results in the filing of

false returns, the misstatements in all such returns will contribute to one

aggregate tax loss.  §2T1.4, comment. (n.1).  This aggregation occurs

regardless of whether the principals realized that the returns were false. 

Id.

      A sentencing court does not necessarily have to calculate the amount of tax

loss attributable to a false return scheme with full certainty or precision. 

United States

 v. Bryant, 128 F.3d 74, 75-76 (2d Cir. 1997)(per

curiam).  In Bryant, the defendant ran an income tax "mill,"

assisting in the preparation of 8,521 individual tax returns from 1991 to 1993. 

Id.

 at 76.  The defendant was convicted of violating §7206(2)

by assisting in the preparation of twenty-two false tax returns, each of which

resulted in an average tax loss of $2,435.  

Id.

  Over 99% of all

returns prepared by the defendant resulted in refunds.  

Id.

 The

IRS
 audited more than 20% of the returns prepared by the defendant, discovering

that 1,683 of them yielded an average tax loss of $2,651 each. 

Id.

.  During sentencing, the district court calculated the

tax loss under §§2T1.4 and 2T4.1 as equaling at least $5,115,203. 

Id at 75.  This sum was based upon $53,570 in loss from the twenty-two

returns underlying the counts of conviction, $4,461,633 in loss from the audited

returns, and at least $600,000 in estimated loss from returns prepared by the

defendant which the 
IRS
 did not audit.  Id.  The defendant

complained on appeal that the $600,000 in tax loss attributed to the unaudited

returns was speculative and unfair.  Noting that this sum rested upon an average

tax loss of less than $100 per unaudited return, the Bryant court

rejected this argument, explaining:

      The §2T1.1 commentary, which is applicable to a violation of 

      §7206(2), states that "the amount of the tax loss may be 

      uncertain," and it envisions that "indirect methods of proof [may be] 

      used.  It states expressly that "the guidelines contemplate that the 

      court will simply make a reasonable estimate based upon the available 

      facts."

      [Therefore,] it is permissible for the sentencing court, in 

      calculating a defendant's offense level, to estimate the loss 

      resulting from his offenses by extrapolating the average amount of tax 

      loss from known data and applying that average to transactions where 

      the exact amount of loss is unknown. . . .

      We see no reason why [estimation of total tax loss through 

      extrapolation] may not be used in a §7206(2) case in which, as 

      here, the defendant has been convicted of assisting in the preparation 

      of numerous fraudulent tax returns, and government records show many 

      more such instances.  Although extrapolation might not be reasonable 

      if . . . there were few instances of fraud, or if the returns audited 

      constituted a minuscule percentage of the total that the defendant 

      prepared or in whose preparation he assisted, we see no 

      unreasonableness here.

Bryant, 128 F.3d at 75-76; cf. United States v.

Marshall, 92 F.3d 758, 760-61 (8th Cir. 1996)(trial record supported

determination that tax loss equaled $2,004,961 because defendant admitted that

he had prepared more than 1,200 returns, admitted that he controlled all

employees in his return preparation business, and returns submitted during

sentencing contained the same improprieties as returns underlying §7206(2)

convictions).

      As with other tax crimes, the tax loss arising from a §7206(2)

violation includes the attempted or intended tax loss, rather than the tax loss

actually suffered by the government.  United States v. Hunt, 25

F.3d 1092, 1095-96 (D.C. Cir. 1994); United States v. Moore,

997 F.2d 55, 59-61 (5th Cir. 1993); United States v. Brimberry, 961

F.2d 1286, 1292 (7th Cir. 1992); but cf. United States v.

Schmidt, 935 F.2d 1440, 1451 (4th Cir. 1991) (stating that actual tax

loss was proper basis for computing tax loss), limited by United

States v. Hirschfeld, 964 F.2d 318, 324-25 (4th Cir. 1992)(holding that,

although false deduction did not create tax loss during year in which deduction

was claimed, deduction provided basis for anticipated tax loss).

      5.03[1][e]  Section 7212(a) 

      The omnibus clause of 26 U.S.C. §7212(a) prohibits an individual from

corruptly obstructing or impeding, or endeavoring to obstruct or impede, the due

administration of Title 26.  Pursuant to an amendment which took effect on

November 1, 1993, the statutory index to the guidelines, USSG Appendix A,

provides that either §2J1.2, the guideline applying to obstruction of

justice, or §2T1.1 normally govern §7212(a) violations involving the

omnibus clause.  The index also states that §2A2.4, which applies to

obstruction of officers, ordinarily governs §7212(a) violations not

involving the omnibus clause.  Prior to the November 1, 1993 amendment, the

statutory index regarding §7212(a) did not refer to either §§2J1.2

or 2T1.1.

      Applying a pre-November 1, 1993 version of the guidelines, the Second

Circuit upheld the application of §2T1.1 during the sentencing of a

defendant who had violated the omnibus clause of §7212(a) by filing a false

return, and by providing false documents to the 
IRS
 during an audit in order to

try to conceal the prior act of filing a false return.  United States v.

Kelly, 147 F.3d 172, 177-78 (2d Cir. 1998).  The fact that the defendant

had been acquitted of the charge of filing a false tax return did not prevent the

district court from applying §2T1.1 or enhancing the sentence on the basis

of the tax loss.  Id. at 178.  In another case governed by the pre-

November 1, 1993 guidelines, the parties did not contest the conclusion of the

district court that §2T1.1 was the most appropriate sentencing guideline for

the §7212(a) conviction at issue.  United States v. Brennick,

134 F.3d 10, 12-13 (1st Cir. 1998).  Further, the First Circuit  accepted the

application of §2T1.1 by the district court because the defendant's

§7212(a) conviction rested upon acts of concealment and upon the deliberate

underpayment of taxes.  Id.

      Interpreting a pre-November 1, 1993 version of the guidelines, the Ninth

Circuit upheld the application of the general obstruction of justice guideline,

§2J1.2, during the sentencing of a defendant convicted of violating the

omnibus clause of §7212(a).  United States v. Van Krieken, 39

F.3d 227, 230-31 (9th Cir. 1994).  Noting that the defendant had filed false

returns and sought to have the 
IRS
 levy on innocent taxpayers, the Van

Krieken court implied that the commentary accompanying §2J1.2

indicated that the guideline applied to such attempts to obstruct a civil or

administrative proceeding or evade legal process.  Id. at 231.  The

Van Krieken court also observed that the 
November 1, 1993

amendment, which states in part that §2J1.2 can apply to omnibus clause

convictions, was a clarifying amendment which applied to the defendant and

supported the use of §2J1.2 during his sentencing.  Id. at 231

n.2.  Similarly, and again interpreting the pre-November 1, 1993 guidelines, the

Eighth Circuit held that §2J1.2 is the most appropriate guideline for 

§7212(a) omnibus clause violations.  United States v. Dykstra,

991 F.2d 450, 453-54 (8th Cir. 1993).  Noting that "the language and structure

of §7212 track part of certain federal obstruction of justice statutes," and

that courts have used those statutes to interpret §7212(a), the

Dykstra court approved the use of §2J1.2 during the sentencing

of a §7212(a) omnibus clause violation.  Id. Relying upon

this holding in Dykstra, the Ninth Circuit found that a district

court did not commit plain error under the 1989 sentencing guidelines by applying

§2J1.2 to defendants who had violated the omnibus clause of §7212(a)

by targeting and attempting to intimidate 
IRS
 officials conducting collection

proceedings, and by attempting to use false claims for refunds to offset an

assessed tax liability.  See United States  v. Koff, 43 F.3d

417, 419 (9th Cir. 1994).

      Finally, some opinions which have reviewed sentencings under pre-November

1993 guidelines have approved the application of other guideline provisions to

convictions under the §7212(a) omnibus clause.  For example, the Eleventh

Circuit declined to apply the assault guidelines after finding that the

defendant's §7212(a) omnibus clause conviction was based on evidence of his

transferring real estate to his spouse, and of his filing an altered lien notice

in an attempt to cause the release of that lien.  United States v.

Shriver, 967 F.2d 572, 574 (11th Cir. 1992).  The court decided that the

guideline which most closely tracked the defendant's actions was §2F1.1,

which governs cases of fraud and deceit.  Id. at 573-74.  Likewise,

the Ninth Circuit declined to apply the assault guidelines to the §7212(a)

omnibus clause conviction of a defendant who had filed a false return seeking a

refund, as well as false 1096 and 1099 forms.  United States v.

Hanson, 2 F.3d 942, 947 (9th Cir. 1993).  The Hanson court

also reversed the district court's application of §2T1.9, which applies to

tax fraud conspiracies, because the defendant had acted alone.  Id. 

Instead, the Hanson court found that the guideline section most

analogous to the defendant's conduct was now-deleted §2T1.5, which governed

the sentencing of §7207 offenses involving fraudulent returns, statements,

or other documents.  Id. The Ninth Circuit subsequently

distinguished the conclusion in Hanson that §2T1.5 is the most

analogous guideline for a §7212(a) omnibus clause conviction by relying upon

the holding  in Dykstra, supra, and ruling that it was not

plain error to apply §2J1.2 in a case involving defendants who had targeted

and attempted to intimidate 
IRS
 officials, and had tried to use false claims for

refunds to offset an assessed tax liability.  See Koff, 43

F.3d at 419; see also Van Krieken, 39 F.3d at 230-31

(declining to follow Hanson and upholding use of §2J1.2 in

case involving defendant who had filed false returns and had sought tax levies

on innocent 
IRS
 employees).

      Because the statutory index now identifies both §§2J1.2 and 2T1.1

as appropriate guideline provisions for §7212(a) omnibus clause violations,

and because the statutory index does not establish an exclusive list of the

guideline provisions which are potentially applicable to any offense, a

sentencing court still must determine which guideline is the most appropriate

provision for the particular omnibus clause violation at issue.  Van

Krieken, 39 F.3d at 231 n.2.  Section 2J1.2 establishes a base offense

level of 12, subject to certain enhancements for specific offense

characteristics.  Section 2T1.1, however, establishes a base offense level of

either 6, if there is no tax loss, or a higher base offense level, corresponding

to the specific tax loss under the tax table.  Under the current tax loss table,

a tax loss of more than $23,500, but no more than $40,000, results in a base

offense level of 12.  §2T4.1.  Accordingly, §2J1.2 ordinarily will

yield a higher base offense level than §2T1.1 if the tax loss is $23,500 or

less, whereas §2T1.1 ordinarily will yield a higher base offense level than

§2J1.2 if the tax loss exceeds $40,000.

      5.03[1][f]  Sections 286 and 287

      Section 287 of Title 18 prohibits the knowing presentation of false,

fictitious, or fraudulent claims to the government.  Similarly, 18 U.S.C.

§286 prohibits conspiracies to defraud the government by obtaining or aiding

to obtain the payment of any false, fictitious or fraudulent claim.  In the

criminal tax context, these statutes generally apply to individuals who file

income tax returns claiming false or fraudulent refunds of income tax.  The

general sentencing guideline pertaining to fraud, §2F1.1, governs

sentencings for §§286 and 287 violations, including false claims for

tax refunds.[FN8]  USSG Appendix A; United States v. Fleming, 128

F.3d 285, 287 (6th Cir. 1997).   Section 2F1.1 establishes a base offense level

of 6 for crimes involving fraud or deceit, §2F1.1(a), and provides for an

increase in the base offense level corresponding to the amount of loss exceeding

$2,000, as calculated by the sentencing court.  §§2F1.1(b)(1)(A)-(S). 

"The commentary directs the sentencing court to calculate the 'intended loss that

the defendant was attempting to inflict . . . if it is greater than the actual

loss'"  Fleming, 128 F.3d at 287 (quoting §2F1.1, comment.

(n.7)).  Further, loss under §2F1.1 includes the intended loss attributable

to a common scheme or course of conduct by the defendant, regardless of the

number of counts of conviction in a multiple-count indictment, and regardless of

the actual loss.  Id.

      Defendants who pursue false claim for refund schemes may be responsible at

sentencing for the total sum of refunds claimed, even if the taxpayers in whose

names the false returns were filed might have been able to claim legitimate

refunds.  In Fleming, the defendant was convicted of twenty-five

counts of violating §287, based upon his preparation of tax returns

containing false claims for refunds in the names of third-party taxpayers. 

Id. at 286.  The district court sentenced the defendant according

to the total dollar amount of refunds claimed in the twenty-five returns

underlying his convictions, as well as refunds claimed in thirty-two additional

false returns introduced at sentencing.  Id.  The defendant challenged

this tax loss calculation, arguing that the district court had enhanced his

sentence improperly because the government had not established the employment or

income status of the thirty-two taxpayers associated with the returns introduced

at sentencing.  Id.  Likewise, he argued that up to five of the

taxpayers associated with the returns underlying his counts of convictions

actually had earned legitimate income.  Id.  The

Fleming court rejected his claims, finding that any portion of the

total loss that the third-party taxpayers might have been entitled to claim

legally was irrelevant to the loss computation because the defendant had

fabricated every W-2 form, dependent, and employer associated with the returns

which he had prepared.  Id at 288-89.  As the Sixth Circuit observed,

"[i]t was simply fortuitous that some of those whom Mr. Fleming preyed upon were

employed . . . . Their actual income and employment status did not influence his

choice when he recruited them; he cannot use those facts now to narrow the scope

of the fraud he designed."  Id.

      Likewise, a defendant involved in a conspiracy to file numerous false

claims for tax refunds will be held accountable at sentencing for the entire

amount of loss which was reasonably foreseeable to the defendant.  United

States v. Okoronkwo, 46 F.3d 426, 438 (5th Cir. 1995)(holding that

evidence supported finding that defendant was responsible for 75% of all false

claims filed through certain tax preparation office, including false claims filed

by other co-conspirators, because defendant joined conspiracy early and had a

central role); United States v. Atkins, 25 F.3d 1401, 1403-04 (8th

Cir. 1994)(rejecting claim that defendant was responsible for only four of thirty

false claims for refund filed; involvement of defendant in every level of the

conspiracy, coupled with her close working relationship with co-conspirator,

indicated that loss arising from all thirty false returns was reasonably

foreseeable).  The government, however, carries the burden of supporting through

sufficient evidence any contested sentencing increase based upon the amount of

loss.  United States v. Rice, 52 F.3d 843, 848 (10th Cir. 1995).

      5.03[1][g]  Section 371

      Section 2T1.9 of the sentencing guidelines governs conspiracies to "defraud

the United States by impeding, impairing, obstructing and defeating . . . the

collection of revenue."  §2T1.9, comment. (n.1)(quoting United States

v. Carruth, 699 F.2d 1017, 1021 (9th Cir. 1983).  This guideline applies

to what is commonly called a "Klein conspiracy," as described in United

States v. Klein, 247 F.2d 908 (2d Cir. 1957).  This guideline does not

apply to taxpayers, such as husband and wife, who jointly evade taxes or file a

fraudulent return.  §2T1.9, comment. (n.1).  Pursuant to a November 1, 1993

amendment, §2T1.9 directs the court to use the base offense level determined

by §2T1.1 or §2T1.4, according to which guideline most closely

addresses the underlying conduct, if that offense level is greater than 10. 

§2T1.9, comment. (n.2).[FN9]   If §2T1.1 or §2T1.4 do not provide

an offense level greater than 10, the base offense level under §2T1.9 is 10. 

Id.; but cf. United States v. Goldberg, 105 F.3d 770, 777 (1st 

Cir. 1997)(commenting in dicta that government "sensibly" chose not to 

appeal downward departure based upon view of district court that base 

offense level of 8 under §2T1.4 was "more reflective" of defendant's 

conduct than base offense level of 10 under §2T1.9 because tax loss was 

only $3,000 to $5,000).

      When calculating the tax loss attributable to a defendant convicted of a

Klein conspiracy offense, the court should hold the defendant responsible

for "all reasonably foreseeable acts and omissions . . .  in furtherance of the

jointly undertaken criminal activity."  United States v. Ladum, 141

F.3d 1328, 1346 (9th Cir. 1998)(quoting USSG §1B1.3(a)(1)(B)).  "This

requires a determination of 'the scope of the criminal activity the particular

defendant agreed to jointly undertake (i.e., the scope of the specific conduct

and objectives embraced by the defendant's agreement)."  Id.

(quoting §1B1.3, comment. (n.2)).  Accordingly, a court should sentence a

defendant according to the tax loss which he directly caused, as well as the tax

loss which his coconspirator caused, if that tax loss was reasonably foreseeable

to the defendant.  United States v. Clark, 139 F.3d 485, 490 (5th

Cir.)(citing United States v. Charroux, 3 F.3d 827, 838 (5th Cir.

1993)), cert. denied, 525 U.S. 899 (1998); see also United

States v. Fleschner, 98 F.3d 155, 160 (4th Cir. 1996)(tax loss finding

was not confined to assessing only conduct which occurred when coconspirators

were physically together or acting in unison at Patriot meetings).  Further,

"[i]n assessing the amount of tax loss, the district court is to make a

'reasonable estimate' of the amount of the loss that the defendant intended to

inflict, not the actual amount of the government's loss."  United States

v. Kraig, 99 F.3d 1361, 1370-71 (6th Cir. 1996).  Whether the

conspirators actually completed the offense is irrelevant to calculating the

offense level.  United States v. Dale, 991 F.2d 819, 855 (D.C. Cir.

1993).  A district court applies the preponderance of the evidence standard when

determining the duration of a conspiracy at sentencing.  United States v.

Furkin, 119 F.3d 1276, 1281 (7th Cir. 1997).

      If a defendant is convicted of a count charging a conspiracy to commit more

than one offense, a sentencing court should treat that conviction "as if the

defendant had been convicted on a separate count of conspiracy for each offense

that the defendant conspired to commit."  Dale, 991 F.2d at 854 

(quoting §1B1.2(d)).  After calculating the offense level for each such 

"separate" conspiracy, the court then must group the various offenses, "such 

that instead of sentencing the defendant for each object offense, the court 

would sentence the defendants on the basis of only one of the offenses."  

Id. (citing §3D1.2).  The court then must sentence according to 

the offense level for the most serious counts comprising the group.  

Id. (citing §3D1.3).

      Consistent with general sentencing guideline law, loss computations

regarding Klein conspiracies may rest upon conduct which was uncharged,

or for which the defendant was acquitted.  For example, in United States

v. Seligsohn, 981 F.2d 1418 (3d Cir. 1992), the defendants paid cash as

part of wages earned by employees, under reported their total payroll, filed

false reports with the 
IRS
 regarding withholding taxes, and deprived a union

welfare plan of its entitlement.  Although the indictments charged only a 

conspiracy with respect to the personal returns, the defendants' sentences were

based upon a tax loss attributable to the defendants' companies, rather than only

the amount of individual tax loss.  Id. at 1427.  The court found

that the tax fraud conspiracy was "clearly intended to encompass the tax losses

attributable to the employees of the defendants' companies as well as the losses

from the defendants' own personal tax evasion."  Id.  The Fifth

Circuit has held that a defendant who has been acquitted of conspiracy may be

held liable as a co-conspirator for sentencing purposes.  United States v.

Hull, 160 F.3d 265, 269-70 (5th Cir. 1998).

      Finally, a sentencing court should make specific findings regarding the

amount of reasonably foreseeable tax loss.  In Ladum, supra,

the sentencing court found that one defendant participated for ten years in a

thirteen-year tax fraud scheme which involved the under-reporting of gross

business receipts from several stores.  Ladum, 141 F.3d at 1346-47. 

The sentencing court further found that this defendant was responsible for the

entire tax loss attributable to the conspiracy, which exceeded $550,000. 

Id.  The district court, however, failed to make a specific factual

finding regarding whether the tax loss which occurred when the defendant was not

participating in the conspiracy was reasonably foreseeable to him. 

Id. at 1347.  Stating that it was not "self-evident" that the

defendant would have foreseen the tax loss arising from stores which did not

exist when he ceased participating in the conspiracy, or from the stores which

had existed when he left the conspiracy, the Ninth Circuit remanded so that the

district court could make specific factual findings regarding the reasonably

foreseeable tax loss.  Id.

5.03[2] Specific Offense Characteristics

      In addition to determining the base offense level from the tax table at

§2T4.1, the sentencing court must adjust the offense level according to the

dictates of the specific offense characteristics of each subsection