To summarize, the state of the law under Booker is: The Guidelines are advisory. They must be considered, hence it is important that the sentencing judge properly calculate the Guidelines, otherwise the sentencing judge will not properly consider the advice they are intended to impart in the sentencing process. So the first step in sentencing is to calculate the Guidelines ranges. Then, the judge considers the 18 USC 3553(a), here, factors under Booker and imposes a sentence, employing if appropriate the wide discretion that Booker permits to vary from the properly calculated Guidelines ranges.
In Black, the taxpayer owed $2.2 million in tax alone and, with interest and penalties, $3.89 million. In 2002, when the tax, penalties and interest aggregated $4.8 million, Black submitted a check to pay but there were not sufficient funds in the account to pay. The Court said that "This pattern continued," sometimes with checks and sometimes with "bills of exchange."
The government charged Black with one count under 26 U.S.C. § 7212(a) for corruptly obstructing and impeding the IRS in its collection of taxes, penalties, and interest (Count 1) and three counts under 18 U.S.C. § 514(a)(3) for passing or presenting the United States with fictitious instruments appearing to be financial instruments with the intent to defraud (Counts 2, 4-5). Count 3 is not relevant to the appeal. The jury found Black guilty of all counts.
Before Black's sentencing hearing, the district court issued an order resolving issues related to Black's sentencing guideline range. First, it grouped Counts 1, 2, 4, and 5 for guideline purposes (collectively, the "group 1 offenses"). Next, it determined that the applicable guideline provision was U.S.S.G. § 2T1.1 and found that the offense level under this guideline "is determined on the basis of Black's intended amount of monetary loss to the IRS that was the object of Black's criminal conduct." The district court also found that the guidelines required him to aggregate the value of the fraudulent documents, so it added the face value of each check and bill of exchange Black submitted to the IRS. From this calculation, the district court determined that the tax loss was over $14 million. It recognized that this amount included the taxes, penalties, and interest Black owed. Using the U.S.S.G. § 2T4.1 tax loss table that applies to § 2T1.1, the district court determined that the tax loss applicable to Black's criminal conduct was more than $7 million but less than $20 million, resulting in a base offense level of 26. Because Black was also convicted of Count 3, the guidelines required the district court to increase the offense level by one point. The resulting base offense level was 27, which provides for a sentencing range of 70 to 87 months. At the sentencing hearing, the district court considered the advisory guidelines range along with the factors set forth in 18 U.S.C. § 3553 and sentenced Black to 71 months imprisonment.The sentencing judge sentenced within the range indicated by the Guidelines calculation, which would make the sentence presumptively reasonable for purposes of review. The problem was that the sentencing judge improperly calculated the Guidelines range. In summary, the problem was that the sentencing judge calculated the Guidelines under the tax guidelines which, properly interpreted, key in on the tax sought to be evaded and does not aggregate multiple attempts to evade the same taxes. Thus, SG 2T1.1(c)(1), here, says that the tax loss is the loss that was the object of the offense. The fact that Black made several attempts to evade the same taxes does not mean that the amount on each attempt is aggregated. And , in the context of the attempts in Black, it is not the amount of each check or bill of exchange that was written to evade the same basic tax liability (with some differences in penalties and interest).
The Court of Appeals said that, since the sentencing court sentenced under the tax guidelines rather than the fraud guidelines, the Guidelines calculation was incorrect.
The Court of Appeals also held that penalties and interest are not properly included in the Guidelines calculation, meaning that the properly calculated Guidelines amount was $2.2 million. I don't want to get hung up on that issue right now, but I think the Court was wrong in that calculation. The Court seemed to think that his count of conviction was tax obstruction, § 7212(a), here, meant that the Guidelines could not be calculated as if this were an evasion of payment case under § 7201, here. However, the tax loss calculation can include relevant conduct (SG §1B1.3 (Relevant Conduct)), here, and evasion of payment was certainly relevant conduct. Perhaps more fundamentally, the tax obstruction was directed at the amount of tax, penalty and interest each time that Black wrote the false financial instruments; in every real sense, the object of the offense included tax, penalties and interest.. I think the Court is wrong on that one; if I am right and the Court was wrong, the Government may ask for rehearing on that issue. (On the other hand, the extra two levels on the final sentencing offense level would likely not affect the final sentence that much, so the Government may not pursue that issue in this case.)
The Court of Appeals then denied Black a reduction for audit errors and unclaimed deductions. The Court cited the amendment to the Sentencing Guidelines Manual app. C, amend. 774 at 41-42, limiting the use of unclaimed or unrecognized deductions and credits by saying that Black had not proved his entitlement to them. The opinion is a bit cryptic on this point, so I do not dwell on it further.
Finally, the Court of Appeals found that the error was not harmless because the sentence was tied too closely to the erroneous Guidelines calculation. The Court said cryptically (bold-face supplied by JAT):
An error in calculating the sentencing guideline range is a procedural error that requires remand unless the government can show that the error is harmless. United States v. Thompson, 599 F.3d 595, 602 (7th Cir. 2010). To establish harmless error, the government must be able to show that the sentence would have been the same absent the error. Abbas, 560 F.3d at 667. At oral argument the government acknowledged that the district court's decision was driven by the guideline calculation. A review of the record reveals the same. As a result, the government cannot show that the sentence would have been the same absent the error, and the miscalculation of the tax loss amount is not harmless error. Therefore, we must remand for reconsideration of the tax loss amount.I particularly liked the Concurring Opinion by Judge Hamilton. Here is the opinion in its entirety:
I join fully in Judge Williams' opinion for the court. I add only that the district judge's sentencing instincts were sound under 18 U.S.C. § 3553(a). The problem here is that the district judge tied the sentencing decision a little too closely to the sentencing guidelines, so that the errors in applying U.S.S.G. § 2T1.1, which applies to certain tax crimes, cannot be deemed harmless.
The parties and the district court all focused on § 2T1.1. The court could also have found useful guidance in the more general sentencing guideline for fraud, § 2B1.1, which applies to Black's convictions under 18 U.S.C. § 514(a). If it had done so, it would have been permitted to aggregate the face value of the multiple phony checks and bills of exchange, though aggregation is not permitted under § 2T1.1.
The underlying problem is that neither § 2T1.1 nor § 2B1.1 is a perfect fit for Black's combination of crimes. Section 2T1.1 has no mechanism to take account of Black's repeated efforts to pay the government with phony checks and bills of exchange. Section 2B1.1 has no mechanism to take account of the tax dimensions of his fraud. That imperfect fit and the rather arbitrary differences between § 2B1.1 and § 2T1.1 as applied to this case demonstrate the value of treating the sentencing guidelines as advisory under United States v. Booker, 543 U.S. 220 (2005). On remand, the district court should step back from the details of the guidelines and look at the entirety of Black's crimes. In doing so, the court may take advice from any relevant guideline and must exercise judgment under 18 U.S.C. § 3553(a). In my view, the district court exercising its judgment under § 3553(a) on remand might well be able to impose a reasonable sentence as high as the original sentence.The point is that if indeed the sentencing Court originally treated the Guidelines as advisory and deemed the within Guidelines sentence to be consistent with its Booker discretion under § 3553(a). the Court could easily reach the same sentence on remand.