9.6.2 Plea Agreements and Sentencing Process18.104.22.168 Overview22.214.171.124 Proposed Plea Agreement Situations126.96.36.199.1 Administrative Investigations188.8.131.52.1.1 Investigations Processed under the Expedited Plea Program Procedures (Tax Division Directive 111)184.108.40.206.1.2 Procedures Prior to Criminal Tax Counsel Pre-Referral Assistance220.127.116.11.1.3 Pre-Referral Assistance From Criminal Tax Counsel18.104.22.168.2 Grand Jury Investigations22.214.171.124.3 Prosecution Recommendation Report126.96.36.199.4 Pleas Involving Title 18 Seizures and Forfeitures188.8.131.52 Concurrence or Non-concurrence of Special Agent in Charge Regarding Prosecution Reports184.108.40.206 Restitution in Plea Agreements220.127.116.11 Sentencing Process18.104.22.168.1 Communication with Probation Officers22.214.171.124.2 Costs of Prosecution Part 9. Criminal InvestigationChapter 6. Trial and Court Related ActivitiesSection 2. Plea Agreements and Sentencing Process 9.6.2 Plea Agreements and Sentencing Process 126.96.36.199 (07-21-2004) Overview This section provides guidelines and procedures for processing referrals in proposed plea agreement situations. These procedures are designed to assist a taxpayer currently under investigation, who is represented by counsel, to negotiate a plea agreement. The sentencing process follows after a defendant signs a plea agreement, enters a guilty plea, or is found guilty as the result of a trial. The section also provides guidance to the special agent for communication with probation officers. This section contains the following topics: Proposed Plea Agreement Situations Concurrence or Non-Concurrence of Special Agent in Charge Regarding Prosecution Reports The Sentencing Process 188.8.131.52 (07-21-2004) Proposed Plea Agreement Situations A taxpayer may enter into a plea agreement with the government at any stage of an investigation. Criminal Investigation (CI) does not have authority to initiate plea negotiations with the taxpayer because this authority rests solely with the Department of Justice (DOJ). A taxpayer must be represented by counsel to initiate plea discussions or negotiations. Note: If a taxpayer that is not represented by counsel expresses an interest in plea negotiation discussions, advise the taxpayer that in order to participate, he/she must be represented by counsel. 184.108.40.206.1 (07-21-2004) Administrative Investigations In an administrative investigation involving legal source income, when a taxpayer, through counsel, expresses a desire to participate in the expedited plea program, inform the taxpayer and his/her counsel that the willingness to enter into plea negotiations with DOJ in no way reduces the taxpayer's ultimate civil tax liability. 220.127.116.11.1.1 (07-21-2004) Investigations Processed under the Expedited Plea Program Procedures (Tax Division Directive 111) These investigations do not require the same degree of preparation as normal administrative tax investigations since they will not go to trial. The investigations do require that sufficient evidence be obtained to constitute a referable matter that would meet the requirements of Federal Rules of Criminal Procedure Rule 11 (b)(3) (Fed. R. Crim. P. 11 (b)(3)) and the charges established by the investigation would adequately address the crime(s) committed by the taxpayer. The IRS will take precautions to ensure that information furnished by the taxpayer, prior to formal plea discussions with DOJ, will not be prohibited from future use under the restrictions of Fed. R. Crim. P. 11(f) in the event that plea negotiations fail by reason of withdrawal or rejection by DOJ. The expedited plea program procedure is designed to accommodate the interests of taxpayers who desire a speedy resolution of the investigation and prosecution, as well as the interest of the government in obtaining an appropriate resolution with the appropriate expenditure of investigative and prosecutorial resources. Taxpayers requesting use of the expedited plea program procedure will be expected to cooperate with the IRS in the determination and satisfaction of their civil tax liabilities, as well as the criminal aspects. In the event the criminal investigation is completed by use of these procedures without establishing the appropriate civil deficiencies, the appropriate operating division of the IRS will complete the civil investigation. For a plea agreement to be acceptable under the expedited plea program, it must: involve legal source income establish culpability for the violations charged include the most significant violation consider the totality of the fraud committed by the taxpayer not reduce tax return felony counts to misdemeanors Note: Investigations in which the taxpayer does not appear willing to enter an acceptable plea, or where the investigation has not established the general scope of the taxpayer’s culpability, are inappropriate for inclusion in this program. 18.104.22.168.1.2 (08-11-2008) Procedures Prior to Criminal Tax Counsel Pre-Referral Assistance When a taxpayer, represented by counsel, expresses a desire to negotiate a plea agreement prior to the formal completion of an administrative investigation, the special agent will advise taxpayer’s counsel of the following: Authority to engage in plea negotiations rests exclusively with DOJ. Counsel for the taxpayer must provide a written statement to CI confirming the taxpayer's desire to engage immediately in plea negotiations with DOJ. The IRS will make a referral to DOJ by forwarding the written proposal to enter a plea of guilty to the charges being investigated. If approved by DOJ, Tax Division, it will be referred to the appropriate US Attorney’s office for plea negotiations. The taxpayer must be informed that he/she will be required to plead to the most significant violation involved, consistent with the Tax Division's Major Count Policy. Plea negotiations have to be conducted by either the respective US Attorney’s office or by DOJ, Tax Division. The taxpayer must submit to an interview by the special agent and anything said or any information furnished can be used against the taxpayer in a criminal prosecution, as well as in any civil settlement. The taxpayer must provide all records or information in his/her possession or to which the taxpayer has access, to the IRS for the years involved. The charges being investigated and any proposal to enter into plea negotiations can be referred to DOJ, Tax Division only after CI is able to corroborate the elements of the offense being investigated or the admissions being made by the taxpayer (e.g., gross income in a §7203 investigation or documentation relating to an unreported material matter in a §7206 (1) investigation, etc.). Criminal Investigation must have sufficient evidence to constitute a referable matter to DOJ. The investigating special agent should review all records in enough detail to ensure that there are no significant undiscovered issues or tax losses in the investigations that have not been taken into account in assessing the merits of the referral to DOJ, Tax Division. The special agent should secure and review the taxpayer’s returns for all years subsequent to the years under investigation and any open prior years to address any issues raised by those returns in assessing the merits of the referral. The special agent should inquire and obtain the details, if appropriate, as to any other (open or closed) Federal, state, or local investigations relating to the taxpayer. 22.214.171.124.1.3 (08-11-2008) Pre-Referral Assistance From Criminal Tax Counsel If CI determines that a referral for plea negotiations would be in the best interests of the government, Criminal Tax (CT) Counsel will be contacted for pre-referral assistance on the issues of whether: The presently available evidence is sufficient to meet the requirements of Fed. R. Crim P. 11(b)(3), specifically that a factual basis exists to support the plea of guilty to each of the counts considered for referral. The charges established by the investigation adequately address the crime(s) committed by the taxpayer. At the option of the Special Agent in Charge (SAC), if CT Counsel concurs with CI that a referral should be made, CT Counsel will contact the taxpayer’s counsel orally or in writing to accomplish the following: Confirm that the taxpayer wants to enter into plea negotiations with DOJ. Remind the taxpayer and his/her counsel of the charges being investigated and that the government will only consider a plea that adequately addresses those specific charges, i.e., the government will generally be looking for a plea of guilty to one or more of the specified charges. Confirm that the taxpayer is willing to be interviewed by the special agent and that the taxpayer will submit all records or information in his/her possession or to which he/she has access to the IRS for the tax years involved. If the taxpayer’s counsel wants to proceed with negotiations, the SAC or CT Counsel will request the taxpayer’s counsel provide a written statement that confirms the taxpayer’s wish to immediately engage in plea negotiations with the US Attorney or DOJ, Tax Division. 126.96.36.199.2 (07-21-2004) Grand Jury Investigations The US Attorney's office or DOJ will be responsible for negotiating any plea agreement during a grand jury investigation. If a plea involves tax violations, authorization must be obtained from DOJ, Tax Division. The taxpayer and his/her counsel will be informed that the willingness to enter into plea negotiations with DOJ in no way reduces the taxpayer's ultimate civil tax liability. The taxpayer must be informed that he/she will be required to plead to the most significant violation involved, consistent with the Tax Division's Major Count Policy. 188.8.131.52.3 (08-11-2008) Prosecution Recommendation Report After the written statement is provided and is deemed legally sufficient by CT Counsel, the special agent will forward a modified prosecution recommendation report containing the following information: The title page of the prosecution recommendation report will state that this matter involves a proposed plea agreement, and is a limited referral to DOJ only for purposes of negotiation, and if possible, finalizing a plea. The taxpayer’s identification, personal history, and a history of business or income-producing activities. The nature of the taxpayer’s fraudulent activity and the evidence, including available exhibits, to support acceptance of a plea to the charges under investigation. Any indication of non-tax crimes (Federal, state, or local) for which the taxpayer may be or has been under investigation. A recommendation for prosecution. Documentation that the taxpayer and/or the representative have provided all available records for all years involved in the investigation so it is clear there are no significant undiscovered issues in the investigation which have not been taken into account in assessing the merits of the investigation. This documentation should include all relevant conduct, which is necessary for presentation to the court for sentencing purposes. A description of the nature and extent of the records supplied and the specific conclusions reached by the special agent and/or revenue agent who reviewed them. Documentation of interview(s) with the taxpayer that reflect a thorough review of the issues in the investigation. (The taxpayer must submit to interview(s)). A complete and thorough discussion of the nature and extent of the taxpayer’s cooperation. A summary and evaluation of the taxpayer’s returns for all years under investigation, and subsequent to the years under investigation, addressing any issues raised by those returns in assessing the merits of the investigation. This summary will, where practical, include a computation reflecting the tax ramifications of the taxpayers’ actions. A discussion as to the potential range of sentences the taxpayer may receive based on the evidence available for use under the Sentencing Guidelines. Criminal Tax Counsel will review the prosecution recommendation report for legal sufficiency pursuant to these guidelines. Criminal Tax Counsel will prepare a Criminal Evaluation Memo (CEM) for the SAC, which reflects CT Counsel's evaluation of the merits of the criminal prosecution. Contained within the CEM will be a section noting CT Counsel's concurrence or nonconcurrence with the prosecution recommendation. If it is determined that prosecution is warranted, the SAC will refer the investigation to DOJ, Tax Division, recommending prosecution and the initiation of plea negotiations in accordance with the written request of taxpayer’s counsel. A copy of the prosecution recommendation report with exhibits will be forwarded to Assistant Attorney General, Tax Division, Criminal Section, DOJ, 950 Pennsylvania Avenue, NW, Room 4744, Washington, DC 20530–0001, Attn: Chief, (Southern, Northern, or Western) Enforcement Section. (Send to the attention of the appropriate Enforcement Section Chief). The SAC will telephone the DOJ liaison attorney to state that such a report is being submitted to their office. The DOJ attorney will contact the SAC by telephone to acknowledge receipt of the report. The DOJ, Tax Division has 30 days after receipt of the referral from the SAC to either authorize prosecution consistent with the proposed plea bargain, or disapprove the negotiation of such a plea. If DOJ, Tax Division objects to proceeding with the plea discussions, or the evidence submitted is insufficient to meet the requirements of Tax Division Directive III, and Fed. R. Crim. P. 11(f), DOJ, the Tax Division will immediately notify the SAC. For administrative investigations, DOJ, Tax Division will then notify the taxpayer’s counsel in writing that the investigation is being returned to the IRS and all exhibits and files will be returned to the IRS. If DOJ, Tax Division authorizes prosecution, it will refer all documents to the appropriate US Attorney’s Office, who may then undertake plea negotiations with the taxpayer and his/her counsel. The US Attorney’s Office may accept a plea to the specified major count without further authorization from DOJ, Tax Division. If the US Attorney’s office desires to accept a plea to any count other than the specified major count, the approval of DOJ, Tax Division is required. No information or evidence submitted to the US Attorney by the taxpayer or counsel during the course of plea negotiations will be forwarded to the IRS unless they expressly authorize the IRS’ use of such information. In these situations, a written waiver of the Rule 11(f) restrictions should be obtained. Upon return of an investigation, the IRS, after considering all relevant facts, will determine whether to continue with the investigation. 184.108.40.206.4 (08-11-2008) Pleas Involving Title 18 Seizures and Forfeitures The plea agreement must include a violation of one of the following offenses charged in the indictment or criminal information to ensure forfeitability of the property: 18 USC §1956 18 USC §1957 18 USC §1960 31 USC §5317(c)(2) 31 USC §5313(a) 31 USC §5324(a) Additional requirements in plea agreements are contained in the Department of Treasury Executive Office of Asset Forfeiture (TEOAF) Directive 17. 220.127.116.11 (08-11-2008) Concurrence or Non-concurrence of Special Agent in Charge Regarding Prosecution Reports The SAC will approve the prosecution recommendation report and make the appropriate referral. If the SAC does not approve the recommendation of the special agent, the SAC will prepare a memorandum documenting or explaining the reason(s) for not approving the prosecution recommendation report. The memorandum and prosecution recommendation report will be returned to the originating Supervisory Special Agent (SSA). For sensitive investigations (those involving any of the following: a currently serving elected Federal official, a currently serving Article III judge; a currently serving high-level Executive Branch official; a currently serving elected statewide official; a currently serving member of the highest court of the state; a mayor currently serving a population of 250,000 or more; perjury in the US Tax Court; and an exempt organization), the SAC will forward the prosecution recommendation report to the Director, Field Operations with a brief cover memorandum asking for the concurrence of the Director, Field Operations. The investigation may not be referred until the written concurrence of the Director, Field Operations is obtained. See IRM 9.4.1, General, Primary and Subject Investigations, subsection 18.104.22.168.3 for sensitive investigations. 22.214.171.124 (08-11-2008) Restitution in Plea Agreements Restitution is often ordered in criminal tax cases pursuant to a plea agreement, and may also be required as condition of probation. Including restitution as part of the plea agreement is an effective method for the Assistant United States Attorney to facilitate civil resolution of a criminal case and the inclusion of the taxpayer’s cooperation in the civil settlement as part of the plea agreement. See LEM 9.14.2 for court ordered restitution for refund crimes. 126.96.36.199 (08-11-2008) Sentencing Process The ultimate goal of every criminal prosecution is not merely obtaining a conviction, but obtaining a sentence sufficient to discourage similar criminal violations by other taxpayers. Therefore, the special agent should devote the same attention and energy to the sentencing process as to the investigation and trial processes. 188.8.131.52.1 (08-11-2008) Communication with Probation Officers Whenever a conviction is obtained, the special agent should contact the US Probation Officer assigned to prepare the pre-sentence report, and furnish a copy of the prosecution recommendation report and any other information which may speak to relevant conduct in setting forth the full magnitude of the defendant’s conduct. Information to be furnished to the probation officer should include, but is not limited to the following: An account of the harm caused to the government or other victims. An explanation of the applicability of any sentencing factors listed in the Federal Sentencing Guidelines Manual. Any indications of any relevant conduct which might be useful to the probation officer in preparing the pre-sentence report and sentencing recommendation. Note: Relevant conduct includes conduct of the defendant that is outside the offense of conviction, but is part of the same or similar pattern of conduct as the count(s) of conviction. The US Sentencing Guidelines allow for consideration of uncharged conduct in calculating the appropriate sentencing range. The standard of proof necessary to utilize relevant conduct for sentencing purposes is a preponderance of the evidence. Upon conviction, the prosecution recommendation report may be disclosed to a probation officer for the purpose of preparing the report contemplated by Fed. R. Crim. P. 32(c). The disclosure of the prosecution recommendation report to probation officers is authorized by 26 USC §6103(h)(4). However, information contained in the report shall not be disclosed if such disclosure would identify a confidential informant or seriously impair a civil or criminal tax investigation. Occasionally, probation officers will request tax information from the IRS as part of a pre-sentence investigation in a non-tax criminal matter. Disclosures may be made to probation officers in these circumstances only as provided in 26 USC §6103(c). Treasury Regulation §301.6103(c)1 provides the format that must be followed in any taxpayer authorization or waiver that is submitted for the purpose of allowing a probation officer to receive tax information. The special agent must emphasize, to both the probation officer and the Assistant US Attorney, the importance that CI attaches to the sentence imposed, and the importance of including restitution. It is vital to point out the effect that the sentence and restitution may have on IRS compliance efforts among similarly situated individuals. Following a conviction for criminal tax violations, courts in some instances specify the sentence imposed is conditioned upon satisfactory settlement and/or payment of civil liability for taxes and penalties, and the satisfactory payment of restitution. See IRM 9.5.14 concerning the conditions of probation in civil tax matters. The SAC will take whatever steps are necessary to initiate appropriate legal action in any instance where the taxpayer has failed to comply with the conditions of the sentence. Title 26 USC §6103(h)(4) permits the disclosure of information contained in taxpayer delinquent account files to a US Probation Officer in a judicial proceeding pertaining to tax administration for the purpose of informing the court of any non-compliance with the terms of the taxpayer’s sentence. 184.108.40.206.2 (08-11-2008) Costs of Prosecution Title 26 explicitly provides that, in addition to incarceration and fines, defendants convicted of tax offenses "shall" pay "costs of prosecution" . The costs that defendants are required to pay are limited to those set out in Title 28 USC §1920. See IRM 9.6.4 concerning recoverable costs of prosecution for additional information.