Source: https://www.irs.gov/irm/part9/irm_09-005-014
Timestamp: 2020-05-31 21:03:46
Document Index: 76918721

Matched Legal Cases: ['§7602', '§7602', '§7441', '§7456', '§7491', '§7454', '§7602', '§7602', '§7602']

9.5.14 Closing Procedures | Internal Revenue Service
9.5.14 Closing Procedures
9.5.14.1 OVERVIEW
9.5.14.2 Procedures For Closing Administrative Investigations That ResultedIn Final Adjudication
9.5.14.3 Procedures For Closing Tax and Tax-Related Grand Jury InvestigationsThat Resulted In Final Adjudication
9.5.14.4 Procedures For Closing Non-Tax Related Directly Referred InvestigationsThat Resulted In Final Adjudication
9.5.14.5 Civil Restitution For Questionable Refund Investigations
9.5.14.5.1 Special Agent's Responsibilities in Restitution Orders in QuestionableRefund Investigations
9.5.14.5.2 Fraud Detection Center Responsibilities in Restitution Orders
9.5.14.6 Reporting Derogatory Information to the Office of Professional Responsibility
9.5.14.7 Civil Penalties
9.5.14.7.1 Information to be used in Civil Assessment
9.5.14.7.1.1 Information Available for Civil Assessment from an AdministrativeInvestigation
9.5.14.7.1.1.1 Information Developed After the Investigation is Submitted for Prosecution
9.5.14.7.1.2 Information Available for Civil Assessment from a Grand Jury Investigation
9.5.14.8 Condition of Probation Relative to Civil Tax Matters
9.5.14.8.1 Completion of Conditions of Probation
9.5.14.9 Offers in Compromise in Closed Criminal Investigations
9.5.14.10 Disputed Civil Assessments and Collections
9.5.14.10.1 US Tax Court
9.5.14.10.2 Coordination of Answers in Investigations Docketed in the Court
9.5.14.11 Reports for Civil Penalty Recommendations for Title 31
9.5.14.12 Procedures For Closing Discontinued Investigations
9.5.14.12.1 Discontinued Administrative Investigation
9.5.14.12.2 Discontinued Grand Jury Investigation
9.5.14.12.3 Discontinued Simultaneous Criminal Investigation Program Investigations(International)
9.5.14.13 Notification to Subjects When an Investigation is Discontinued
9.5.14.14 Post Closing Activities
9.5.14.15 Criminal Investigation Closing Report
9.5.14.16 Claims for Reward
9.5.14.17 Procedures for Closing The Administrative, Discontinued, Grand Juryand Direct Referral Investigation on Criminal Investigation Management InformationSystem Database
Exhibit 9.5.14-1 CLOSING ADMINISTRATIVE INVESTIGATION LETTER
Exhibit 9.5.14-2 CLOSING TAX GRAND JURY INVESTIGATION LETTER (Use AppropriateLetterhead)
Exhibit 9.5.14-3 CLOSING DIRECT REFERRAL LETTER The Honorable (Name) UnitedStates Attorney (Judicial District) Address Attn:(Name AUSA) RE- CLOSING OF GRAND JURY investigation Subject City,State, Zip Code Your Ref. #
Exhibit 9.5.14-4 CLOSING OF DISCONTINUED TAX GRAND JURY INVESTIGATION LETTER
Section 14. Closing Procedures
9.5.14.1 (09-28-2005)
On July 12, 2000, criminal referral authority was transferred from the Office of Chief Counsel to Internal Revenue Service (IRS) Criminal Investigation (CI). It is now CI's responsibility to ensure that criminal tax and/or tax related investigations are properly closed in order to allow civil tax enforcement procedures to begin or resume. IRS operating divisions may not proceed civilly until the criminal tax and/or tax related investigation is closed and any referral to the Department of Justice (DOJ) is terminated. Generally, termination of the referral is accomplished by a letter from DOJ. However, DOJ has delegated preparation of the letter terminating the referral from the IRS by way of the automatic closing procedures.
Department of Justice has agreed to immediate and automatic closing of the following tax and tax-related criminal investigations (both administrative and grand jury), without express written DOJ authorization:
a) acquittals
b) dismissals
c) investigations where sentencing occurred following conviction and no appeals or motions for a new trial are pending
d) investigations where sentencing has occurred following the entry of a guilty plea
e) investigations where appeals are exhausted without any remands
Where investigations are closed pursuant to the automatic closing procedures, the Special Agent in Charge (SAC) will notify DOJ, Tax Division.
In order to close a criminal tax or tax-related investigation that was referred to DOJ, Tax Division which fails to come within the automatic closing procedures, CI must receive formal notice from DOJ, Tax Division that the department's file in the matter is closed. The special agent or the Supervisory Special Agent (SSA) will be responsible for requesting the closing letter from DOJ, Tax Division.
Closing procedures with respect to the Criminal Investigation Management Information System (CIMIS) are also found in this section.
As to tax and tax-related grand jury investigations, the closing procedures of this section apply to all subjects referred to DOJ, Tax Division. As an example, a grand jury request is made to DOJ, Tax Division naming A, B, and C as subjects of the investigation. Only one subject criminal investigation (SCI) number is opened on A. If at a later point B and C are no longer deemed to be subjects of the grand jury investigation (i.e., no criminal charges will be recommended against these individuals), the closing procedures outlined in IRM 9.5.14.12.2 (Discontinued Grand Jury Investigations)are still required for subjects B and C. If this procedure is not followed, DOJ, Tax Division will continue to maintain an open referral on B and C.
This section covers procedures for the following types of investigations that fall within the automatic closing procedures:
a) administrative investigations that have resulted in final adjudication
b) tax and/or tax-related grand jury investigations that have resulted in final adjudication
c) directly referred non-tax investigations that have resulted in final adjudication
This section covers procedures for forwarding the tax information to the appropriate operating division for assessment or collection where the criminal aspects of an investigation are concluded.
This section deals with post-closing civil and administrative activities.
This section also covers closing procedures on the following types of investigations:
discontinued administrative investigations
discontinued grand jury investigations
9.5.14.2 (09-28-2005)
Procedures For Closing Administrative Investigations That Resulted In Final Adjudication
Administrative investigations that resulted in final adjudication are closed under the automatic closing procedures. The procedures to accomplish this are outlined in the following paragraphs. The investigative files in these types of investigations can be made available to the other operating divisions for tax assessment or collection.
Within five workdays of final adjudication, the SAC will ensure that a closing letter is prepared. (See Exhibit 9.5.14-1, Closing Administrative Investigation Letter;a template for the letter exists in Document Manager).
The closing letter must accurately summarize:
The date and nature of the indictment or information.
The date and result of the adjudication.
The date and nature of the sentence imposed.
Whether there was appellate action, and if so, the result.
The closing letter will also include the following language: " Pursuant to 26 USC §7602(d)(2)(B)(ii), this action constitutes a termination of the referral and, as such, we will now seek appropriate civil action."
The SAC will ensure the closing letter is mailed to the DOJ, Tax Division, Chief of the Criminal Enforcement Section and copies are forwarded to the attorney for the government and Criminal Tax (CT) Counsel.
The SAC will forward the Criminal Investigation Closing Report and required attachments to the Territory Manager of Technical Services (exam function) and Advisory Technical Services (collection function). Special agents will confirm receipt of the closing report by Technical Services and Advisory Technical Services. (See IRM 9.5.14.5).
See additional considerations under IRM 9.5.14.5 for QRP and RPP.
9.5.14.3 (09-28-2005)
Procedures For Closing Tax and Tax-Related Grand Jury Investigations That Resulted In Final Adjudication
Tax and/or tax related grand jury investigations that resulted in final adjudication are closed under the automatic closing procedures.
Within five workdays of final adjudication, the SAC will ensure that a closing letter is prepared. ( See Exhibit 9.5.14-2, Closing Tax Grand Jury Investigation Letter;a template for the letter exists in Document Manager).
The SAC will ensure the closing letter is mailed to the DOJ, Tax Division, Chief of the Criminal Enforcement Section and copies are forwarded to the attorney for the government and CT Counsel.
The closing letter will also include the following language: " Pursuant to 26 USC §7602(d)(2)(B)(ii), this action constitutes a termination of the referral and, as such, we will seek appropriate civil action."
The letter will be prepared in accordance with the secrecy requirements of the Fed R Crim P R6(e) in that grand jury information will not be disclosed in the letter.
The SAC will forward the Criminal Investigation Closing Report and required attachments to the Territory Manager of Technical Services (exam function) and Advisory Technical Services (collection function). The information contained in the closing report will not include Rule 6(e) material. Special agents will confirm receipt of the closing report by Technical Services and Advisory Technical Services. See IRM 9.5.14.5.
If the prosecution recommendation report does not recommend prosecution against all the subjects of the grand jury investigation or anyone who has been submitted as the subject of the investigation on the Form 9131, Request for Grand Jury Investigation, or a grand jury expansion request, the special agent must notify the DOJ, Tax Division and CT Counsel that the investigation was concluded without a prosecution recommendation. Failure to do so leaves an open grand jury file for which CI is responsible.
9.5.14.4 (09-28-2005)
Procedures For Closing Non-Tax Related Directly Referred Investigations That Resulted In Final Adjudication
Within five workdays of final adjudication of a non-tax investigation, the SAC will ensure that a closing letter is prepared. See Exhibit 9.5.14-3, Closing Direct Referral Letter; a template for the letter exists in Document Manager.Since these investigations do not involve tax and/or tax-related violations, no closing notification needs to be sent to DOJ, Tax Division unless a Title 26 grand jury was authorized during the investigation. If a Title 26 grand jury was authorized during the investigation and no tax and/or tax-related charges resulted, then the procedures outlined in IRM 9.5.14.3 will be followed.
Since these investigations do not involve tax and/or tax-related violations, the SAC will make a determination whether notification to the other operating divisions is necessary. The decision should be based on whether civil activity would be in furtherance of tax administration and/or in the best interest of IRS, and if the court imposed a sentence that included any conditions of probation relative to tax matters.
9.5.14.5 (09-28-2005)
Civil Restitution For Questionable Refund Investigations
The following procedures apply to investigations where the subject is ordered to make restitution for receipt of fraudulent or fictitious refunds.
When the court imposes an order of restitution, it can impose a condition requiring the defendant to make payments of restitution or adhere to a court ordered installment scheduled for payment of restitution.
Unless the court orders otherwise, restitution must be paid immediately. The court may permit the defendant to make restitution within a specified period or in specified installments, provided the last installment is paid no later than:
the expiration of probation
five years after the end of the defendant's term of imprisonment; or
in any other investigation, five years after the date of sentencing
Interest will not apply if the court order specifically excludes it. Interest will be computed from the date of the erroneous refund to the date of payment.
There is no statute of limitations for collection of court-ordered restitution.
There is no need to file a civil suit upon non-payment of restitution. Should the defendant fail to meet his/her obligation with regards to the court ordered restitution, contact should be made with the US Attorney's Office that has jurisdiction and authority to enforce the terms of the court order.
IRS has no authority to make an assessment against an individual for restitution. Therefore, the restitution (other than tax investigations) will be processed as non-rebate erroneous refunds.
Any subsequent refund return filed by the defendant can be offset to an amount owing from the court-ordered restitution by means of common law offset.
Any payments for court-ordered fines erroneously received and classified as restitution payment should be directed to the US Attorney's Office that has jurisdiction over the investigation. Fines are handled through DOJ for deposit into the Crime Victims Fund.
9.5.14.5.1 (09-28-2005)
Special Agent's Responsibilities in Restitution Orders in Questionable Refund Investigations
Within 30 workdays after a judgment that includes restitution as part of the sentence, the special agent will forward a copy of the judgement and commitment order as an attachment to the Criminal Investigation Closing Report to the Fraud Detection Center (FDC) for disposition of the investigation. See IRM 9.5.14.5.
9.5.14.5.2 (09-28-2005)
Fraud Detection Center Responsibilities in Restitution Orders
9.5.14.6 (09-28-2005)
Reporting Derogatory Information to the Office of Professional Responsibility
Upon conclusion of criminal investigations involving an attorney, Certified Public Accountants (CPA), enrolled agent, and enrolled actuary, information is to be forwarded to the Office of Professional Responsibility (OPR). See IRM 9.5.13, Civil Considerations.
9.5.14.7 (09-28-2005)
See IRM 9.5.13, Civil Considerations.
9.5.14.7.1 (09-28-2005)
Information to be used in Civil Assessment
The information available for use by the other operating divisions in the assessment or collection of tax following a criminal investigation depends upon whether an investigation was conducted administratively or through the grand jury process.
9.5.14.7.1.1 (09-28-2005)
Information Available for Civil Assessment from an Administrative Investigation
Information developed in the course of an administrative investigation can be used by other operating divisions in the assessment and collection of a civil tax liability.
9.5.14.7.1.1.1 (09-28-2005)
Information Developed After the Investigation is Submitted for Prosecution
Information that may have a substantial affect on the civil settlement of an investigation may be developed after a referral for prosecution is made to DOJ, possibly while preparing for or during the trial for the criminal offense. Such information may consist of admissions of liability, or relate to the existence of additional records or witnesses, which may have an important bearing on the determination of the civil liability. The special agent should make every effort to obtain copies of any exhibits introduced during the trial which contain information not obtained during the investigation and may have a significant bearing on the civil liability.
Special agents will prepare a report summarizing such information as soon as it is received and attach copies of any supporting documents.
If the investigation has not been forwarded for civil disposition when the report of additional information is prepared, the special agent will hold the report and forward it with the Criminal Investigation Closing Report when the criminal aspects of the investigation are completed. See IRM 9.5.14.5.
If the investigation was forwarded for civil disposition, the report will be forwarded by memorandum from the SAC to his/her counterpart in the other operating division who has control of the file.
For prosecuted investigations, the report will include a descriptive list of all exhibits introduced on behalf of the defendant.
9.5.14.7.1.2 (09-28-2005)
Information Available for Civil Assessment from a Grand Jury Investigation
Grand jury information may not be used in civil purposes unless the IRS obtains the information independent of the grand jury or in accordance with Fed R Crim P R6(e). Any grand jury information included in an indictment/information or plea agreement filed with the court and any grand jury information presented during any court proceeding becomes public information (unless sealed by the court). This information can be used for civil purposes. Special agents should attempt to include relevant grand jury information in public documents and courtroom proceedings. When possible, public documents such as plea agreements should include the amount of unreported income and outstanding tax liability for each year. If courtroom proceedings are conducted, a transcript of the proceeding can be obtained for civil purposes. The special agent must segregate grand jury information from non-grand jury information. See IRM 9.3.1, Disclosure.
9.5.14.8 (09-28-2005)
Condition of Probation Relative to Civil Tax Matters
When sentencing a defendant, the court may suspend sentence or reduce the incarceration time and place the defendant on probation. The courts routinely order an individual convicted of tax crimes to comply with the tax laws either by filing returns, cooperating with IRS and/or paying restitution to IRS. Criminal Investigation and SB/SE share joint responsibility in ensuring compliance with court orders. Failure to comply with the terms of probation may result in its revocation and imposition of a term of incarceration.
When the court orders an individual convicted of a tax or tax-related crime to perform certain acts such as filing returns, cooperating with the IRS and/or payment of taxes/restitution as a condition of probation or supervised release, the following steps must promptly be taken:
Form 4135, CI Control Notice, is prepared establishing an appropriate transaction code.
Form 4930, CI General/Primary/Subject Investigation Report, Item 67 "The Conditional Probation Expiration Date" is completed when the sentencing information is entered in the Criminal Investigation Management Information System (CIMIS). See IRM 9.5.14.16.
The probation period does not begin until the subject is released from confinement.
A copy of the Judgment and Commitment Order will be maintained in the administrative case file.
Electronic access to the US District Court records may be available through Pacer for a fee. Pacer can be accessed through the Circuit and District Court links on the CI web. To obtain a Pacer account, contact Pacer Service Center at 1-800-676-6856 or pacer.psc.uscourt.gov.
Completion of the Criminal Investigation Closing Report. See IRM 9.5.14.15.
Even if payment of a civil liability is not part of a criminal sentence, the information concerning the civil tax liability should be made available for civil tax assessment after the final criminal actions on the investigation are completed.
To assist the court in imposing a prison sentence or granting probation, the probation service may initiate a pre-sentence investigation and generate a report. See IRM 9.6.2, Plea Agreements.The investigation and report concerned any prior criminal record of the defendant and personal background, relevant conduct, individual characteristics, financial condition, and any circumstances that may have affected the defendant's behavior. In the course of a pre-sentence investigation, the probation officer will usually consult with the special agent for information about the defendant’s cooperation (or lack thereof) during the investigation, the defendant’s relevant conduct, the defendant’s mental and physical history, whether the defendant made any payments on the tax deficiencies involved in the criminal investigation, other tax obligations due the government, and data regarding any other matters that might be helpful to the court in imposing a sentence. Before imposing sentence the court may disclose to the defendant or his/her counsel all or part of the material contained in the report of the pre-sentence investigation and afford an opportunity to the defendant or his/her counsel to comment thereon. Any material disclosed to the defendant or his/her counsel shall also be disclosed to the attorney for the government, Fed R Crim P R32.
Information contained in the presentencing report cannot be forwarded to the other operating divisions.
Failure to comply with the conditions of probation set forth by the court can result in revocation of probation. The other operating division should notify the SAC of any instance in which a defendant fails to comply with the conditions of probation in regard to civil tax matters. Upon notification of the failure to comply with the terms of probation, the SAC will review the information and determine if a probation revocation investigation should be initiated. See IRM 9.5.11, Other Specialized Investigations.
9.5.14.8.1 (09-28-2005)
Completion of Conditions of Probation
Upon completion of the period of probation, the special agent will:
Prepare Form 4135, CI Control Notice, establishing appropriate transaction code.
Complete Form 4930, CI/General/Primary/Subject Investigation Report, Item 68 "Conditional Probation Terms Met" when the conditions of probation are met or when it is determined that the conditions of probation will not be met and probation revocation will not be sought.
Justification for an entry of "will not be met" will be maintained in the administrative case file.
9.5.14.9 (09-28-2005)
Offers in Compromise in Closed Criminal Investigations
Offers in compromise involving joint investigations where the criminal aspects of the investigation are completed, will be examined solely by the appropriate operating division. Except as noted in (2) below, the Territory Manager of the appropriate operating division will, after completion of the civil activity, refer the entire file to the SAC, for concurrence or comment when all of the following conditions exist:
the merits of the fraud or negligence penalty are involved
the offer in compromise involves an investigation in which the special agent wrote the final report and recommended the assertion of such a penalty
the other operating division contemplates recommending acceptance of the offer
If the sole issue presented by the offer in compromise is the ability to pay, referral to CI will not be made.
If the SAC concurs in the recommended disposition of the offer in compromise, the concurrence will be indicated by memorandum and the entire file should be returned to the other operating division for processing. If the SAC does not concur and no agreement can be reached with the other operating division as to the disposition of the offer in compromise, the entire file will be forwarded to the Area Director and Director, Field Operations for resolving any difference. Guidelines concerning the disposition of offers in compromise are in IRM 8.13.2, Offers in Compromise, also see IRM 9.5.13, Civil Considerations, for more general information.
9.5.14.10 (09-28-2005)
Disputed Civil Assessments and Collections
A taxpayer can file a petition in the US Tax Court, US District Court or the Court of Federal Claims to dispute civil assessments and penalties, which may include information developed by a special agent in the course of a criminal investigation. In those instances, Counsel or other government attorneys may request the assistance of the special agent.
Special agents are authorized to assist the Office of Chief Counsel and Appeals in any investigation involving the merits of a civil penalty recommended by CI. Further investigation will be made to obtain additional evidence to help sustain the penalty upon written request from Counsel or the Appeals Office. Such information will be forwarded in a supplemental report upon request of the Appeals office; assistance may include participation in any conference with respect to the civil liability in any investigation. The extent of the special agent’s participation in any conference will be determined by the Appeals office.
9.5.14.10.1 (09-28-2005)
The Tax Reform Act of 1969 changed the name of the Tax Court of the United States to the US Tax Court and established it as a court of record under Article I, Section 8, Clause 9, of the Constitution. It is now part of the Judicial Branch of government. In addition to the powers it already possessed, the US Tax Court has been given the power to punish contempt of its authority, and to enforce its decisions by issuing any writ, etc., which a US District Court can issue (26 USC §7441-§7456).
In a US Tax Court trial, evidence is admitted and excluded much as it would be in a civil non-jury trial in the US District Court. In general, the Commissioner of the IRS' determination of deficiency is presumed to be correct unless the taxpayer produces credible evidence with respect to any factual issue relevant to ascertaining the correct tax liability, or any item of income reconstructed solely through the use of statistical information on unrelated taxpayers. In these investigations, the IRS has the burden of proof with respect to the issue(s) in question (Tax Court Rules of Practice) (26 USC §7491(a) and (b)). If the fraud penalty is asserted, the burden is upon the IRS to prove fraud with intent to evade tax (26 USC §7454(a)). The evidence in that respect must be "clear and convincing," not "beyond a reasonable doubt" as in a criminal investigation, but more than a "mere preponderance." The failure of the IRS to prevail on the fraud issue does not relieve the taxpayer of the burden of overcoming the prima facie correctness of the determination of the deficiencies unless the exceptions noted above are present or the assessment was not made within the applicable statute of limitations.
Record of the disposition of the criminal investigation against a taxpayer is admissible in the US Tax Court on the issue of fraud. Despite an acquittal in a criminal investigation, the same evidence may be sufficient to prove fraud in the civil investigation.
A conviction for attempted tax evasion in the US District Court is conclusive in US Tax Court proceedings as to the fraud issue, on the same facts and particularly on the same amounts.
A plea of guilty can be used as an admission of the taxpayer in a civil matter concerning taxes and penalties against the taxpayer based on the same facts.
A plea of nolo contendere subjects the defendant to the same punishment as a plea of guilty, but does not mean the defendant admits the charges. It cannot be used against him/her as an admission in any civil suit for the same act.
A guilty plea in a criminal investigation will be received by the US Tax Court as an admission to be given weight according to the circumstances. Without any explanation of the circumstances, it is sufficient to establish fraud. However, such a plea in a failure-to-file investigation may constitute only a willful omission and passive neglect to perform a statutory duty and not render the taxpayer liable for the fraud penalty.
The Commissioner is not barred from assessing the fraud penalty by: the taxpayer’s filing correct amended returns and paying additional taxes due after filing fraudulent returns; or the death of the taxpayer, since the penalty is for an offense against property rights and not personal rights.
It is the special agent's responsibility during a criminal investigation for the development of evidence to sustain the ad valorem additions to the tax (except those concerning tax estimations). Consequently, during a US Tax Court trial where the fraud penalty is at issue, the special agent is often a principal witness for the government.
It is the duty of the special agent in the preparation for trial and the presentation of the investigation in US Tax Court to consult with and assist the Counsel attorney assigned to the matter.
9.5.14.10.2 (09-28-2005)
Coordination of Answers in Investigations Docketed in the Court
Counsel normally will request from the SAC, copies of any reports and supporting data in the investigation which were prepared by the special agent, to be used solely in connection with the preparation of the matter before the US Tax Court. Counsel will not use the information for the purpose of evaluating the merits of the criminal investigation.
The SAC will identify issues and items in the Criminal Investigation Closing Report which need to be protected from disclosure to the extent possible under the requirements of the US Tax Court.
Requests relating to grand jury investigations will be referred to CT Counsel.
9.5.14.11 (09-28-2005)
Reports for Civil Penalty Recommendations for Title 31
Reports for civil penalty recommendations for Title 31 investigations resulting in an indictment will consist of:
a summary of the charges in the indictment and the charges on which convicted
the scope of the Title 31 crime to include the amount of money involved in the offense
the total dollar amount of unreported currency transactions in the indictment
the number of Currency Transaction Reports (CTRs) not properly filed
the number of improperly reported transactions named in the indictment
copies of any public information such as a copy of the indictment, sentencing memorandum, affidavit for search warrants, arrest warrants, press releases, and news articles
9.5.14.12 (09-28-2005)
Procedures For Closing Discontinued Investigations
When an investigation is discontinued, the formal closing and associated civil aspects of the investigation are handled differently for an administrative investigation than for a grand jury investigation.
9.5.14.12.1 (09-28-2005)
Discontinued Administrative Investigation
Information developed during the course of an administrative investigation is not subject to Rule 6(e) and, therefore, can be used by the other operating divisions in the assessment and collection of a tax liability. The SSA will communicate the withdrawal to the cooperating and/or referring group manager of the other operating division. If a fraud referral prompted the investigation, the SSA will also communicate the withdrawal to the Fraud Referral Specialist, Group Manager.
The special agent will prepare a discontinuance report. If the investigation was tax or tax-related the Criminal Investigation Closing Report (see IRM 9.5.14.15) will be also be prepared.
The discontinued investigation report will include:
a summary of the evidence developed during the investigation that would support or negate a recommendation of the civil fraud penalty. If appropriate, the report should contain a statement to affect that nothing was discussed or occurred in the investigation which precludes the assertion of the civil fraud penalty.
In joint investigations, the discontinued investigation report should contain a statement that the cooperating officer's group manager was advised of the proposed action.
When the SAC approves a final report discontinuing a tax or tax-related administrative investigation, he/she will promptly forward the reports to the Territory Manager of Technical Services and Advisory Technical Services.
9.5.14.12.2 (09-28-2005)
Discontinued Grand Jury Investigation
If a grand jury investigation does not result in a prosecution recommendation, the special agent will prepare a discontinued investigation final report similar to the final discontinued report in an administrative investigation and address it to the attorney for the government.
The special agent should prepare separate exhibit folders for information developed during the course of the administrative aspects of the investigation (if there were any) and for documents governed by Rule 6(e). Grand jury information should be clearly labeled and the SAC should not give copies of documents containing grand jury information to any person not specifically on the grand jury access list.
Discontinued grand jury investigations do not fall under the automatic closing procedures. Accordingly, it is necessary to obtain concurrence from the attorney for the government overseeing the grand jury investigation as to the decision to discontinue the investigation. The special agent or the Supervisory Special Agent (SSA) will be responsible for requesting the closing letter from DOJ, Tax Division. See IRM 9.5.14.1.
At the conclusion of a grand jury investigation that does not result in a criminal prosecution, the SAC will, within five workdays, ensure that a closing letter is prepared. The letter should include the following (see Exhibit 9.5.14-4, Closing of Discontinued Tax Grand Jury Investigation Letter; a template for the letter exists in Document Manager):
the primary reason the investigation is being discontinued
whether there are any pending investigations on the other subjects under the same grand jury investigation
an affirmative statement of the government attorney's concurrence with the decision to discontinue the investigation
The SAC will ensure the closing letter is mailed to DOJ, Tax Division, Chief of the Criminal Enforcement Section and copies to the attorney for the government and CT Counsel when the grand jury investigation involve tax or tax-related violations.
If the investigation was tax or tax-related, the special agent will prepare a Criminal Investigation Closing Report. See IRM 9.5.14.15.
The closing report will be prepared in accordance with the secrecy requirements of Rule 6(e) in that matters occurring before the grand jury will not be disclosed.
Information developed during the course of a grand jury investigation typically cannot be used by IRS in the civil assessment of tax unless a Rule 6(e) Order is obtained by the attorney for the government. See IRM 9.3.1, Disclosure.
If the prosecution recommendation report does not recommend prosecution against the subject(s) of the grand jury investigation or anyone who has been submitted as the subject of the investigation on the Form 9131, Request for Grand Jury Investigation, or a grand jury expansion request, the special agent must notify DOJ, Tax Division and CT Counsel that the investigation was concluded without a prosecution recommendation. Failure to do so leaves an open grand jury file for which CI is responsible.
9.5.14.12.3 (09-28-2005)
Discontinued Simultaneous Criminal Investigation Program Investigations (International)
If a field office decides to withdraw from a Simultaneous Criminal Investigation (SCIP) investigation, (see IRM 9.4.2, Sources of Information):
The SAC will submit a memorandum through the Director, Field Operations to CI:OPS:I indicating the field office is withdrawing from the investigation and why. The field office will also discuss the withdrawal with the treaty counterpart designated SSA and document this in the memorandum.
The Director, CI:OPS:I will inform the KM:IN of the action.
The Director, CI:OPS:I will advise the Competent Authority by letter.
The field office will proceed with the investigation under normal guidelines, making any subsequent requests for information by collateral assistance requests.
9.5.14.13 (09-28-2005)
Notification to Subjects When an Investigation is Discontinued
When an administrative investigation, not a Questionable Refund Program investigation, is discontinued, a letter will be prepared by the SAC and sent to the subject and/or representative by mail. The letter will state that CI is no longer investigating the subject. If appropriate, it should also state that the matter has been referred to the civil operating division.
If the SAC decides not to notify the subject, a memorandum setting forth the reasons will be prepared. Letters will not normally be sent in the grand jury investigation, nor investigations involving multiple filers or individuals related to other prosecution investigations.
In investigations declined by DOJ, Tax Division, letters of notification will not be sent by the IRS.
9.5.14.14 (09-28-2005)
Information developed during the course of a criminal investigation that has civil tax potential should be forwarded to the other operating divisions when possible. If the information is covered by grand jury Rule 6(e) disclosure restrictions, a Rule (6) Order is required for release of the information to the other operating divisions. See IRM 9.3.1, Disclosure.
Records obtained during the course of a criminal investigation should be disposed of in accordance with established policy and procedure. See IRM 9.5.14.3.
9.5.14.15 (09-28-2005)
Criminal Investigation Closing Report
Every tax and tax-related subject investigation requires that a Criminal Investigation Closing Report be prepared at the conclusion of all judicial activities. The closing report serves as notice that the subject is no longer under criminal investigation and civil action can resume/proceed. It serves as notice when tax related conditions are imposed by the court. It serves to inform the appropriate civil functions as to the outcome of the criminal case and transmits documents to be used in the civil closing process. By requesting feedback, it serves as a tool to trace the case through the civil process and to facilitate monitoring for probation purposes when required.
The following items are to be attached to the closing report as applicable:
Copy of the prosecution recommendation report (except for grand jury investigations)
A copy of the investigation source document(s)
Suspicious Activity Report (SAR), law enforcement and restricted documents are not to be included with the closing report
Describe and provide the location of all relevant public information developed during the grand jury investigation that can be used in civil settlement proceedings
Copies of relevant public records such as search warrant affidavits, indictments, pleadings, etc.
Additional information developed subsequent to the prosecution recommendation. See subsection 9.5.14.7.1.1.1.
Based on the knowledge of the special agent, potential for the collection of a significant amount of tax will be identified.
The SAC will forward the closing report and attachments to the Territory Manager of Technical Services (exam function) and Advisory Technical Services (collection function) in all investigations other than QRP and RPP. For cases involving QRP and RPP, the Criminal Investigation Closing Report is sent to the RAC of the assisting FDC with required attachments. A copy is also sent to the Territory Manager of Technical Services and Advisory Technical Services if TC 914 controls had been placed on the subject's own returns. In this instance, the Criminal Investigation Closing Report is sent to Technical Services and Advisory Technical Services only to notify them that TC 914 controls have been removed, no attachments are required. If the investigation involves a return preparer, a copy of the Criminal Investigation Closing Report should also be sent to the SB/SE Return Preparer Coordinator along with appropriate attachments to assist them in any civil process they deem necessary.
The special agent will confirm the receipt of the documents by Technical Services and Advisory Technical Services. CI should receive feedback by the return of a copy of the CI Closing Report with Section 9a completed. If this does not occur, follow-up should be made.
Once the investigation is assigned to the field, the special agent will contact the civil agent (examination and/or collection) to ensure the conditions of probation are understood.
Each field office will establish a method to monitor current and future probation cases and insure CIMIS entries are accurate and timely.
If the investigation is discontinued by CI or declined by DOJ or the US Attorney's office and is not a joint investigation, consideration should be given to referring the investigation as a Prime Lead. A Criminal Investigation Closing Report is still prepared to inform Technical Services and Advisory Technical Services that TC914 controls have been removed. Section 4e of the CI Closing Report is checked to show the item has been forwarded as a Prime Lead.
9.5.14.16 (09-28-2005)
Claims for Reward
In all investigations where a Form 211, Application and Public Voucher for Reward for Original Information, was filed and it is determined that the investigation lacks criminal potential, a copy of the closing report will be forwarded to the area SBSE, Attention: Informant Claims Examiner, regardless of whether the allegation concerns a failure to file or a filed return.
9.5.14.17 (09-28-2005)
Procedures for Closing The Administrative, Discontinued, Grand Jury and Direct Referral Investigation on Criminal Investigation Management Information System Database
At the conclusion of a criminal investigation, a Form 4930, CI General/Primary/Subject Investigation Report, is prepared completing the item showing the appropriate closing status code to include a code for "Civil Actions" and the item stating the appropriate reason closed code. Refer to IRM 9.9, Criminal Investigation Management Information System for details on completing the Form 4930.
The subject criminal investigation (SCI) and primary investigation (PI) should not be closed until the period for appeal has expired.
If appropriate, the item for Conditional Probation Expiration Date needs to be completed. The date is computed based on information contained in the court's sentencing documents. The probation period does not begin until the subject is released from confinement, therefore, the date may need to be updated during the monitoring period.
This section should only be completed if the sentence imposed by the court includes conditions of probation relative to tax matters.
The amount in Item 66 "Fines to Pay" should represent only amounts imposed by the courts as a "penalty" for the illegal activity. Tax and/or restitution of any kind ordered by the court should NOT be reflected in Item 66.
If all SCIs are being closed, then the related PI should also be closed.
The data on Form 4930 should be input into Criminal Investigation Management Information System (CIMIS) within five days of closing the investigation.
Exhibit 9.5.14-1 (09-28-2005)
CLOSING ADMINISTRATIVE INVESTIGATION LETTER
600 E Street NW, Room XXXX
Attn: (Name), Chief
(Northern/Southern/Western) Division Criminal Enforcement Section
Re: CLOSING OF ADMINISTRATIVE investigation
Your Ref. #
Dear (Name of Chief):
By our letter dated (Date), the above referenced matter was referred to your office with our recommendation that (Taxpayer's Name) be prosecuted for (Charges). Our office has been advised by the US Attorney that (Taxpayer's Name) was (Indicted or Information Filed) on (Charges) and (Legal Action, i.e., Plead Guilty, etc.) on (Date). We have been further advised that on (Date), (Taxpayer's Name) was sentenced to (Sentencing Data).
There are no other related cases in this investigation and there is no outstanding appellate action. Since the criminal prosecution has been concluded, I am closing our files as of this date pursuant to the automatic closing procedures. Pursuant to 26 USC §7602(d)(2)(B)(ii), this action constitutes a termination of the referral and, as such, we will now seek appropriate civil action.
Your assistance in pursuing this matter to a successful conclusion has been greatly appreciated.
XXXXXX Field Office
CC: US Attorney
Exhibit 9.5.14-2 (09-28-2005)
CLOSING TAX GRAND JURY INVESTIGATION LETTER
The Honorable Assistant Attorney General
600 E. Street NW, Room XXXX
(Name), Chief
Re:CLOSING OF TAX GRAND JURY investigation
There are no other related cases in this investigation and there is no outstanding appellate action. Since the criminal prosecution has been concluded, I am closing our files as of this date pursuant to the automatic closing procedures. Pursuant to 26 USC §7602(d)(2)(B)(ii), this action constitutes a termination of the referral and, as such, we will now seek appropriate civil action as limited by Rule 6(e) of the Federal Rules of Criminal Procedure.
Exhibit 9.5.14-3 (09-28-2005)
CLOSING DIRECT REFERRAL LETTER
Attn: (Name AUSA)
RE- CLOSING OF GRAND JURY investigation
Dear (Name US Attorney):
By our letter dated (Date), the above referenced matter was referred to your office with our recommendation that (Subject's Name) be prosecuted for (Charges). The Assistant US Attorney advised my office that (Subject's Name) was (Indicted or Information Filed) on (Charges) and (Legal Action, i.e., Plead Guilty, etc.) on (Date). I have been further advised that on (Date), (Subject's Name) was sentenced to (Sentencing Data).
There are no other related cases in this investigation and there is no outstanding appellate action. Since the criminal prosecution has been concluded, we are closing our files as of this date pursuant to the automatic closing procedures. Pursuant to 26 USC §7602(d)(2)(B)(ii), this action constitutes a termination of the referral and, as such, we will now seek appropriate civil action as limited by Rule 6(e) of the Federal Rules of Criminal Procedure (if applicable).
XXXXXXX Field Office
Exhibit 9.5.14-4 (09-28-2005)
CLOSING OF DISCONTINUED TAX GRAND JURY INVESTIGATION LETTER
Re: CLOSING OF DISCONTINUED GRAND JURY investigation
Please be advised that the grand jury investigation of the above-referenced individual has been discontinued based on (STATE PRIMARY REASON, E.G. LACK OF EVIDENCE, INABILITY TO ESTABLISH RESPONSIBILITY, ETC.). Assistant US Attorney (Name) is aware of the investigative findings and has concurred with the decision to discontinue the grand jury investigation.
As no further investigative action is warranted, the above named grand jury matter has been closed. There are no other related cases in this investigation (ALTERNATIVELY, IF APPLICABLE, STATE THAT INVESTIGATIONS ON OTHER GRAND JURY SUBJECTS ARE STILL PENDING). Since the investigation has been concluded, this letter will constitute the termination of the referral and, as such, we will now seek appropriate civil action. The civil action will be sought within the limitations of Rule 6(e) of the Federal Rules of Criminal Procedure.
Your assistance in this matter has been greatly appreciated.
CC: Assistant US Attorney (or Department of Justice)