The Department of Justice Criminal Tax Division has the ultimate authority to review and prosecute criminal tax cases. If you are subject to a criminal tax investigation or prosecution, it will likely be headed by the DOJ. The department has the power to authorize or decline criminal prosecutions, take action in response to Criminal Investigation Division or U.S. Attorney Grand Jury requests, and to oversee tax matters involving Tax Division directives. When you are involved in a criminal tax case with the DOJ, you will likely have frequent interactions with the DOJ Tax Division attorneys. These attorneys belong to geographical Criminal Enforcement Sections (CES) and they are assigned cases within their particular regions. CES attorneys receive prosecution recommendations from the Criminal Investigation Division and U.S. Attorneys, which they then review during Grand Jury investigations and criminal trials and appeals.
Where Does the DOJ Tax Division Receive Authority for Prosecution?
After the CID makes a prosecution recommendation to the DOJ Tax Division, a specific Tax Division attorney is assigned to the case. The CES attorney then prepares a memorandum which will result in one of several outcomes for the DOJ Tax Division:
- directing a prosecution to be initiated;
- requesting that the CID take further investigation;
- referring the case to the U.S. Attorney; or
- declining the case and returning it to the IRS.
Cases reviewed by the DOJ Tax Division are classified as either “simple” or “complicated.” Simple cases are typically referrals from administrative CI investigations which can be taken care of on an expedited basis. Complicated cases involve indirect methods of proof, or other factual, legal, or policy issues and they are reviewed and prepared by a CES senior attorney.
What Factors Will the Tax Division Consider When Pursuing Criminal Prosecution?
When determining whether to pursue criminal prosecution against a taxpayer, the CES typically applies uniform standards reflecting the DOJ Tax Division’s policy goals. One factor that may be considered is the taxpayer’s participation in an IRS voluntary disclosure practice, with particular emphasis placed on the taxpayer’s cooperation and timeliness of the disclosure. With respect to the voluntary disclosure program, the Tax Division attorney will consider what prompted the taxpayer to make the disclosure, whether the taxpayer fully paid past tax liabilities in compliance with the disclosure, and whether the taxpayer assisted in the prosecution of other persons involved in the crime.
Another factor that the Tax Division will possibly consider is the health of the taxpayer. When it is “clear beyond all reasonable doubt that a proposed defendant will never be able to stand trial because of a terminal physical condition,” the DOJ may decide against prosecuting the taxpayer. If a taxpayer attempts to claim ill health as a reason to continue or delay a criminal tax trial, the judge will often appoint a physician to conduct an examination of the taxpayer to support the claim.
Other Policy Matters Considered by the DOJ Tax Division
The DOJ Tax Division takes several other factors into consideration as a matter of official department policy. As a general rule, the Tax Division reviews and authorizes or declines cases for prosecution without any regard for whether the taxpayer actually made an offer to pay civil liability. In those cases, the Tax Division will typically not consider the offer to pay even if the IRS was eventually able to collect tax from the taxpayer. In fact, the Tax Division usually prefers any settlement with the IRS take place after the criminal prosecution has concluded.
As far as pleas are concerned, the DOJ Tax Division has a firm policy of rejecting nolo contendere pleas as well as pleas that are made from defendants who maintain their innocence. In the event that a court accepts a nolo contendere plea over the objection of the government, the Tax Division typically insists that the U.S. Attorney take the case to trial on any remaining charges. When dealing with a case disposed of by negotiated plea, the Tax Division aggressively tries to reserve itself the freedom to recommend incarceration or a fee for the defendant taxpayer.
The Tax Division Pre-Indictment Conference with the Taxpayer
If a taxpayer wishes to have a pre-indictment conference with the Tax Division, it may be granted where the government believes that the practice will result in information to aid prosecution decision. However, these conferences are not granted as a matter of right to the taxpayer and are only issued at the discretion of the Tax Division. The purpose of a pre-indictment conference is to give the taxpayer “an opportunity to present any explanation or evidence which he or she desires the Tax Division to consider.” Due to the narrow goals of the conference, it will typically be rather quick and formal. If you are attending a pre-indictment conference, your attorney will usually only be informed of the proposed charges, the tax years involved, and the criminal tax charges as computed by the IRS. However, the DOJ will almost never provide proof of willfulness, the theory of prosecution, any affirmative acts showing conspiracy, and any government witness statements. As such, the conference should not be seen as an opportunity to gain insight into the government’s evidence against the taxpayer. Depending on the decision of the DOJ Tax Division, the taxpayer and his attorney will be notified by mail. If the Tax Division recommends prosecution, the case will proceed to a Grand Jury investigation with the U.S. Attorney’s Office. If the Tax Division declines prosecution, the case is returned to the IRS for any additional necessary agency action.
- US Federal
Tax Enforcement Dealing with the DOJ Tax Division on your Criminal Tax Case
By William Hartsock |
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