Policy Directives and Memoranda page1

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3.00 TAX DIVISION POLICY DIRECTIVES AND MEMORANDA

http://www.usdoj.gov/tax/readingroom/2001ctm/03ctax.htm

Updated May 2001

The Tax Division's policies and procedures are contained in a series of Tax Division Directives and Memoranda, which are set forth in the pages that follow for ease of reference.
TAX DIVISION DIRECTIVE NO. 52	THE AUTHORITY TO EXECUTE TITLE 26 OR TAX-RELATED TITLE 18 SEARCH WARRANTS
BRIEF MEMORANDUM OF LAW CONCERNING SEARCH WARRANTS
TAX DIVISION DIRECTIVE NO. 86-58	TAX DIVISION CONFERENCES
TAX DIVISION DIRECTIVE NO. 86-59	AUTHORITY TO APPROVE GRAND JURY EXPANSION REQUESTS TO INCLUDE FEDERAL CRIMINAL TAX VIOLATIONS
TAX DIVISION DIRECTIVE NO. 87-61	DELEGATION OF AUTHORITY FOR TAX PROSECUTIONS INVOLVING RETURNS UNDER 26 U.S.C. SECTION 6050I
TAX DIVISION DIRECTIVE NO. 75	MODIFICATION OF POLICY RE USE OF 26 UNITED STATES CODE SECTION 7207 IN FALSE RETURN FILING CIRCUMSTANCES
TAX DIVISION DIRECTIVE NO. 77	SECTION 7212(a) POLICY STATEMENT
TAX DIVISION DIRECTIVE NO. 96	DELEGATION OF AUTHORITY TO AUTHORIZE GRAND JURY INVESTIGATIONS OF FALSE AND FICTITIOUS CLAIMS FOR TAX REFUNDS
INTERPRETATION OF TAX DIVISION DIRECTIVE NO. 96
TAX DIVISION VOLUNTARY DISCLOSURE POLICY
LESSER INCLUDED OFFENSES IN TAX CASES
POLICY CHANGE IN TAX CASES INVOLVING LESSER INCLUDED OFFENSES
TAX DIVISION DIRECTIVE NO. 99	CLARIFICATION OF TAX DIVISION POLICY CONCERNING THE CHARGING OF TAX CRIMES AS MAIL FRAUD, WIRE FRAUD, OR BANK FRAUD, OR AS PREDICATES TO A RICO CHARGE OR AS THE SPECIFIED UNLAWFUL ACTIVITY ELEMENT OF A MONEY LAUNDERING OFFENSE
CIVIL SETTLEMENTS IN PLEA AGREEMENTS
PRESS RELEASES IN CASES INVOLVING THE IRS
INCLUSION OF STATE TAX LOSS IN TAX LOSS COMPUTATION FOR FEDERAL TAX OFFENSES UNDER THE SENTENCING GUIDELINES
TAX DIVISION DIRECTIVE NO. 111	EXPEDITED PLEA PROGRAM
TAX DIVISION DIRECTIVE NO. 115	DELEGATION OF AUTHORITY RELATING TO CRIMINAL TAX CASES

                             DEPARTMENT OF JUSTICE

                                 TAX DIVISION

                               DIRECTIVE NO. 52

                                
January 2, 1986

                     The Authority to Execute Title 26 or

                     Tax-related Title 18 Search Warrants

      Pursuant to the authority vested in me by Part 0, Sub-Part N of Title 28

of the Code of Federal Regulations, Section 0.70, delegation of authority with

respect to approving the execution of Title 26, U.S.C., or tax-related Title 18,

U.S.C., search warrants directed at offices, structures, premises, etc., owned,

controlled or under the dominion of the subject or target of a criminal

investigation, is hereby conferred upon:

            1.    Any United States Attorney appointed under Section 541 of

                  Title 28, U.S.C.,

            2.    Any United States Attorney appointed under Section 546 of

                  Title 28 U.S.C.,

            3.    Any permanently appointed representative within the United

                  States Attorney's office assigned as First Assistant United

                  States Attorney,

            4.    Or to any permanently appointed representative within the

                  United States Attorney's office assigned as chief of criminal

                  functions.

      This delegation of authority is expressly restricted to these, and no

other, individuals.

      This delegation of authority does not affect the statutory authority and

procedural guidelines relating to the use of search warrants in criminal

investigations involving disinterested third parties as contained in 28 C.F.R.

Sec. 59.1, et seq.

   The Tax Division shall have exclusive authority to seek and execute a search

warrant that is directed at the offices, structures or premises owned,

controlled, or under the dominion of a subject or target of an investigation who

is:

      1.    An accountant;

      2.    A lawyer;

      3.    A physician;

      4.    A local, state, federal, or foreign public official or political

            candidate;

      5.    A member of the clergy;

      6.    A representative of the electronic or printed news media;

      7.    An official of a labor union;

      8.    An official of an organization deemed to be exempt under Section

            501(c)(3) of the Internal Revenue Code.

      Any application for a warrant to search for evidence of a criminal tax

offense not specifically delegated herein must be specifically approved in

advance by the Tax Division pursuant to Section 6-2.330 of the 

United States

Attorneys' Manual. 

      Notwithstanding this delegation, the United States Attorney or his delegate

has the discretion to seek Tax Division approval of any search warrant or to

request the advice of the Tax Division regarding any search warrant.

      The United States Attorney shall notify the Tax Division within ten working

days, in writing, of the results of each executed search warrant and shall

transmit to the Tax Division copies of the search warrant (and attachments and

exhibits), inventory, and any other relevant papers.

      The United States Attorneys' Manual is hereby modified effective January

2, 1986. 

                                                ROGER M. OLSEN

                                            Acting Assistant Attorney General

                                                 Tax Division

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                               ATTACHMENT

Subject:    Authority to Execute Title 26                Date: 
AUG. 7, 1984

            Tax-Related Title 18 Search Warrants

To:   All United States Attorneys   

From: Glenn L. Archer, Jr.

      Asst. Attorney General

      Tax Division

      By Tax Division Directive No. 49 (copy attached), I have authorized

delegation to United States Attorney's offices the authority to approve the

execution of certain limited Title 26 or tax-related Title 18 search warrants. 

At the request of the Internal Revenue Service, the effective date of this

delegation is 
October 1, 1984
.  In recent years, the case law concerning search

and seizure has developed to the point where it is clear that, upon a showing of

probable cause, the Government may conduct reasonable searches for the purpose

of obtaining documentary evidence establishing the commission of a crime.  The

developing case law has led, in part, to the decision to delegate the authority

to approve requests for search warrants in tax cases on a limited basis.

      The procedure will now permit a direct request from District Counsel's

office to you.  The delegation order permits consultation or referral of the

matter to the Tax Division, as you choose.  The delegation extends to the United

States Attorney and the Chief of your Criminal Division.  It cannot be delegated

to anyone else in your office.  There is a ten-day notification requirement which

will permit the Tax Division to collect the relevant data necessary to evaluate

the use of search warrants by the Internal Revenue Service and Department of

Justice nationally.

      If you have any questions whatsoever, please contact Roger M. Olsen, Deputy

Assistant Attorney General, Tax Division, telephone: 
633-2915
, or 

Stanley

 F.

Krysa, Chief, Criminal Section, Tax Division, telephone:  
633-2973
.

      I would appreciate having the name and telephone number of the Assistant

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

United States

Attorney, is authorized to approve these warrants.  A list of those names will

be forwarded to the 
IRS
 and, of course, retained for the Tax Division's files.

      Also attached is a brief, technical memorandum on the law of search

warrants for documentary evidence. 

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                          BRIEF MEMORANDUM OF LAW

                        CONCERNING SEARCH WARRANTS

      Ever since Warden v. Hayden, 378 U.S. 294 (1967), established

that the Government could seize ''mere evidence'' pursuant to a search warrant,

the use of search warrants for items, such as personal papers and business

records, became a viable legal possibility.  In Warden v. Hayden,

although the items of clothing seized were evidentiary, their seizure did not

violate the Fifth Amendment privilege, since the items were not "'testimonial'

or 'communicative' in nature, and their introduction therefore did not compel

respondent to become a witness against himself ..." supra, 302-303.  Rule

41(b) of the Federal Rules of Criminal Procedure echoes this holding and provides

that: "A warrant may be issued ... to search for and seize any ... property that

constitutes evidence of the commission of a criminal offense ...".

      In 1976, the possibility that a search and seizure of business records

might violate the Fifth Amendment privilege against self-incrimination was

foreclosed in Andresen v. Maryland, 427 U.S. 463 (1976).  The

Supreme Court upheld the search of the defendant's law office and of the office

of the real estate firm which he also controlled, although incriminating business

records were found at both locations.  The Court based its opinion on the finding

that the individual against whom the search was directed was not required to aid

in the discovery, production, or authentication of incriminating evidence; thus,

the seizure of the business records was not a violation of the Fifth Amendment. 

Cf. United States v. Doe, 52 U.S.L.W. 4296 (Feb. 28, 1984).

      The Supreme Court's approval of a law office search in

Andresen lends some support to similar searches in the future. 

However, the issue of attorney/client privilege or work-product doctrine was not

specifically addressed in Andresen and is, therefore, still a matter of

controversy and sensitivity.  In addition, the search's legality may depend on

whether the status in the investigation of the individual whose property is

searched is that of a disinterested third party or whether he is believed to have

engaged in criminal conduct. See Zurcher v. Stanford Daily,

436 U.S. 547 (1978); United States v. Bithoney, 631 F. 2d l (lst

Cir. 1980), cert. denied, 449 U.S. 1083 (1981).

      Because the questions of privilege and status in the investigation remain

sensitive legal issues, the Tax Division has decided to delegate 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 exempted categories listed

in the delegation order, which categories we deem to be of such a sensitive

nature, from the perspective of tax law enforcement, 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 a problem as is the seizure

of a contraband.  These documents usually contain much personal and confidential

information and these very same documents, which, by their own nature, are not

unusual, illegal or dangerous, will be the evidence of 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.

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                           DEPARTMENT OF JUSTICE

                            TAX DIVISION DIRECTIVE

                                NO. 86 - 58

                                 
May 14, 1986

      Introduction.  While it is the function of the Tax Division

to carefully review the facts, circumstances, and law of each criminal tax case

as expeditiously as possible, the taxpayer should be given a reasonable

opportunity to present his/her case at a conference before the Tax Division. 

Where the rules governing conferences are so rigid and inflexible that such an

opportunity is effectively denied a taxpayer, the interests of justice are not

served.  The following guidelines will assist the Tax Division attorneys in

reviewing such cases.

            (1)  Vicarious Admissions.  Effective immediately, the

vicarious admissions rule for statements by lawyers attending conferences before

the Criminal Section shall no longer be used by the Tax Division, except where

the lawyer authenticates a written instrument, i.e., document, memorandum,

record, etc.

            (2)  Administrative Investigations.  Effective July 1,

1986, plea negotiations may be entertained at the conference in non-grand jury

matters, consistent with the policies of the appropriate United States Attorney's

office.  Written plea agreements should be prepared and entered into by the

United States Attorney's office unless there is a written understanding between

the Tax Division and the United States Attorney's office to the contrary.  Where

the prospective defendant indicates a willingness to enter into a plea of guilty

to the major counts(s) and to satisfy the United States Attorney's office policy,

the matter should be referred to the United States Attorney's office for plea

disposition.

            (3)  Number of Conferences.  There is no fixed number

of conferences which may be granted in any one particular case.  Ordinarily, one

conference is sufficient.  However, in some cases it may be that more than one

conference is appropriate.  The test is not in the number of conferences, for

there is no right to a conference, but whether, under the facts and circumstances

of the case, sufficient progress is or will be made in either the development of

material facts or the clarification of the applicable law, without causing

prejudice to the United States.  Tax Division attorneys should be mindful that

justice delayed is justice denied and, therefore, sound, professional judgment

should be used at all times in such matters.

            (4)  Witness at Conferences.  On occasion, the taxpayer

or a witness may attend the conference.  In rare situations, the taxpayer or a

witness may attempt to make oral reprensentations or statements at the

conference.  There are no restrictions on the use of such statements by the

Government.  However, such attempts should be discouraged, since the Tax Division

is conducting a review of an investigation and is not conducting either a hearing

or an investigation.  Under no circumstances may evidence be presented at the

conference based upon any understanding that it is in lieu of any person

testifying before a grand jury.

            (5)  Grand Jury Investigations and Coordination with United

States Attorney's Office.  Effective immediatley, in every grand jury

investigation where a conference is requested, the Tax Division trial attorney

shall initially contact the United States Attorney's office and discuss the case

with the appropriate Assistant United States Attorney, and ascertain whether

disclosure of any facts of the case is likely to expose any person, including

witnesses, to the risk of intimidation or danger.  If there is such a risk, the

trial attorney shall then advise the appropriate assistant chief of the Criminal

Section, who shall decide the appropriate course of action.  The Tax Division

trial attorney shall advise the Assistant United States Attorney that he/she may

attend the conference if they so desire.

                                                ROGER M. OLSEN

                                             Assistant Attorney General

                                                 Tax Division

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                            DEPARTMENT OF JUSTICE

                                 TAX DIVISION

                            DIRECTIVE NO. 86-59

                 AUTHORITY TO APPROVE GRAND JURY EXPANSION

                   REQUESTS TO INCLUDE FEDERAL CRIMINAL

                            TAX VIOLATIONS

AGENCY:     Department of Justice

ACTION:     Notice

SUMMARY:  This Directive delegates the authority to approve requests seeking to

expand nontax grand jury investigations to include inquiry into possible federal

criminal tax violations from the Assistant Attorney General, Tax Division, to any

United States Attorney, Attorney-In-Charge of a Criminal Division Organization

Strike Force or Independent Counsel.  The Directive also sets forth the scope of

the delegated authority and the procedures to be followed by designated field

personnel in implementing the delegated authority.

EFFECTIVE DATE:   
October 1, 1986

FOR FURTHER INFORMATION CONTACT:  Edward M. Vellines, Senior Assistant Chief,

Office of Policy & Tax Enforcement Analysis, Tax Division, Criminal Section (202-

633-3011
).  This is not a toll number. [FN1]

     FN1. This information in the Directive is out of date.  Questions 

     concerning this directive should now be addressed to the Criminal 

     Appeals and Tax Enforcement Policy Section at 
202-514-3011
.

SUPPLEMENTARY INFORMATION:  This order concerns internal Department management

and is being published for the information of the general public.

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                       TAX DIVISION DIRECTIVE NO. 86-59

      By virtue of the authority vested in me by Part O, Subpart N of Title 28

of the Code of Federal Regulations, particularly Section 0.70, delegation of

authority with respect to approving requests seeking to expand a nontax grand

jury investigation to include inquiry into possible federal criminal tax

violations is hereby conferred on the following individuals:

      1.    Any United States Attorney appointed under Section 541 or 546 of

            Title 28, United States Code.

      2.    Any Attorney-In-Charge of a Criminal Division Organization Strike

            Force established pursuant to Section 510 of Title 28, United States

            Code.

      3.    Any Independent Counsel appointed under Section 593 of 

            Title 28, United States Code.

      The authority hereby conferred allows the designated official to approve,

on behalf of the Assistant Attorney General, Tax Division, a request seeking to

expand a nontax grand jury investigation to include inquiries into potential

federal criminal tax violations in a proceeding which is being conducted within

the sole jurisdiction of the designated official's office.  (Section

301.6103
(h)(2)-1(a)(2)(ii) (26 C.F.R.)).  Provided, that the delegated

official determines that--

      1.    There is reason to believe, based upon information developed during

            the course of the nontax grand jury proceedings, that federal

            criminal tax violations may have been committed.

      2.    The attorney for the Government conducting the subject nontax grand

            jury inquiry has deemed it necessary in accordance with F.R.Cr.P.

            6(e)(A)(ii) to seek the assistance of Government personnel assigned

            to the Internal Revenue Service to assist said attorney in his/her

            duty to enforce federal criminal law.

      3.    The subject grand jury proceedings do not involve a

            multijurisdictional investigation, nor are the targets individuals

            considered to have national prominence--such as local, state,

            federal, or foreign public officials or political candidates;

            members of the judiciary; religious leaders; representatives of the

            electronic or printed news media; officials of a labor union; and

            major corporations and/or their officers when they are the targets

            (subjects) of such proceedings.

      4.    A written request seeking the assistance of Internal Revenue Service

            personnel and containing pertinent information relating to the

            alleged federal tax offenses has been forwarded by the designated

            official's office to the appropriate Internal Revenue Service

            official (e.g., Chief, Criminal Investigations).

      5.    The Tax Division of the Department of Justice has been furnished by

            certified mail a copy of the request seeking to expand the subject

            grand jury to include potential tax violations, and the Tax Division

            interposes no objection to the request.

      6.    The Internal Revenue Service has made a referral pursuant to the

            provisions of 26 U.S.C. Section 6103(h)(3) in writing stating that

            it: (1) has determined, based upon the information provided by the

            attorney for the Government and its examination of relevant tax

            records, that there is reason to believe that federal criminal tax

            violations have been committed; (2) agrees to furnish the personnel

            needed to assist the Government attorney in his/her duty to enforce

            federal criminal law; and (3) has forwarded to the Tax Division a

            copy of the referral.

      7.    The grand jury proceedings will be conducted by attorney(s) from the

            designated official's office in sufficient time to allow the results

            of the tax segment of the grand jury proceedings to be evaluated by

            the Internal Revenue Service and the Tax Division before undertaking

            to initiate criminal proceedings.

      The authority hereby delegated includes the authority to designate: the

targets (subjects) and the scope of such tax grand jury inquiry, including the

tax years considered to warrant investigation.  This delegation also includes the

authority to terminate such grand jury investigations, provided, that

prior written notification is given to both the Internal Revenue Service and the

Tax Division.  If the designated official terminates a tax grand jury

investigation or the targets (subjects) thereof, then the designated official

shall indicate in its correspondence that such notification terminates the

referral of the matter pursuant to 26 U.S.C. Section 7602(c).

      This delegation of authority does not include the authority to file an

information or return an indictment on tax matters.  No indictment is to be

returned or information filed without specific prior authorization of the Tax

Division.  Except in Organized Crime Drug Task Force Investigations, individual

cases for tax prosecution growing out of grand jury investigations shall be

forwarded to the Tax Division by the United States Attorney, Independent Counsel

or Attorney-in-Charge of a Strike Force with a special agent's report and

exhibits through Regional Counsel, (Internal Revenue Service) for evaluation

prior to transmittal to the Tax Division.  Cases for tax prosecutions growing out

of grand jury investigations conducted by an Organized Crime Drug Task Force

shall be forwarded directly to the Tax Division by the United States Attorney

with a special agent's report and exhibits.

      The authority hereby delegated is limited to matters which seek either to: 

(1) expand nontax grand jury proceedings to include inquiry into possible federal

criminal tax violations; (2) designate the targets (subjects) and the scope of

such inquiry; or (3) terminate such proceedings.  In all other instances,

authority to approve the initiation of grand jury proceedings which involve

inquiries into possible criminal tax violations, including requests generated by

the Internal Revenue Service, remains vested in the Assistant Attorney General

in charge of the Tax Division as provided in 28 C.F.R. 0.70.  In addition,

authority to alter any actions taken pursuant to the delegations contained herein

is retained by the Assistant Attorney General in charge of the Tax Division in

accordance with the authority contained in 28 C.F.R. 0.70.

                                Roger M. Olsen

                          Assistant Attorney General

                                 Tax Division

Approved to take effect on 
October 1, 1986

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                           DEPARTMENT OF JUSTICE

                                 TAX DIVISION

                           DIRECTIVE NO. 87 - 61

                 DELEGATION OF AUTHORITY FOR TAX PROSECUTIONS

                INVOLVING RETURNS UNDER 26 U.S.C. SECTION 6050I

      By virtue of the authority vested in me by Part 0, Subpart N of Title 28

of the Code of Federal Regulations (C.F.R.), particularly Section 0.70,

delegation of authority with respect to authorizing tax prosecutions, under Title

26, United States Code (U.S.C.), Sections 7203 and 7206 with respect to Returns

(
IRS
 Form 8300) Relating to Cash Received in a Trade or Business as prescribed

in 26 U.S.C.  Section 6050I, is hereby conferred on the following individuals:

      1.    The Assistant Attorney General, Deputy Assistant Attorneys General,

and Section Chiefs of the Criminal Division.

      2.    Any United States Attorney appointed under Section 541 or 546 of

Title 28, U.S.C.

      3.    Any permanently appointed representative within the United States

Attorney's Office assigned either as First Assistant United States Attorney or

Chief of criminal functions.

      4.    Any Attorney-In-Charge of a Criminal Division Organization Strike

Force established pursuant to Section 510 of Title 28, U.S.C.

      5.    Any Independent Counsel appointed under Section 593 of Title 28,

            U.S.C.

      This delegation of authority is expressly restricted to the aforementioned

individuals and may not be redelegated.

      The authority hereby conferred allows the designated official to authorize,

on behalf of the Assistant Attorney General, Tax Division, tax prosecutions under

26 U.S.C.  Sections 7203 and 7206 with respect to returns (
IRS
 Form 8300)

prescribed in 26 U.S.C. Section 6050I relating to cash received in a trade or

business; Provided, that:

      1.    The prosecution of such tax offenses (e.g. Sections 7203 and 7206)

involves solely cash received in a trade or business as required by 26 U.S.C.

Section 6050I.

      2.    The matter does not involve the prosecution of accountants,

physicians, or attorneys (acting in their professional representative capacity)

or their employees;  casinos or their employees; financial institutions or their

employees; local, state, federal or foreign public officials or political

candidates; members of the judiciary;  religious leaders; representatives of the

electronic or printed news media; officials of a labor union; and publicly-held

corporations and/or their officers.

      3.    The Tax Division of the Department of Justice will be furnished by

certified mail a copy of the referral from the Internal Revenue Service to the

designated field office personnel regarding the potential tax violations.

      Except as expressly set forth herein, this delegation of authority does not

include the authority to file an information or return an indictment on tax

matters.  The authority hereby delegated is limited solely to the authorization

of tax prosecutions involving the filing or non-filing of returns (
IRS
 Form 8300)

pursuant to 26 U.S.C.  Section 6050I.  The authority to alter any actions taken

pursuant to the delegation contained herein is retained by the Assistant Attorney

General, Tax Division, in accordance with the authority contained in 28 C.F.R.

0.70.

      Notwithstanding this delegation, the designated official has the discretion

to seek Tax Division authorization of any proposed tax prosecution within the

scope of this delegation or to request the advice of the Tax Division with

respect thereto.

                                Roger M. Olsen

                          Assistant Attorney General

                                 Tax Division

             Approved to take effect on 
February 27, 1987
.

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                            DEPARMENT OF JUSTICE

                         TAX DIVISION DIRECTIVE NO. 75

                              
March 21, 1989

            MODIFICATION OF POLICY RE USE OF 26 UNITED STATES

        CODE SECTION 7207 IN FALSE RETURN FILING CIRCUMSTANCES

INTRODUCTION

      The Tax Division recognizes that United States Attorneys frequently

investigate financial crimes through joint tax and nontax grand jury

investigations.  In such matters, it is appropriate that the culpable parties be

prosecuted for felony violations, that immunity be used sparingly, and that

cooperating participants in the corrupt activity be required to plead guilty to

the commission of some significant aspect of the original conduct.

      We also recognize there are instances when a minor target seeks to

cooperate, and his or her culpability is such that neither immunity nor a plea

to a felony is appropriate.  In short, the criminal conduct is more suited to a

misdemeanor charge, when there is an agreement to cooperate in the ongoing

investigation of the principal target(s). 

      In some situations, described above, the only misdemeanor charges that may

be available to the prosecution are tax misdemeanors, i.e., sections 7203 or 7207

of Title 26 U.S.C. Where a tax return has not been filed, a section 7203

violation (failure to file) may exist.  However, if a tax return has been filed

and the false aspect of that return is minor, e.g., the corrupt person may have

accepted bribes of relatively minor amounts that were not reported or the payor

may have falsely deducted the bribe payment as a business expense, then the

conduct would constitute the filing of a false return, punishable either as a

felony under 26 U.S.C. Section 7206(1) or a misdemeanor under 26 U.S.C. Section

7207.

      In the past, the Tax Division would not approve either a prosecution or

guilty plea pursuant to section 7207, when the false document was a tax return,

because it has been our long-standing policy that prosecution of materially false

returns should be for felony charges.  We believe that the use of section 7207

should generally be restricted to circumstances where taxpayers submitted false

or altered documents to the 
IRS
 in support of information submitted on a

tax return.

      We recognize that this policy has created problems because an individual,

who desires to cooperate, may be willing to plead to a misdemeanor but not to a

felony.  To address this problem, the Tax Division is modifying its policy to

provide United States Attorneys with a means of dealing with the limited

situation described above.

      Accordingly, the Tax Division will now entertain requests for the approval

of guilty pleas to a violation(s) of 26 U.S.C. section 7207 in appropriate

circumstances where the taxpayer is involved in the corrupt activity under

investigation and agrees to cooperate in the ongoing investigation against the

principal target(s). The guidelines for the limited use of 26 U.S.C. section

7207 are set forth below.

      The relaxation of the Tax Division policy relative to section 7207

prosecutions will be limited to the circumstances described in the guidelines. 

Defendants providing assistance to the Government shou