Source: http://www.justice.gov/usao/eousa/foia_reading_room/usam/title6/4mtax.htm
Timestamp: 2013-12-12 08:14:11
Document Index: 565422929

Matched Legal Cases: ['§ 286', '§ 6103', '§ 7602', '§ 0', '§ 286', '§ 287', '§ 7602', '§ 7212', '§ 7212', '§ 7213', '§ 7208', '§ 0', '§ 0', '§ 1341', '§1343', '§ 1344', '§ 0', '§ 286', '§ 286', '§ 0', '§ 7201', '§ 3', '§ 1', '§ 3', '§ 7201', '§ 209', '§ 3551']

USAM 6-4.000 CRIMINAL TAX CASE PROCEDURES
US Attorneys > USAM > Title 6 > USAM Chapter 6-4.000 prev | next | Tax Resource Manual
6-4.000
CRIMINAL TAX CASE PROCEDURES
Federal Criminal Tax Enforcement
6-4.011
Criminal Tax Manual and Other Tax Division Publications 6-4.110
IRS Administrative Investigations 6-4.120
Grand Jury InvestigationsGenerally 6-4.121
IRS Requests to Authorize Grand Jury Investigations
6-4.122
United States Attorney's Grand Jury Investigations and Prosecutions
6-4.123
Joint United States AttorneyIRS Request to Expand Tax Grand Jury Investigation
6-4.125
IRS Transmittal of United States Attorney's Recommendation, Special Agent's and Criminal Tax Counsel's Reports, and Exhibits from Grand Jury Investigation
6-4.126
Restriction on Disclosure of Grand Jury Matters to IRS for Civil Use
6-4.130
6-4.200
Tax Division Jurisdiction and Procedures
6-4.210
Tax-Related Mail, Wire, or Bank Fraud, RICO, or Money Laundering Charges
6-4.211
6-4.212
Categories of Matters Reviewed
6-4.213
Review of Direct Referrals
6-4.214
6-4.217
6-4.218
Tax Division Authorizations and Declinations
6-4.219
Assistance of Criminal Enforcement Section Personnel
6-4.240
United States Attorney's Responsibilities
6-4.242
Recommendation Following a Grand Jury Investigation
6-4.243
Review of Direct Referral Matters
6-4.244
Review of Non-complex Matters
6-4.245
Request to Decline Prosecution
6-4.246
Request to Dismiss Prosecution
6-4.247
United States Attorney's Protest of Declination
6-4.248
6-4.249
Return of Reports and Exhibits
6-4.270
Criminal Division Responsibility
6-4.310
Major Count Policy in Plea Agreements
6-4.320
6-4.330
6-4.340
6-4.350
6-4.360
Compromise of Criminal Liability/Civil Settlement
6-4.370
6-4.400
The Government helps to preserve the integrity of this
Nation's self-assessment tax system through vigorous and uniform
criminal enforcement of the internal revenue laws. Criminal
prosecutions punish tax law violators and deter other persons who
would violate those laws. To achieve maximum deterrence, the
Government must pursue broad, balanced, and uniform criminal tax
enforcement. Uniformity in tax cases is necessary because tax
enforcement potentially affects more individuals than any other
area of criminal enforcement. Broad and balanced enforcement is
essential to effectively deter persons of varying economic and
vocational status, violators in different geographic areas, and
different types of tax law violations.
To achieve uniform, broad, and balanced criminal tax
enforcement, the Attorney General has authorized the Tax
Division to oversee all federal criminal tax enforcement and to
authorize or decline investigations and prosecutions in tax
matters. See USAM 6-4.200. For a map reflecting
the geographical assignments of the Tax Division Criminal
Enforcement Sections, see Tax Resource Manual 1. For
contact information, including mailing addresses and telephone
and fax numbers, see Tax Resource Manual 2.
Criminal Tax Manual and Other Tax Division Publications
The Tax Division's Criminal Tax Manual (2001) contains
comprehensive discussions of statutes, methods of proof, various
specialized areas, and policies and procedures pertaining to
criminal tax prosecutions. The Manual also contains indictment
and information forms and jury instructions. All prosecutors
involved in federal criminal tax cases should consult the Manual
for guidance on handling criminal tax cases. The Criminal Tax
Manual may be accessed in at http://www.justice.gov/tax/readingroom/foia/tax.htm. The
Tax Division also compiles other resources useful in criminal tax
prosecutions. Should those resources conflict with this Title of
the USAM, this Title of the USAM controls.
6-4.110
IRS Administrative Investigations
The special agents of IRS Criminal Investigation conduct the
administrative investigations into allegations of criminal
violations arising under the internal revenue laws and related
provisions of Title 18, U.S.C. (e.g., 18 U.S.C.
§§ 286, 287, 371, 1341). See Tax Resource Manual 5 and 6.
After an administrative investigation is completed, the
special agent must prepare a special agent's report (SAR),
together with exhibits, in order to recommend that the Government
prosecute the matter. The SAR contains a detailed account of the
investigation and the special agent's recommendations, and is
reviewed by both the special agent's supervisors and the Chief
Counsel, Criminal Tax Division (CT). CT then prepares a Criminal
Enforcement Memorandum (CEM) that discusses the nature of the
crime(s) for which the agent recommends prosecution, the evidence
relied upon to prove the crime(s), technical or legal
issues, anticipated difficulties in prosecution,
and the special agent's specific recommendation. Thereafter,
if CI concludes that the Government should prosecute the matter,
the CI Special Agent-in-Charge (SAC) refers the matter to the Tax
Division or, in some cases, the United States Attorney. See USAM 6-4.243. When the IRS directly refers a matter
to the United States Attorney, it simultaneously forwards a copy
of the transmittal letter to the Tax Division.
During an administrative investigation of a criminal tax
case, the IRS may refer the case directly and simultaneously to
both the United States Attorney and the Tax Division for an
expedited guilty plea, if only legal source income is involved
(i.e., neither narcotics nor organized crime), and the
taxpayer's counsel states that the taxpayer wishes to enter such
a guilty plea. The plea must be consistent with the Tax
Division's major count policy. See Tax Resource Manual 7.
When the IRS refers a criminal matter to the Department of
Justice, it may share returns or return information with the
Department of Justice (see 26 U.S.C. § 6103(h)(2)). Once a criminal referral is made, the IRS, including CI, may not
issue or commence an action to enforce an administrative summons
with respect to the taxpayer for the same tax and the same
taxable period. See 26 U.S.C. § 7602(d), Tax Resource Manual 8.
6-4.120
Grand Jury InvestigationsGenerally
Although a federal grand jury is empowered to
investigate both tax and non-tax violations of federal criminal
laws, the Tax Division must first approve and authorize the
United States Attorney's use of a grand jury to investigate
criminal tax violations (see 28 C.F.R. § 0.70). The
Tax Division has delegated to the United States Attorneys,
however, the authority to approve grand jury investigations of
certain false and fictitious claims for tax refunds in violation
of 18 U.S.C. § 286 and 18 U.S.C. § 287 (other than
those investigations involving a professional tax return
preparer). See Tax Division Directive No. 96 (December
31, 1991), Tax Resource Manual 9.
6-4.121
In addition to using administrative process to secure
evidence in an investigation, CI also may request that the Tax
Division authorize a grand jury investigation when CI either
cannot complete its investigation or otherwise determines that it
cannot feasibly gather evidence through the administrative
process. The IRS's request to authorize a grand jury
investigation constitutes a referral of the matter to the
Department of Justice. Once a criminal referral is made, the IRS,
including CI, may not issue or commence an action to enforce an
administrative summons with respect to the taxpayer for the same
tax and the same taxable period. See 26 U.S.C. § 7602(d).
United States Attorney's Grand Jury Investigations and
Expansion of Non-tax Grand Jury Investigation to Possible Federal Criminal Tax Violations. The Assistant Attorney General, Tax Division, has delegated limited authority to the United States Attorney to expand non-tax investigations in order to inquire into possible federal criminal tax violations, designate targets (subjects), determine the scope of the expanded investigation, and terminate such proceedings. Before a United States Attorney may file an information or seek the return of an indictment on matters arising under the internal revenue laws in an expanded investigation, however, the Tax Division must first authorize the specific tax charges. See Tax Division Directive No. 86-59 (October 1, 1986), Tax Resource Manual 10.
Joint United States AttorneyIRS Request to Expand Tax
The United States Attorney may not, without Tax Division
approval, expand grand jury investigations into matters arising
under the internal revenue laws to include targets that the Tax
Division did not previously authorize. The United States
Attorney, together with the IRS, must submit a
written request to obtain Tax Division approval. The request
must establish the basis for the Tax Division to authorize
expansion of the investigation. See USAM 6-4.211(B).
IRS Transmittal of United States Attorney's
Recommendation, Special Agent's and Criminal Tax Counsel's
Reports, and Exhibits from Grand Jury Investigation
When a grand jury investigation is complete and the United
States Attorney concludes that the Government has gathered
sufficient evidence to proceed with prosecution, the United
States Attorney should request that the special agent assigned to
the matter prepare a SAR. After the SAR is completed, the
special agent should request that CT Counsel review the SAR and
prepare a CEM. Then, the SAC must forward the SAR, with copies
of the relevant exhibits, and the CEM to the Tax Division for
review and authorization. At the same time, the United States
Attorney or the SAC must forward to the Tax Division the United
States Attorney's written recommendation regarding prosecution of
a target(s) for tax violations. See USAM 6-4.200.
Whenever possible, the Tax Division will complete its review of
the prosecution recommendation within thirty (30) days of
receiving the transmittal letter, reports, and exhibits. See USAM 6-4.242.
The IRS also must transmit a recommendation against
prosecution resulting from a grand jury investigation to the Tax
Division for evaluation. Alternatively, the IRS must advise the
Tax Division that it has no recommendation. See IRM
9.5.14.12.2(3); see also USAM 6-4.242. The Tax Division
will complete its evaluation of the matter and authorize
declination or other actions within thirty (30) days of receiving
Restriction on Disclosure of Grand Jury Matters to IRS
Federal Rule of Criminal Procedure 6(e)(3)(C)(i)
prohibits the United States Attorney from disclosing "matters
occurring before the grand jury" to the IRS for use in civil tax
audit or administrative collection proceedings. See United
States v. Baggot, 463 U.S. 476 (1983). The court may grant
the Government's motion for disclosure of grand jury matters for
use in certain civil proceedings, if the United States Attorney
satisfies the exception requirements set forth in Rule
6(e)(3)(C)(i)(I), which require the Government to show that it
will make the disclosure "preliminarily to or in connection with
a judicial proceeding...." and that it has a "particularized
need" for the requested materials. See United States v. John
Doe, Inc. I, 481 U.S. 102, 108 (1987). Information that is
not deemed to be "matters occurring before the grand jury" may be
disclosed consistent with the requirements of 26 U.S.C. section
6103. See Tax Resource Manual 11.
The Assistant Attorney General, Tax Division, has
responsibility for all criminal proceedings arising under the
internal revenue laws, with the exception of proceedings that
pertain to: misconduct of IRS personnel; taxes on liquor,
narcotics, firearms, coin-operated gambling and amusement
machines, and wagering; forcible rescue of seized property (26
U.S.C. § 7212(b)); corrupt or forcible interference with an
officer or employee acting under the internal revenue laws (26
U.S.C. § 7212(a) (but not the "omnibus clause"));
unauthorized disclosure of information (26 U.S.C. § 7213);
and counterfeiting, mutilation, removal, or reuse of stamps (26
U.S.C. § 7208). See 28 C.F.R. § 0.70. The Tax Division must approve any and all criminal charges that a United States Attorney intends to bring against a defendant in connection with conduct arising under the internal revenue laws, regardless of which criminal statute(s) the United States Attorney proposes to use in charging the defendant. See 28 C.F.R. § 0.70.
[updated September 2012] [cited in USAM 6-1.110; 6-2.000; 6-4.010; 6-4.125; 6-4.210]
6-4.209
Stolen Identity Refund Charges
In Stolen Identity Refund Fraud ("SIRF") cases, the Assistant Attorney General, Tax Division, has delegated to the United States Attorney the authority to (1) open tax-related grand jury investigations; (2) charge by criminal complaint persons engaged in SIRF crimes; and (3) seek and obtain seizure warrants for forfeiture of criminally derived proceeds arising from SIRF crimes, without prior approval from the Tax Division. See Tax Division Directive No. 144, Tax Resource Manual 36. The Internal Revenue Service, Criminal Investigation, may or may not participate in the SIRF investigation. All subsequent charging decisions by way of indictment, information, or superseding indictment/information must be authorized in advance by the Tax Division. Expedited review procedures between the United States Attorneys' Offices and the Tax Division are available for proposed indictments/informations arising from SIRF investigations. (See Memorandum dated September 18, 2012, from AAG Kathryn Keneally to All United States Attorneys re: Expedited and Parallel Review of Proposed Indictments Arising from Stolen Identity Refund Fraud, Tax Resource Manual 37.)
A United States Attorney must obtain Tax Division approval before bringing mail, wire or bank fraud charges, either alone or as the predicate to RICO or money laundering charges, if the conduct arises under the internal revenue laws. Conduct arising under the internal revenue laws includes a defendant's submission of a document or information to the IRS. A United States Attorney also must obtain Tax Division approval to bring charges based on state tax violations if the case involves parallel federal tax violations. See Tax Division Directive No. 128 (October
29, 2004), Tax Resource Manual 14.
Examples of situations where, with Tax Division approval, a
United States Attorney may appropriately use mail, wire or bank
fraud charges in a tax case include:
1) when a target has filed multiple fraudulent returns
seeking tax refunds, using fictitious names, or using
the names of real taxpayers without their knowledge, appropriate charges may include mail fraud (18 U.S.C.
§ 1341) or wire fraud (18 U.S.C. §1343);
2) when a target has promoted a fraudulent tax scheme,
appropriate charges may include mail fraud (18 U.S.C.
3) when a target has induced a financial institution to
approve refund anticipation loans on the basis of the
fraudulent information submitted to the IRS,
appropriate charges may include bank fraud charges
(18 U.S.C. § 1344).
The Government may derive significant benefits at different
stages of the litigation by using mail, wire or bank fraud
charges. First, at the charging stage, the charges may support
the Government's effort to forfeit the proceeds of the fraud
scheme or may enable the Government to describe the entire scheme
in the indictment. Second, at trial, the charges may support the
Government's presentation of all relevant evidence of the scheme
or permit flexibility in the Government's choice of witnesses. And third, at sentencing, the charges may support the
Government's efforts to obtain full restitution. See USAM 9-27.320(B)(3) ("If the evidence is available, it is
proper to consider the tactical advantages of bringing certain
charges.").
Prosecution. The Principles of Federal
Prosecution set forth the standards that govern the Tax
Division's review of a criminal tax matter to determine whether
to authorize prosecution. Under these principles, before
authorizing a prosecution, the Tax Division must conclude that
the Government has: 1) sufficient evidence to support a prima
facie case; and 2) a reasonable probability of conviction. See USAM 9-27.220. The Tax Division also considers
factors such as uniformity, balanced and broad enforcement goals,
and Department and IRS priorities and policies in criminal
enforcement matters. See generally USAM 6-4.010.
1) Complex Matters. The Tax Division designates as
"complex" referrals that have the following
characteristics: a) the IRS utilized an indirect method
of proof in developing the case; b) the facts or legal
issues are complicated; or c) the case contains
technical and/or sensitive issues or tax or policy
issues. A docket attorney from one of the three
regional Criminal Enforcement Sections reviews each
complex referral and prepares a prosecution memorandum
("pros. memo") that analyzes the evidence, highlights
procedural and/or substantive problems with the case,
and makes recommendations for further action. At least
one senior Criminal Enforcement Section attorney
reviews each pros. memo. The Tax Division then decides
to authorize or decline prosecution.
2) Non-complex Matters. Non-complex matters are
referrals that are relatively straightforward and
uncomplicated and that do not present technical tax or
sensitive policy issues. Senior Criminal Enforcement
Section attorneys review these referrals to ensure that
they do not present issues that require in-depth
review. The Tax Division transmits a non-complex
matter to the appropriate United States Attorney within
two weeks of receiving the referral from the IRS. In
turn, the United States Attorney must consider the
matter within 90 days. See USAM 6-4.244.
United States Attorney Requests for Grand Jury Authorization. When a United States Attorney requests that the Tax Division authorize a grand jury investigation into a matter arising under the internal revenue laws, Criminal Enforcement Section personnel review the request and then approve or deny it. See USAM 6-4.122 and 6-4.123.
The Tax Division monitors all matters that the IRS refers
directly to the United States Attorneys. See USAM 6-4.243. If the Tax Division determines that the IRS has
improperly referred a matter to the United States Attorney, the
Tax Division will inform the United States Attorney to forward
the matter to the Tax Division for review.
If time and circumstances permit, the Tax Division generally
grants a taxpayer's written request for a conference with the
Division in Washington, D.C. If the taxpayer makes the request
for a conference after the Tax Division has forwarded the matter
to the United States Attorney, the Tax Division will deny the
request and suggest that the taxpayer ask the United States
Attorney for a conference. The United States Attorney has
discretion to grant or deny a taxpayer's request for a
conference. On rare occasions, the Tax Division may ask a United
States Attorney to hold a conference and submit a written
recommendation about whether the Division should change its
decision regarding prosecution.
During the conference, the Tax Division usually advises
conferees of the proposed charges, the method of proof, and the
income and tax computations that the IRS recommended. The
Division also advises them that these may change. The taxpayer
or the taxpayer's representative may present explanations or
evidence for the Tax Division to consider in reaching a decision
regarding prosecution. The conferees may not use the conference,
however, as an opportunity to explore the Government's
The Government may use any statements made by the
taxpayer at the conference not only to evaluate the matter, but
also in any court proceeding, whether criminal or civil. See
Fed. R. Evid. 801(d)(2). The Government does not, however,
use in general court proceedings statements made at these
conferences by attorneys for the taxpayer, i.e.,
vicarious admissions,. The Government may also develop
investigative leads from any information provided at the
conference. The Tax Division permits plea negotiations during
conferences in non-grand jury cases. A plea obtained in such a
case must be consistent with the Tax Division's major count
policy and the policies of the appropriate United States
Attorney's Office. See Tax Division Directive No. 86-58
(May 14, 1986), Tax Resource Manual 15.
The United States Attorney may request that the Tax Division
perform an on-site review of a matter by personally submitting a
written request that outlines the reasons for the review. The
Division grants such a request only in exceptional circumstances. Criminal Enforcement Section personnel will perform the approved
The final authority for the prosecution or declination of all
criminal matters arising under the internal revenue laws rests
with the Assistant Attorney General, Tax Division. 28 C.F.R.
§ 0.70.
The Tax Division will consider the following reasons in
support of a United States Attorney's request for litigation
1) Recusal of the United States Attorney and his/her office;
2) The United States Attorney's lack of sufficient
resources, personnel or expertise.
The Tax Division generally expects the United States Attorney
to handle non-complex matters that have been accepted for
prosecution. See USAM 6-4.244.
The United States Attorney is normally responsible for the
investigation and prosecution of criminal tax matters that the
Tax Division has authorized.
At the conclusion of a tax or joint tax and non-tax grand
jury investigation, the United States Attorney should submit to
the Tax Division a written analysis of the investigation, along
with a recommendation regarding whether the Government should
bring charges or decline prosecution. If the United States
Attorney is recommending that the Government should bring non-tax
charges as well, the analysis must explain how the non-tax
charges relate to the tax charges. See USAM 6-4.125.
The United States Attorney must ensure that the Tax Division
receives the material at least 60 days prior to the expiration of
The Tax Division authorizes the IRS to refer directly to the
United States Attorney for prosecution the following categories
of matters:
Excise taxes. This category includes all 26 U.S.C. and 18 U.S.C. offenses involving taxes imposed under Subtitles C, D, and E of the Internal Revenue Code (26 U.S.C.), except taxes imposed under Chapter 24 (withholding from wages), 32A parts I through III (motor and aviation fuels), and 38D (ozone-depleting chemicals). Multiple filings of false and fictitious returns claiming refunds. This category includes all 18 U.S.C. §§ 286 and 287 charges that arise when a taxpayer files, in a single tax year, two or more returns on which false refunds are claimed. This category does not include, and the IRS may not directly refer to the United States Attorney, cases involving return preparers who falsified returns to claim refunds or cases involving persons who submitted false or fictitious claims for refund to the IRS through the Electronic Filing (ELF) program. (18 U.S.C. §§ 286 and 287).
The United States Attorney may initiate or decline
prosecution of direct referral matters without first obtaining
Tax Division approval, but in all other tax matters may initiate
proceedings only after the Tax Division authorizes prosecution. Once a prosecution of any tax matter, including a direct
referral matter, is initiated, however, the United States
Attorney may not dismiss the indictment, information, or
complaint unless and until the Tax Division authorizes dismissal. See USAM 6-4.246.
[updated September 2007] [cited in USAM 6-4.110; 6-4.122]
Within 90 days of receiving a designated non-complex matter,
a United States Attorney must either initiate proceedings or
request that the Tax Division decline the matter (see USAM 6-4.245) or handle it (see USAM 6-4.219).
The United States Attorney may not dismiss an indictment,
information, or complaint unless and until the Tax Division
approves the dismissal. There are two exceptions to this rule:
1) the grand jury returns a superseding indictment; or 2) the
defendant has died. In all other cases, an Assistant United
States Attorney must submit to the Tax Division a written request
for dismissal which outlines the reasons for the request and
indicates that the United States Attorney concurs with the
If a United States Attorney disagrees with the Tax Division's
decision to decline prosecution of a matter arising out of a
grand jury investigation, the United States Attorney may
submit a written request for reconsideration explaining why
prosecution is warranted.
After the Tax Division refers a criminal tax case to the
United States Attorney, it is essential that the United States
Attorney keep the Division apprised of all developments through
periodic case status reports. See Tax Resource Manual 17. As the case progresses, the Tax Division requires the following information:
1) A copy of the indictment returned (or no billed), or the
information filed that reflects the date of the return (or
no bill) or filing;
2) The date of arraignment and kind of plea;
3) The date of trial;
4) The verdict and date verdict returned;
5) The date and terms of sentence;
6) The date of appeal and appellate decision; and
7) copy of any press release.
It is important for the United States Attorney to provide the
Tax Division with timely and regular updates regarding
developments in pending cases. The Tax Division's files must
reflect the true case status so that, upon completion of the
criminal case, the Division can close the criminal case in a
timely manner and return it to the IRS.
After obtaining both a final judgment from the trial court
and a final appellate decision, the United States Attorney should
1) Retain grand jury materials under secure conditions, in
accordance with the requirements of Federal Rule of
Criminal Procedure 6(e) for maintaining the secrecy of
2) Return all exhibits and other materials that the
Government obtained from witnesses; and
3) Return to the SAC, by certified mail, return receipt
requested, all non-grand jury reports, exhibits, and
other materials that the IRS furnished for use in the
The Criminal Division of the Department of Justice is
responsible for prosecuting persons who have committed the
following tax-related offenses:
corrupt or forcible interference with an officer or employee
acting under the internal revenue laws (but not omnibus
counterfeiting, mutilation, removal, or misuse of stamps See 28 C.F.R. § 0.70.
Disposition of tax cases through pleas. The
Government disposes of an overwhelming percentage of all criminal
tax cases by entry of a plea of guilty. The Tax Division
authorizes the United States Attorney to accept a plea of guilty
to the major count(s) of the indictment or information, without
first obtaining Tax Division approval. The United States
Attorney also may seek a plea to more than the major count(s) if
he or she thinks the Government should accept such a plea. In
most cases, the Tax Division identifies the major count(s) that
have been authorized for prosecution in the Tax Division's
prosecution memorandum or in its case transmittal letter.
Major Count Designations. When it designates the
major count, the Tax Division primarily considers the
1) Felony counts have priority over misdemeanor counts.
2) Tax evasion counts (26 U.S.C. § 7201) have
priority over all other substantive tax counts.
3) The count charged in the indictment or information that
carries the longest prison sentence is the major
4) As between counts under the same statute, the count
involving the greatest financial detriment to the
United States (i.e. , the greatest additional
tax due and owing) is the major count. 5) As between counts, if the financial detriment does not
differ significantly, the relative flagrancy of the
offense is determinative.
The United States Attorney may request the Tax Division to
consider other factors not included above.
Other Factors in Designating Major Count. The Tax
Division may need to designate more than a single count as a
major count when the computed guideline sentencing range exceeds
the maximum sentence that the court can impose under a single
If the Government charges both tax and non-tax counts, the
Tax Division's selection of which tax count to designate as the
major count may not have any effect on the applicable guideline
range. This lack of effect occurs when the offense level of the
group or groups of non-tax offenses is nine (9) or more levels
higher than the offense level of the group containing the tax
charges. See U.S.S.G. §§ 3D1.2 and 3D1.4. In
such a case, if its designation will not affect the applicable
guideline range, the Tax Division may designate a less serious
tax offense in the group as the major count.
If all of the tax charges are not part of the same
course of conduct or common scheme or plan, the Department's plea
policy for Sentencing Guidelines cases may require that the Tax
Division either designate one count from each group of unrelated
counts as major counts or designate one count from one of the
groups of unrelated counts as the major count and have the
prosecutor obtain a stipulation from the defendant establishing
the commission of the offenses in the other group. See
U.S.S.G. § 1B1.2(c). The Tax Division engages in this
process to determine the combined offense level for the case
under U.S.S.G. § 3D1.4.
No Reduction From Felony to Misdemeanor. When the
major count of a tax indictment charges a felony offense, the
United States Attorney may not accept a plea to a lesser-included
offense nor substitute a misdemeanor offense for the felony
offense charged. Absent unusual circumstances, the Tax Division
will not approve the reduction of a charge from a felony to a
misdemeanor merely to secure a plea.
Post-Plea Dismissal of Remaining Counts. After the
court accepts a defendant's guilty plea to one or more major
counts and imposes a sentence, the United States Attorney may
move to dismiss the remaining counts of the indictment or
Pleas Taken in Advance of Indictment or Information. A defendant who has not yet been charged sometimes indicates an
intent to enter a guilty plea to the major count(s). If this
occurs, the United States Attorney, when presenting the factual
basis for the prosecution, in compliance with Federal Rule of
Criminal Procedure 11, must include the full extent of the
defendant's tax violations on all of the counts in order to
demonstrate the defendant's actual criminal intent. In most
cases, all of the tax charges are related. Consequently, even if
the defendant pleads to only a single count, the court should
take into account the tax loss from all of the years when it
determines the tax loss for the offense to which the defendant
Under Department of Justice policy, all government attorneys
must oppose the acceptance of nolo contendere pleas. In cases
involving tax charges, the United States Attorney may not consent
to a plea of "nolo contendere" except in the most unusual
circumstances and only after the Assistant Attorney General, Tax
Division, has approved a written request. See USAM 9-16.010 and 9-27.500. The United States Attorney also must
oppose dismissal of any charges to which the defendant does not
plead nolo contendere. See USAM 9-27.530.
There are several reasons for the Government's opposition to
nolo pleas. When pleading "nolo," the defendant may create the
impression that the Government has only a technically adequate
case that the defendant elects not to contest. Further, a
standard guilty plea permits the Government to use collateral
estoppel in subsequent civil proceedings (e.g., when a
defendant contests a civil fraud penalty). When it obtains a
"nolo" plea, however, the Government will not be able to use
collateral estoppel in the civil proceeding.
In North Carolina v. Alford, 400 U.S. 25 (1970), the
Supreme Court held that a trial court may accept a defendant's
plea of guilty over the defendant's claims of innocence. The
United States Attorney should discourage Alford pleas by
refusing to agree to terminate prosecutions in situations where a
defendant proffers a plea to fewer than all of the pending
charges. The United States Attorney may not consent to a
so-called Alford plea except in the most unusual
Division, or a higher Departmental official, has approved a
written request. See USAM 9-16.015 and 9-27.440.
Furthermore, if a defendant tenders an Alford plea to
fewer than all of the charges and the court accepts it over the
Government's objection, the United States Attorney must proceed
to trial on all of the remaining counts that are not barred on
double jeopardy grounds, unless the Assistant Attorney General,
Tax Division, approves dismissal of the remaining charges.
Rule 32(i)(4)(A)(iii) of the Federal Rules of Criminal
Procedure permits the Government to make a statement to the court
at the time of sentencing. The United States Attorney should
make a full statement of the facts, including the amount of tax
that the defendant evaded for all relevant conduct, including how
the defendant perpetrated and concealed the fraud, the
defendant's past criminal record, and all other information that
the court may consider important in imposing an appropriate
Because a jail sentence provides the maximum deterrent value,
the Tax Division prefers that the United States Attorney's
sentencing recommendation request that the court impose a jail
sentence in addition to a fine and the costs of prosecution. A
court's order of probation and a defendant's payment of any civil
tax liability in addition to a fine and costs, do not constitute
a satisfactory disposition of a criminal tax case.
Notwithstanding the foregoing, the United States Attorney may
agree to a sentence of probation (preferably with alternative
conditions of confinement) when: 1) the defendant pleads guilty;
2) the sentencing guidelines range is 0-6 months (and within
Criminal History Category I); and 3) the United States Attorney
personally signs and approves a written memorandum that
identifies those unusual and exceptional circumstances that
support the appropriateness of agreeing to probation. Examples
of exceptional circumstances include the need to secure
cooperation against a more culpable party or a serious,
post-indictment degradation in the evidence available for trial
(such as the death of a witness or the loss or suppression of
evidence). The United States Attorney must keep this memorandum
in the case file and must forward a copy to the Tax Division when
Congress has provided that, after a jury or court convicts a
defendant of any of the principal substantive criminal tax
offenses (e.g, 26 U.S.C. §§ 7201, 7203, 7206(1)
and (2)), the court must order the defendant to pay the
Government's costs of prosecution. Thus, the United States
Attorney should seek recovery of the costs of prosecution in
criminal tax cases.
Compromise of Criminal Liability/Civil
While statutory authority under 26 U.S.C. Sec. 7122(a) does
exist for the Attorney General, after referral of a case to the
Department, to enter into agreements to compromise criminal tax
cases without prosecution, as a matter of longstanding policy,
such authority is very rarely exercised. If it is concluded that
there is a reasonable probability of conviction and that
prosecution would advance the administration of the internal
revenue laws, any decision to forgo prosecution on the ground
that the taxpayer is willing to pay a fixed sum to the United
States, would be susceptible to the attack that a taxpayer who is
able to pay whatever amount of money the government demanded had
been given preferential treatment.
Consequently, proposed criminal tax cases are reviewed
without any consideration being given to the matter of civil
liability or the collection of taxes, penalties, and interest. In short, proposed criminal tax cases are examined with the view
to determining whether a violation has occurred, to the exclusion
of any consideration of civil liability.
Absent extraordinary circumstances, such as permanent loss of
tax revenues unless immediate protective action is taken,
settlement of the civil liability is postponed until after
sentence has been imposed in the criminal case, except when the
court chooses to defer sentencing pending the outcome of such
settlement. In this event, the IRS should be notified so that it
can begin civil negotiations with the defendant.
However, the Tax Division strongly encourages, but does not
require, that a plea agreement include certain civil admissions
by the defendant, including: (1) admission of either receipt of
enumerated amounts of unreported income or claimed enumerated
amounts of illegal deductions or improper credits for years set
forth in the plea agreement; (2) a stipulation that defendant is
liable for the fraud penalty imposed by the Internal Revenue Code
(26 U.S.C. Sec. 6663) on the understatements of liability for the
years involved; and (3) an agreement by the defendant to file,
prior to sentencing, complete and correct initial or amended
personal returns for the years subject to the above admissions
and, if requested, to provide the IRS with information regarding
the years covered by the returns and to pay, at sentencing, all
additional taxes, penalties and interest which are due and owing;
and (4) an agreement by the defendant not to file any claims for
refund of taxes, penalties, or interest for amounts attributable
to the returns filed incident to the plea.
The Department of Justice authorizes and encourages United
States Attorneys to seek restitution in criminal tax cases. In
May 2005, the Attorney General issued new Guidelines on Victim
and Witness Assistance. Those Guidelines require that prosecutors in all cases "must consider "requesting that the defendant provide full restitution to all victims of all charges contained in the indictment or information, without regard to the counts to which the defendant actually plead[s]." (Pub. L. No. 104-132 § 209; 18 U.S.C. § 3551 note).
A Joint IRS/DOJ Task Force on Restitution developed standard
language for the restitution portion of a plea agreement and a
proposed restitution order for use by prosecutors in criminal tax
cases involving defendants who agree or are ordered to pay
restitution. For the Task Force Memorandum, standard restitution
plea language, optional restitution plea language, and the
recommended form for a restitution, see Tax Resource Manual 18 through 21.
A United States Attorney should direct any questions about
restitution in criminal tax cases to the Criminal Appeals and
Tax Enforcement Policy Section (CATEPS) of the Tax Division. See Tax Resource Manual 2.
the tax laws. These actions include criminal prosecutions, civil
injunction actions, summons enforcement actions, collection
actions, and the defense of civil refund suits. The Government
may take these actions simultaneously or sequentially. See Tax Resource Manual 22.