Trying to reconstruct the Guidelines calculation, the restitution ordered for the IRS was $538,569. Hence the tax loss was at least $538,569. (It may well be that the defendant had already paid some of the tax loss, so this should be a minimum and there may be a $1.5 million addition as noted below.) And, the defendant also appears to have fraudulently underpaid state taxes of $150,000 which may have been considered relevant conduct.. So, I am going to estimate (unscientifically) that his tax loss was at least $900,000, which would produce a Base Offense Level of 20. Since the income appeared to be legal income, the only Specific Offense Characteristic that might apply would be sophisticated means and, as described, his conduct does not appear to have used sophisticated means. The only other adjustment might be obstruction, which would add 2. So, the Sentencing Table will produce a guidelines range of 51-63 months. It would thus appear that the judge departed or varied upward -- a rarity in a tax case.
However, there is one ringer. The defendant filed fraudulent delinquent returns "requesting fraudulent refunds from the IRS in amounts up to approximately $1.5 million." So, his tax loss probably was more in the range of $2.4 million, which would indicate a Guidelines level of 26 and an indicated sentencing range of 63-78. This would still indicate an upward departure or variance.
How do you squeeze out 10 counts of conviction for false returns when the statute of limitations is six years.
[I]n April 2006, Davis filed five fraudulent amended income tax returns for 1996 through 2000, falsely claiming that he earned little or no adjusted gross income in each of those years. And from April 2008 to February 2009, Davis filed five fraudulent individual income tax returns for 2004 through 2008, reporting false amounts of federal income tax withheld for each of those years and requesting fraudulent refunds from the IRS in amounts up to approximately $1.5 million.So, it is the filing of the delinquent returns in years still open under the statute of limitations that permitted the counts of conviction.
And, as to the nature of his conduct that justified the 120 month sentence (apparently via upward departure):
According to trial records and today's sentencing hearing, during the IRS's efforts to collect Davis's tax debt, Davis obstructed and impeded the IRS by submitting fraudulent payment documentation to the IRS and concealing his assets and income in a nominee bank account. Davis also used a fraudulent address in Texas to avoid paying state income taxes, and currently owes the North Carolina Department of Revenue in excess of $150,000.
In handing down the sentence, Judge Voorhees emphasized the egregious nature of Davis's conduct and Davis's lack of regret and remorse.Readers may recall that airline pilots have figured prominently in trying to evade taxes. They were disproportionately represented among tax protestors in earlier periods, and an airline pilot played the central role in one of the leading tax cases, Cheek v. United States, 498 U.S. 192 (1991), which recognized that a sincerely held belief that taxes were not legally owed was a defense that should be submitted to a jury. Perhaps pilots have too much time on their hands and do not get enough oxygen while in the air, so that they fall easy pray to these notions of tax invincibility.