Policies and Procedures

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4.00 TAX DIVISION POLICIES AND PROCEDURES

Updated May 2001

4.01     VOLUNTARY DISCLOSURE

4.01[1]  Policy Respecting Voluntary Disclosure

4.01[2]  Timeliness of Disclosure

4.01[3]  Cooperation of Taxpayer

4.02     DUAL PROSECUTION AND SUCCESSIVE PROSECUTION

4.02[1]  Applicability of Policy

4.02[2]  Tax Prosecutions

4.02[3]  Pretrial Diversion

4.03     INCARCERATED PERSONS

4.03[1]  General

4.03[2]  Prosecution of Incarcerated Persons

4.04     HEALTH POLICY

4.04[1]  General Policy

4.04[2]  Court Determination of Health Status

4.05     MENTAL INCOMPETENCY

4.05[1]  Evaluation at Administrative Level

4.05[2]  Insanity Defense Reform Act of 1984

4.06     SEARCH WARRANTS

4.06[1]  Generally

4.06[2]  Procedures Under Directive No. 52

4.07     APPEALS

4.08     REQUESTS FOR TRIAL ASSISTANCE

4.09     STATUS REPORTS

4.10     RETURN OF REPORTS AND EXHIBITS

There are numerous policies governing the operation of the Department of Justice, many of which are set forth in the United States Attorneys' Manual (USAM). Some of these policies, as implemented by the Tax Division and not otherwise covered in this Manual, are discussed in the sections which follow.

                4.01  VOLUNTARY DISCLOSURE

4.01[1]  Policy Respecting Voluntary Disclosure

      Prior to 1952, it was the policy of the Treasury Department not to

recommend criminal prosecution where a taxpayer voluntarily revealed his

commission of a tax crime to an appropriate IRS official before any investigation

of his affairs had commenced.

      Due to the controversy which ensued in the courts over what constituted a

true "voluntary disclosure," and because it was difficult, "and sometimes

impossible" to ascertain administratively whether the taxpayer had made a

voluntary disclosure or had merely discovered he was under investigation, the

Treasury Department abandoned this policy on January 10, 1952.  Treasury

Department Information Release No. S-2930, 1952 C.C.H., ¶ 6079.  

See 
United States
 v. Shotwell Manufacturing Co., 355 

U.S.

 233, 

235 n.2 (1957).

      In 1961, the Internal Revenue Service adopted an "informal" policy

regarding voluntary disclosure, under which it considered voluntary disclosure,

along with other facts and circumstances, on a case-by-case basis in determining

whether or not to recommend prosecution.  See Statement of 

Commissioner Mortimer M. Caplin, News Release IR-432, Dec. 13, 1961; IRM 

Part IX, §9781- 342.14 and CCDM Part (31)134.

      In December 1992, the IRS clarified, but did not change, its "informal"

policy, noting that, in the past, it had not generally recommended prosecution

if the taxpayer:

      1.    Informed the IRS of the failure to file for one or more taxable

            years;

      2.    Had only legal source income;

      3.    Made the disclosure prior to being contacted by the IRS in the form

            of a telephone call, letter, or personal visit informing the

            taxpayer that he is under criminal investigation;

      4.    Filed a true and correct tax return or cooperated with the IRS in

            ascertaining his correct tax liability; and 

      5.    Made full payment of amounts due, or in those situations where the

            taxpayer was unable to make full payment, made bona fide

            arrangements to pay.

"Peterson [IRS Commissioner Shirley D. Peterson] Formalizes Practice of Not

Prosecuting Non-Filers Who Come Forward."  BNA Daily Tax Report (Dec. 7, 1992). 

See 

United States

 v. Knottnerus, 139 F.3d 558, 559-560 (7th 

Cir. 1998) (holding that prior visit by special agent disqualified defendant 

from voluntary disclosure program).

      However, the 1992 clarification by the Service created confusion as to the

application of the voluntary disclosure policy with respect to nonfilers. 

See United States v. Tenzer, 127  F.3d 222, 226-28 (2d Cir. 

1997), vacated in part and remanded on other grounds, 213 F.3d 34, 

40-41 (2d Cir. 2000).  Thus, in 1995, the Service reinstated its former 

voluntary disclosure practice, eliminated the language relative to 

nonfilers, and modified the triggering event example.  

      Currently, the Service's voluntary disclosure practice is that a voluntary

disclosure will be considered along with all other factors in a case in

determining whether criminal prosecution will be recommended.  Under the

Service's practice, a voluntary disclosure occurs when the communication is: (1)

truthful; (2) timely; (3) complete; and (4) the taxpayer shows a willingness to

cooperate, and, in fact cooperates, with the Service in determining his or her

tax liability.  A disclosure is timely if received before: (1) the Service has

initiated an inquiry that is likely to lead to the taxpayer and the taxpayer is

reasonably thought to be aware of that activity; or (2) some event known by the

taxpayer occurred which event is likely to cause an audit into the taxpayer's

liabilities.  The Service tests voluntariness by the following factors: (1)

actual status of the Service's awareness of the taxpayer as to specific tax

investigation potential; (2) taxpayer's knowledge or awareness of the Service's

interest; and (3) taxpayer's fear of a "trigger" or "potential trigger" to make

the Service aware of violations (where the disclosure is 'triggered' by an event

which would have led the Service to the fraud, the disclosure is not considered

to be voluntary).   See United States v. Knottnerus, 139 F.3d 

at 559-560;  United States v. Tenzer, 127  F.3d at 226-228.

      At present, the Department of Justice continues to give consideration to

a "voluntary disclosure" on a case-by-case basis in determining whether to

prosecute but such disclosure is not conclusive on the issue.  See 

United States v. Hebel, 668 F.2d 995 (8th Cir. 1982). Specifically, 

the Tax Division considers the timeliness of the disclosure and whether the 

taxpayer fully cooperated with the Government in deciding whether a 

disclosure was voluntary.

4.01[2]  Timeliness of Disclosure

      There are two elements to a voluntary disclosure:  (1) it must be made

timely and (2) the taxpayer must thereafter fully cooperate with the government. 

There has been considerable debate among practitioners as to the meaning of

"timely."  Some argue that the test for timeliness should be strictly objective,

that is, a disclosure is timely if the disclosure is made before the taxpayer's

return is selected by the Internal Revenue Service for audit regardless of the

taxpayer's motivation for making the disclosure.  Under this approach, a

disclosure would not be timely if the return had been selected for audit, even

if the taxpayer did not know that the return had already been selected for audit

at the time of the disclosure.

      The objective test does have simplicity of application in its favor.  On

the other hand, if all of the circumstances are considered, then whether or not

a return has been selected for audit at the time of disclosure is not necessarily

conclusive.  For example, if the disclosure followed closely upon an IRS inquiry

directed to a third party which reasonably could be anticipated to lead to

selection of the taxpayer's return for audit, then the disclosure reasonably

could be described as "triggered," rather than as "voluntary."  Although not yet

subject to audit, the taxpayer was obviously attempting to place himself or

herself in the best light possible after concluding that an audit was inevitable. 

United States v. McCormick, 67 F.2d 867, 868 (2d Cir. 1933). 

Conversely, if the taxpayer was in fact clearly unaware that his or her 

return had been selected for audit at the time of the disclosure and 

"triggering" circumstances are absent, then seemingly consideration should 

be given for having come forward voluntarily.  Cf. United States 

v. Levy, 99 F. Supp. 529, 533 (D.Conn. 1951).  Similarly, there may be 

situations where an audit is already in progress, and the taxpayer discloses 

a transaction that almost certainly would not have been found by the 

auditing agent.  On a strictly objective test, the disclosure of the unknown 

transaction would not be a "timely disclosure" since the return was under 

audit.   

      Because the objective test is essentially arbitrary, the Department has

rejected it, and, instead, favors an "all events" test in assessing whether a

disclosure was timely.  That is, a disclosure is not timely if:

      1.    The IRS has already initiated an inquiry that is likely to lead to

            the taxpayer and the taxpayer is reasonably thought to be aware of

            that activity;  or

      2.    Some event occurred before the disclosure which the taxpayer

            probably knew about and which event is likely to cause an audit into

            the taxpayer's liabilities, e.g., a newspaper article high-lighting

            commercial bribery in a particular industry or corruption in a

            governmental office. Cf. United States v. 

            McCormick, 67 F.2d 867 (2d Cir. 1933).

4.01[3]  Cooperation of Taxpayer

      If it is concluded that the disclosure was timely, a second point of

inquiry is whether the taxpayer has fully cooperated with the IRS in ascertaining

and paying the taxes owed.  Thus, the Department's position on cooperation is

that the taxpayer must make a full disclosure of all facts and cooperate with the

Service in determining the proper amount of taxes owed.  If the taxes are not

paid because of a claim of inability to pay, then full and accurate disclosure

must be made by the taxpayer of his financial position.

      At bottom, application of the "voluntary disclosure" policy is an exercise

of prosecutorial discretion that does not, and legally could not, confer any

legal rights on taxpayers.  Whether there is or is not a voluntary disclosure is

only a factor in evaluating a case, and even if there has been a voluntary

disclosure, prosecution and conviction may still result.  In short, a voluntary

disclosure is not a bar to prosecution, but merely a factor to be considered. 

See United States v. Hebel, 668 F.2d 995 (8th Cir. 1982). 

See February 17, 1993, Tax Division memorandum on Tax Division 

Voluntary Disclosure Policy from Acting Assistant Attorney General James 

A. Bruton, Tax Division.  A copy of this memorandum is contained in Section 

3.00 of this Manual. 

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        4.02  DUAL PROSECUTION AND SUCCESSIVE PROSECUTION

4.02[1]  Applicability of Policy

      The dual and successive prosecution policy establishes guidelines for the

exercise of discretion by appropriate officers of the Department of Justice in

determining whether to bring a federal prosecution based on substantially the

same act(s) or transactions involved in a prior state or federal proceeding.  The

purpose of this policy is to vindicate substantial federal interests through

appropriate federal prosecutions, to protect persons charged with criminal

conduct from the burdens associated with multiple prosecutions and punishmentsfor

substantially the same act(s) or transaction(s), to promote efficient utilization

of Department resources, and to promote coordination and cooperation between

federal and state prosecutors.  The policy "precludes the initiation or

continuation of a federal prosecution, following a state or federal prosecution

based on substantially the same act(s)  or transaction(s) unless three

substantive prerequisites are satisfied: first, the matter must involve a

substantial federal interest; second, the prior prosecution must have left that

interest demonstrably unvindicated; and third, applying the same test that is

applicable to all federal prosecutions, the government must believe that the

defendant's conduct constitutes a federal offense, and that the admissible

evidence probably will be sufficient to obtain and sustain a conviction by an

unbiased trier of fact." USAM 9-2.031.  For an example of a 

dual prosecution, see Thompson v. United States, 444 U.S. 248 

(1980). For examples of successive prosecution, see Rinaldi v. 

United States, 434 U.S. 22 (1977);  Petite v. United States, 361 

U.S. 529 (1960).  Parenthetically, the Petite case has given its name 

to both components of the policy, i.e., the courts have used the "Petite 

Policy" interchangeably for both dual and successive prosecutions.  

Cf. Thompson, 444 U.S. at 249. 

      The policy is set forth in detail in USAM, § 9-2.031. In 

order to prevent unwarranted dual or successive prosecutions, the policy 

requires that authorization be obtained from the appropriate Assistant 

Attorney General prior to initiating or continuing the federal prosecution. 

USAM, § 9-2.031.  In criminal tax cases, this is the Assistant 

Attorney General, Tax Division.  28 C.F.R., §§ 0.70, 0.179.  

      The United States will move to dismiss any prosecution governed by this 

policy in which prior approval was not obtained, unless the appropriate Assistant

Attorney General retroactively approves it on the following grounds: first, that

there are unusual or overriding circumstances justifying retroactive approval,

and second, that the prosecution would have been approved had approval been

sought in a timely fashion.  Appropriate administrative action may be initiated

against prosecutors who violate this policy.  USAM, § 9-2.031.

      Requests for the authorization of dual or successive federal prosecutions

are evaluated on a case-by-case basis by the appropriate Assistant Attorney

General based on the factors set forth in USAM, § 9-2.031. A 

federal prosecution will not be authorized unless the state/prior federal 

proceeding left substantial federal interests demonstrably unvindicated.  

Even so, a dual or successive prosecution is not warranted unless a 

conviction is anticipated.  If the state/prior federal proceeding resulted 

in a conviction, prosecution normally will not be authorized unless a 

substantially enhanced sentence in the subsequent federal prosecution is 

anticipated.

4.02[2]  Tax Prosecutions>

      It can be argued that neither the dual nor the successive prosecution

policy really applies to income tax prosecutions because even if the acts and

transactions of the prior prosecution were the same income-producing activities,

the tax crime did not take place until the following year when the fraudulent

income tax return was filed or the failure to file happened.  In other words, the

failure to report income is not usually an element of the prior criminal

proceeding, e.g., an embezzlement charge.  Nevertheless, in the exercise of its

prosecutorial discretion, the Tax Division adheres to the letter and spirit of

these policies in conformity with USAM, § 9-2.031.

      Similarly, the dual and successive prosecution policy technically is not

implicated when venue considerations precluded joinder of all the offenses in one

judicial district, when the defendant opposed a single trial, or when the

evidence was not obtained until after the earlier prosecution was commenced.  As

a practical matter, however, when a tax case is being evaluated before

indictment, the better course is not to rely on these technical points to

conclude that the dual and successive prosecution procedures need not be

followed.  Under its discussion of these policies, the United States 

Attorneys' Manual specifically states that prosecution will not be 

authorized unless a conviction is anticipated for the subsequent case, and 

it is thought that the second conviction will result in a substantially 

enhanced sentence.  USAM, § 9-2.031.

      For example, assume that tax and non-tax charges arising out of the same

transactions are brought, and venue precludes trying all of the charges in the

same district.  If the non-tax charges are tried first and result in a

substantial sentence, then it is questionable whether the government should

subsequently proceed with the tax charges if an enhanced sentence cannot be

anticipated, unless the federal interest was not substantially vindicated by the

earlier prosecution because of circumstances extraneous to the case.

      In the final analysis, when there is a question as to the applicability of

the dual and successive prosecution policies, the procedures set forth in

USAM, § 9-2.031 should be followed.  If the facts are compelling 

in support of the conclusion that the federal interest has not been 

substantially vindicated, securing the Assistant Attorney General's 

authorization does not impose a substantial burden to processing a case 

through the Tax Division.  Conversely, if it is determined that the 

subordinate reviewing attorney erred in not obtaining the authorization of 

the appropriate Assistant Attorney General, then there is a substantial 

danger that all the effort spent in securing a conviction will have gone for 

naught.

4.02[3]  Pretrial Diversion>

      While no specific reference is made to pretrial diversion in the section

of the United States Attorneys' Manual dealing with dual and 

successive prosecution, the safer course is to consider pretrial diversion 

as within the context of these two policies even though jeopardy has not 

attached in that situation.  This approach comports with the Department's 

traditional policy of applying the policy in a common sense, non-technical 

fashion in order to effectuate its salutary objectives. 

      USAM, § 9-22.000 does address the pretrial diversion 

program, but requires, among other things, prior Tax Division approval in 

all cases under its jurisdiction.  The Tax Division's long-standing, strict 

policy is that criminal tax cases should not be disposed of under the 

Department's pretrial diversion program.  This policy is stated in the 

transmittal letter that accompanies all criminal tax cases sent from the Tax 

Division to a United States Attorney's office.  Accordingly, criminal tax 

defendants should not be given pretrial diversion treatment.

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                   4.03  INCARCERATED PERSONS

4.03[1]  General>

      Whenever a proposed tax defendant is incarcerated on other charges, an

initial determination must be made as to whether the Department's policies on

dual and successive prosecution (Petite Policy) are applicable.  See 

4.02, supra.  If they are, the procedures for those policies are 

controlling and must be followed.  If it is determined that there is no 

connection, direct or indirect, between the acts and transactions underlying 

the conviction(s) for which the proposed defendant is presently incarcerated 

and the contemplated tax- related prosecution, then other considerations 

nevertheless come into play in determining whether prosecution should be 

initiated or declined.  These considerations are discussed in the section 

which follows.

4.03[2]  Prosecution of Incarcerated Persons>

      Principles of Federal Prosecution, as reprinted in USAM, 

§ 9-27.000, provides as follows (USAM, § 9-27.230):

      A.    In determining whether prosecution should be declined because no

            substantial Federal interest would be served by prosecution, the

            attorney for the government should weigh all relevant

            considerations, including:

      1.    Federal law enforcement priorities;

      2.    The nature and seriousness of the offense;

      3.    The deterrent effect of prosecution;

      4.    The person's culpability in connection with the offense;

      5.    The person's history with respect to criminal activity;

      6.    The person's willingness to cooperate in the investigation or

            prosecution of others; and

      7.    The probable sentence or other consequences if the person is

            convicted.

      The above list of relevant considerations is not intended to be all-

inclusive and in a given case one factor may deserve more weight than it might

in another case.  USAM, § 9-27.230, Subsection B.

      Principles of Federal Prosecution further emphasizes the weight 

to be given the probable sentence in the determination as to whether 

criminal proceedings should be instituted as follows (USAM, § 

9-27.230(B)(8)):

      8.    The Probable Sentence

            In assessing the strength of the Federal interest in prosecution,

            the attorney for the government should consider the sentence, or

            other consequence, that is likely to be imposed if prosecution is

            successful, and whether such a sentence or other consequence would

            justify the time and effort of prosecution.  If the offender is

            already subject to a substantial sentence, or is already

            incarcerated, as a result of a conviction for another offense, the

            prosecutor should weigh the likelihood that another conviction will

            result in a meaningful addition to his/her sentence, might otherwise

            have a deterrent effect, or is necessary to ensure that the

            offender's record accurately reflects the extent of his/her criminal

            conduct. * * * (I)f the person is on probation or parole as a result

            of an earlier conviction, the prosecutor should consider whether the

            public interest might better be served by instituting a proceeding

            for violation of probation or revocation of parole, than by

            commencing a new prosecution.  The prosecutor should also be alert

            to the desirability of instituting prosecution to prevent the

            running of the statute of limitations and to preserve the

            availability of a basis for an adequate sentence if there appears to

            be a chance that an offender's prior conviction may be reversed on

            appeal or collateral attack.

      This concept is probably best understood by example.  Assume that the

contemplated tax defendant is presently incarcerated for the killing of his

spouse, committed in the heat of passion without any income-producing

ramifications, that all appellate stages have been exhausted, and that 10 years

are left to be served on his sentence.  If the tax case involves nothing more

than the skimming of income from the proposed defendant's sole proprietorship,

it would be pointless to institute a criminal tax case, for there is no reason

to believe that, even if convicted, a meaningful additional sentence would be

imposed.  The specific deterrent value to be derived from that case would be

marginal.  Under this hypothetical, it would be a more efficient use of resources

to resort to an "adequate non-criminal alternative to prosecution," 

e.g., "civil tax proceedings."  Principles of Federal 

Prosecution, USAM, § 9-27.250, Subsection B.  

      Conversely, if the tax crime was accomplished by a sophisticated scheme,

such as promoting a widespread fraudulent tax shelter or refund scheme,

prosecution could be appropriate even though the likelihood of an enhanced

sentence for the tax crime would be remote.  In that instance, the conviction for

the tax crime could serve to deter other individuals from embarking on the same

scheme. 

      There will obviously be situations between these two extremes.  For

example, if only one year is left to be served on the nontax conviction, there

may be a reason for concluding that the tax prosecution could result in a

substantial, additional sentence.  Another example is the submission of

fraudulent returns claiming refunds by a prisoner with a long term yet to be

served.  A tax prosecution, as a practical matter, may not lengthen the actual

time ultimately served, but it might deter other prisoners from adopting the

scheme.

      The effect of present incarceration on the prosecution decision is to be

made on a case-by-case basis.  Incarceration, of itself, does not implicate any

formal policy of the Department, and the personal authorization of the Assistant

Attorney General is not a condition precedent to the institution of criminal

proceedings simply because the proposed defendant is currently in jail. 

Incarceration, however, should alert the reviewing attorney to the possibility

of the dual and successive prosecution policies being an issue.

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                       4.04  HEALTH POLICY

4.04[1]  General Policy 

      On February 19, 1953, the Attorney General ordered the abandonment of the

so-called "health policy" in criminal tax cases.  Department of Justice Press

Release, February 19, 1953.  The Treasury Department had earlier rescinded its

identical policy on December 11, 1951.  The question of whether an individual

could physically survive the stress and strain of a trial is, therefore, no

longer a controlling consideration in deciding for or against a tax prosecution

at the administrative level.  The Department's position is that whether a

taxpayer should or should not be tried because of health reasons is a matter

which can best be decided by the trial court, rather than on an administrative

basis.  Only when it is clear beyond all doubt that a proposed defendant will

never be able to stand trial because of a terminal physical condition is a case

disposed of for reasons of health at the administrative level.

4.04[2]  Court Determination of Health Status 

      After the filing of an indictment or information, physical health questions

should be left to the defendant to raise.  The defense is customarily raised by

way of a motion for continuance.  The issues basically are whether the defendant

is able to assist his counsel in his defense and/or whether the strain of a trial

will pose a serious threat to the defendant's health.  The United States Attorney

should ensure that the health facts and the court's decision are made a matter

of record.  The following course is to be followed in this connection:  (1) the

special agent of the Internal Revenue Service should be asked to conduct a

discrete investigation to determine the extent of the defendant's daily

activities and to eliminate the possibility of malingering; (2) a request should

be made of the court to have a court-appointed physician conduct an examination

and, if possible, this should include a necessary period of observation in a

hospital; and (3) there should be a hearing in open court to disclose for the

record the results of (1) and (2) above and to enable the court to make a

finding.

      The court's finding probably will not embrace a prognosis beyond the

immediate necessity for a continuance.  But if the record, as developed, makes

it apparent that the defendant cannot ever stand trial, the United States

Attorney should request authority from the Tax Division to dismiss the indictment

or information.  If the physical condition is only temporarily disabling, only

a continuance should be permitted. 

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                   4.05  MENTAL INCOMPETENCY 

4.05[1]  Evaluation at Administrative Level

      In criminal tax cases, where the taxpayer is in a money-producing activity

during the prosecution years, lack of mental responsibility defenses are highly

questionable.  Because of the nature of criminal tax cases, it would be rare for

a case to be referred to the Tax Division for prosecution by the Internal Revenue

Service where there is clear and convincing evidence of a mental defense calling

for a decision not to prosecute at the administrative level.  In the usual case

where there are allegations of a mental disorder, the case is evaluated at the

administrative level in the framework of whether there is guilt beyond a

reasonable doubt and a reasonable probability of conviction.

      The net result is that except for cases where very serious mental disorders

are obvious, the Tax Division takes the position that it is up to the court to

determine whether a taxpayer is competent to stand trial.  This determination

should be made after an indictment has been returned or an information filed in

accordance with the appropriate judicial procedures.  See, in this connection,

the discussion which follows in Section 4.05[2], Insanity Defense Reform 

Act of 1984.

4.05[2]  Insanity Defense Reform Act of 1984

      The Comprehensive Crime Control Act of 1984, Pub. L. No. 

98-473, 98 Stat. 1837, made a significant series of changes in numerous 

areas of the federal criminal justice system.  Chapter IV of the Act 

contains the Insanity Defense Reform Act of 1984, Pub. L. No. 98-473, 

98 Stat. 1837, 2057, which governs, among other things, the insanity defense 

and the determination of mental competency to stand trial.  Where 

applicable, the provisions of the Insanity Defense Reform Act can have a 

significant bearing on the administrative evaluation of criminal tax cases 

as well as on trial procedures.    See USAM, § 9-9.000 

and USAM, § 9- 18.000.    

      Section 4241 of Title 18 governs procedures for the determination of

competency to stand trial and related commitments of the defendant.  Under

Section 4241, if competency is perceived to be an issue by the prosecutor, by

defense counsel, or by the court itself, a psychiatric examination may be ordered

and a hearing is to be held on the defendant's competency to stand trial. 

See USAM, § 9-9.000 and USAM, § 9-18.000.

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                     4.06  SEARCH WARRANTS 

4.06[1]  Generally

      Department of Justice policy formerly required that all search warrants in

criminal tax cases be approved in advance by the Tax Division.  This policy was

based upon the premise that the law on search warrants was so unsettled that

strict scrutiny was warranted.  As case law concerning search and seizure

developed, it became clear that, upon a showing of probable cause, the government

could conduct reasonable searches for the purposes of obtaining documentary

evidence establishing the commission of a crime.  

      With case law becoming more settled, the Assistant Attorney General, Tax

Division, by Directive No. 52 (January 2, 1986), which superseded an earlier 1984

Directive No. 49, delegated to certain personnel in United States Attorneys'

offices the authority to approve the execution of certain limited Title 26 or

tax-related Title 18 search warrants directed at offices, structures, premises,

etc., of targets or subjects of the investigation.  The existing authority

delegated to United States Attorneys' offices and the authority reserved to the

Tax Division contained in Tax Division Directive No. 52, is reproduced in Section

3.00 of this Manual.  See also USAM, § 6-4.130.

4.06[2]  Procedures Under Directive No. 52

      In those instances where authority to approve a search warrant has been

delegated to the United States Attorney's office, a direct request for a search

warrant may be made by District Counsel, I.R.S., to the United States Attorney's

office.  Note, however, that in the United States Attorney's office, the only

persons who can approve the application for a search warrant are the United

States Attorney, the First Assistant United States Attorney, or the Chief of the

Criminal Division in the office.  This authority to approve cannot be delegated

to anyone else in the office of the United States Attorney.

      The name and telephone number of the Assistant United States  Attorney(s)

in each office who, in addition to the United States Attorney, is authorized to

approve search warrants under the delegated authority is to be forwarded to the

Tax Division.  The names will be retained in the Tax Division files, with a copy

given to the Internal Revenue Service.

      Because the questions of privilege and status in the investigation remain

sensitive legal issues, the Tax Division has delegated the authority to approve

search warrants in tax cases only in those limited instances where the search

warrant is directed at offices, structures, or premises owned, controlled, or

under the dominion of the subject or target of a criminal investigation.  The

subject, or target, moreover, must not fall into the eight exempted categories

listed in the delegation order (Directive No. 52, para. 4).  The exempted

categories, which include accountants, lawyers, physicians, public

official/political candidates, members of the clergy, news media representatives,

labor union officials, or officials of 501(c)(3) tax exempt organizations, are

deemed to be of such a sensitive nature that prior approval of the Tax Division

is still required before a search warrant is obtained.

      Aside from questions of strict legality, search warrants in tax

investigations involve potential problems and issues intrinsic to tax cases.  The

concept of seizing personal or business books and records as the evidence or

instrumentality of a crime is not as direct or simple as the seizure of

contraband.  These documents can contain information considered to be personal

and confidential, and these very same documents, which, by their own nature, are

not unusual, illegal, or dangerous, will be the evidence or the instrumentality

of the crime to be charged.  In addition to the controversial nature of such a

seizure of documents, the requirement that the items to be seized must be named

with specificity is more difficult to meet.  In tax cases, the warrant must be

specific, not only regarding the items to be seized and the place searched, but

a specific time frame must also be stated, e.g., records for the 

years 1996 and 1997.

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                          4.07  APPEALS

      The procedures and rules governing appeals are set forth in the

USAM, § 2-1.000 et seq., and § 9-2.170, and should 

be reviewed and followed when handling a criminal tax or other appellate 

matter. Attention is called to the particular following procedures set forth 

in the USAM.

       In all cases resulting in adverse decisions, all recommendations for and

against appeal, the filing of a petition for certiorari, and direct appeal to the

Supreme Court must be authorized by the Solicitor General.  This includes

interlocutory appeals under 28 U.S.C., Sec. 1292(b) and litigation in state

courts subject to review by a higher state court or by the United States Supreme

Court.  It also includes the filing of an amicus curiae brief, petitions seeking

mandamus or other extraordinary relief, and the filing of a suggestion for a

rehearing en banc.  USAM, § 2-2.120 and § 9-2.170.

      The United States Attorney has the appellate responsibility for the

handling of criminal tax cases in the courts of appeals that have been tried by

the United States Attorney unless the Assistant Attorney General, Tax Division,

elects that the Tax Division handle a particular category of cases or a case on

appeal.  USAM, § 2-3.100.

      The Tax Division, and specifically the Criminal Appeals & Tax Enforcement

Policy Section (CATEPS), has the appellate responsibility for the handling of

criminal tax cases that have been tried by personnel of the regional Criminal

Enforcement Sections of the Tax Division.  USAM, § 2-3.100.

      The need for immediate reporting of adverse decisions, whether at the trial

level or the appellate level, is stressed in USAM, § 2-2.110 as 

follows:

            In any civil or criminal action before a United States District

      Court or a United States Court of Appeals, in which the United States is

      a litigant, and a decision is rendered adverse to the government's

      position, the U.S. Attorney must immediately transmit a copy of the

      decision to the appellate section of the division responsible for the

      case.

      To secure the necessary authority from the Solicitor General to appeal or

not appeal a criminal tax case, the United States Attorney or the Chief of the

appropriate regional Criminal Enforcement Section of the Tax Division "must

promptly" make a report to the Chief, Criminal Appeals & Tax Enforcement Policy

Section (CATEPS), Tax Division. See USAM, § 2-2.110, et 

seq.  The Tax Division prefers that such reports be made promptly by 

telephone to the Chief of CATEPS at (202) 514-3011.  

      Following receipt of an adverse decision, CATEPS solicits the views of the

regional Criminal Enforcement Section of the Tax Division, the United States

Attorney, and the Internal Revenue Service on appropriate further action.  CATEPS

then prepares a Tax Division memorandum for