Opinion ID: 78300
Heading Depth: 2
Heading Rank: 3

Heading: Clarke's Sentence

Text: Clarke argues that the court should have calculated the tax loss based not upon his tax liability under the original return, which he filed as married, filing separately, but upon what his tax liability would have been had he amended his return to reflect a filing status of married, filing jointly. He asserts that if he had filed as the latter, the loss would have been reduced from $35,811 to $28,186, resulting in a base offense level of 12 rather than 14. See U.S.S.G. § 2T4.1. The government responds that the tax loss was correctly based on the original returns because the tax loss is the loss the defendant intends when he files the fraudulent return. Because this claim involves an interpretation of the sentencing guidelines, our review is de novo. United States v. Hunerlach, 197 F.3d 1059, 1069 (11th Cir.1999) (reviewing de novo district court's inclusion of interest and penalties in tax loss calculation under U.S.S.G. § 2T1.1). The guidelines provide that where, as here, the offense involved the filing of a fraudulent or false tax return, the tax loss is the total amount of loss that was the object of the offense ( i.e., the loss that would have resulted had the offense been successfully completed). U.S.S.G. § 2T1.1(c)(1). Although we have not decided the issue of whether a defendant's unclaimed deductions or losses may be taken into account in determining tax loss for purposes of § 2T1.1(c)(1), several other circuits have taken the government's position and have held that the tax loss is the amount of loss the defendant intends to bring about, not the amount of loss to the government that actually results, and therefore, unclaimed deductions or other reductions in tax liability that are unrelated to the offense of conviction may not be used to offset the tax loss amount. See United States v. Blevins, 542 F.3d 1200, 1203 (8th Cir.2008), cert. denied, ___ U.S. ___, 129 S.Ct. 1024, ___ L.Ed.2d ___ (2009); accord United States v. Delfino, 510 F.3d 468, 472-73 (4th Cir.2007), cert. denied, ___ U.S. ___, 129 S.Ct. 41, 172 L.Ed.2d 20 (2008); United States v. Phelps, 478 F.3d 680, 682 (5th Cir.) (per curiam), cert. denied, ___ U.S. ___, 128 S.Ct. 436, 169 L.Ed.2d 305 (2007); United States v. Chavin, 316 F.3d 666, 677 (7th Cir.2002); United States v. Spencer, 178 F.3d 1365, 1368 (10th Cir.1999); United States v. Tandon, 111 F.3d 482, 490 (6th Cir.1997); United States v. Valentino, 19 F.3d 463, 465 (9th Cir.1994). But see United States v. Gordon, 291 F.3d 181, 188 (2d Cir.2002) (holding that district court erred in refusing to consider potential unclaimed deductions in sentencing analysis). We join the majority of the circuits that have addressed this issue and hold that tax loss under U.S.S.G. § 2T1.1(c)(1) is the amount of loss the defendant intends to create when he falsifies his tax return and must therefore be calculated based upon the fraudulent return. In this case, the object of Clarke's offense was the amount by which he under-reported and fraudulently misstated his taxable income on his 2000, 2001, and 2002 returns. That his tax liability may have been lower had he filed as married, filing jointly rather than married, filing separately is thus irrelevant to the determination of the amount of loss to the government that he intended when he under-reported his income. See Chavin, 316 F.3d at 677 ([R]eference to other unrelated mistakes on the return such as unclaimed deductions tells us nothing about the amount of loss to the government that [defendant's] scheme intended to create.). Accordingly, the district court did not err in computing the tax loss based on the fraudulent return Clarke actually filed, and not on the tax return Clarke could have filed but did not.
Clarke also argues that the district court erred in applying the two-level sophisticated means enhancement under U.S.S.G. § 2T1.1(b)(2) because he never directed anyone to hide the payments that were made on his behalf and the existence of an audit trail belied any purposeful concealment. We review the district court's findings of fact related to the imposition of sentencing enhancements, including a finding that the defendant used sophisticated means, for clear error. United States v. Robertson, 493 F.3d 1322, 1329-30 (11th Cir.2007). Under this standard, we will not disturb a district court's findings unless we are left with a definite and firm conviction that a mistake has been committed. United States v. Crawford, 407 F.3d 1174, 1177 (11th Cir.2005) (quotation marks and citation omitted). Notwithstanding the deferential nature of our review, we are not required to rubber stamp the district court's findings simply because they were entered. Id. (quotation marks and citation omitted). The sentencing guidelines allow the district court to enhance a defendant's base offense level by two levels if the offense involved sophisticated means. U.S.S.G. § 2T1.1(b)(2). The commentary describes sophisticated means as especially complex or especially intricate offense conduct pertaining to the execution or concealment of an offense, including [c]onduct such as hiding assets or transactions, or both, through the use of fictitious entities, corporate shells, or offshore financial accounts. Id. § 2T1.1(b), comment. (n.4). Although the mere failure to report income to an accountant does not involve sophisticated means, see United States v. Barakat, 130 F.3d 1448, 1457 (11th Cir.1997), a defendant need not use offshore bank accounts or transactions through fictitious entities in order for the enhancement to apply, see United States v. Campbell, 491 F.3d 1306, 1315-16. (11th Cir.2007). In Barakat, we concluded that where the defendant had a mortgage company for whom he performed consulting work deposit his $15,000 fee into an attorney's trust account, the district court did not clearly err in finding that the defendant had used sophisticated means to conceal his tax evasion. Because the fee was routed through the trust account, [the defendant] could fail to disclose the ... payment[ ] knowing that, in the absence of a Form 1099, it was unlikely the IRS would ever become aware of that income. Barakat, 130 F.3d at 1457. [4] In Campbell, we held that the district court's application of the sophisticated means enhancement was not clear error where the defendant was found to have utilized campaign accounts and credit cards issued to other people to conceal cash expenditures. See 491 F.3d at 1315. In so holding, we noted that Campbell's deceptive practices were at least as sophisticated as the practice at issue in Barakat,  and that, in terms of the degree of sophistication, hiding assets or transactions through the use of a campaign fund was no different than hiding assets or transactions through the use of fictitious entities, corporate shells, or offshore financial accounts. Id. As in Barakat and Campbell, we are not in this case left with a definite and firm conviction that the district court erred in finding that Clarke used sophisticated means to hide his tax evasion scheme. The record reflects that Clarke concealed the true extent of his income by: (1) depositing his salary from the church and the credit union into accounts that were not registered in his own name; (2) instructing the church to make payments out of these accounts directly to his personal creditors; and (3) having the school and the church pay his life and disability insurance premiums directly to the insurance carriers. For purposes of the sophisticated means enhancement, we see no material difference between concealing income and transactions through the use of third-party accounts, as was the case here, and using a corporate shell or a fictitious entity to hide assets. See U.S.S.G. § 2T1.1, comment. (n.4); see Campbell, 491 F.3d at 1315-16. The district court did not clearly err in finding that Clarke's activity, which covered a three-year period and required intricate planning, involved the use of sophisticated means.