6-4.010
Federal Criminal Tax Enforcement
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.
[updated September 2007]
[cited in USAM 6-4.211]
6-4.011
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.usdoj.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.
[updated September 2007]
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.
[updated September 2007]
6-4.120
Grand Jury InvestigationsGenerally
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.
[updated September 2007]
[cited in USAM 6-2.000]
6-4.121
IRS Requests to Authorize Grand Jury Investigations
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).
[updated September 2007]
6-4.122
United States Attorney's Grand Jury Investigations and
Prosecutions
- Tax Division Referrals for Prosecution.
The Tax Division
authorizes the United States Attorney to conduct grand jury investigations
into matters arising under the internal revenue laws to the extent necessary
to perfect those tax charges that the Tax Division refers for
prosecution.
- Tax Division Referrals for Grand Jury Investigation.
The Tax
Division authorizes the United States Attorney to conduct grand jury
investigations into matters arising under the internal revenue laws to the
extent necessary to 1) perfect the tax charges for which the Tax Division
authorizes an investigation or 2) determine whether the Tax Division should
authorize prosecution. See USAM 6-4.242.
- 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.
- IRS Direct Referrals for Prosecution.
In limited categories of
cases, the Tax Division authorizes the IRS to refer certain matters arising
under the internal revenue laws directly to the United States Attorney for
prosecution. See USAM 6-4.243.
In turn, the Tax Division authorizes
the United States Attorney to conduct grand jury investigations into these
matters, to the extent necessary to perfect the charges that the IRS has
directly referred.
[updated September 2007]
[cited in USAM 6-4.212]
6-4.123
Joint United States AttorneyIRS Request to Expand Tax
Grand Jury Investigation
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).
[updated September 2007]
[cited in USAM 6-2.000;
6-4.212]
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
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
the recommendation.
[updated September 2007]
[cited in USAM 6-4.242]
6-4.126
Restriction on Disclosure of Grand Jury Matters to IRS
for Civil Use
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.
[updated September 2007]
6-4.130
Search Warrants
The Assistant Attorney General, Tax Division, has delegated to the
United States Attorney and other specified supervisory officials in United
States Attorney's Offices the authority to approve search warrants in many
matters arising under the internal revenue laws: a warrant directed at an
office, structure, or premises of a target or subject of an investigation; a
warrant directed to a provider of electronic communication services or
remote computing services and relating to a subject or target of a criminal
investigation; and a warrant directed to a disinterested third party owning
a storage space business or similar business and relating to a subject or
target of a criminal investigation. See Tax Division Directive No. 52
(modified March 17, 2008) and related documents in
Tax Resource Manual 12 and 13. The United
States Attorney must, however, submit a written request and obtain the
approval of the Tax Division for any search warrant where the target or
subject is reasonably believed to be
- an accountant
- a lawyer
- a physician
- a public official/political candidate
- a member of the clergy
- a news media representative
- a labor union official or
- an official of an organization exempt from tax under 26 U.S.C.
§ 501(c)(3)
Except as provided above, the United States Attorney must also submit a
written request and obtain the approval of the Tax Division for any search
warrant directed at an office, structure, or premises of a third party,
i.e., a person who is not a target or subject of the investigation.
[updated April 2008]
6-4.200
Tax Division Jurisdiction and Procedures
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.
[updated September 2007]
[cited in USAM 6-1.110;
6-2.000;
6-4.010;
6-4.125;
6-4.210]
6-4.210
Tax-Related Mail, Wire, or Bank Fraud, RICO, or Money Laundering
Charges
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
USAM 6-4.200; 28 C.F.R. § 0.70. Thus, 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.
- Mail, Wire or Bank Fraud Charges.
The Tax Division may approve
mail, wire or bank fraud charges in tax- related cases involving schemes to
defraud the Government or other persons if there was a large fraud loss or a
substantial pattern of conduct and there is a significant benefit to
bringing the charges instead of or in addition to Title 26 violations.
See generally
USAM 9-43.100. Absent unusual circumstances, however,
the Tax Division will not approve mail or wire fraud charges if a case
involves only one person's tax liability or when all submissions to the IRS
were truthful.
- 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.
§ 1341) or wire fraud (18 U.S.C. §1343);
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.").
- Racketeering and Money Laundering Charges Based on Tax Offenses.
The Tax Division will not authorize the use of mail, wire or bank fraud
charges to convert routine tax prosecutions into RICO or money laundering
cases, but will authorize prosecution of tax-related RICO and money
laundering offenses when unusual circumstances warrant such a prosecution. A
United States Attorney who wishes to bring a RICO charge (18 U.S.C.
§ 1962) in any criminal matter arising under the internal revenue
laws, must first obtain the authorization of the Tax Division and the
Criminal Division's Organized Crime and Racketeering Section. See
USAM 9-110.101. This requirement also applies to RICO cases where the
predicate act is a state tax violation and there is a parallel federal
violation. A United States Attorney who wishes to bring a money laundering
charge (18 U.S.C. § 1956) based on conduct arising under the
internal revenue laws, must first obtain the authorization of the Tax
Division and, if necessary, the Criminal Division's Asset Forfeiture and
Money Laundering Section. See
USAM 9-105.300.
[updated September 2007]
[cited in USAM 6-2.000]
6-4.211
Standards of Review
- 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.
- Grand Jury Investigation.
When it reviews a criminal tax matter
to decide whether it should authorize a grand jury investigation, the Tax
Division considers whether articulable facts support a reasonable belief
that a target or subject is committing or has committed a tax crime.
[updated September 2007]
[cited in USAM 6-2.000;
6-4.123]
6-4.212
Categories of Matters Reviewed
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