Thursday, March 24, 2016

TRAC Offerings on IRS and DOJ Criminal Tax Enforcement (3/24/16)

The Transaction Records Access Clearinghouse ("TRAC"), here, has published new statistics on a web page titled "IRS Criminal Enforcement Slides," here.  I discuss some aspects of that data in this blog entry, but I do caveat the saying popularized by Mark Twain (who attributed -- perhaps misattributed -- it to Benjamin Disreali):  "there are lies, damned lies, and statistics."  See Wikipedia, here.

The data reported shows that referrals by the IRS to DOJ Tax peaked in the early 90s at 20 per million of population and are about 9 per million in fy 2015.  (In several years there were slightly lower numbers, but I have not attempted to analyze why that happened.

Of course, as a general proposition, the criminal tax enforcement resources that can be systemically deployed by the various players (IRS, DOJ Tax, Courts, Probation Office, Bureau of Prisons) are small relative to the population and tax revenue overall.  So those limited resources have to be deployed for maximum effect, which is what the players claim.  What that results in is a low number of prosecutions for tax crimes relative to the number of U.S. taxpayers who actually cheat on their taxes.  The message through prosecution and punishment is to show honest taxpayers that something is being done and to discourage the potentially dishonest from misbehaving.

The website links to "TRAC's free IRS criminal enforcement tool," here, which provides more detailed data by judicial district.  I highly recommend TRAC's presentation of data on the data tool page titled "IRS Criminal Enforcement by District."  I have no way of assessing whether the raw data is correct, but I suspect that it is.  The more serious issue, though, is whether the presentation of the data provides a fair picture of what is really happening.  There are a lot of questions that can be asked about the data.  I present here only some of the questions:

1. The Lead Charges for Prosecution are overwhelmingly non Title 26.  That really does not tell us what portion of the charges are tax-related Title 18 charges (such as, most prominently, conspiracy (offense or defraud / Klein conspiracy) related to tax misconduct, but also including §§ 286 and 287, false claims conspiracy and false claims).

2.  More surprisingly are the number of "declinations."  As presented, the declinations are almost 50% (1,633 prosecuted and 1,461 declined).  There may be some year-to-year problems that a single year's data do not explain.  More importantly, I think, would be to have the data limited to the tax crimes as indicated in paragraph 1 (without the other crimes that are not normally considered tax crimes, such as wire fraud or money laundering).

3.  The IRS's fy 2015 statistics, here, may or may not be consistent with TRAC's presentation since they may not be using the same data sets.  The IRS statistics show 3,289 prosecution recommendations and 3,208 indictments, a much lower apparent declination rate (again with the caveat of year to year issues) than TRAC offers.

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