Policy
Directives and Memoranda page2
MEMORANDUM
To: All United States Attorney
From: James A. Bruton
Acting Assistant Attorney General
Tax Division
Re: Policy Change in Tax Cases Involving
Lesser Included Offenses
On
February 12, 1993
, the Tax Division circulated a memorandum providing
guidelines concerning the government's handling of lesser included offense issues
in certain kinds of tax cases. In that memorandum, we referred to Becker
v.
United States
(S. Ct. No. 92-410), where defendant sought certiorari
on the ground that the misdemeanor of failure to file a tax return (26 U.S.C.
§ 7203) is a lesser included offense of the felony of attempted tax evasion
(26 U.S.C. §7201) and that cumulative punishment for the greater and lesser
offenses is therefore unconstitutional. The government opposed certiorari,
arguing that Congress intended to authorize cumulative punishment for the two
offenses and, in any event, that the willful failure to file a tax return is not
a lesser included offense of attempted tax evasion. As we noted in our earlier
memorandum the latter argument reflects an adoption of the strict "elements" test
set forth in Schmuck v. United States, 489 U.S. 705 (1989), and,
consequently, a change in Tax Division policy.
On
March 8, 1993
, the Supreme Court denied the petition for a writ of
certiorari in Becker. Accordingly, there will no change in the
guidelines set forth in the February 12 memorandum and they will remain in effect
until further notice.
Prosecutors are encourage to consult with the Tax Division whenever they
are faced with a tax case raising questions regarding lesser included offenses
by calling the Criminal Appeals and Tax Enforcement Policy Section at (202) 514-
3011.
DEPARTMENT OF JUSTICE
TAX DIVISION
DIRECTIVE NO. 99
Re: Clarification of Tax Division Policy Concerning the Charging of Tax
Crimes as Mail Fraud, Wire Fraud, or Bank Fraud (18 U.S.C.
§§ 1341, 1343, 1344) or as Predicates to a RICO Charge or
as the Specified Unlawful Activity Element of a Money Laundering
Offense
The purpose of this directive is to clarify Tax Division policy concerning
the charging of tax crimes as mail fraud, wire fraud, or bank fraud (18 U.S.C.
§§ 1341, 1343, 1344), or as predicates to a RICO charge or as the
specified unlawful activity element of a money laundering offense. Although
primarily concerned with tax crimes charged as mail fraud, [FN1] wire fraud, or
bank fraud, either directly or as a basis for some other charge, the policy
stated herein is equally applicable to tax crimes charged under any statute --
be it one found in Title 26 or one found in Title 18 or any other title of the
United States
Code.
The extent of Tax Division jurisdiction in the criminal arena is set out
in section 70(b), Subpart N, Part O of Title 28 of the Code of Federal
Regulations (28 C.F.R. § 0.70(b)). That section provides that, with a few
specified exceptions, all "[c]riminal proceedings arising under the internal
revenue laws" * * * "are assigned to and shall be conducted, handled, or
supervised by, the Assistant Attorney General, Tax Division * * *." Tax Division
jurisdiction, thus, depends not on the particular criminal statute utilized in
charging the defendant, but on the nature of the underlying conduct. Whenever
the violation can be said to be one arising under the internal revenue laws, Tax
Division authorization is required before bringing any charges, irrespective of
the statute or statutes under which they are brought. [FN2] In general, an
offense can be said to arise under the internal revenue laws when it involves (1)
an evasion of some responsibility imposed by the Internal Revenue Code, (2) an
obstruction or impairment of the Internal Revenue Service, or (3) an attempt to
defraud the Government or others through the use of mechanisms established by the
Internal Revenue Service for the filing of internal revenue documents or the
payment, collection, or refund of taxes.
In particular, this means that the authorization of the Tax Division is
required before charging mail, wire or bank fraud, either independently or as
predicate acts to a RICO charge or as the specified unlawful activity element of
a money laundering charge, when the mailing, wiring, or representation charged
is used to promote or facilitate any criminal violation arising under the
internal revenue laws. In the exercise of its prosecutorial discretion, the Tax
Division will grant such authorization only in exceptional circumstances. As a
general rule, the use of such charges will not be approved (1) when the only
mailing charged is a tax return or other internal revenue form or document, or
a tax refund check; (2) when the only wire transmission is a transmission of tax
return information to the
IRS
or the transmission of a refund to a bank account
by electronic funds transfer; or (3) when the mailing, wiring, or representation
charged is only incidental to a violation arising under the internal revenue laws
(for example, although the mailing of a set of instructions to a cohort in a tax
shelter scheme might support a mail fraud charge, such a mailing would be
considered incidental to the primary purpose of the scheme which is to defraud
the United States by abetting the filing of false income tax returns).
Normally, violations arising under the internal revenue laws should be
charged as tax crimes and the specific criminal law provisions of the Internal
Revenue Code should form the focus of prosecutions when essentially tax law
violations are involved, even though other crimes may have been committed. [FN3]
Thus, for example, the filing of a false tax return, which almost invariably
involves either a mailing or, in the case of an electronically-filed return, an
interstate wiring, is a tax crime chargeable generally under 26 U.S.C. 7206(1)
(if the violator is the taxpayer), 26 U.S.C. 7206(2) (if the violator is, for
example, a tax return preparer or promoter of a fraudulent tax scheme), or under
18 U.S.C. 287. Moreover, in the exercise of its prosecutorial discretion, the
Tax Division will only authorize tax charges or false claims charges, and will
not authorize mail, wire or bank fraud charges, where the
United States
is
defrauded in a revenue raising capacity and is the only one defrauded. Tax
charges and the false claims statutes are the established means for litigating
such criminal tax matters.
A mail, wire, or bank fraud charge arising out of a scheme to defraud the
Government through the use of the revenue laws might be appropriate in addition
to, but never in lieu of, other charges based on violations of the internal
revenue laws, however, where the Government has also lost money in a non-revenue
raising capacity or individuals or other entities have been the financial victims
of the crime. The bringing of such charges will seldom, if ever, be justified
by the mere desire to see a more severe term of imprisonment or fine imposed.
Rather, they must serve some federal interest not adequately served by the
bringing of traditional tax charges. Each individual case will be reviewed to
determine whether it warrants the use of charges in addition to the appropriate
Title 26 charges or Title 18 charges (i.e., §§ 286, 287, 371, 1001).
For example, in an electronic filing fraud, a bank making a refund
anticipation loan for the amount of the fictitious refund claim may be the
financial victim in the scheme, and bank fraud charges, drafted to reflect that
the bank was victimized by the scheme, may be appropriate. Similarly, in motor
fuel excise tax evasion schemes and fraudulent tax shelter schemes in which
individuals or entities other than the
United States
are demonstrably victimized
in a direct, substantial and measurable way that will be charged, the use of mail
or wire fraud charges may also be appropriate in a particular case.
A similar policy will be followed with respect to RICO or money laundering
charges predicated on mail, wire, or bank fraud violations which involve
essentially only a federal tax fraud scheme. Tax offenses are not predicate acts
for RICO or specified unlawful activities for money laundering offenses -- a
deliberate Congressional decision -- and converting a tax offense into a RICO or
money laundering case through the charging of mail, wire or bank fraud based on
a violation of the internal revenue laws as the underlying illegal act could be
viewed as circumventing Congressional intent unless circumstances justifying the
use of a mail, wire or bank fraud charge are present.
A United States Attorney who wishes to charge a RICO violation in any
criminal matter arising under the revenue laws must obtain the authorization of
the Tax Division prior to alleging the predicate act, [FN4] and must obtain the
authorization of the Organized Crime and Racketeering Section of the Criminal
Division prior to charging a RICO violation. The Tax Division and the Organized
Crime and Racketeering Section will approve the use of the RICO statute in
revenue matters as appropriate. In addition, traditional tax charges must also
be brought, as noted above, and the prosecution package must allow for
forfeitures under the Internal Revenue Code.
Tax Division authorization is also required before a money laundering
charge may be brought where the specified unlawful activity is based on a
violation arising under the internal revenue laws. [FN5] The Tax Division will
approve the use of mail fraud, wire fraud, or bank fraud as the specified
unlawful activity only in cases that meet the requirements set forth in this
Directive. When a request is made to include such a money laundering charge in
an indictment, the Tax Division will consult with or refer the case to the Money
Laundering Section of the Criminal Division, as the case may require, prior to
authorizing the money laundering charges or the use of one of the fraud statutes
as the specified unlawful activity. See
USAM
9-105.00, as amended by bluesheet
dated
October 1, 1992
. The Tax Division should be consulted early in any
investigation to determine whether mail fraud, wire fraud, or bank fraud charge
are appropriate.
FN 1. Tax Division policy concerning the charging of tax crimes as mail fraud
violations, either independently or as predicate acts underlying a RICO charge,
is set out in Section 6-4.211(1) of the United States Attorneys' Manual,
Filing False Tax Returns: Mail Fraud Charges or Mail Fraud Predicates for
RICO. This directive clarifies that policy and explains how it fits into
the overall Tax Division jurisdiction over criminal proceedings arising under the
internal revenue laws.
FN 2. The authorization of the Tax Division is also required in any case which
involves parallel state and federal tax violations and the charges are based on
the parallel state tax violations.
FN 3. Pursuant to 28 C.F.R. 0.70(b), the Tax Division has traditionally
authorized prosecution of certain crimes under various provisions of Title 18
(e.g., 18 U.S.C. §§ 286, 287, 371, and 1001). While Title 26 offenses
are the preferred vehicle for criminal tax prosecutions, charges for offenses
arising under the internal revenue laws have never been limited to that title.
FN 4. Tax Division authorization is also required when the predicate act is based
on a state tax violation.
FN 5. This is in addition to the requirement that Tax Division authorization is
required for any prosecution under 18 U.S.C. § 1956(a)(1)(A)(ii).
JAMES A. BRUTON
Acting Assistant Attorney General
Tax Division
APPROVED TO TAKE EFFECT ON:
March 30, 1993
June 3, 1993
MEMORANDUM
TO: All CES Attorneys
FROM: Stanley F. Krysa
Director
Criminal Enforcement Sections
SUBJECT: Civil Settlements in Plea Agreements
It is not unusual for the taxpayer, in the course of negotiating a plea
agreement, especially in cases arising from a grand jury investigation, to seek
to include a civil settlement for the years involved. Very often, in such a
situation, the Internal Revenue Service is agreeable to settlement. The Internal
Revenue Service often believes the money to be paid is likely all it could ever
realize because of Rule 6(e) restrictions and scarce audit resources. The Tax
Division, however, has long followed a policy against approving plea agreements
that include such global settlements. This policy wisely reflects the
substantial differences between criminal and civil tax litigation.
Criminal tax investigations are frequently narrow in focus and
substantially more targeted than any civil audit. For example, a criminal
investigation centering on a complex return will normally focus on large items
of unreported income or improper deductions that are easily provable rather than
complex tax adjustments that may result in further taxes due, which, either
because of difficulties of proof or the uncertain state of the substantive tax
law, cannot form the focus of a criminal case.
In a civil tax setting, the determination by the Internal Revenue Service
that an item of income was realized or that a deduction claimed was not allowable
constitutes a prima facie case for inclusion or disallowance, as the case might
be, and the taxpayer bears the burden of proving that determination wrong.
Accordingly, reasonable inferences from known facts can support a finding of
civil liability, but often would not provide a basis for indictment.
The Tax Division cannot authorize a plea agreement in a case that, by its
terms, bars the Government from a further examination of the target's civil tax
liabilities. We can and will, however, approve acceptance of a plea that
includes certain civil admissions by the target. Thus, we would be willing to
authorize a plea agreement in which the target would make the following civil
admissions:
1. An admission by the defendant that he received enumerated amounts of
unreported income or claimed enumerated amounts of illegal deductions for years
set forth in the plea agreement.
2. A stipulation by the target that he was liable for the fraud penalty
imposed by the Code (formerly Section 6653 and now Section 6663) on the
understatements of liability for the years involved.
3. An agreement by the target that he or she will file, prior to the
time of sentencing, initial or amended personal returns for the years subject to
the above admissions, correctly reporting all previously unreported income or
proper deductions, will provide the Internal Revenue Service information, if
requested, regarding the years covered by the returns, and will pay at sentencing
all additional taxes, penalties and interest owing. Such an agreement should
also include a provision pursuant to which the target agrees that he or she will
promptly pay any additional amounts determined to be owing with respect to that
return because of computational errors.
4. An agreement by the target that he will not thereafter file any
claims for refund of taxes, penalties or interest for amounts attributable to the
return filed incident to the plea.
As a final note, all such provisions must be drafted with considerable
care. A plea agreement is an undertaking by the
United States
and, if not
properly crafted, could be construed to foreclose the civil side of the Internal
Revenue Service from examining and making any civil audit adjustments to the
returns involved after they are filed.
In reviewing or negotiating any proposed plea agreements the above
principles should be applied. If you have any questions contact your respective
Chiefs. All plea agreements negotiated by you should be in writing. They should
be submitted for review and approval by the Chief before executed.
October 15, 1997
MEMORANDUM
TO:
ALL
UNITED STATES ATTORNEYS
ALL
CRIMINAL
CHIEF
S
ALL
CIVIL
CHIEF
S
FROM: Loretta C. Argrett
Assistant Attorney General
SUBJECT: Press Releases in Cases Involving the
IRS
ACTION REQUIRED: Forward, preferably via fax, a copy of each press
release in criminal tax cases to the Deputy Assistant
Attorney General (Criminal), Tax Division,
P.O. Box
501
,
Washington
,
D.C.
20044. FAX
(202)
514-5479
.
DUE DATE: None
RESPOND TO: See Below
CONTACT PERSON: Bob Lindsay
(202)
514-3011
Summary
The purpose of this message is to provide guidance to
United States
Attorneys' offices about the use of press releases publicizing indictments,
convictions, and sentences in criminal tax and other
IRS
-investigated cases, in
light of a recent circuit court opinion and several earlier decisions. [This
guidance also applies to civil tax cases.]
This recent decision has increased the confusion about the information that
may be released in tax cases. On
August 21, 1997
, the United States Court of
Appeals for the Fifth Circuit ruled that the prohibitions against the disclosure
of tax returns and return information from
IRS
or DOJ files (26 U.S.C. §
6103) continue to apply even if the information has been made public in an
indictment or court proceeding. Johnson v. Sawyer, 5th
Cir. No. 96-20667 ____F.3d___.[FN1] The Fifth Circuit concluded that "[i]f the
immediate source of the information claimed to be wrongfully disclosed is tax
return information ..., the disclosure violates § 6103, regardless
of whether that information has been previously disclosed (lawfully) in a
judicial proceeding and has therefore arguably lost its taxpayer
confidentiality." Several other circuits have addressed this issue, often
reaching conflicting conclusions.
FN1. 120 F.3d 1307 (5th Cir. 1997).
The practical effect of these holdings is that you should exercise caution
when preparing tax press releases. Press releases cannot be written with
information from
IRS
or the prosecutor's files, but must be based on, and contain
only, public record information. Thus, a press release announcing an indictment
should contain only information set forth in the publicly-filed indictment and
indicate that the source of the information is the indictment. Similarly, a
press release discussing a conviction should be based solely on information made
public at the trial or in pleadings publicly filed in the case, and should
indicate that the source of the information is the public court record.
Background
Section 7431 of the Internal Revenue Code (26 U.S.C.) authorizes a civil
action for damages against the
United States
for the unauthorized disclosure of
returns or return information. The minimum damage award for each negligent
disclosure is $1,000. The statute also provides for punitive damages for any
unauthorized disclosures that are due to gross negligence or willfulness. A
willful disclosure of returns or return information in a manner not authorized
by Section 6103 also is punishable as a felony under 26 U.S.C. 7213.
"Return information" is defined in Section 6103 of the Code to include
virtually all information collected or gathered by the
IRS
with respect to a
taxpayer's tax liabilities, or any investigation concerning such liability. It
prohibits any disclosure of either tax returns themselves or return information,
except as specifically authorized by that section. The statute authorizes the
IRS
to disclose tax returns and return information to the Department of Justice
for use in criminal and civil tax cases on its own initiative (Section 6103(h)(2)
and (3)) and for use in non-tax criminal cases pursuant to a court order (Section
6103(i)(1)). Sections 6103(h)(4) and 6103(i)(4) permit the Department to
disclose such returns or return information in civil or criminal judicial
proceedings relating to tax administration and in non-tax criminal cases and
civil forfeiture cases, respectively.
Several circuits have addressed the question of when the non-disclosure
restrictions of Section 6103 no longer apply to return information. The Ninth
Circuit has held that once return information has been made public in a judicial
proceeding, the non-disclosure restrictions no longer apply to that information.
Lampert v.
United States
, 854 F.2d 335 (9th Cir. 1988). The Sixth Circuit
has held that the return information disclosed by the filing of a notice of
federal tax lien loses it confidentiality and is not protected by Section 6103,
but emphasized that a notice of federal tax lien "is designed to provide public
notice and is thus qualitatively different from disclosures made in judicial
proceedings, which are only incidentally made public." Rowley v. United
States, 76 F.3d 796, 801 (6th Cir. 1996). In an unpublished opinion, the
Third Circuit has held that a press release did not contain unauthorized
disclosures of return information because the information in the press release
was public information. Barnes v.
United States
, 73 A.F.T.R. 2d (PH) .
94-581, at 1160 (3rd Cir. 1994). On the other hand, the Tenth and the Fourth
Circuits have held that public disclosure of return information does not lift the
non-disclosure bar on further disclosure of such information. Rodgers v.
Hyatt, 697 F.2d 899 (10th Cir. 1983); Mallas v.
United States
, 993
F.2d 1111 (4th Cir. 1993). While the Seventh Circuit did not resolve the issue
of whether return information disclosed in court loses its confidentiality, it
concluded that information in a court opinion is not return information and, when
the source of the information disclosed is the court opinion, no violation has
occurred. Thomas v.
United States
, 890 F.2d 18 (7th Cir. 1989) In
Johnson v. Sawyer, supra, the Fifth Circuit followed "the approach
of the Fourth and Tenth Circuits, modified by the Seventh Circuit's "source'
analysis." Under the Fifth Circuit's analysis, Section 6103 is violated only
when tax return information -- which is not a public record open to public
inspection -- is the immediate source of the information claimed to be wrongfully
disclosed.
The starting point in determining what information may be included in a
press release publicizing an indictment, conviction, or sentence is
acknowledgment that the Section 6103 prohibitions on disclosure are source-based.
That is, the statute bars the public disclosure of information taken directly
from
IRS
files, or returns and return information that have been accumulated in
Department files as part of an investigation or prosecution. It does not,
however, ban the disclosure of information that is taken from the public court
record.
Thus, for example, the statute, as interpreted by the majority of the
circuits, prohibits the disclosure from
IRS
or Department files of a tax-crime
defendant's name, or the fact that he was under investigation or has been
indicted for a particular tax crime. To the extent that this same information
has been placed in the public court record (e.g., included in an
indictment or other pleading), its dissemination from the
public court record does not violate the statute.
Recommendations
United States Attorneys may (and should) continue to issue press
releases in criminal tax cases. In light of the judicial interpretations of
Section 6103 discussed above, however, a press release should contain only
information the immediate source of which is the public record of
the judicial proceeding, and the press release should attribute the information
to the public court record.
A post-indictment press release may relate information set forth in the
publicly-filed indictment, and should state that the information is from the
publicly-filed indictment (for example: "according to the indictment, during the
years 1993 and 1994, John Doe received income in excess of $100,000 which he
failed to report on his income tax returns. The indictment further charges .
. ."). Facts (including minor details) that do not appear in the indictment
(such as the defendant's age, full name, and address) should not be included in
the press release unless they are obtained from and attributed
to public records.
Post-conviction press releases should make it clear that the information
being released came from the publicly-filed indictment, public filings in the
case, or public testimony. Care should be taken to avoid statements that are
ambiguous as to source. Statements that could be based on information in
IRS
or
Department files should not be made unless the information in the statements are
obtained from and attributed to specific public sources. (For example, the
source of the facts in this statement -- "Doe shielded his income in offshore
bank accounts" -- could be from the
IRS
special agent's files, trial testimony,
or the indictment. If the source of the facts in the statement is trial
testimony, the indictment, or other public record, disclosure is permissible.)
Thus, statements of facts that could have come from the
IRS
files should not be
made unless attributed to a specific public source.
Assistant United States Attorneys and Public Information Officers issuing
a press release or responding to press inquiries should secure the source
document from the public record and make it clear that the immediate source of
the information they are providing is the public court record, and identify the
source.
These rules apply to the use in press releases of any return information
provided to the Department in any criminal [or civil] case. United State
Attorneys should apply these guidelines in all cases in which tax return
information has been made available to the attorney for the Government. Return
information obtained for use in non-tax criminal cases and related civil
forfeiture cases pursuant to a Section 6103(i) order is subject to the same
disclosure restrictions as return information provided by the
IRS
for use in
criminal tax cases. In addition, return information provided to the United
States Attorney's office by the
IRS
in money laundering or narcotics cases that
the
IRS
has determined are "related to tax administration," pursuant to Section
6103(b)(4), is also subject to the same non-disclosure rules.
Request
The Tax Division requests that a copy of each press release in a criminal
tax case be sent to the Deputy Assistant Attorney General (Criminal), Tax
Division,
P.O. Box 501
,
Washington
,
D.C.
20044, preferably by faxing the release
to
(202)
514-5479
. The Division is actively seeking to obtain more publicity for
successful results in criminal tax cases and maintains a tax-interested press
list for faxing press releases reflecting favorable outcomes in such cases. The
Division would be happy to forward press releases from individual
United States
Attorneys' offices to those in the media who have shown an interest in such
matters, thereby widening the publicity given to successful tax prosecutions.
December 4, 1998
MEMORANDUM
To: All Tax Division Criminal Enforcement
Section Attorneys
Assistant
United States
Attorneys
From: Loretta C. Argrett /s/
Assistant Attorney General
Subject: Inclusion of State Tax Loss in Tax Loss Computation for Federal
Tax Offenses Under the Sentencing Guidelines
Questions have been raised concerning whether state tax crimes can be
treated as part of the relevant conduct for sentencing purposes in federal tax
cases. For the reasons set out below, we believe that state tax offenses arising
out of the same scheme or course of conduct as federal tax crimes constitute
relevant conduct under USSG §1B1.3 and may be included in the calculation
of the base offense level in appropriate cases.
Under the relevant conduct guideline, USSG §1B1.3, "relevant conduct"
includes, inter alia, all acts that were part of the same course of
conduct or common scheme or plan and all harm that resulted from those acts.
Nothing in the language of the guideline limits relevant conduct to federal
offenses, or harm to the
United States
or other victims of federal offenses.
Moreover, the Ninth Circuit held in United States v. Newbert, 952 F.2d
281, 284 (9th Cir. 1991), cert. denied, 503 U.S. 997 (1992), that
nonfederal offenses may be considered for sentence enhancement under §1B1.3.
Similarly, the Eleventh Circuit has held that state offenses that were part of
the same course of conduct as federal offenses and part of a common scheme or
plan must be considered relevant conduct under §1B1.3(a)(2). United
States v. Fuentes, 107 F.3d 1515, 1526 (11th Cir. 1997).
Fuentes involved USSG §5G1.3, which relates to imposition of
a sentence on a defendant subject to an undischarged term of imprisonment. The
commentary to that guideline indicates that the Sentencing Guidelines contemplate
the inclusion of state offenses in the determination of the base offense level
for an offense. An example set out in Application Note 2 includes the following:
The defendant is convicted of a federal offense charging the sale of
30 grams of cocaine. Under § 1B1.3 (Relevant Conduct), the
defendant is held accountable for the sale of an additional 15 grams
of cocaine, an offense for which the defendant has been convicted
and sentenced in state court.
Thus, there is ample support for including tax loss from state tax offenses
in calculating the total tax loss in a federal tax case. Indeed, it could be
argued that, in light of the language of USSG § 1B1.3 that "the base offense
level . . . shall be determined on the basis of... all acts and omissions . . .
that were part of the same course of conduct or common scheme or plan as the
offense of conviction," state tax losses must be included as relevant conduct in
the calculation of base offense level for a federal tax violation where they
qualify as part of the same course of conduct or common scheme or plan. See
United States
v. Fuentes, 107 F.3d at 1523. In fact, if it is not included,
it could result in dissimilarly situated defendants being treated similarly --
a result clearly at odds with the spirit of the Guidelines. (
United States
Sentencing Commission, Guidelines
Manual
,
Ch.
1, Pt. A, 3.) For example,
one defendant might evade federal excise taxes on fuel but pay the state excise
tax, while another defendant evades both.[FN1] If the state tax loss is not
taken into account, both of these defendants will end up with the same sentence
as long as the federal loss is the same.
FN1. This is not that far-fetched an example. There has been at least one
case where the defendants evaded the federal excise tax, but paid the
state excise tax.
The government argued this position -- that state tax offenses arising out
of the same scheme or course of conduct as federal tax crimes constitute relevant
conduct under USSG § 1B1.3 and should be included in the calculation of the
base offense level -- before the Fifth Circuit in United States v. Powell,
124 F.3d 655 (1997), a case involving federal and state excise taxes. The court
accepted our position, holding that state taxes evaded by the defendant qualified
as "relevant conduct" that could be included in "tax loss" under Sentencing
Guidelines in sentencing defendant for evading federal fuel excise taxes, where
evasion of state and federal taxes occurred at same time, was based on same
conduct, and was not isolated or sporadic. 124 F.3d at 665-66.
Prosecutors, therefore, may seek inclusion of state tax loss in appropriate
cases -- e.g., where the state tax loss is clearly part of the same course
of conduct or common scheme or plan, where the loss is easily ascertainable, and
where the loss is clearly due to criminal conduct. Assistant
United States
Attorneys and Tax Division trial attorneys are encouraged to consult with the
Criminal Appeals and Tax Enforcement Policy Section of the Tax Division ((202)
514-3011
) prior to sentencing when they are faced with a case where the defendant
has also committed state offenses which could be considered part of the same
course of conduct or common scheme or plan as the offense of conviction.
We recognize that there may be problems of proof, and prosecutors should
be aware of these possible problems. First, evidence of state tax loss may simply
be unavailable in the absence of cooperation from state officials. Even where
there is cooperation, it still may be difficult to prove the state loss without
slowing down the sentencing process or unnecessarily complicating it.
In addition, guideline provisions simplifying the determination of tax loss
will probably be unavailable. Under USSG §2T1.1(c)(1), tax loss is 28% of
the magnitude of a particular false statement in a return or other tax document
(34% in the case of a corporation) unless a more accurate determination of tax
loss can be made; and under USSG §2T1.1(c)(2), tax loss is 20% of the amount
of gross income that should have been reported by a defendant who has failed to
file a return (25% in the case of a corporation) unless a more accurate
determination of tax loss can be made. The applicable percentages in those
guidelines are loosely based on federal tax rates and bear no relation to losses
under state tax rates. Where there are problems of proof, prosecutors may, in the
exercise of their discretion, decide not to seek inclusion of state tax loss in
the tax loss computation.
A final matter bearing note is that there may be cases in which the ability
to treat state tax offenses as relevant conduct would effectively limit the
defendant's federal sentence. Under §5G1.3(a) of the Guidelines, if a
defendant commits an offense while serving a term of imprisonment, the sentence
for his new offense must run consecutively to his undischarged term of
imprisonment. However, under §5G1.3(b), if §5G1.3(a) is not applicable
and an undischarged term of imprisonment has been fully taken into account in the
determination of the offense level for a defendant's new offense, the sentence
for the new offense must be imposed to run concurrently with the undischarged
term of imprisonment. Section 5G1.3(c) provides that in any other case, the
sentence for the new offense may be imposed to run concurrently, partially
concurrently, or consecutively to the prior term to achieve a reasonable
punishment for the new offense. In United States v. Fuentes, supra,
the court held that where subsection (a) of §5G1.3 does not apply, "the
'fully taken into account' requirement of §5G1.3(b), is satisfied when the
undischarged term resulted from an offense that §1B1.3 requires to be
included as relevant conduct, regardless of whether the sentencing court actually
took that conduct into account." 107 F.2d at 1522; see also 107 F.2d at
1524. Thus, under Fuentes, if state offenses for which a defendant was
serving a sentence constituted relevant conduct, the sentencing court would be
required to impose a concurrent sentence even if the state offenses were not used
in the calculation of tax loss. However, we do not think the holding in
Fuentes on the application of §5G1.3, even if adopted by other
circuits, will have much impact on tax cases: to our knowledge, defendants in
most tax cases are not often serving state sentences for related state tax
offenses. Nevertheless, prosecutors should be aware of Fuentes.
DEPARTMENT OF JUSTICE
TAX DIVISION DIRECTIVE
NO. 111
EXPEDITED PLEA PROGRAM
On
March 1, 1986
, the Tax Division, Department of Justice, and the Internal
Revenue Service implemented the Simultaneous Plea Program. This program was
designed to accommodate both the interests of the taxpayer who desired a speedy
resolution to a criminal tax investigation and the interests of the government
in obtaining a fair resolution of the case with a minimum expenditure of
investigative and prosecutorial resources.
By memorandum dated
February 25, 1986
, the Acting Assistant Attorney
General of the Tax Division notified the United States Attorneys of this program
and described its operation. After reviewing the operation of the program since
its inception in 1986, the Tax Division has decided to modify the program in
several ways and rename it to more accurately reflect its function. This
Directive is intended to explain those changes and formalize the new procedures
for administering the program.
1. The program is designed to expedite the handling of criminal tax cases
where the taxpayer, through counsel, indicates during the course of an
administrative investigation being conducted by the Criminal Investigation
Division, Internal Revenue Service, an interest in entering a guilty plea
to some or all of the charges and years under investigation. The program
is intended to dispose expeditiously of the entire case. It is not
intended to be utilized to limit the taxpayer's exposure by curtailing or
limiting the Service's investigation.
2. This program applies only to administratively investigated cases involving
legal source income.
3. The program is available only to taxpayers represented by counsel.
4. The request for initiation of any plea discussions or negotiations must be
originated by a taxpayer who is represented by counsel; Criminal
Investigation Division shall not initiate the subject of plea discussions.
5. The taxpayer must be informed that the Internal Revenue Service has no
authority to engage in plea negotiations and that only the Department of
Justice can engage in such negotiations.
6. Taxpayer's counsel must provide a written statement to Criminal
Investigative Division confirming the taxpayer's desire to engage
immediately in plea negotiations with the Department of Justice regarding
the charges under investigation.
7. The taxpayer must be informed that the taxpayer will be required to plead
to the most significant violation involved, consistent with the Tax
Division's Major Count Policy.
8. The Internal Revenue Service must take precautions to insure that
information furnished by the taxpayer, prior to formal plea discussions
with the Department of Justice, will not be foreclosed from future use
under the restrictions of Rule 11(e)(6) of the Federal Rules of Criminal
Procedure in the event that plea negotiations fail.
9. The Internal Revenue Service must obtain sufficient evidence to constitute
a referable matter to the Tax Division.
Although the case does not have to be as fully developed as one that does
not go through the Expedited Plea Program, any referral to the Tax
Division for review of the proposed plea under the program must reflect
the following:
a. That, for the years implicated in the investigation, the taxpayer
has provided all records in his or her possession, or to which the
taxpayer has access, to the Service and the investigating agent has
reviewed those records with sufficient particularity to insure that
there are no significant undiscovered issues or tax losses in the
case that have not been taken into account in assessing the merits
of the referral;
b. A description of the nature and extent of the records supplied and
the specific conclusions reached by the agent with respect to them;
c. That the taxpayer has submitted to an interview, the substance of
the interview, and the agent's satisfaction with the nature and
extent of the taxpayer's cooperation;
d. That the agent has secured and reviewed the taxpayer's returns for
all years subsequent to the years under investigation (and any open
prior years) and has addressed any issues raised by those returns in
assessing the merits of the referral;
e. The agent has inquired, and obtained the details, if appropriate, as
to any other (open or closed) Federal, state, or local
investigations relating to the taxpayer.
10. If District Counsel, after receipt of the Special Agent's Report (SAR),
concludes that prosecution is warranted, District Counsel will refer the
case to the Tax Division, with a recommendation for prosecution based on
the foregoing requirements. Such referral to the Division shall include
all exhibits to the SAR, and the evidentiary basis for the referral.
a. District Counsel will telephone the Tax Division liaison attorney in
the appropriate Criminal Enforcement Section to advise that a
referral is being made to the Tax Division;
b. The Tax Division liaison attorney will contact District Counsel by
telephone to acknowledge receipt of the referral.
11. No plea negotiations may be undertaken until prosecution is
authorized by the Tax Division.
12. Within 30 days after receipt of the referral from District Counsel, the
Tax Division will either authorize prosecution consistent with the
proposed plea bargain or disapprove of the negotiation of such a plea.
a. If the proposed plea is not authorized, the Tax Division will notify
the taxpayer's counsel in writing that the case is being returned to
the Internal Revenue Service, and all exhibits and files submitted
will be returned to the Service;
b. If the proposed plea is authorized, the Tax Division will refer all
documents to the appropriate United States Attorney's office who may
then undertake plea negotiations with the taxpayer and may accept a
plea to the specified major count without further authorization from
the Tax Division. If the United States Attorney's office desires to
accept a plea to any count other than the specified major count, the
approval of the Tax Division is required.
13. If plea negotiations are unsuccessful, the United States Attorney's office
will notify in writing both the taxpayer's counsel and the Tax Division
that the case is being returned to the Internal Revenue Service.
a. All files and exhibits submitted to the United States Attorney's
office will be returned to the Service;
b. No information or evidence submitted to the United States Attorney's
office by the taxpayer and/or counsel during the course of plea
negotiations will be sent to the Internal Revenue Service unless the
taxpayer expressly authorizes the Service's use of such information.
In such a case, a written waiver of the restrictions of Federal Rule
of Criminal Procedure 11(e)(6) should be obtained.
14. All procedures and requirements for administering this program that have
heretofore been agreed to between the Internal Revenue Service and the
Tax Division remain in force unless inconsistent with any provision of
this Directive.
LORETTA C. ARGRETT
ASSISTANT ATTORNEY GENERAL
TAX DIVISION
DATED:
2/11/99
DEPARTMENT OF JUSTICE
TAX DIVISION
DIRECTIVE NO. 115
Delegation of Authority Relating to Criminal Tax Cases
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, the delegation of
authority with respect to criminal tax matters within the jurisdiction of the Tax
Division is hereby conferred as follows:
1. Authority of the Assistant Attorney General that is Not
Delegated
Action in the following criminal tax matters is expressly reserved for the
Assistant Attorney General of the Tax Division ("AAG"):
a. A request to present the same matter to a second grand jury or to
the same grand jury after a no true bill has been returned;
b. A request to recuse or disqualify a federal justice, judge or
magistrate;
c. A request to consent to a polo contendere or Alford plea;
d. A request to initiate or continue a federal prosecution affected by
the Department's Petite policy (dual and successive
prosecution);
e. A request for disclosure of a tax return or return information
pursuant to 26 U.S.C. 6103(h)(3)(B);
f. A request to authorize a subpoena, the interrogation, indictment, or
arrest of a member of the news media; [FN1]
FN1. See 28 C.F.R. . 50.10 for the policies regarding these matters, and the
principles to be taken into account in requesting an authorization which may
require the express approval of the Attorney General.
g. A subpoena of an attorney for information relating to the attorney's
representation of a client; and
h. A request to authorize prosecution of a person who has testified or
produced information pursuant to a compulsion order for an offense
or offenses first disclosed in, or closely related to, such
testimony or information.[FN2]
FN2. See
USAM
9-23.400.
2. Delegation of Authority to the Deputy Assistant Attorney General
Criminal
The Deputy Assistant Attorney General, Criminal ("DAAG, Criminal"), is
authorized to exercise all the powers and authority of the AAG with respect to
criminal proceedings covered by this delegation, except those expressly reserved
in Section 1 above.
In addition, the DAAG, Criminal, shall forward to the AAG matters which are
deemed appropriate for action by the AAG.
3. Delegation of Authority to the Section Chiefs in Criminal Tax
Matters
A Chief of a Criminal Section is authorized to act in all matters arising
within the jurisdiction of his or her section, except those specifically
reserved for action by the AAG in Section 1 above and the following:
a. A prosecution pursuant to 26 U.S.C. Section 7212(a);
b. A prosecution pursuant to 18 U.S.C. Section 1001;
c. Issuance of a search warrant when Tax Division approval is necessary
(Tax Directive 52);
d. A matter in which the recommendations of the Chief and Assistant
Chief as to prosecution or declination conflict;
e. Prosecution of an attorney for criminal conduct committed in the
course of acting as an attorney;
f. A prosecution involving: (a) a local, state, federal, or foreign
public official or political candidate; (b) a representative of the
electronic or print news media; (c) a member of the clergy or an
official of an organization deemed to be exempt under section
501(c)(3) of the Internal Revenue Code; or (d) an official of a
labor union;
g. A request to issue a compulsion order in any case over which the Tax
Division has jurisdiction;
h. Prosecution pursuant to 18 U.S.C. Section 1956(a)(1)(A)(ii);
i. Any prosecutorial decision that requires a deviation from Tax
Division policy or procedure; and
j. A request to authorize dismissal of an indictment.
In addition, a Chief shall forward for action to the DAAG, Criminal, all
matters that involve novel substantive, evidentiary, or procedural issues, or any
other sensitive matter for which review at a higher level is appropriate.
Notwithstanding the foregoing, the DAAG, Criminal, may prescribe additional
matters, the actions of which are within the authority of a Section Chief
pursuant to this section, that the DAAG, Criminal, determines requires action by
the DAAG, Criminal.
4. Scope and Effect of this Delegation
a. This delegation includes all tax and tax-related offenses delegated
to the Tax Division pursuant to 28 C.F.R. §§0.70 and.
179a.
b. This delegation supersedes Tax Division Directives 44, 53, and 71,
and all other delegations of authority to approve or decline
criminal tax or tax-related matters or cases previously issued.
c. In the event a Section Chief is recused from acting on a particular
matter, then the DAAG, Criminal, may select another Section Chief to
act in that matter.
d. When either, or both, the AAG or the DAAG, Criminal, is recused in
a particular matter, a ranking Tax Division official will be
authorized pursuant to 28 C.F.R. §0.132 to act as either the
Acting AAG or the Acting DAAG, Criminal, in that matter.
e. When an individual has been duly designated a specified "Acting"
official, the individual shall have the same authority as the
position commands, unless that authority is specifically limited in
writing by the appropriate authorizing official.
f. The Assistant Attorney General, at any time, may withdraw any
authority delegated by this Directive
APPROVED:
Date: July 26. 1999
Loretta C. Argrett
Assistant Attorney General
Tax Division
