Confusion as to Sentencing Guidelines Tax Loss and Civil Tax Loss Requires Remand and Resentencing (5/21/20)

In United States v. Brannum (9th Cir. Unpublished 5/12/20), here, the Ninth Circuit reversed and remanded a case because of the prosecutor’s violation of the plea agreement as to the amount of the tax loss.  Readers will recall that, in the Sentencing Guidelines’ calculation of the offense level and sentencing range, the principal component in tax crimes cases is often the tax loss.  The plea agreement stipulated a tax loss of $101,554.01.  The PSR incorporated this number and recommended a below-guidelines sentence of probation and home confinement.  In its sentencing memorandum, however, the Government urged that the actual loss was approximately $3.3 million, and sought a sentence of 21 months.  Brannum objected.  The sentencing court said it would not consider the higher number in sentencing and then sentenced Brannum to a year and a day (a standard sentence to get the benefit  of good time credit).

The Ninth Circuit reversed and remanded for resentencing, holding that the Government’s assertion of higher tax loss than stipulated in the plea agreement violated the terms of the plea agreement.  The Court felt that remand and resentencing before a different judge was required because, in a sense, although the sentencing judge said he did not consider the higher number, it is hard to “unring the bell” so to speak.

 JAT Comments:

1. The Government’s excuse for citing the higher number was:  “that the stipulation about 'total tax loss' referred only to so-called ‘criminal’ losses for Guidelines purposes, not the actual total ‘civil’ loss of tax revenue, which the government contends could be used in applying the 18 U.S.C. § 3553(a) factors.”  If that indeed was the Government’s attempted justification, the justification was patently wrong.  Sentencing is based on the criminal tax numbers.  The civil tax numbers may and often do exceed the criminal tax numbers.  (Accordingly, after sentencing, it common for the IRS to assert a higher civil tax amount.)  But sentencing in a criminal proceeding can only consider loss related to the criminal tax conduct.  But neither § 3553(a) nor the Sentencing Guidelines suggest or hint that civil matters should be considered in sentencing.  

2. Thanks for the lead to the case from Evan J. Davis, 9th Circuit Confirms Plea Agreements Are Worth the Paper They’re Printed On (Tax Litigator Blog 5/21/20), here.  Readers will find the Tax Litigator Blog a useful resource for tax crimes and tax litigation generally.