TAXLITIGATOR – Tax Controversy (Civil & Criminal) Report

The Federal Sentencing Commission keeps track of sentencing in federal criminal cases. Its recently released Data Report gives an idea of sentences in criminal tax cases and how they stack up against sentencing in other types of federal criminal cases.  First, some basics.

The report is for the fourth quarter of 2017. Since the U.S. is on a fiscal year ending September 30, the report is for the period July 1 through September 30, 2017.  During those 92 days sentences were handed down in 66,412 cases by federal district courts.  The three largest categories were drug cases (trafficking, facilitating or possessing), with over 20,500 cases sentenced (30.9%), immigration with 20,334 cases sentenced (30.6%) and firearms violations with 8,024 cases (12.1%).  So almost 75% of federal criminal cases involved drug, guns or immigration violations.  Where do taxes stand? Sentences were handed down in only 428 tax cases, a measly 0.6%.

The Sentencing Commission statistics tell you more than just the number of cases sentenced in each category. It breaks cases down by race:

Race                      White        Black          Hispanic            Other

All Cases               21.5%         21.1%            53.3%               5.4%

Tax Cases              60.2%         23.5%            10.8%               4.2%

It breaks cases down by gender (but only male and female are listed):

Gender                 Male                            Female

All Cases              86.7%                            13.3%

Tax Cases            73.1%                             26.9%

The IRS is a greater believer in gender equality than other federal agencies.

Now the naughty bits: the periods of incarceration. The average sentence in tax cases was 13 months and the median sentence was 10 months.  This is a lot better than in other classes of criminal cases where overall the average sentence was 48 months and the median sentence was 21 months.  So if you are convicted of a tax crime, you’ll probably spend less time in prison than if you trafficked in drugs (70 months average, 55 months median).  Immigration violations average 12 months incarceration with a median of 8 months.

Prior to the Supreme Court’s decision in Booker, holding that the guideline ranges were advisory, almost all cases were sentenced within the guideline range. How many are within the guideline range, above the guideline range and below the guideline range?  Here’s how it breaks down:

Below                 Below

Guidelien Range   Above                  (Gov’t Request)   (No Gov’t Request)

All              49.1%                   2.9%                  27.8%                 20.1%

Tax             25.2%                   1.6%                  24.7%                 48.5%

Courts are less likely to give sentences within the guideline range for tax cases than for almost any other class of case and they are far more likely to sentence below the guideline range where the Government does not sponsor a below guideline range sentence than in almost every other class of cases. Of course, where the Government sponsored a below guideline range sentence in a tax case the incarceration rate was -0-.  No one was sentenced to prison in a tax case where the Government asked the court to give a below guideline range sentence.  How does this compare with cases where the Government did not sponsor a below guideline range sentence?  The median sentence was 1 month incarceration.  Yes, you read that correctly: ONE MONTH.

Things didn’t look so good in the 7 tax cases where the court gave an above guideline range sentence: the median sentence was 45 months.

Bottom line: the courts continue to give lighter sentences in tax cases than in most other types of federal criminal cases.

ROBERT S. HORWITZ – For more information please contact Robert S. Horwitz – horwitz@taxlitigator.com or 310.281.3200   Mr. Horwitz is a principal at Hochman, Salkin, Rettig, Toscher & Perez, P.C., a former Assistant United States Attorney of the Tax Division of the Office of the U.S. Attorney (C.D. Cal) and represents clients throughout the United States and elsewhere involving federal and state, administrative civil tax disputes and tax litigation as well as defending criminal tax investigations and prosecutions. Additional information is available at http://www.taxlitigator.com