United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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No. 06-3372

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United States of America, *

*

Appellant, *

* Appeal from the United States

v. * District Court for the

* District of Minnesota.

Richard L. Carlson, *

*

Appellee. *

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Submitted: May 14, 2007

Filed: August 20, 2007

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Before LOKEN, Chief Judge, JOHN R. GIBSON, and WOLLMAN, Circuit Judges.

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WOLLMAN, Circuit Judge.

Richard L. Carlson pled guilty to willfully failing to account for and pay over

trust fund taxes, in violation of 26 U.S.C. § 7202, and was sentenced to eight months’

home confinement, five years’ probation, and 1,000 hours of community service. The

government appeals the sentence, arguing that it is unreasonable. We vacate the

sentence and remand for resentencing. 
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I.

From 1986 to 2003, Carlson and his brother each owned fifty percent of the

capital stock of Jyland Development, Inc. (Jyland), whose business consisted of land

development and new home construction. During each of the twenty-four quarters

from 1998 to 2003, Carlson withheld payroll taxes from the wages of Jyland’s

employees, including himself and his brother, but did not pay those taxes over to the

Internal Revenue Service (IRS). Carlson asserts that the money was used for business,

rather than personal, expenses and that his failure to remit the withheld taxes began

after a client defaulted on its obligation and there had been a downturn in the market.

The total amount withheld but not remitted by Carlson was determined to be

$561,223.76. 

Carlson was charged with and pled guilty to one count of willfully failing to

account for and pay over trust fund taxes, a violation of 26 U.S.C. § 7202. Prior to

pleading guilty, Carlson paid the IRS the full amount of payroll taxes owed. To do

so, Carlson withdrew $35,000 from his retirement account and borrowed $175,000

from each of two friends, both of which loans were secured by the equity in his home.

At sentencing, the district court adopted, without objection by either party, the factual

statements and conclusions contained in the presentence report (PSR). Because of the

amount of the tax loss, Carlson’s base level offense was calculated to be eighteen.

From this, Carlson received a three-level reduction for acceptance of responsibility,

resulting in a total offense level of fifteen. Since this was Carlson’s first offense, his

criminal history category was I. Given this offense level and criminal history

category, Carlson faced a sentencing guidelines range of eighteen to twenty-four

months’ imprisonment, two to three years of supervised release, and a fine of $4,000

to $40,000. 

At the sentencing hearing, Carlson asked the court to impose a sentence below

the guidelines range, reasserting arguments proffered in an earlier motion. In
1

The defendant in Ture was convicted of willfully attempting to evade federal

income tax and ultimately sentenced to two years’ probation and 300 hours of

community service, which amounted to a five-level reduction in his total offense level

and a 100% variance from the guidelines range. United States v. Ture, 450 F.3d 352,

355 (8th Cir. 2006). On appeal, we concluded that the district court’s sentence was

unreasonable and remanded for resentencing. Id. at 359-60.

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response, the government stated that, in the circumstances, it opposed any downward

variance. The district court thereafter varied downward from the guidelines range and

imposed the sentence described above. In doing so, the district court noted that five

years’ probation is the maximum that can be imposed, that 1,000 hours of community

service is the most the court has ever imposed, and that the district court “accorded

significant weight to the guidelines range and believes that the sentence imposed is

no more severe than necessary to take into account the purpose of the guidelines.”

The district court stated that the “substantial variance here is supported by comparably

extraordinary circumstances,” and justified the variance on the basis that Carlson (1)

has a significant record of charitable activities; (2) accepted responsibility and made

an exceptional effort to repay the money; (3) suffered damage to his business,

reputation, and family relationships; and (4) was not motivated by a desire to defraud

the government, but was instead attempting to resolve a financial crisis within the

business. In its statement of reasons, the district court also distinguished this case

from our decision in United States v. Ture, 450 F.3d 352 (8th Cir. 2006).1

II.

Neither party challenges the district court’s calculation of the guidelines range.

When there is no dispute on appeal about the applicable guidelines range, we review

“[a] district court’s decision to vary from the advisory sentencing Guidelines range . . .

for reasonableness, which is a similar standard to the abuse of discretion standard.”
2

Carlson asserts that the government did not properly preserve an objection to

a below the guidelines sentence, limiting us to plain error review, because the

government did not file a response to Carlson’s motion for a sentence below the

advisory guidelines range and because the government, at the sentencing hearing,

stated only that, “for this crime, six years sustained pattern of stealing money from the

IRS and the taxpayers, we stand by the guideline range to which we have stipulated

and which was the result of substantial negotiations, and we respectfully oppose any

downward departure or variance from the guideline range.” We reject Carlson’s

assertion. As the government points out, the District of Minnesota’s Local Rule

83.10, upon which Carlson relies on to assert that the government was required to file

a response to his motion, prescribes the procedure used to resolve disputes concerning

the content found in PSRs. Because such disputes are not present here, the local rule

does not support Carlson’s position. Furthermore, we conclude that the government’s

oral statement at sentencing was sufficient to apprise the district court of its position

regarding a below the guidelines sentence and that the issue was thus preserved for

appellate review. 

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United States v. Pepper, 486 F.3d 408, 411 (8th Cir. 2007).2

 A sentence that varies

from the guidelines range is reasonable “so long as the judge offers appropriate

justification under the factors specified in Section 3553(a),” but “[t]he further the

district court varies from the presumptively reasonable guideline range, the more

compelling the justification based on the 3553(a) factors must be.” United States v.

Bryant, 446 F.3d 1317, 1319 (8th Cir. 2006). In addition, a sentence imposed outside

the guidelines range 

may be unreasonable if a sentencing court fails to consider a relevant

factor that should have received significant weight, gives significant

weight to an improper or irrelevant factor, or considers only appropriate

factors but nevertheless commits a clear error of judgment by arriving at

a sentence that lies outside the limited range of choice dictated by the

facts of the case. 

United States v. Haack, 403 F.3d 997, 1004 (8th Cir.), cert. denied, 126 S. Ct. 276

(2005). Our review of Carlson’s sentence takes into account the fact that a variance
3

We reject Carlson’s contention that his sentence to eight months of home

confinement should be considered equivalent to eight months of imprisonment when

determining the extent of a variance from the sentencing guidelines. Although United

States Sentencing Guidelines § 5C1.1 provides that home confinement may be a

substitute for imprisonment in some circumstances and that, in such a case, a day of

home confinement is equivalent to a day of imprisonment, this substitute punishment

is not permitted under the guidelines when the defendant’s guideline range is in Zone

D, as is the case here. See also United States v. Soperla, No. 06-3316, 2007 WL

2141678, at *4 (8th Cir. July 27, 2007). 

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from a guidelines sentencing range of imprisonment down to probation is not per se

unreasonable. See United States v. Wadena, 470 F.3d 735, 738 (8th Cir. 2006).

The sentenced imposed upon Carlson in effect amounts to a 100% downward

variance from the guidelines range and a seven-level reduction in Carlson’s total

offense level.3

 “‘We have suggested that a variance to zero prison time where the

Sentencing Commission has found that substantial prison time is indicated . . .

requires extraordinary justification,’” United States v. Soperla, No. 06-3316, 2007

WL 2141678, at *3 (8th Cir. July 27, 2007) (quoting United States v. McDonald, 461

F.3d 948, 957 n.7 (8th Cir. 2006)), and “have routinely rejected this kind of variance

as unreasonable.” Id. at *4 (collecting cases). We similarly reject this variance here

and conclude that the sentence is unreasonable because the district court, in

formulating it, failed to accord significant weight to certain § 3553(a) factors and

failed to articulate sufficiently compelling circumstances to justify such a large

variance. 

Section 3553(a) requires the district court to consider, among other things, the

need for the sentence to promote respect for the law, to reflect the seriousness of the

offense, and to provide just punishment. In Ture, we addressed these considerations

and recognized that “‘[t]ax offenses, in and of themselves, are serious offenses,’” and

that “‘a greater tax loss is obviously more harmful to the treasury and more serious

than a smaller one.’” Ture, 450 F.3d at 357-58 (alteration in original) (quoting United
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States Sentencing Guidelines (U.S.S.G.) § 2T1.1, cmt. background). We also noted

that “‘criminal tax laws are designed to protect the public interest in preserving the

integrity of the nation’s tax system’” and that “‘[c]riminal tax prosecutions serve to

punish the violator and promote respect for the tax laws.’” Id. at 357 (quoting

U.S.S.G. Manual ch. 2, pt. T, introductory cmt.). With these considerations in mind,

we concluded in Ture that, given the duration of the defendant’s criminal conduct

(nearly four years), the amount of tax evaded ($240,252), and his enlistment of an

employee to assist with the crime, “the District Court failed to adequately consider the

seriousness of Ture’s offense, the goal of promoting respect for our federal tax laws,

and the need for a just sentence” when it imposed a sentence of two years’ probation

and 300 hours of community service, which amounted to a 100% downward variance

from the guidelines range and a five-level reduction in the defendant’s total offense

level. Id. at 358. The sentence imposed here compels the same conclusion,

particularly in light of the fact that, as compared to Ture, (1) Carlson evaded a

significantly greater amount of tax ($561,223.76), (2) his criminal conduct extended

for a longer duration (six years), and (3) he received a larger reduction in his total

offense level (seven-level). Although Carlson did not enlist the help of an employee

in committing his offense and received a longer term of probation, more hours of

community service, and eight months of home confinement, we still conclude, as we

did in Ture, that the district court failed to adequately consider the seriousness of

Carlson’s offense, the goal of promoting respect for our federal tax laws, and the need

for a just sentence when formulating Carlson’s sentence.

The district court’s 100 % variance additionally demonstrates a failure to accord

significant weight to the need for sentences to deter future criminal conduct. See 18

U.S.C. § 3553(a)(2) (2000). Terms of imprisonment are important “to deter others

from stealing from the national purse.” Ture, 450 F.3d at 358. This is particularly

true in cases involving willful tax evasion, since that crime often goes undetected. Id.

(“[W]illful tax evaders often go undetected such that those who are caught –

especially those who are caught evading nearly a quarter-million dollars in tax – must
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be given some term of imprisonment.”). Although the district court noted that “[i]t

is highly unlikely that Carlson will ever commit another crime,” it did not address the

sentence’s effect of deterring others – an important consideration. See United States

v. Miller, 484 F.3d 964, 967-68 (8th Cir. 2007) (“[G]eneral deterrence . . . is one of

the key purposes of sentencing . . . .” (quotations omitted)) Because of the district

court’s failure to address the deterrence of others, the importance placed on imposing

terms of imprisonment to deter future tax evaders, and the fact that Carlson received

no term of imprisonment, we conclude that the district court failed to give the goal of

deterrence adequate weight when formulating its sentence. 

The district court further failed to adequately consider the need to avoid

unwarranted sentencing disparities among similar defendants. 18 U.S.C. § 3553(a)(6).

As we have noted, “[t]o reduce sentencing disparities, the Guidelines sought to ensure

more tax evaders were sentenced to prison, specifically focusing on those who evaded

more than $100,000 in federal taxes.” Ture, 450 F.3d at 358-59. In Ture, where the

defendant had a similar record (first offense) and had been found guilty of similar

conduct (tax evasion), we reversed a 100%, five-offense-level variance. Id. at 354-55,

357-59. Here, the district court recognized the similarities between Carlson’s case and

Ture, noting that both involved first offenses, expressions of remorse, and cooperation

with the prosecution, but then attempted to distinguish Carlson’s sentence from the

one in Ture on the basis that, unlike the defendant in Ture, Carlson had a significant

record of charitable activities, had not enlisted an employee to assist in the crime, and

was motivated to commit the crime because of a financial crisis, rather than personal

gain. Although we acknowledge these differences, we do not believe that they are

sufficient to justify the imposition of a 100% (seven-level) variance here when we

reversed a 100% (five-level) variance in Ture, particularly given the number of

similarities between the two cases and the fact that Carlson failed to remit almost

twice as much in taxes for a longer period of time. 
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Finally, we conclude that the “extraordinary factors” relied on by the district

court to justify its sentence are not sufficiently compelling to justify a 100% variance

– a variance that, as we acknowledged above, requires “extraordinary justification.”

See Soperla, 2007 WL 2141678, at *3. Carlson’s record of charitable activities is

certainly commendable, as evidenced by the numerous letters that outlined his

involvement in his community and church and the impact he has had on many lives.

We do not believe, however, that it was extraordinary, especially in light of some of

our other cases addressing the issue. Compare United States v. Morken, 133 F.3d

628, 630 (8th Cir. 1998) (concluding that a defendant’s “record of good works is

neither exceptional nor out of the ordinary” even though he advised local business

owners, hired young people, served on his church council, raised money for charity,

and was an accommodating neighbor and a good friend), with United States v. Woods,

159 F.3d 1132, 1136-37 (8th Cir. 1998) (upholding a one-level downward departure

based on a defendant’s exceptional charitable activity, which included bringing two

troubled women into her own home, paying for these women to attend a private high

school, and caring for an elderly friend who lived nearby). We similarly do not

believe that Carlson’s repayment of the unpaid taxes prior to entering his plea of

guilty, or the efforts associated therewith, constitutes a sufficiently exceptional

circumstance. The district court stated that “Carlson liquidated his family’s assets so

that he could fully repay the debt owed to the Internal Revenue Service,” and then

classified Carlson’s repayment efforts, which included the withdrawal of $35,000

from his retirement account and the borrowing of $350,000 from two friends, as “truly

exceptional efforts” that “equate[d] in the Court’s view to extraordinary acceptance

of responsibility.” As the government points out, however, Carlson had already

received a three-level downward departure for his acceptance of responsibility, and

the only asset of Carlson’s that was shown to have actually been liquidated was his

retirement account. In addition, these repayment efforts, when compared to other

cases, are not exceptionally compelling. See United States v. O’Malley, 364 F.3d 974,

981-82 (8th Cir. 2004) (concluding that the defendant’s pre-sentencing repayment of

the $459,047.02 he owed did not constitute extraordinary restitution sufficient to
4

We recognize, as did the court in O’Malley, that placing too much weight on

a defendant’s ability to make restitution immediately works to “differentiate criminal

defendants on the basis of their economic resources, which is clearly contrary to the

intent of the sentencing guidelines.” United States v. O’Malley, 364 F.3d 974, 981

(8th Cir. 2004).

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justify a departure, even though the defendant “must have gone to great lengths” to

come up with the money); United States v. Oligmueller, 198 F.3d 669, 672 (8th Cir.

1999) (upholding a one-level downward departure on the basis of the defendant’s

repayment efforts because the defendant, among other things, voluntarily began

making restitution payments one year before he was indicted, worked hard to insure

that his assets received the highest possible value, turned over his life insurance policy

and wife’s certificate of deposit, took up an outside job, and gave up his home).4

In support of its variance, the district court also stated that “Carlson’s crime was

not motivated by a desire to defraud and was not for personal gain,” but that he was

instead “motivated by a financial crisis and . . . acted to preserve subcontractors and

others who were relying on him in his business.” Although Carlson’s purported

intentions were arguably better than a defendant who uses the funds for purely

personal reasons, we note that Carlson, as a fifty percent shareholder of Jyland, still

benefitted personally from his failure to remit the payroll taxes and that he still

defrauded the government by doing so. This rationale is consequently not particularly

compelling. Nor is the damage Carlson has suffered to his business, family, and

reputation – another consideration relied on by the district court. Although Carlson

has certainly suffered such damage, it does not appear to be anything out of the

ordinary for individuals convicted of such crimes.

For the foregoing reasons, we conclude that the circumstances present here do

not justify the variance granted by the district court and that the sentence was

therefore unreasonable in light of the relevant sentencing factors. Accordingly, we
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vacate the sentence and remand for resentencing consistent with the views expressed

in this opinion. 

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