Source: https://www.justice.gov/tax/criminal-tax-manual-700-statute-limitations
Timestamp: 2019-04-24 20:50:28+00:00

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7.02 TRIGGERING OF STATUTE OF LIMITATIONS 7.02 Filing a False Tax Return 7.02[a] General Rule The general rule is that the statute of limitations for the filing of a false tax return starts on the day the return is filed. United States v. Habig, 390 U.S. 222, 223 (1968). See also United States v. Kelly, 864 F.2d 569, 574 (7th Cir. 1989); United States v. Marrinson, 832 F.2d 1465, 1475-76 (7th Cir. 1987). However, if the return is filed early (i.e., before the statutory due date), the statute of limitations does not start to run until the statutory due date. 26 U.S.C. § 6513(c)(1) (1988). See also Habig, 390 U.S. at 225. For example, if a tax return that is due to be filed on April 15, 1999, is filed early on January 26, 1999, the statute of limitations on the return would not begin to run until April 15, 1999. Conversely, if a return is filed late (i.e., after the statutory due date), the statute of limitations begins running the day the return was filed. Habig, 390 U.S. at 225. Thus, if a return that was due on April 15, 1999, was filed late on June 1, 1999, the statute of limitations commences on June 1, 1999. In cases where an extension of time to file at a later date has been obtained, the statute of limitations begins to run from the date the return was filed, regardless of whether it was filed before or after the extension date. Habig, 390 U.S. at 225-27. Thus, where a return due on April 15, 1999, was granted an extension to August 16, 1999, and actually filed on August 1, 1999, the statute of limitations begins to run on August 1, 1999. Similarly, if the extension was to August 16, 1999, and the return was filed October 1, 1999, the statute of limitations begins to run on October 1, 1999. The statutory due date for filing a return depends upon the type of tax and the return involved. Section 6072 of Title 26 sets out the statutory due dates for the filing of various tax returns. Individual income tax returns made on a calendar year basis are due on April 15th of the following year. 26 U.S.C. § 6072(a) (1988). Returns made on a fiscal basis are due on the fifteenth day of the fourth month of the following fiscal year. 26 U.S.C. § 6072(a) (1988). Corporate returns made on a calendar year basis are due on March 15th of the following year. 26 U.S.C. § 6072(b) (1988). Corporate returns made on a fiscal basis are due on the fifteenth day of the third month of the following fiscal year. 26 U.S.C. § 6072(b) (1988). Other types of returns may have unusual rules applicable only to that type of return. 7.02[b] Definition of Timely Filed A tax return is generally considered timely filed when it is received by the Internal Revenue Service on or before the due date of the return. Typically, when a return is received on or before the statutory due date, it is not date stamped. However, in cases where a return is filed after the statutory due date, the return is date stamped on the date received by the Service Center. This date then becomes the date of filing for statute of limitation purposes. Prosecutors should be aware of the timely filed/timely mailed exception. Section 7502 of Title 26 deems the date of mailing by the taxpayer (as opposed to the date of receipt by the Internal Revenue Service) to be the date of filing where: (1) the return is sent by U.S. Mail and contains a U.S. postmark on or before the statutory due date; (2) the return is deposited in the mail addressed to the appropriate IRS office with postage prepaid; and (3) the return is delivered to the IRS after the date it was due. 26 U.S.C. § 7502 (1988). In these circumstances, the return may be date stamped after the statutory due date and still deemed timely filed under section 7502. 7.02 Failing to File a Tax Return Generally, the statute of limitations does not begin to run until the crime is complete. Toussie v. United States, 397 U.S. 112, 115 (1970). In cases where the defendant has failed to file a tax return, the statute of limitations begins to run when the return is due. Phillips v. United States, 843 F.2d 438, 443 (11th Cir. 1988). For example, if a tax return that was due to be filed on April 15, 1999, was not filed by the defendant, the statute of limitations on the return would not begin to run until April 15, 1999. If a defendant has obtained an extension of time to file a tax return, there is no duty to file until the extension date. Phillips, 843 F.2d at 442-43. Thus, if a defendant obtained an extension to file from April 15, 1999, to August 16, 1999, and failed to file on the extension date, the statute of limitations would begin to run on August 16, 1999. The extension date applies only if the extension is valid. An invalid, untimely application for automatic extension does not extend the statute of limitations beyond the statutory due date. Phillips, 843 F.2d at 443. Section 6081 of Title 26 governs extensions. The IRS regulations for section 6081 detail the application procedures and extension times for filing various returns. Treas. Reg. § 1.6081-1, et seq. (26 C.F.R.) Generally, the regulations provide for an automatic four-month extension of time for filing individual income tax returns. Treas. Reg. § 1.6081-4(a)(1). Prosecutors should be aware that an automatic extension of time does not operate to extend the time for the payment of any tax due on the return. Treas. Reg. § 1.6081-4(b). Thus, an extension request is valid only when accompanied by payment of the taxpayer's estimated tax liability. Treas. Reg. § 1.6081-4(a)(4). 7.02 Tax Evasion In order to commit tax evasion, the defendant must commit some affirmative act to evade a tax. While this act most often is the filing of a false tax return, it may also be "any conduct the likely effect of which would be to mislead or conceal." Spies v. United States, 317 U.S. 492, 499 (1943). The general rule is that the statute of limitations for tax evasion begins to run on the date the last affirmative act took place or the statutory due date of the return, whichever is later. United States v. DiPetto, 936 F.2d 96, 97 (2d Cir. 1991); United States v. Goodyear, 649 F.2d 226 (4th Cir. 1981); United States v. Carlson, 235 F.3d 466, 470 (9th Cir. 2000); United States v. Payne, 978 F.2d 1177, 1179 (10th Cir. 1992); United States v. Hunerlach, 197 F.3d 1059, 1065 (11th Cir. 1999). Thus, in cases where the affirmative act of evasion is the filing of a false tax return, the statute of limitations begins to run on the date the return is filed or the statutory due date, whichever is later. Prosecutors should be aware of the applicable early filing, late filing and extension filing rules enumerated in section 7.02[a], supra. Additionally, in cases where a false return is filed coupled with an affirmative act of evasion after the filing date, the statute of limitations commences on the date the last affirmative act took place or the statutory due date, whichever is later. United States v. Ferris, 807 F.2d 269, 271 (1st Cir. 1986); United States v. Dandy, 998 F.2d 1344, 1355 (6th Cir. 1993); United States v. Trownsell, 367 F.2d 815, 816 (7th Cir. 1966); United States v. Hunerlach, 197 F.3d 1059, 1065 (11th Cir. 1999). For example, if a false 2000 tax return was timely filed on April 16, 2001, and the defendant engages in further affirmative acts of evasion (e.g., lying to agents of the IRS) on September 15, 2002, regarding his 2000 taxes, the statute of limitations would begin to run on September 15, 2002. Further, in cases where no return is filed and some other act constitutes the affirmative act of evasion, the statute of limitations begins to run on the date the last affirmative act took place or the statutory due date of the return, whichever is later. DiPetto, 936 F.2d at 97; United States v. Williams, 928 F.2d 145, 149 (5th Cir. 1991); Carlson, 235 F.3d at 470; Payne, 978 F.2d at 1179; United States v. Winfield, 960 F.2d 970, 973-74 (11th Cir. 1992). For example, if a 2000 tax return that was due to be filed on April 16, 2001, was not filed by the defendant, and the defendant had committed an act of evasion (e.g., filing a false Form W-4 exemption certificate) on June 6, 2000, relating to his 2000 taxes, the statute of limitations would commence on April 16, 2001. Conversely, if a 2000 tax return that was due to be filed on April 16, 2001, was not filed by the defendant, and the defendant commits an act of evasion (e.g., lying to agents of the IRS) on December 1, 2003, relating to his 2000 taxes, the statute of limitations would commence on December 1, 2003. 7.02 Conspiracy The statute of limitations for a conspiracy to evade taxes under the offense clause of section 371 is six years. Similarly, the statute of limitations for a Klein conspiracy under the defraud clause of section 371 is six years. Both of these offenses are controlled by 26 U.S.C. § 6531. Occasionally, defendants charged with a tax conspiracy under section 371 will argue that a five-year statute of limitations should apply to section 371, pursuant to 18 U.S.C. § 3282, which is the general limitations statute for Title 18 offenses. The courts have routinely rejected this position and affirmed the application of the six-year limitations period to tax conspiracies. See United States v. Aracri, 968 F.2d 1512, 1517 (2d Cir. 1992); United States v. Vogt, 910 F.2d 1184, 1201 (4th Cir. 1990); United States v. Lowder, 492 F.2d 953, 955-56 (4th Cir. 1974); United States v. Fruehauf, 577 F.2d 1038, 1070 (6th Cir. 1978); United States v. White, 671 F.2d 1126, 1133-34 (8th Cir. 1982); United States v. Pinto, 838 F.2d 426, 435 (10th Cir. 1988); United States v. Brunetti, 615 F.2d 899, 901 (10th Cir. 1980); United States v. Waldman, 941 F.2d 1544, 1548 (11th Cir. 1991). The statute of limitations in a conspiracy begins to run from the date of the last overt act proved. Grunewald v. United States, 353 U.S. 391, 397 (1957). The government, however, is not required to prove that each member of a conspiracy committed an overt act within the statute of limitations. Hyde v. United States, 225 U.S. 347, 369-70 (1912). See also United States v. Read, 658 F.2d 1225, 1234 (7th Cir. 1981) (interpreting the Hyde decision). Once the government shows a member joined the conspiracy, his continued participation in the conspiracy is presumed until the object of the conspiracy has been achieved. See, e.g., United States v. Juodakis, 834 F.2d 1099, 1103 (1st Cir. 1987); United States v. Barsanti, 943 F.2d 428, 437 (4th Cir. 1991); United States v. Krasn, 614 F.2d 1229, 1236 (9th Cir. 1980); United States v. Finestone, 816 F.2d 583, 589 (11th Cir. 1987). [FN4] However, a showing of withdrawal before the limitations period (i.e., more than 6 years prior to the indictment where the limitations period is 6 years) is a complete defense to conspiracy. Read, 658 F.2d at 1233. The defendant carries the burden of establishing this affirmative defense. Juodakis, 834 F.2d at 1102-03; United States v. Borelli, 336 F.2d 376, 385 (2d Cir. 1964); United States v. Lash, 937 F.2d 1077, 1083 (6th Cir. 1991); United States v. Boyd, 610 F.2d 521, 528 (8th Cir. 1979); Krasn, 614 F.2d at 1236; United States v. Parnell, 581 F.2d 1374, 1384 (10th Cir. 1978); Finestone, 816 F.2d at 589. But see Read, 658 F.2d at 1236 (burden of production on defendant, burden of persuasion remains on government to negate withdrawal defense); United States v. Jannoti, 729 F.2d 213, 221 (3d Cir. 1984) (initial burden on defense, then shifted to government); United States v. West, 877 F.2d 281, 289 (4th Cir. 1989) (government retains burden of persuasion); United States v. MMR Corp., 907 F.2d 489, 501 (5th Cir. 1990) (burden is two step process on defense and government); Manual of Model Criminal Jury Instructions for the Ninth Circuit, Instruction No. 8.5.4 (1997) (following Read). The courts have held that mere cessation of activity is insufficient to prove withdrawal. Rather, some sort of affirmative action to defeat the object of the conspiracy is required. See Juodakis, 834 F.2d at 1102; Lash, 937 F.2d at 1083; Krasn, 614 F.2d at 1236; United States v. Gonzalez, 797 F.2d 915, 917 (10th Cir. 1986); Finestone, 816 F.2d at 589.
7.03 TOLLING PROVISION: FUGITIVE OR OUTSIDE U.S. Section 6531 of Title 26 contains its own tolling provision. The statute provides: The time during which the person committing any of the various offenses arising under the internal revenue laws is outside the United States or is a fugitive from justice within the meaning of section 3290 of Title 18 of the United States Code, shall not be taken as any part of the time limited by law for commencement of such proceedings. 26 U.S.C. § 6531 (1988). Thus, the statute of limitations in Title 26 cases can be tolled if the defendant is outside the United States or is a fugitive. "Outside the United States" and "fugitive from justice" are interpreted in the disjunctive. Mere absence from the United States without any intent to become a fugitive is sufficient to toll the statute of limitations. United States v. Marchant, 774 F.2d 888, 892 (8th Cir. 1985). For example, in Marchant, 774 F.2d at 892, the Eighth Circuit held that defendant's eleven-day health and pleasure trip to Switzerland tolled the statute of limitations under 26 U.S.C. § 6531. According to the court, under section 6531 persons are "outside the United States" whenever they cannot be served with criminal process within the jurisdiction of the United States under Rule 4(d)(2) of the Federal Rules of Criminal Procedure. Marchant, 774 F.2d at 892. The "fugitive from justice" clause in section 6531 refers to 18 U.S.C. § 3290. This statute provides: "No statute of limitations shall extend to any person fleeing from justice." The circuits are split as to the intent required under this statute. The District of Columbia and Eighth Circuits have held that mere absence from the jurisdiction, regardless of intent, is sufficient to toll the statute of limitations. In Re Assarsson, 687 F.2d 1157, 1162 (8th Cir. 1982); McGowen v. United States, 105 F.2d 791, 792 (D.C. Cir. 1939). The First, Second, Fifth, Sixth, Seventh and Ninth Circuits have held that intent to avoid arrest or prosecution must be proved before section 3290 applies. Brouse v. United States, 68 F.2d 294, 296 (1st Cir. 1933); Jhirad v. Ferrandina, 486 F.2d 442, 444-45 (2d Cir. 1973); Donnell v. United States, 229 F.2d 560, 563-65 (5th Cir. 1956); United States v. Greever, 134 F.3d 777, 780-81 (6th Cir. 1998); United States v. Marshall, 856 F.2d 896, 897-900 (7th Cir. 1988); United States v. Wazney, 529 F.2d 1287, 1289 (9th Cir. 1976).
7.04 COMPLAINT TO EXTEND STATUTE OF LIMITATIONS Section 6531 of Title 26 contains a mechanism for extension of the statute of limitations period. The statute provides: Where a complaint is instituted before a commissioner of the United States within the period above limited, the time shall be extended until the date which is 9 months after the date of the making of the complaint before the commissioner of the United States. 26 U.S.C. § 6531 (1988). Thus, the government may file a complaint within the limitations period and effectively extend the statute period nine months. However, section 6531 was not designed to grant the government greater time in which to make a case. Jaben v. United States, 381 U.S. 214, 219 (1965). Rather, it was intended to be used in situations where the government has made its case within the limitations period but cannot obtain an indictment within the limitations period because of the grand jury schedule. Jaben, 381 U.S. at 219-20. But see United States v. O'Neal, 834 F.2d 862, 865 (9th Cir. 1987) (investigation and case preparation need not cease upon filing of complaint; whether government improperly invoked extension is tested by sufficiency of the complaint at the preliminary hearing). In Jaben, the Supreme Court addressed the requirements for a valid complaint under section 6531. The Court held that a complaint must allege sufficient facts to support a probable cause finding that a tax crime has been committed by the defendant. Jaben, 381 U.S. at 220. Further, the government must fully comply with the complaint process and afford the defendant a preliminary hearing. 381 U.S. at 220. As a practical matter, a complaint should only be filed for the year in which the statute of limitations would otherwise expire. This procedure will not preclude development before the grand jury of counts for subsequent years in which the statute has not expired. Prosecutors should be aware, however, that the filing of a complaint may trigger the Speedy Trial Act as to the charge which is the subject of the complaint and, as a practical matter, may shorten the time within which the government can act on the remaining tax years under investigation. See 18 U.S.C. § 3161(b).
7.05 SUSPENSION OF STATUTE: SUMMONS ENFORCEMENT Section 7609(e)(1) of Title 26 provides for the suspension of the statute of limitations in certain types of summons enforcement proceedings. This statute provides: If any person takes any action as provided in subsection (b) [intervenes] and such person is the person with respect to whose liability the summons is issued (or is the agent, nominee, or other person acting under the direction or control of such person), then the running of any period of limitations . . . under section 6531 (relating to criminal prosecutions) with respect to such person shall be suspended for the period during which a proceeding, and appeals therein, with respect to the enforcement of such summons is pending. 26 U.S.C. § 7609(e)(1) (1988). It is beyond the scope of this Manual to treat in detail the nuances of summons enforcement proceedings. Any reliance on the suspension issue in this area requires a thorough analysis of section 7609, and particular care must be taken in measuring and documenting any period for which the statute of limitations is suspended.
7.06 SUSPENSION OF STATUTE: OFFICIAL REQUEST FOR FOREIGN EVIDENCE Criminal tax prosecutions increasingly involve the use of evidence obtained from foreign sources. Section 3292 of Title 18 provides for the suspension of the statute of limitations to permit the United States to obtain foreign evidence. This statute provides: (a)(1) Upon application of the United States, filed before return of an indictment, indicating that evidence of an offense is in a foreign country, the district court before which a grand jury is impaneled to investigate the offense shall suspend the running of the statue of limitations for the offense if the court finds by a preponderance of the evidence that an official request has been made for such evidence and it reasonably appears, or reasonably appeared at the time the request was made, that such evidence is, or was, in such foreign country. . . . . . (b) Except as provided in subsection (c) of this section, a period of suspension under this section shall begin on the date on which the official request is made and end on the date on which the foreign court or authority takes final action on the request. (c) the total of all periods of suspension under this section with respect to an offense-- (1) shall not exceed three years; and (2) shall not extend a period within which a criminal case must be initiated for more than six months if all foreign authorities take final action before such period would expire without regard to this section. 18 U.S.C. § 3292 (1988). Letters rogatory, requests under a treaty or convention, or any other request made by a court or law enforcement authority of the United States will qualify as an "official request." 18 U.S.C. § 3292(d). The statute does not require that the "request expressly list by citation the alleged statutory violations in order for a foreign evidence request to pass muster under 18 U.S.C. § 3292." United States v. Neill, 952 F.Supp. 831, 832 (D.D.C. 1996). While the maximum period for which the statute of limitations may be suspended for an offense is three years, the period begins to run when the government requests evidence from a foreign government. "[T]he starting point for tolling the limitations period is the official request for evidence, not the date the § 3292 motion is made or granted." United States v. Bischel, 61 F.3d 1429, 1434 (9th Cir. 1995). Likewise, the period ends when the foreign court or authority takes final action on the request. "'[F]inal action' for purposes of § 3292 means a dispositive response by the foreign sovereign to both the request for records and for a certificate of authenticity of those records." United States v. Bischel, 61 F.3d at 1434. The government's satisfaction with the evidence provided is not determinative of whether there has been a final action. "However, when the foreign government believes it has completed its engagement and communicates that belief to our government, that foreign government has taken a 'final action' for the purposes of § 3292(b)." United States v. Meador, 138 F.3d 986, 992 (5th Cir. 1998). Such a communication from a foreign government does not preclude further inquiry by the United States. "If dissatisfied with a dispositive response from a foreign authority, the prosecutor need only file another request and seek a further suspension of the limitations period, subject to the ultimate three-year limitation on the suspension period." United States v. Meador, 138 F.3d at 993 (footnote omitted). All requests for foreign evidence in criminal tax investigations should be coordinated with the Criminal Appeals & Tax Enforcement Policy Section, Tax Division, and the Office of International Affairs, Criminal Division. For further information on foreign evidence gathering in criminal tax cases, see Section 41.00 of this Manual.
FN1. There is a difference of opinion as to the limitations period for section 7202 offenses. The Second, Third, Ninth and Tenth Circuits hold that a six-year statute of limitations period applies. United States v. Evangelista, 122 F.3d 112, 119 (2d Cir. 1997) (reaff'g the holding of United States v. Mussacchia, 900 F.2d 493, 500 (2d Cir. 1990)); United States v. Gollapudi, 130 F.3d 66, 68-71 (3d Cir. 1997); United States v. Gilbert, No. 00-10314, 2001 WL 1111928 (9th Cir. Sept. 24, 2001); United States v. Porth, 426 F.2d 519, 521-22 (10th Cir. 1970). At least one district court has held that a three-year limitations period applies. United States v. Block, 497 F. Supp. 629, 630-32 (N.D. Ga.), aff'd, 660 F.2d 1086 (5th Cir. 1980). The Tax Division takes the position that the Second, Third, Ninth and Tenth Circuits are correct, and that the six-year limitations period under 26 U.S.C. § 6531(4) applies to section 7202. FN2. A number of exceptions exist to the six-year rule. Section 6531(4) exempts returns which are required to be filed under part III of subchapter A of chapter 61. Part III refers to information returns required to be filed under 26 U.S.C. §§ 6031-6060, and includes, for example, partnership returns, returns of exempt organizations, subchapter S returns, estate returns and trust returns. Part III also includes returns relating to cash received in trade or business (Form 8300). Reference should be made to these specific Code provisions for a more detailed discussion of applicable limitations periods. FN3. Section 7212(a) refers to two types of offenses: (1) impeding employees of the United States acting in an official capacity; and (2) impeding the administration of the Internal Revenue laws. The Tax Division believes the six-year limitations period applies to offenses under both prongs of section 7212(a) pursuant to 26 U.S.C. § 6531(6). Reference should be made to the discussion of this issue in the chapter dealing with Section 7212(a). See Chapter 17.00, infra. FN 4. The government technically is not required to prove that each member of the conspiracy committed an overt act within the statute period. However, in practice, the prosecutor should critically review those conspirators whose membership predates the limitations period, and be prepared to rebut a withdrawal defense coupled with a statute of limitations defense.

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