## United States Court of Appeals
FOR THE EIGHTH CIRCUIT

___________
No. 06-3372

___________ United States of America, *

* Appellant, * * Appeal from the United States v. * District Court for the * District of Minnesota. Richard L. Carlson, *

* Appellee. *

___________ Submitted: May 14, 2007 Filed: August 20, 2007

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

___________ WOLLMAN, Circuit Judge.

Richard L. Carlson pled guilty to willf ully 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.-2- 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 c onstruction. During each of the twenty-four quarters from 1998 to 2003, Carlson withheld payro ll taxes from the wa ges of Jyland’s employees, including himself and his brother, but did not pay thos e taxes over to the Internal Revenue Service (IRS). Carlson asse rts that the money was used for business, rather than personal, expenses and that hi s 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 re mitted 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 loan s were secured by the equity in his home. At sentencing, the district court adopted, w ithout objection by either party, the factual statements and conclusions contained in th e presentence report (PSR). Because of the amount of the tax loss, Carlson’s base leve l 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 aske d the court to impose a sentence below the guidelines range, reasserting arguments proffered in an earlier motion. In1 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 hi s 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 conclude d that the district court’s sentence was unreasonable and remanded for resentencing. Id. at 359-60.

-3- response, the government stated that, in the circumstances, it opposed any downward variance. The district court thereafter va ried 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 di strict 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 “substa ntial variance here is supported by comparably extraordinary circumstances,” and justifie d 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 mone y; (3) suffered damage to his business, reputation, and family relati onships; 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 c ourt’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 th e 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 th e government, at the sentencing hearing, stated only that, “for this crime, six year s sustained pattern of stealing money from the IRS and the taxpayers, we st and 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 pro cedure used to resolve disputes concerning the content found in PSRs. Because such dis putes are not present here, the local rule does not support Carlson’s position. Furtherm ore, 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 an d that the issue was thus preserved for appellate review.

-4- United States v. Pepper , 486 F.3d 408, 411 (8th Cir. 2007). 2A sentence that varies from the guidelines range is reasonable “s o 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 presump tively 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 c ourt 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 limite d 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 variance3 We reject Carlson’s contention that his sentence to eight months of home confinement should be considered equivale nt to eight months of imprisonment when determining the extent of a variance fro m the sentencing guidelines. Although United States Sentencing Guidelines § 5C1.1 pr ovides that home confinement may be a substitute for imprisonment in some circumst ances and that, in su ch a case, a day of home confinement is equivalent to a day of imprisonment, this substitute punishment is not permitted under the guidelines when th e defendant’s guidelin e 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).

-5- 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 justificati on,’” 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 si milarly reject this variance here and conclude that the sentence is unreas onable 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 prom ote 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 se rious offenses,’” and that “‘a greater tax loss is obviously moreharmful to the treasury and more serious than a smaller one.’” Ture , 450 F.3d at 357-58 (alteration in original) (quoting United-6- States Sentencing Guidelines (U.S.S.G.) § 2T1.1, cmt. background). We also noted that “‘criminal tax laws are designed to pr otect 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 Turethat, given the duration of th e defendant’s criminal conduct (nearly four years), the amount of tax evaded ($240,252), and his enlistment of an employee to assist with the cr ime, “the District Court faile d to adequately consider the seriousness of Ture’s offense, the goal of promoting respectfor 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, whic h 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 f act 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 Carls on 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 resp ect for our federal tax laws, and the need for a just sentence when formulating Carlson’s sentence.

The district court’s 100 % variance additi onally demonstrates a failure to accord significant weight to the need for sentences to deter future criminal conduct. See18 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 undetect ed such that those who are caught – especially those who are caught evading n early a quarter-million dollars in tax – must-7- be given some term of imprisonment.”). Although the district court noted that “[i]t is highly unlikely that Carlson will ever co mmit another crime,” it did not address the sentence’s effect of deterring others – an important consideration. SeeUnited 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, th e importance placed on imposing terms of imprisonment to deter future tax evaders, and the fact that Carlson received no term of imprisonment, we c onclude that the district c ourt failed to give the goal of deterrence adequate weight wh en formulating its sentence.

The district court further failed to ad equately consider the need to avoid unwarranted sentencing disparities among si milar defendants. 18 U.S.C. § 3553(a)(6). As we have noted, “[t]o redu ce sentencing disparities, the Guidelines sought to ensure more tax evaders were sent enced to prison, specifically focusing on those who evaded more than $100,000 in fe deral taxes.” Ture , 450 F.3d at 358-59. In Ture , where the defendant had a similar record (first offe nse) 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 recognizedthe similarities between Carlson’s case and
Ture , noting that both involved first offenses, expressions of remo rse, 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 enliste d an employee to assist in the crime, and was motivated to commit the crime because of a financial cr isis, rather than personal gain. Although we acknowledge these differe nces, we do not belie ve 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.-8- Finally, we conclude that the “extraor dinary factors” relied on by the district court to justify its sentence are not suffici ently compelling to justify a 100% variance – a variance that, as we ac knowledged above, requi res “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 extrao rdinary, 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 c hurch council, raised money for charity, and was an accommodating ne ighbor and a good friend), with United States v. Woods
, 159 F.3d 1132, 1136-37 (8th Cir. 1998) (uphol ding 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 therew ith, constitutes a sufficiently exceptional circumstance. The district court stated th at “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 borrowi ng of $350,000 from two friends, as “truly exceptional efforts” that “equate[d] in th e Court’s view to extraordinary acceptance of responsibility.” As the government points out, however, Carlson had already received a three-level downward departur e for his acceptance of responsibility, and the only asset of Carlson’s th at 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 notconstitute extraordinary restitution sufficient to4 We recognize, as did the court in O’Malley , that placing too much weight on a defendant’s ability to make restitution imme diately works to “differentiate criminal defendants on the basis of thei r 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).

-9- justify a departure, even though the defenda nt “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 c ourt also stated that “Carlson’s crime was not motivated by a desire to defraud and was not for persona l gain,” but that he was instead “motivated by a financial crisis and . . . acted to preserve subcontractors and others who were relying on him in hi s 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 payro ll taxes and that he still defrauded the government by doing so. This rationale is consequently not particularly compelling. Nor is the damage Carlson ha s suffered to his business, family, and reputation – another consider ation 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 th at the circumstances present here do not justify the variance granted by the di strict court and that the sentence was therefore unreasonable in light of the releva nt sentencing factors. Accordingly, we-10- vacate the sentence and remand for resentenci ng consistent with the views expressed in this opinion.

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