```

[House Report 113-576]
[From the U.S. Government Publishing Office]

113th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     113-576

======================================================================

 
   STOPPING TAX OFFENDERS AND PROSECUTING IDENTITY THEFT ACT OF 2014

                                _______
                                

 September 8, 2014.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

          Mr. Goodlatte, from the Committee on the Judiciary, 
                        submitted the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 744]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 744) to provide effective criminal prosecutions for 
certain identity thefts, and for other purposes, having 
considered the same, reports favorably thereon with an 
amendment and recommends that the bill as amended do pass.

                                CONTENTS

                                                                   Page
The Amendment....................................................     2
Purpose and Summary..............................................     2
Background and Need for the Legislation..........................     3
Hearings.........................................................     5
Committee Consideration..........................................     5
Committee Votes..................................................     5
Committee Oversight Findings.....................................     6
New Budget Authority and Tax Expenditures........................     7
Congressional Budget Office Cost Estimate........................     7
Duplication of Federal Programs..................................     8
Disclosure of Directed Rule Makings..............................     8
Performance Goals and Objectives.................................     8
Advisory on Earmarks.............................................     8
Section-by-Section Analysis......................................     8
Changes in Existing Law Made by the Bill, as Reported............     9
Dissenting Views.................................................    10

                             The Amendment

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Stopping Tax Offenders and Prosecuting 
Identity Theft Act of 2014'' or the ``STOP Identity Theft Act of 
2014''.

SEC. 2. USE OF DEPARTMENT OF JUSTICE RESOURCES WITH REGARD TO TAX 
                    RETURN IDENTITY THEFT.

  (a) In General.--The Attorney General should make use of all existing 
resources of the Department of Justice, including any appropriate task 
forces, to bring more perpetrators of tax return identity theft to 
justice.
  (b) Considerations To Be Taken Into Account.--In carrying out this 
section, the Attorney General should take into account the following:
          (1) The need to concentrate efforts in those areas of the 
        country where the crime is most frequently reported.
          (2) The need to coordinate with State and local authorities 
        for the most efficient use of their laws and resources to 
        prosecute and prevent the crime.
          (3) The need to protect vulnerable groups, such as veterans, 
        seniors, and minors (especially foster children) from becoming 
        victims or otherwise used in the offense.

SEC. 3. VICTIMS OF IDENTITY THEFT MAY INCLUDE ORGANIZATIONS.

  Chapter 47 of title 18, United States Code, is amended--
          (1) in section 1028--
                  (A) in subsection (a)(7), by inserting ``(including 
                an organization)'' after ``another person''; and
                  (B) in subsection (d)(7), in the matter preceding 
                subparagraph (A), by inserting ``or other person'' 
                after ``specific individual''; and
          (2) in section 1028A(a)(1), by inserting ``(including an 
        organization)'' after ``another person''.

SEC. 4. IDENTITY THEFT FOR PURPOSES OF TAX FRAUD.

  Section 1028(b)(3) of title 18, United States Code, is amended--
          (1) in subparagraph (B), by striking ``or'' at the end;
          (2) in subparagraph (C), by inserting ``or'' after the 
        semicolon; and
          (3) by adding at the end the following:
                  ``(D) during and in relation to a felony under 
                section 7206 or 7207 of the Internal Revenue Code of 
                1986;''.

SEC. 5. REPORTING REQUIREMENT.

  Not later than 180 days after the date of the enactment of this Act, 
the Attorney General shall submit to the Committees on the Judiciary of 
the House of Representatives and the Senate a report that contains the 
following information:
          (1) Information readily available to the Department of 
        Justice about trends in the incidence of tax return identity 
        theft.
          (2) Recommendations on additional statutory tools that would 
        aid in the effective prosecution of tax return identity theft.
          (3) The status on implementing the recommendations of the 
        Department's March 2010 Audit Report 10-21 entitled ``The 
        Department of Justice's Efforts to Combat Identity Theft''.

                          Purpose and Summary

    H.R. 744 increases the penalty for Federal identity theft 
offenses committed during and in relation to tax fraud and 
clarifies that, in addition to individuals, businesses and 
organizations can be considered victims of Federal identity 
theft offenses. H.R. 744 encourages the Department of Justice 
to dedicate additional resources, including the use of 
investigative task forces, to address tax return identity theft 
and coordinate investigations with state and local law 
enforcement agencies and requires the Department to submit a 
report on the trends in tax return identity theft, 
recommendations for additional improvements to Federal law, and 
the status of the Department's implementation of the DOJ IG's 
2010 report entitled ``The Department of Justice's Efforts to 
Combat Identity Theft.''

                Background and Need for the Legislation

    Like other forms of identity theft, tax return identity 
theft is a rapidly growing problem in the United States. As a 
general matter, this crime is committed when an individual uses 
the Social Security Number and other information of another 
individual to file a false tax return with the Internal Revenue 
Service (``IRS'') or fraudulently claims someone as a dependent 
in order to receive a refund.
    Tax return identity theft is often committed by gangs and 
organized crime organizations who defraud large groups of 
people.\1\ These groups see it as a low-risk, high-return crime 
that often carries low penalties. Tax fraud is also being 
committed at high rates by prison inmates. In 2012, there were 
more than 173,000 fraudulent tax returns filed by inmates.\2\
---------------------------------------------------------------------------
    \1\Written Statement of Nina E Olson, National Taxpayer Advocate, 
Hearing on Tax Fraud by Identity Theft, Part 2: Statute, Progress, and 
Potential Solutions, Subcommittee on Fiscal Responsibility and Economic 
Growth, Committee on Finance, March 20, 2012.
    \2\Stephen Olemacher, Tax Fraud a Popular Pastime Among Prison 
Inmates, Associated Press, January 17, 2013. See, http://
bigstory.ap.org/article/tax-fraud-popular-pastime-among-prison-
inmates .
---------------------------------------------------------------------------
    Criminals obtain Social Security Numbers from various 
sources, including medical facilities, schools, insurance 
companies, and pension funds. Another common source for Social 
Security Numbers is the Social Security Administration's Death 
Master File, a list containing the full name, Social Security 
Number, date of birth, and some address information for every 
person who dies in the United States that is published each 
year. In one instance, scam artists allegedly established a 
fake job placement company and used the information they 
learned from 300 victims to obtain more than $450,000 in 
returns from the IRS.\3\ The fraudulent returns are either paid 
to the scam artist in the form of a check, direct deposit, or 
debit cards. Debit cards are particularly dangerous because 
once a refund is issued in that form, it is extremely difficult 
to trace.
---------------------------------------------------------------------------
    \3\Identity Theft Tops List of Tax Scams, http://www.cnbc.com/id/
47077876/Identity_Theft_
Tops_List_of_Tax_Scams .
---------------------------------------------------------------------------
    The IRS detected 580,000 fake returns among the 2013 
returns alone, for which the IRS would have paid over $3.6 
billion in fraudulent claims had the perpetrators not been 
caught.\4\ In Fiscal Year 2013, the IRS initiated 1,492 
identity theft related criminal investigations; this is an 
increase of 66 percent over investigations initiated in FY 
2012.\5\ The IRS estimates that it prevented refunds for 96% of 
these known fraudulent returns.\6\ However, there are 
potentially a great many other fraudulent returns that are not 
detected. Fraudulent returns are often not detected because the 
IRS does not verify W-2 forms until after a refund is paid. 
Detection is also difficult when the identity stolen is not an 
active income tax-filer, either because the person is deceased 
or because he is not required to pay Federal income taxes. In 
those cases, the victim is not notified of the fraud when he 
attempts to file a return and, thus, does not in turn notify 
the IRS of the fraud.
---------------------------------------------------------------------------
    \4\Delvin Barrett and John McKinnon, Identity Theft Triggers a 
Surge in Tax Fraud, Wall St. Journal, February 23, 2014. See, http://
online.wsj.com/news/articles/SB100014240527023048347
04579401411935878556 .
    \5\IRS Combats Identity Theft and Refund Fraud on Many Fronts, See 
http://www.irs.gov/uac/Newsroom/IRS-Combats-Identity-Theft-and-Refund-
Fraud-on-Many-Fronts-2014 .
    \6\Id.
---------------------------------------------------------------------------
    The billions of dollars in fraudulent tax returns that are 
paid each year harm the taxpayers as a whole because, in many 
cases, the IRS pays two refunds--one to the scam artist, and 
one to the actual taxpayer. Tax return identity theft also can 
be devastating to the individual victims, who must prove their 
own identities to the IRS and, oftentimes, wait months or years 
to receive refunded money that is rightfully owed to them. In 
some instances, individual victims have faced enforcement 
actions by the IRS due to fraudulent returns filed by scam 
artists under the taxpayer's name. And recipients of Social 
Security disability payments could potentially face the loss of 
these benefits because the Social Security Administration uses 
tax returns as proof that someone is working.
    The IRS reports that it is taking a number of steps to 
prevent, detect, and prosecute tax return identity theft. These 
include:

         LImplementing identity theft screening filters 
        designed to spot fake returns before a refund is 
        issued. As of March 2012, these filters have stopped 
        potentially fraudulent returns worth $1.15 billion in 
        refunds.\7\
---------------------------------------------------------------------------
    \7\Testimony of Steven T. Miller, Deputy Commissioner for Services 
and Enforcement, Internal Revenue Service, Before the Senate Committee 
on Finance, Subcommittee on Fiscal Responsibility and Economic Growth, 
March 20, 2012.

         LIssuing identification numbers to taxpayers 
        whose identities have been stolen in order to 
        facilitate their income tax filing and prevent others 
---------------------------------------------------------------------------
        from stealing their identity.

         LImplementing procedures for using personal 
        information gathered by law enforcement to flag 
        taxpayer accounts that may be subject to identity 
        theft.

         LExpanding how the IRS uses lists of prisoners 
        in order to stop inmates from filing false returns.

         LEstablishing a specialized unit for identity 
        theft within the IRS's Criminal Investigation division.

    A 2012 report released by the Treasury Inspector General 
for Tax Administration, however, found that the IRS was falling 
short on its efforts to combat identity theft. Among the issues 
cited by the Inspector General are the length of time the IRS 
takes to resolve a case, the inadequacy of communications with 
victims, confusing and conflicting internal advice on how to 
handle such cases, and evidence that the IRS does not use the 
information it has to identify trends in identity theft in 
order to prevent future crimes.\8\
---------------------------------------------------------------------------
    \8\Most Taxpayers Whose Identities Have Been Stolen to Commit 
Refund Fraud Do Not Receive Quality Customer Service, Treasury 
Inspector General for Tax Administration, May 3, 2012.
---------------------------------------------------------------------------
    During full Committee consideration of H.R. 744, Mr. Scott 
(D-VA) offered an amendment to section 3 of the bill. The 
amendment would replace the existing mandatory sentences in the 
Aggravated Identity Theft statute (18 U.S.C. 1028A) with 
statutory maximum sentences, but only for those aggravated 
identity thefts committed against organizations. The mandatory 
sentences would continue to apply to those aggravated identity 
thefts committed against individuals. Section 3 of H.R. 744 
makes a technical clarification to the identity theft and 
aggravated identity theft statutes to ensure that these 
statutes apply to identity thefts committed against both 
individuals and organizations. Not-for-profit organizations and 
businesses are not immune to identity theft schemes, and they 
should not be excluded from the protections afforded victims in 
our Federal criminal law.
    Aggravated identity thefts are those committed in 
furtherance of specific, enumerated felonies. Congress 
specifically designed this statute to assign a determinate 
penalty for identity theft committed in furtherance of one of 
these felonies and to require such penalty to run consecutively 
to the penalty imposed for the underlying felony.
    Mr. Scott argued that his amendment would assign higher 
penalties for aggravated identity thefts committed against 
organizations than those provided by the underlying statute. 
But this claim is true in number only. While the penalties 
contemplated by Mr. Scott's amendment (4 years or 10 years) 
are, indeed, higher than the existing mandatory sentences in 
current law (2 years or 5 years), they are statutory maximum 
penalties and, therefore, assign only the top of the sentencing 
range that a Federal judge may apply. In practice, a Federal 
judge would be free to impose a sentence well below the maximum 
prescribed by Mr. Scott's amendment and even below the 
mandatory sentences currently required for aggravated identity 
thefts.\9\ Those who are found guilty of aggravated identity 
theft should be held accountable as required by the law 
regardless of whether their victim was an individual or an 
organization.
---------------------------------------------------------------------------
    \9\See U.S. Sentencing Guidelines Manual Sec. 2B1.6(a) (2013).
---------------------------------------------------------------------------

                                Hearings

    The Committee on the Judiciary held no hearings on H.R. 
744.

                        Committee Consideration

    On July 16, 2014, the Committee met in open session and 
ordered the bill H.R. 744 favorably reported with an amendment, 
by voice vote, a quorum being present.

                            Committee Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
following rollcall votes occurred during the Committee's 
consideration of H.R. 744.
    1. An amendment by Mr. Scott of Virginia to replace the 
existing mandatory penalties in 18 U.S.C. 1028A with statutory 
maximum penalties for offenses under this section committed 
against organizations. Defeated by a rollcall vote of 12 to 16.

                             ROLLCALL NO. 1
------------------------------------------------------------------------
                                                  Ayes    Nays   Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman...................              X
Mr. Sensenbrenner, Jr. (WI)....................              X
Mr. Coble (NC).................................              X
Mr. Smith (TX).................................              X
Mr. Chabot (OH)................................              X
Mr. Bachus (AL)................................
Mr. Issa (CA)..................................              X
Mr. Forbes (VA)................................
Mr. King (IA)..................................              X
Mr. Franks (AZ)................................              X
Mr. Gohmert (TX)...............................              X
Mr. Jordan (OH)................................              X
Mr. Poe (TX)...................................
Mr. Chaffetz (UT)..............................              X
Mr. Marino (PA)................................              X
Mr. Gowdy (SC).................................              X
Mr. Labrador (ID)..............................      X
Ms. Farenthold (TX)............................
Mr. Holding (NC)...............................              X
Mr. Collins (GA)...............................              X
Mr. DeSantis (FL)..............................
Mr. Smith (MO).................................              X
[Vacant].......................................

Mr. Conyers, Jr. (MI), Ranking Member..........      X
Mr. Nadler (NY)................................
Mr. Scott (VA).................................      X
Ms. Lofgren (CA)...............................      X
Ms. Jackson Lee (TX)...........................
Mr. Cohen (TN).................................      X
Mr. Johnson (GA)...............................      X
Mr. Pierluisi (PR).............................      X
Ms. Chu (CA)...................................      X
Mr. Deutch (FL)................................      X
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................      X
Ms. DelBene (WA)...............................      X
Mr. Garcia (FL)................................
Mr. Jeffries (NY)..............................
Mr. Cicilline (RI).............................      X
                                                ------------------------
    Total......................................     12      16
------------------------------------------------------------------------

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee advises that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives is inapplicable because this legislation does 
not provide new budgetary authority or increased tax 
expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, H.R. 744, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 25, 2014.
Hon. Bob Goodlatte, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 744, the ``STOP 
Identity Theft Act of 2013.''
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Mark 
Grabowicz, who can be reached at 226-2860.
            Sincerely,
                                      Douglas W. Elmendorf,
                                                  Director.

Enclosure

cc:
        Honorable John Conyers, Jr.
        Ranking Member

               H.R. 744--STOP Identity Theft Act of 2013.

      As ordered reported by the House Committee on the Judiciary 
                           on July 16, 2014.

    H.R. 744 would direct the Department of Justice (DOJ) to 
better utilize its existing resources to combat identity theft 
related to the filing of tax returns. The department currently 
allocates its funding to investigate and prosecute a wide range 
of criminal activity, including identity theft. CBO expects 
that the legislation could result in a reallocation of DOJ 
resources, but we estimate that implementing the bill would 
have no significant net cost to the Federal Government. 
Enacting H.R. 744 would not affect direct spending or revenues; 
therefore, pay-as-you-go procedures do not apply.
    H.R. 744 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Mark Grabowicz. 
The estimate was approved by Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

                    Duplication of Federal Programs

    No provision of H.R. 744 establishes or reauthorizes a 
program of the Federal Government known to be duplicative of 
another Federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111-139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

                  Disclosure of Directed Rule Makings

    The Committee estimates that H.R. 744 specifically directs 
to be completed no specific rule makings within the meaning of 
5 U.S.C. 551.

                    Performance Goals and Objectives

    The Committee states that pursuant to clause 3(c)(4) of 
rule XIII of the Rules of the House of Representatives, H.R. 
744 would provide additional tools for the effective criminal 
prosecution of tax return identity theft.

                          Advisory on Earmarks

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 744 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(e), 9(f), or 9(g) of Rule XXI.

                      Section-by-Section Analysis

    Section 1--Short Title. This section cites the short title 
of the Act as the Stopping Tax Offenders and Prosecuting 
Identity Theft Act of 2013 or the STOP Identity Theft Act of 
2014.
    Section 2--Use of Department of Justice Resources with 
Regard to Tax Return Identity Theft. This section encourages 
the Department of Justice to dedicate additional resources, 
including the use of investigative task forces, to address tax 
return identity theft. The section encourages the Department to 
focus its resources in areas with a high rate of tax return 
identity theft, to coordinate investigations with state and 
local law enforcement agencies, and to protect vulnerable 
victims, including veterans, seniors and minors.
    Section 3--Victims of Identity Theft May Include 
Organizations. This section amends the Federal identity theft 
statutes (18 U.S.C. Sec. 1028 and 1028A) to clarify that the 
victims of such an offense includes not just individuals, but 
businesses and organizations as well.
    Section 4--Identity Theft for Purposes of Tax Fraud. This 
section amends the Federal identity theft statute (18 U.S.C. 
Sec. 1028) to authorize a statutory maximum sentence of 20 
years for identity thefts committed during and in relation to 
tax fraud under sections 7206 or 7207 of the Internal Revenue 
Code.
    Section 5--Reporting Requirement. This section instructs 
the Department of Justice to issue to the House and Senate 
Judiciary Committees within 180 days of enactment a report on 
the trends in tax return identity theft, recommendations for 
additional improvements to Federal law, and the status of the 
Department's implementation of the DOJ IG's 2010 report 
entitled ``The Department of Justice's Efforts to Combat 
Identity Theft.''

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

                      TITLE 18, UNITED STATES CODE

           *       *       *       *       *       *       *
PART I--CRIMES

           *       *       *       *       *       *       *

CHAPTER 47--FRAUD AND FALSE STATEMENTS

           *       *       *       *       *       *       *

Sec. 1028. Fraud and related activity in connection with identification 
                    documents, authentication features, and information

    (a) Whoever, in a circumstance described in subsection (c) 
of this section--
            (1) * * *

           *       *       *       *       *       *       *

            (7) knowingly transfers, posseses, or uses, without 
        lawful authority, a means of identification of another 
        person (including an organization) with the intent to 
        commit, or to aid or abet, or in connection with, any 
        unlawful activity that constitutes a violation of 
        Federal law, or that constitutes a felony under any 
        applicable State or local law; or

           *       *       *       *       *       *       *

    (b) The punishment for an offense under subsection (a) of 
this section is--
            (1) * * *

           *       *       *       *       *       *       *

            (3) a fine under this title or imprisonment for not 
        more than 20 years, or both, if the offense is 
        committed--
                    (A) * * *
                    (B) in connection with a crime of violence 
                (as defined in section 924(c)(3)); [or]
                    (C) after a prior conviction under this 
                section becomes final; or
                    (D) during and in relation to a felony 
                under section 7206 or 7207 of the Internal 
                Revenue Code of 1986;

           *       *       *       *       *       *       *

    (d) In this section and section 1028A--
            (1) * * *

           *       *       *       *       *       *       *

            (7) the term ``means of identification'' means any 
        name or number that may be used, alone or in 
        conjunction with any other information, to identify a 
        specific individual or other person, including any--
                    (A) * * *

           *       *       *       *       *       *       *

Sec. 1028A. Aggravated identity theft

    (a) Offenses.--
            (1) In general.--Whoever, during and in relation to 
        any felony violation enumerated in subsection (c), 
        knowingly transfers, possesses, or uses, without lawful 
        authority, a means of identification of another person 
        (including an organization) shall, in addition to the 
        punishment provided for such felony, be sentenced to a 
        term of imprisonment of 2 years.

           *       *       *       *       *       *       *

                            Dissenting Views

                              INTRODUCTION

    H.R. 744, the ``Stopping Tax Offenders and Prosecuting 
Identity Theft Act'' or the ``STOP Identity Theft Act,'' 
encourages the Department of Justice to increase its efforts to 
fight tax return identity theft and makes a number of changes 
to the existing identity theft statutes with the goal of 
enhancing the ability of prosecutors to bring charges against 
perpetrators of this type of crime. While well-intentioned, the 
bill raises longstanding concerns we have with mandatory 
minimum sentencing by expanding the scope of possible 
defendants who would be subject to the existing mandatory 
penalty of the aggravated identity theft statute, 18 U.S.C. 
Sec. 1028A. For this reason, and those stated below, we are 
unable to support this legislation and respectfully dissent.

                       DESCRIPTION AND BACKGROUND

    H.R. 744 is primarily intended to combat the serious 
problem of tax return identity theft. Like other forms of 
identity theft, tax fraud through identity theft is a growing 
problem in the United States. This crime is committed when an 
individual uses the Social Security Number and other 
information of another individual to file a false tax return 
with the Internal Revenue Service (``IRS'') or fraudulently 
claims someone as a dependant in order to receive a refund. Tax 
fraud through identity theft is often committed by gangs and 
organized crime organizations who defraud large groups of 
people.\1\ These groups see it as a low-risk, high-return 
crime. Tax fraud is also being committed at high rates by 
prison inmates. In 2009, there were 1,464 fraudulent tax 
returns filed by inmates.\2\
---------------------------------------------------------------------------
    \1\Tax Fraud by Identity Theft, Part 2: Statute, Progress, and 
Potential Solutions: Hearing Before the Subcomm. on Fiscal 
Responsibility and Economic Growth of the S. Comm. on Finance, 112th 
Cong. (2012) (written statement of Nina E Olson, National Taxpayer 
Advocate).
    \2\Senators Press IRS to Stop Prisoner Tax Fraud, Accounting Today, 
Jan. 19, 2011, available at http://www.accountingtoday.com/news/
Senators-Press-IRS-Stop-Prisoner-Tax-Fraud-56973-1.html.
---------------------------------------------------------------------------
    The IRS detected 940,000 fake returns among the 2010 
returns alone, for which the IRS would have paid more than $6.5 
billion in fraudulent payments if the fake returns had not been 
detected and stopped.\3\ The IRS estimates, however, that it 
did pay as much as $5.2 billion in fraudulent refunds for 
unidentified fake tax returns filed for 2010.\4\
---------------------------------------------------------------------------
    \3\Identity Theft and Tax Fraud: Joint Hearing before the Subcomm. 
on Oversight and the Subcomm. on Social Security of the H. Comm. on 
Ways and Means, 112th Cong. (2012) (testimony of J. Russell George, 
Treasury Inspector General for Tax Administration).
    \4\Id.
---------------------------------------------------------------------------
    This bill encourages the Department of Justice to bring 
more prosecutions of tax return identity theft; expands the 
definition of victims of identity theft to include 
organizations in addition to individuals; requires the Justice 
Department to report on the incidence of tax return identity 
theft and enforcement efforts; and adds tax fraud as a 
predicate for identity theft under 18 U.S.C. Sec. 1028(b). A 
detailed section-by-section analysis of the bill as reported 
follows:
    Sec. 1. Short Title. Section 1 sets forth the short title 
of the bill as the Stopping Tax Offenders and Prosecuting 
Identity Theft Act of 2013 or STOP Identity Theft Act of 2013.
    Sec. 2. Use of Department of Justice Resources with Regard 
to Tax Return Identity Theft. Section 2 encourages the 
Department of Justice to dedicate additional resources, 
including the use of investigative task forces, to address tax 
return identity theft. The section encourages the Department to 
focus its resources in areas of the country with a high rate of 
tax return identity theft, to coordinate investigations with 
state and local law enforcement agencies, and to protect 
vulnerable victims, including veterans, seniors, and minors.
    Sec. 3. Victims of Identity Theft May Include 
Organizations. Section 3 amends the Federal identity theft 
statute (18 U.S.C. Sec. 1028) and the aggravated identity theft 
statute (18 U.S.C. Sec. 1028A), as requested by the Department 
of Justice, to clarify that the victims of such an offense 
include not just individuals, but businesses and organizations 
as well. Depending on the circumstances of the offense and the 
purpose for which the identity theft is perpetrated, the 
maximum penalty for the basic identity theft provision is 30 
years in prison. However, the aggravated identity theft 
statute, which applies when the theft of the identity of 
another person facilitates certain types of conduct, such as 
theft of public money, false personation of citizenship, and 
acquisition of a firearm, provides for a mandatory additional 
2-year sentence. When the conduct facilitated by the identity 
theft is an offense related to crimes of terrorism, the 
mandatory additional sentence under the aggravated identity 
theft statute is 5 years.
    Sec. 4. Identity Theft for Purposes of Tax Fraud. Section 4 
amends the Federal identity theft statute to provide sentences 
of up to 20 years in prison for those who engage in identity 
theft during and in relation to certain tax fraud offenses.
    Sec. 5. Reporting Requirement. Section 5 instructs the 
Justice Department to submit, within 180 days of enactment, a 
report to the Committees on the Judiciary of the House of 
Representatives and the Senate concerning trends in the 
incidence of tax return identity theft, recommendations on 
additional statutory tools that would aid in the prosecution of 
tax return identity theft, and the status of implementation of 
recommendations concerning combating identity theft included in 
a 2010 report of the Inspector General of the Department of 
Justice.

                         CONCERNS WITH H.R. 744

    H.R. 744's proposed changes to the aggravated identity 
theft statute would compound the unjust sentencing scheme in 
that statute. In section 3, the bill would amend the primary 
Federal identity theft statute (18 U.S.C. Sec. 1028) and the 
aggravated identity theft statute (18 U.S.C. Sec. 1028A) to 
provide that these statutes prohibit identity theft against 
organizations, in addition to the current prohibition related 
to the theft of identities of individuals. While extending the 
protections against identity theft to organizations may be a 
worthy goal, this section unfortunately expands the application 
of the mandatory sentences provided in 18 U.S.C. Sec. 1028A. 
The statute currently provides for a mandatory 2-year sentence 
for identity theft that facilitates certain crimes and a 
mandatory 5-year sentence when the conduct facilitated by the 
identity theft is an offense related to crimes of terrorism.
    In order to address this flaw, Congressman Robert C. 
``Bobby'' Scott (D-VA) offered an amendment at markup that 
would have prevented this extension of the mandatory sentences. 
The amendment provided that, instead of the mandatory terms of 
imprisonment for offenses against organizations under the 
aggravated identity theft statute, judges would be allowed to 
impose sentences of up to 4 and 10 years, which is double the 
current mandatory amounts, but without being mandatory in 
nature. Judges should be permitted to exercise their 
constitutional role as neutral arbiters imposing a proportional 
sentence that is sufficient but not greater than necessary to 
accomplish the deterrent and rehabilitative goals of 
punishment. Because the amendment was defeated by a vote of 12 
to 16, the bill as reported by the Committee retains this flaw 
concerning mandatory sentencing.
    The extension of the 2-year and 5-year mandatory sentences 
in H.R. 744, even if it may only apply to a limited number of 
cases, is problematic. Mandatory minimum sentences are the 
wrong way to determine punishment under this or any other 
statute because they not only lead to unjust outcomes for 
individuals, but also have serious systemic consequences by 
contributing to the problem of overincarceration. As of 
September 2010, 75,579 Federal prisoners--more than one-third 
(39.4%)--were serving mandatory minimum sentences.\5\ This 
represents a 155% increase from the number of Federal prisoners 
serving mandatory minimum sentences in 1995 (29,603).\6\ Since 
Congress enacted harsh mandatory minimums in the 1980s, the 
Federal prison population has exploded by over 800% to more 
than 216,000 by June, 2014.\7\
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    \5\United States Sentencing Commission, Report to Congress: 
Mandatory Minimum Penalties in the Federal Criminal System, at 148 
(Oct. 2011), available at http://www.ussc.gov/sites/
default/files/pdf/news/congressional-testimony-and-reports/mandatory-
minimum-penalties/201110
31-rtc-pdf/Chapter_07.pdf.
    \6\Id. at 81, available at http://www.ussc.gov/sites/default/files/
pdf/news/congressional-
testimony-and-reports/mandatory-minimum-penalties/20111031-rtc-pdf/
Chapter_04.pdf.
    \7\Bureau of Prisons, Historical Information, at http://
www.bop.gov/about/history/ and Inmate Statistics: Offenses, at http://
www.bop.gov/about/statistics/statistics_inmate_offenses.jsp.
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    In addition, higher than warranted sentences resulting from 
mandatory minimum sentencing strain public finances. For 
example, the average cost of incarceration for a Federal inmate 
in fiscal year 2011 was $28,893.40.\8\ In fact, the U.S. 
Department of Justice has referred to the increased year-to-
year spending on Federal prisons as ``unsustainable'' and a 
threat to public safety.\9\ For fiscal year 2014, close to a 
third (28.8%) of the Justice Department's $27.7 billion budget 
is earmarked for Federal prisons and detention.\10\ Every 
dollar expended on lengthy mandatory minimum incarcerations is 
a dollar that cannot be spent on crime prevention, victim 
services, training, investigation, and prosecution.\11\ Absent 
smarter sentencing policies and reformation of mandatory 
minimum sentences, prison populations and their associated 
costs will continue to escalate.\12\ We need to take steps to 
ensure that sentences are appropriately severe, but are not set 
beyond levels that no longer serve legitimate criminal justice 
purposes.
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    \8\Bureau of Prisons, Annual Determination of Average Cost of 
Incarceration, 78 Fed. Reg. No. 52 at 16711 (Mar. 18, 2013), available 
at http://www.gpo.gov/fdsys/pkg/FR-2013-03-18/pdf/2013-06139.pdf.
    \9\Michael E. Horowitz, Inspector General, Top Management and 
Performance Challenges Facing the Dep't of Justice--2013, at http://
www.justice.gov/oig/challenges/2013.htm.
    \10\U.S. Senate Committee on Appropriations, Summary: Fiscal Year 
2014 Omnibus Appropriations Bill 5-7 (Jan. 13, 2014), at http://
www.appropriations.senate.gov/news.cfm?
method=news.view&id=5aa8e660-f52e-4074-945f-9618eb963ae9.
    \11\Id.
    \12\Horowitz, supra n.7.
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    This is one reason why the Committee's bipartisan Over-
Criminialization Task Force was authorized in 2013 to ``assess 
our current Federal criminal statutes and make recommendations 
for improvements.''\13\ While the Committee examines the 
information and testimony gathered by the Task Force and 
continues to study a range of issues related to the criminal 
justice system, including the penalties in the Federal criminal 
code, we should not, as this bill would do, expand mandatory 
minimum sentencing.
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    \13\U.S. House of Representatives, Committee on the Judiciary, 
Press Release, Feb. 5, 2014, available at http://judiciary.house.gov/
index.cfm/2014/2/house-judiciary-committee-reauthorizes-bipartisan-
over-criminalization-task-force.
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    In addition to the serious concerns related to mandatory 
minimum sentencing, we question the need for Section 4 of the 
bill, which would amend the Federal identity theft statute, 18 
U.S.C. Sec. 1028, to allow for penalties of up to 20 years 
imprisonment for violations of that statute involving certain 
tax fraud offenses in the Internal Revenue Code. It appears 
that the current statutes, including the underlying identity 
theft statute and the mail and wire fraud statutes, 18 U.S.C. 
Sec. Sec. 1341 and 1343, may adequately apply to and provide 
appropriate penalties for instances of tax return identity 
theft. In fact, the mail and wire fraud statutes already 
provide for lengthy prison sentences of up to 20 years for each 
violation.
    While tax return identity theft is a serious problem that 
defrauds both individuals and their government, the most 
effective means of addressing this crime may well be better 
enforcement of current law. If Federal prosecutors are not 
prosecuting offenders as often as they should, then we should 
encourage them to do more and provide them with the resources 
to do so.

                               CONCLUSION

    Tax return identity theft is a serious problem and Congress 
has an interest in ensuring Federal law enforcement authorities 
are vigorously combating it. While H.R. 744 is a well-
intentioned effort to address this problem, it is flawed 
because it expands the scope of possible defendants who would 
be subject to mandatory minimum sentencing, an unjust and 
unwise policy that leads to rising prison populations and 
strained public finances.
    For the foregoing reasons, we respectfully dissent.

                                   John Conyers, Jr.
                                   Robert C. ``Bobby'' Scott.
                                   Zoe Lofgren.
                                   Henry C. ``Hank'' Johnson, Jr.

                                  
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