ABA Tax Section Recommendation to IRS for Priority Guidance to Disavow Application of WSLA and Further Comments Re Same (7/23/21)

I have written several times on the Wartime Suspension of Limitations Act (“WSLA”), 18 U.S.C. § 3287, here.  In part relevant to tax crimes, the WSLA suspends “the running of any statute of limitations applicable to any offense involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not.”  (Cleaned up.) The statute of limitations is suspended from the date of the “specific authorization for the use of the Armed Forces until 5 years after the termination of hostilities as proclaimed by a Presidential proclamation, with notice to Congress, or by a concurrent resolution of Congress.”  (Cleaned up.)

Where the WSLA is applicable, there are several authorizations that might establish the starting point for the suspensions.  Authorizations that have never been revoked were passed in 2001 and 2002 related to the activity after the 9/11 event.  So, for purposes of this discussion, I assume that the WSLA authorizes tax crimes prosecutions with the general 6-year statute of limitations for conduct back to 1995 or 1996 and the statute continues until 5 years after the authorizations are terminated.

Caveat:  There could be even earlier starting dates under the WSLA for earlier authorizations not yet revoked:  (1) a 1991 authorization incident to the Gulf “War”; and (2) a 1957 authorization (although it might not meet the “specific authorization” required by the WSLA.  Matthew Waxman, Remembering Eisenhower’s Middle East Force Resolution (LawFare 3/9/19), here.  The House has recently passed resolutions to revoke these authorizations.  See Karoun Demirjian, House votes to repeal military authorizations dating to Gulf War, Cold War (WAPO 6/29/21), here.

I have stated my belief that tax evasion under § 7201 is within the literal language of the WSLA.  That would mean also that the offense conspiracy to commit tax evasion would likely be within the literal language of the WSLA.  (The defraud conspiracy, in my view, would not be within the WSLA because the defraud conspiracy for some strange reason does not require fraud per Hammerschmidt v. United States, 265 U.S. 182, 188 (1924); see John A. Townsend, Tax Obstruction Crimes: Is Making the IRS's Job Harder Enough, 9 Hous. Bus. & Tax. L.J. 255 (2009), here; I think (perhaps speculation) that if the crime’s elements do not include fraud in the traditional sense of the term (defraud conspiracy does not), the WSLA would not apply.)

However, for some reason as yet unnanounced, at least in recent memory, DOJ Tax has asserted only the traditional six-year tax crime statute of limitations.  The CTM’s discussion of statutes of limitations does not even mention the WSLA.  DOJ CTM 7.00 STATUTE OF LIMITATIONS, here.  So how long DOJ Tax will forebear asserting the WSLA is open.  Further, in cases where the defendant challenges the normal statute of limitations, a court might sua sponte invoke the WSLA to deny the challenges.

Does the Statute of Limitations Affect the Issue of Whether a President Can be Indicted During His Presidency? (12/13/18; 12/17./18)

Tax crimes and other federal crimes, all statutory, have statutes of limitations.  Section 6531, here, is the statute of limitations for tax crimes.  Generally, where there might be some impediment to discovery or prosecution of a tax crime, arguments can be made that the statute of limitations should be tolled or suspended.  (That is also true of civil remedies as well.)  And, frequently, the statutes do provide for such tolling in some specifically identified cases.  For example, the general six year statute of limitations for tax crimes is 6 years (per § 6531), but the flush language provides:

The time during which the person committing any of the various offenses arising under the internal revenue laws is outside the United States or is a fugitive from justice within the meaning of section 3290 of Title 18 of the United States Code, shall not be taken as any part of the time limited by law for the commencement of such proceedings. (The preceding sentence shall also be deemed an amendment to section 3748(a) of the Internal Revenue Code of 1939, and shall apply in lieu of the sentence in section 3748(a) which relates to the time during which a person committing an offense is absent from the district wherein the same is committed, except that such amendment shall apply only if the period of limitations under section 3748 would, without the application of such amendment, expire more than 3 years after the date of enactment of this title, and except that such period shall not, with the application of this amendment, expire prior to the date which is 3 years after the date of enactment of this title.) Where a complaint is instituted before a commissioner of the United States within the period above limited, the time shall be extended until the date which is 9 months after the date of the making of the complaint before the commissioner of the United States. For the purpose of determining the periods of limitation on criminal prosecutions, the rules of section 6513 shall be applicable.

The issue of tolling is currently a topic in today's political environment where there are various claims bandied about that a sitting President cannot or should not be indicted.  I point readers to this article:  Jed Shugerman, The Single Fatal Flaw in the Legal Argument Against Indicting a Sitting President (Slate 10/11/18), here.  The by-line is:  Should a president be above the law because of the statute of limitations?

Let's use a tax crimes example.  Say that the Government (Mueller, the IRS, DOJ Tax etc.) has evidence that Trump committed tax crimes for the tax years 2012-2015 (2015 is the last year where a return was filed before he became President).  Assuming that he filed his tax years timely on extension for those years, the statute of limitations related to those filings would expire annually starting on October 15, 2019.  If President Trump cannot be indicted while President, the statute as the text of the law is worded would expire on those crimes starting on October 15, 2019.  Even if he is a one-term President, the statute would expire on some of those years before he leaves office (unless he leaves prematurely).  Moreover, if he is a two term President and does not leave prematurely, the statute of limitations on all of those years will expire.  Can that be?

Mr. Shugerman's article suggest that, although federal crimes are generally not tolled without an express statute for tolling (which there is not in this  case), there is a concept called "equitable tolling" that might apply.  I think that the potential of equitable tolling in this case is doubtful, particularly where it has never been established that the President could not be indicted while in office.

It seems to me that the proper course to set up even the possibility for equitable tolling would be to indict the President (perhaps under seal) and, if President Trump wants to fight whether he can be indicted, let the parties fight to final resolution (also perhaps under seal) whether the President can be indicted.  This would all occur during his presidency and the matter will be resolved.  If he can be indicted, there might be policy reasons to let the indictment remain under seal under he leaves office.  But, if he can't be indicted, the indictment would be dismissed and the issue of equitable tolling would be set up.

Is Federal Tax Fraud an Impeachable Offense for a President? (8/22/18)

The question I address here, albeit lightly, is whether, if it is shown that any President committed tax fraud (covering both evasion and tax perjury), the tax fraud would be an impeachable offense.  I do not address the issue of whether he can be indicted for tax fraud or any other offense while he still serves as President (although I do have an aside on that at the end).

The only actual example was President Nixon.  As I note in my chapter on Criminal Penalties and the Investigative Function, Chapter 12 in Michael Saltzman and Leslie Book, IRS Practice and Procedure (Thomsen Reuters 2015),  ¶12.01. Criminal Penalties in General, ¶ 12.01[1] In General at fn. 6:  Richard Nixon's alleged tax crime was fully pardoned in a general pardon by President Ford who succeeded Nixon on his resignation, but as to impeachment:

Among President Nixon's alleged crimes was tax evasion, which the House Judiciary Committee declined to include in the articles of impeachment because, it believed, tax evasion was not an impeachable offense. Mezvinsky & Freedman, Federal Income Tax Evasion as an Impeachable Offense, 63 Geo. L.J. 1071 (1974-1975).

But, there is authority from a scholar that income tax fraud can be an impeachable offense.  See Charles L. Black, Impeachment: A Handbook (1974), with pertinent portions republished by permission in Charles L. Black, The Impeachable Offense (Lawfare 7/20/17), here:

Income-Tax Fraud 

Serious income-tax fraud by a president, particularly when the vehicle of such fraud is a set of papers resulting from his holding one government office, and when he might anticipate virtual immunity from serious audit because of his occupying the presidency, would seem definitely impeachable, in addition to being criminal. The offense seems akin to bribery, in that it uses office for corrupt gain; in any case, it undermines government, and confidence in government. A large-scale tax cheat is not a viable chief magistrate.

Special Counsel Opposes Motion to Dismiss FBAR Count as Untimely Because of Secret 18 USC 3292 Order (5/15/18)

Paul Manafort filed a motion to dismiss the FBAR count, Count 11 of the superseding indictment, here, in the case in E.D. Virginia, United States v. Manafort (E.D. Va. No. 1:18-cr-83 (TSE)).  The argument was the the statute of limitations prevented that count.  As described in the superseding indictment:

COUNTS 11-14: 31 U.S.C. §§ 5314 and

5322(a); 18 U.S.C. §§ 2 and 3551 et seq.

Failure To File Reports Of Foreign Bank

And Financial Accounts

Count 11 was for failure to file the FBAR for 2011, due on June 29, 2012.  The statute of limitations is 5 years (18 USC 3282(a), here), which had lapsed on June 29, 2017.  The original indictment was brought on February 13, 2018, and the superseding indictment brought on February 22, 2018.  The indictment was clearly out of time unless some special rule applied.  And it did.  As the prosecutors explained in its response to the motion, here (and Exhibit A here):

Section 3292(a)(1) of Title 18 suspends the running of the statute of limitations where the government, before the return of an indictment, applies to a court in which a grand jury is investigating the offense to suspend the running of the statute of limitations because evidence of the offense being investigated is in a foreign country. In connection with that application, the government must show, by a preponderance of the evidence, that “an official request has been made for such evidence and that it reasonably appears, or reasonably appeared at the time the request was made, that such evidence is, or was, in such foreign country.” 18 U.S.C. § 3292(a)(1). If the government is successful in making that showing, the running of the applicable statute of limitations is suspended from “the date on which the official request is made” until “the date on which the foreign court or authority takes final action,” id. § 3292(b), though the suspension may not exceed three years, id. § 3292(c).

Because the government secured a timely and valid order in this District to suspend the running of the applicable statute of limitations until at least the date on which the Superseding Indictment was returned, Manafort’s motion should be denied. On June 6, 2017, the government transmitted a request pursuant to a mutual legal assistance treaty (“MLAT”) to the Republic of Cyprus seeking, among other evidence, bank records, articles of incorporation, and witness interviews concerning certain of Manafort and Richard Gates’s bank accounts in Cyprus.  

On June 26, 2017, the government applied, ex parte, to this Court for an order pursuant to 18 U.S.C. § 3292 to suspend the applicable statute of limitations in light of the government’s MLAT request to Cyprus. This Court (Hilton, J.) granted the government’s request on June 27, 2017, thus suspending the applicable statute of limitations during the pendency of the government’s official request to Cyprus. See In Re Grand Jury Investigation, No. 14 GJ 1420 (E.D.V.A. June 27, 2017) (attached hereto as Exhibit A). As found by Judge Hilton, a grand jury impaneled in this District was conducting an investigation into, as relevant here, the flow of foreign money to Manafort, DMP International, Davis Manafort Partners, Smythson LLC, and Jesand Investment Corporation, and into subject offenses that included potential violations of 31 U.S.C. §§ 5314 and 5322(a) (Failure to File a Report of Foreign Bank Accounts). Judge Hilton further found, based on a preponderance of evidence, that evidence of such offenses was located in Cyprus and that the government had made an “official request” to Cyprus for that evidence under 18 U.S.C. § 3292(d) on June 6, 2017. Having found the requirements of Section 3292 satisfied, Judge Hilton ordered that the statute of limitations be suspended for the FBAR offenses, among others, for the period authorized by Section 3292(c). 

Because Cyprus had not taken “final action” on the government’s June 6, 2017 official request at the time the Superseding Indictment was returned, the statute of limitations remained suspended. Specifically, Cyprus produced documents in response to the government’s June 6 request on September 6, 2017; October 2, 2017; November 1, 2017; and April 30, 2018. Several of the items requested in the June 6, 2017 request remained outstanding at least until the time of the April 2018 production. For example, on December 8, 2017—before Cyprus’s most recent production—the government wrote to Cypriot authorities to renew its June 6, 2017 request (and a related request made two weeks later). The government’s December 8 letter stated that, after reviewing the records produced thus far, investigators had identified several items called for in the MLAT request that Cyprus had not produced. And Cyprus did not make a subsequent response to the government’s request until the April 30, 2018 production mentioned above. The bottom line, then, is that Cyprus had not fully satisfied the government’s official request when the original and Superseding Indictment of Manafort were returned on February 13 and 22, respectively. As a result, no “final action” had yet occurred as of the date of the operative indictments, and the applicable statute of limitations remained suspended. See United States v. Bischel, 61 F.3d 1429, 1433-34 (9th Cir. 1995) (construing “final action” to mean “a dispositive response by the foreign sovereign to both the request for records and for a certificate of authenticity of those records”); see also, e.g., United States v. Ratti, 365 F. Supp. 2d 649, 659-60 (D. Md. 2005) (following Bischel’s interpretation of Section 3292).

Supreme Court Addresses the Wartime Suspension of Limitations Act (5/26/15)

In Kellogg Brown & Root Services, Inc. v. Carter, 575 US 650 (2015), here, a unanimous opinion handed down today, the Supreme Court held that the Wartime Suspension of Limitations Act (19 USC § 3287, "WSLA"), here, did not apply in a case arising under the civil False Claims Act (31 U. S. C. §3729), "FCA"), here.  Both Acts, in their own ways, dealt with fraud in war defense contracts and related frauds.  Although fraud in defense contracts and related frauds was the impetus for both Acts, as I have noted before the WSLA, is rather broad in its textual coverage and read literally includes any fraud crimes against the U.S.  I will devote this blog entry to the WSLA and what the Court said about it in Kellogg.

The WSLA provides in relevant part: that, "When the United States is at war or Congress has enacted a specific authorization for the use of the Armed Forces" under the War Powers Resolution Act, "the running of any statute of limitations applicable to any offense . . . involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not."  I have previously discussed the possible application of WSLA to tax crimes.  See Is the Criminal Statute of Limitations Suspended under the Wartime Suspension Act? (Federal Tax Crimes Blog 11/20/09), here; and Wartime Suspension of Limitations Act and Tax Fraud (Federal Tax Crimes Blog 6/27/12), here.

In part relevant to the WSLA, the Court in the Kellogg opinion says (Slip Op. 5-6, footnote omitted):

III

The text, structure, and history of the WSLA show that the Act applies only to criminal offenses. 

A

The WSLA’s roots extend back to the time after the end of World War I. Concerned about war-related frauds, Congress in 1921 enacted a statute that extended the statute of limitations for such offenses. The new law provided as follows: “[I]n offenses involving the defrauding or attempts to defraud the United States or any agency thereof . . . and now indictable under any existing statutes, the period of limitations shall be six years.” Act of Nov. 17, 1921, ch. 124, 42 Stat. 220 (emphasis added). Since only crimes are “indictable,” this provision quite clearly was limited to the filing of criminal charges.  

In 1942, after the United States entered World War II, Congress enacted a similar suspension statute. This law, like its predecessor, applied to fraud “offenses . . . now indictable under any existing statutes,” but this time the law suspended “any” “existing statute of limitations” until the fixed date of June 30, 1945. Act of Aug. 24, 1942, ch. 555, 56 Stat. 747–748. 

As that date approached, Congress decided to adopt a suspension statute which would remain in force for the duration of the war. Congress amended the 1942 WSLA in three important ways. First, Congress deleted the phrase “now indictable under any statute,” so that the WSLA was made to apply simply to “any offense against the laws of the United States.” 58 Stat. 667. Second, although previous versions of the WSLA were of definite duration, Congress now suspended the limitations period for the open-ended timeframe of “three years after the termination of hostilities in the present war as proclaimed by the President or by a concurrent resolution of the two Houses of Congress.” Ibid. Third, Congress expanded the statute’s coverage beyond offenses “involving defrauding or attempts to defraud the United States” to include other offenses pertaining to Government contracts and the handling and disposal of Government property. Ibid., and §28, 58 Stat. 781. 

Congress made more changes in 1948. From then until 2008, the WSLA’s relevant language was as follows:  

“When the United States is at war the running of any statute of limitations applicable to any offense (1) involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not . . . shall be suspended until three years after the termination of hostilities as proclaimed by the President or by a concurrent resolution of Congress.” Act of June 25, 1948, §3287, 62 Stat. 828.
In addition, Congress codified the WSLA in Title 18 of the United States Code, titled “Crimes and Criminal Procedure.” 

Finally, in 2008, Congress once again amended the WSLA, this time in two relevant ways. First, as noted, Congress changed the Act’s triggering event, providing that tolling is available not only “[w]hen the United States is at war,” but also when Congress has enacted a specific authorization for the use of military force. Second, Congress extended the suspension period from three to five years. §855, 122 Stat. 4545.

Suspension of Statute of Limitations From the UBS John Doe Summons (1/26/14)

A reader has provided me an IRS document calculating the statute of limitations for U.S. taxpayers within the scope of the IRS's John Doe Summons (JDS) for UBS records.  The document invokes the authority of IRS 7609(e)(2), here, which provides:

(2) Suspension after 6 months of service of summons
In the absence of the resolution of the summoned party’s response to the summons, the running of any period of limitations under section 6501 or under section 6531 with respect to any person with respect to whose liability the summons is issued (other than a person taking action as provided in subsection (b)) shall be suspended for the period—
   (A) beginning on the date which is 6 months after the service of such summons, and
   (B) ending with the final resolution of such response.

Note that the statute of limitations is suspended for both civil and criminal purposes.  The cited statutes are Sections 6501, here, the civil statute and 6531, here, the criminal statute.

The document says that this suspension applies to each member of the John Doe class -- the class of persons described in the John Doe Summons (which the document does not define, but see below).  The document then states the calculation of the suspension as follows:

7/21/08 UBS John Doe Summons Served
1/21/09 Six Month Anniversary of the Service of the Summons
11/16/10 Notification to UBS Advising of the Withdrawal of the Summons (Final Period of Statute Suspension)_
664 Days Statute Suspension

Who is subject to this suspension?  The document says that it is any person in the class described in the John Doe Summons to UBS.   The following is from the John Doe Petition Documents:

The Petition for the JDS:

5. The "John Doe" summons relates to the investigation of an ascertainable group or class of persons, that is, United States taxpayers, who at any time during the years ended December 31, 2002 through December 31, 2007, had signature or other authority (including authority to withdraw funds; to make investment decisions; to receive account statements, trade confirmations, or other account information; or to receive advice or solicitations) with respect to any financial accounts maintained at, monitored by, or managed through any office in Switzerland of UBS AG or its subsidiaries or affiliates and for whom UBS AG or its subsidiaries or affiliates (1) did not have in its possession Forms W-9 executed by such United States taxpayers, and (2) had not filed timely and accurate Forms 1099 naming such United States taxpayers and reporting to United States taxing authorities all reportable payments made to such United States taxpayers. There is a reasonable basis for believing that such group or class of persons may fail, or may have failed, to comply with one or more provisions of the Internal Revenue laws. The information sought to be obtained from the examination of the records or testimony (and the identity of the persons with respect to whose tax liabilities the summonses have been issued) is not readily available from other sources. 

Raoul Weil Pleads Not Guilty: Thoughts and Speculations (1/8/14)

Raoul Weil, the top UBS banker, pled not guilty yesterday.  See Zachary Fagenson, UPDATE 2-Ex-UBS banker pleads not guilty in major tax fraud case (Reuters 1/7/14), here.  For prior blogs on Weil, see the list at the end of this blog.

The not guilty plea is a routine step in a criminal case.  So there really is nothing eventful in Weil's plea itself.  A plea deal is often agreed to or finalized after the initial not guilty plea, and the defendant will still qualify for hte sentencing benefits of accepting responsibility provided it is not immediately before trial after all the preparation work has been done.

The article, however, does report some speculations from Bradley Birkenfeld's lawyer on his whistleblower claim that the government may be "negotiating a 'sweetheart deal'" with Weil in order to keep him from implicating prominent former UBS account holders.  This claim is made on the lawyer's web site under an entry titled Federal Court Hearing Scheduled for UBS Tax Fraud Kingpin Raoul Weil (Whistleblowers Protection Blog 1/6/13), here.  The source of the lawyer's claim is obviously Birkenfeld, who worked for Weil at UBS.

I can't speak to whether the lawyer's claim is true.  I am skeptical.  If the Government wanted to keep things quiet , the Government would not have obtained his indictment and then pursued his extradition.  This smacks of a conspiracy theory with scant but speculations on thin threads.

I do note at least the possibility that Weil could be a whistleblower and claim some gargantuan award.  Of course, his central role in the tax underpayments involved would likely disqualify him from a whistleblower award.  See Section 7623(b)(3), here.

Tax Notes Today has an article offering skeptical comments on the lawyer's claim.  Stephanie Soong Johnston, Former UBS Banker Pleads Not Guilty to Tax Fraud Conspiracy Charges, 2014 TNT 5-2 (1/8/14).  Peter Hardy, a well-known criminal tax lawyer (bio here), expresses his doubts as well.  From the article:

 "He may or may not know embarrassing details, but generally speaking, the DOJ wants to prosecute, when appropriate, the elite, not to make sweetheart deals to protect them," Hardy told Tax Analysts. "The government is going to want him to enter into a guilty plea and cooperate."

According to Hardy, it is unusual that Weil faces only one count of conspiracy because economic crime cases, including tax fraud, usually include multiple counts. Because the general statute of limitations for tax crimes is six years and the last overt act the indictment references is in 2006, the government may not be able to add any additional charges, he said.

Ex Top UBS Banker Arrested; Likely to be Extradited (10/21/13)

Raoul Weil, a fugitive from U.S. justice [Wikipedia entry here], was arrested in Italy.  See Guy Dinmore and Daniel Schäfer, Former UBS banker faces US extradition (Financial Times 10/21/13), here.  Excerpts:

A prominent Swiss asset manager is facing extradition to the US after being arrested while holidaying in Italy on charges he helped American clients with $20bn of assets to evade US taxes during his previous job at UBS. 

Police in Bologna said Raoul Weil was arrested early on Saturday after he registered at a hotel and his name appeared on a police list of international arrest warrants. Mr Weil was transferred to Bologna’s prison where the next step would be for the US authorities to request his extradition, police said. 

Under Swiss laws, a suspect has to consent to an extradition, making it all but impossible for foreign authorities to succeed with such a request. Under Italian law, however, Mr Weil could be extradited within weeks or months, according to a US official following the case.

Tax Notes Today has the following article:  Kristen A. Parillo and Andrew Velarde, Fugitive Swiss Banker Wanted by U.S. Arrested in Italy, 2013 TNT 204-3 (10/22/13).  Excerpts:\

Weil was indicted by the DOJ in 2008 for conspiring to defraud the United States by helping U.S. clients conceal taxable assets. The indictment alleged that Weil and others conspired between 2002 and 2007 to help about 17,000 Americans conceal about $20 billion in assets in Swiss bank accounts. In January 2009 Judge James Cohn of the U.S. District Court for the Southern District of Florida signed an order declaring Weil a fugitive after he failed to surrender himself to U.S. authorities. (Prior coverage 2009 TNT 10-7: News Stories.) 

Bryan C. Skarlatos of Kostelanetz & Fink LLP told Tax Analysts that the latest development highlights the DOJ's long reach. "Swiss banks, bankers, and other professionals who claim to have no connection to the U.S. still have real risks because the U.S. can and will indict them on charges of conspiring to help U.S. citizens evade U.S. tax," he said. 

Not only do Swiss banks face the prospect of paying stiff fines and potentially going out of business, but the individual bankers or professionals are effectively imprisoned in Switzerland for fear of being picked up on an international arrest warrant, Skarlatos said. "The lesson here is that the DOJ does have real leverage in forcing banks and bankers to comply with U.S. demands for information," he said, adding that this is why so many Swiss banks are considering making a voluntary disclosure to the United States under the recently announced DOJ settlement program for Swiss banks.  

* * * * 

Weil likely doesn't have a lot of settlement options given that the UBS probe is completed and other UBS bankers entered into plea deals with the DOJ, [Peter D.] Hardy said. "Perhaps there are some individuals out there that he can provide information on, but at this point I wouldn't be surprised if we saw a trial," he said. "And based on the indictment, he'd be looking at significant jail time.

Attorneys quoted in the foregoing excerpts are Bryan C. Skarlatos, here, and Peter D. Hardy, here.

JAT Comments:

Eleventh Circuit Sustains Statute Suspension For Foreign Records Request Under 18 USC 3292 (8/17/12)

In United States v. Broughton, 689 F.3d 1260 (11th Cir. 2012), here, the court affirmed convictions related to finanical fraud.  The Court of Appeals summarized the fraud as:

This criminal case involves sophisticated financial structuring through the interplay of related corporate subsidiaries in the context of the insurance business. While such financial structuring is not inherently improper, here the two Appellants, William Allen Broughton ("Broughton") and Richard William Peterson ("Peterson"), were convicted of conducting a modern-day financial shell game in which they falsified financial statements, exchanged paper ownership over non-extant fraudulent assets, and collected insurance premiums and monthly payments from unwitting innocents.

The investigation leading to the convictions started as follows:

For a little over two years beginning in 1996, the Internal Revenue Service conducted an undercover investigation into insurance fraud in the United States and overseas. In particular, the investigation was directed at individuals and corporations who marketed themselves as insurance providers on the basis of rented assets. Such companies sought to collect insurance premiums while never intending to pay out on any meritorious claims. As will be discussed below, the undercover agents learned of numerous companies, some of which were operated by Appellants, that engaged in a conspiracy to operate in such a fashion.

The facts uncovered from the investigation are a bit convoluted and not important for present purposes where the focus of the discussion is 18 U.S.C § 3292(a), here, which suspends the statute of limitations while request to a foreign country for information is pending pursuant to a grand jury investigation.  See my prior blog Suspension of Statute of Limitations Period During Request for Foreign Assistance to Obtain Evidence (1/28/11), here.  The Government made the application to the district court and the district court granted it.  The issue on appeal was:

A plain reading of § 3292 demonstrates that a district court's decision to suspend the running of a statute of limitations is limited to two considerations: 1) whether an official request was made; and 2) whether that official request was made for evidence that reasonably appears to be in the country to which the request was made. Id. If both those considerations are met, the statute of limitations "shall" be suspended. Id. Therefore, the issue before us is whether those conditions were satisfied.

Suspension of the Statute of Limitations from the UBS John Doe Summons (8/11/12)

I have previously blogged on Section 7609(e)(2)'s suspension of the statute of limitations upon nonresponse to a summons after 6 months from the date of service of the summons.  See John Doe Summonses & Statutes Of Limitations (5/27/11), here.

The statute is:

(2) Suspension after 6 months of service of summons.  In the absence of the resolution of the summoned party’s response to the summons, the running of any period of limitations under section 6501 or under section 6531 with respect to any person with respect to whose liability the summons is issued (other than a person taking action as provided in subsection (b)) shall be suspended for the period—
    (A) beginning on the date which is 6 months after the service of such summons, and
    (B) ending with the final resolution of such response.

The complete Section 7609 is here.

I have received information from a fellow practitioner that the IRS included the following language in an IDR with respect to the UBS John Doe summons:

Our counsel has recently brought to light the fact that the statute of limitation for years 2002 through 2007 have been extended due to code section 7609(e)(2). This is because a John Doe third party summons was issued to UBS and it took more than 6 months for UBS to provide the information. The result is an additional 814 days added to these statutes.

Wartime Suspension of Limitations Act and Tax Fraud (6/27/12)

I have previously written about 18 U.S.C. § 3287, the Wartime Suspension of Limitations Act ("WSLA"), here.  See Is the Criminal Statute of Limitations Suspended under the Wartime Suspension Act? (11/20/09), here.  The issue was whether the WSLA applied to any fraud against the U.S., particularly tax fraud, regardless of relationship to war or hostilities.

The statute currently provides in relevant part:

When the United States is at war or Congress has enacted a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. 1544 (b)), the running of any statute of limitations applicable to any offense
(1) involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not, or
(2) committed in connection with the acquisition, care, handling, custody, control or disposition of any real or personal property of the United States, or
(3) committed in connection with the negotiation, procurement, award, performance, payment for, interim financing, cancelation, or other termination or settlement, of any contract, subcontract, or purchase order which is connected with or related to the prosecution of the war or directly connected with or related to the authorized use of the Armed Forces, or with any disposition of termination inventory by any war contractor or Government agency, shall be suspended until 5 years after the termination of hostilities as proclaimed by a Presidential proclamation, with notice to Congress, or by a concurrent resolution of Congress.

The question I asked earlier is whether the portion earlier version of the WSLA which contained subsection (1) applied to any fraud against the U.S., particularly tax fraud.  I did not have any answer to the question.

Special Statute of Limitations Rules Regarding $5,000 Omissions from Foreign Accounts (4/9/12)

The IRS recently published a memorandum discussing the special 6 year statute of limitations rule for $5,000+ omissions of income from specified foreign financial assets enacted in FATCA which also contained Section 6038D special reporting on Form 8938.  See IRS Memorandum from Director, Examination Policy, dated 3/9/12, here.  The statute of limitations extension is independent of Form 8938, and thus applies to all open years on the date on the effective date of March 18, 2010.  Readers should review the linked memo for more detail (with some examples) but I offer here the guts of the discussion for present purposes:

The amendment to § 6501(e) applies to all returns as long as the period of time (determined without regard to the § 6501(e) amendments referenced above) for assessment of taxes has not expired as of March 18, 2010.  Therefore, if the income tax return was filed after March 18, 2010, or the assessment statute was otherwise still open as of that date, and more than $5,000 was omitted from gross income that is attributable to specified foreign financial assets, the statute remains open under § 6501(e) for a total of six years from the date the return was filed. 

In general, this new provision means that the year 2006, with a tax return due date is April 15, 2007, will be subject to a 6 year statute of limitations if there is a $5,000+ omission related to specified foreign financial assets.  Earlier years will be subject to the rule only if the statute were otherwise open on March 18, 2010.  Assuming the returns for those pre-2006 years were filed prior to March 18, 2007, the statute is not affected by this new 6 year statute unless (i) there were a 25% omission of gross income (whether foreign account related or not) which would have caused a 6 year statute under general rules (which would mean that the new 6 year statute would run contemporaneously with the 25% omission 6 year statute, so that the new statute of limitations applies but is irrelevant), (ii) the taxpayer timely consented to extend the statute of limitations to a date including March 18, 2010 (taxpayers in this circumstance should note that the end date of a Form 872 will not control), or (iii) the filed return was fraudulent (in which case the new 6 year statute of limitations is also irrelevant).

The memo also notes that, for years for which a Form 8938 required by Section 6038D is required (2011 forward), the statute of limitations remains open until three years after the date the taxpayer supplies the required information.  This statute extension applies to all items on the return but, upon showing of reasonable cause and not willful neglect, the extension applies only to income items associated with the failure.

Court holds Application to Court for 18 USC 3292 Foreign Treaty Request Suspension Must be Made Within Statute of Limitations (2/11/12)

In United States v. Csolkovits, 2012 U.S. Dist. LEXIS 14314 (ED MI 2012), here, the defendant was charged with (1) sixteen counts of wire fraud in violation of 18 U.S.C. § 1343, (2) one count of engaging in a monetary transaction in criminally-derived property in violation of 26 U.S.C. § 1957(a), (3) one count of impeding the administration of the Internal Revenue Service ("IRS") laws in violation of 26 U.S.C. § 7212(a), and (4) one count of submitting false documents to the IRS in violation of 18 U.S.C. § 1001.

The indictment was brought more than five years after the underlying conduct for some of the counts alleging crimes with a five year statute of limitations.  The defendant raised a statute of limitations defense.   The defendant had entered a statute tolling agreement for some of the period, so that was not in issue.  What was in issue was whether the Government met the requirements for suspensions of the statutes of limitations in 18 U.S.C. § 3292 which provides for suspension in part here pertinent:

• There must be a grand jury investigation.
• Incident to the investigation, a request for information must be made to a foreign jurisdiction before the return of an indictment.
• That request to the foreign authority must be made within the otherwise applicable statute of limitations.
• The Government must apply to the district court.
• The tolling period is from the date of the request until the foreign government takes final action on the request.
• The tolling period cannot exceed the lesser of (i) three years or (ii) if the final action from the foreign authority is during the otherwise applicable statute of limitations, for more than six months.

John Doe Summonses & Statutes Of Limitations (5/27/11)

This week, a district court denied an IRS request for an order authorizing issuance of a John Doe Summons.  Readers will recall that Section 7609(f) permits the IRS to issue John Doe Summonses seeking tax related information and documents about unknown taxpayers. These taxpayers are unknown, so the IRS cannot give notice to the taxpayers who can then contest the summons. So, Congress required that a federal district judge approve the issuance of the summons.

The IRS sought the court order authorizing it to serve a John Doe summons to the California Board of Equalization for certain a certain discrete record set that would help the IRS identify persons making gift transfers to non-spouse related parties which, the IRS imagined, might have compliance issues with the gift tax. I won't get into the details of the focus of the IRS's interest, since the principal focus would be civil compliance initiatives. The judge refused to authorize the summons, finding that the IRS had not shown that the information and documents were not otherwise reasonably available. Further, although dismissing the motion for authorization without prejudice on the basis stated, the Court cautioned that, if the IRS were to repackage the motion, the court had some serious concerns about whether the IRS could otherwise qualify.  The opinion is here.

Court Holds Criminal Statute of Limitations Commences on Due Date of Return and Summons Suspends for Husband but not Wife

In United States v. Buckler, 2011 U.S. Dist. LEXIS 39839 (WD KY 2011), the court made two holdings relevant for this blog in a criminal tax prosecution of husband and wife.

First, the Court held that the criminal statute of limitations for a return filed before the normal due date of the return (April 15 for individuals) commences on the normal due date (April 15), thus making the indictment timely. The Court cited for this proposition Section 6513(a) and United States v. Habig, 390 U.S. 222, 225 (1968). Section 6513(a) provides that "For purposes of section 6511," which deals with claiming refunds, (i) the statute of limitations commences on the due date rather than an earlier filed date and (ii) the due date "shall be determined without regard to any extension of time granted the taxpayer and without regard to any election to pay the tax in installments." Section 6531, dealing with criminal statutes of limitation, provides that "for the purpose of determining [such] periods of limitation . . . the rules of section 6513 shall be applicable." In Habig, the defendant sought to interpret the bold faced provision of Section 6513(a) to mean that it applied to returns filed after the due date, so that returns filed during the extension period required a due date commencement of the civil and criminal statute of limitations. The Habig Court rejected that argument, holding that returns filed after the due date have their statutes of limitation commence on the date of filing rather than the earlier due date of the return. In Buckler, the return was filed before the normal due date and hence fell squarely within the rule that the return is deemed filed on the normal due date of the return.

Suspension of Statute of Limitations Period During Request for Foreign Assistance to Obtain Evidence (1/28/11)

18 USC Section § 3292 provides that, if the Government makes an official request to a foreign government to obtain evidence in that country and thereafter applies to a district court for an order to suspend the statute of limitations, upon appropriate proof that the official request was made and that the requested evidence is in the foreign country, the district court "shall suspend the running of the statute of limitations for the offense." The suspension period is from the date of the request to the foreign country until the foreign court or authority takes final action on the request, with a maximum of 3 years.  The DOJ CTM discussion of this provision is at CTM 7.06 (2008 ed.).

In Jenkins v. United States, ___ F.3d ___ (9th Cir. 2011), the Ninth Circuit applied this suspension statute in a straight-forward manner. One key holding is worth noting, even though it is a straight forward application of the statute.

Is the Criminal Statute of Limitations Suspended under the Wartime Suspension Act? (11/20/09)

There are rumors that the government in a tax shelter case is seeking to suspend the criminal statute of limitations under the "wartime suspension act", 18 USC Section 3287. The text of the statute is:

When the United States is at war or Congress has enacted a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. 1544(b)), the running of any statute of limitations applicable to any offense (1) involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not, or (2) committed in connection with the acquisition, care, handling, custody, control or disposition of any real or personal property of the United States, or (3) committed in connection with the negotiation, procurement, award, performance, payment for, interim financing, cancelation, or other termination or settlement, of any contract, subcontract, or purchase order which is connected with or related to the prosecution of the war or directly connected with or related to the authorized use of the Armed Forces, or with any disposition of termination inventory by any war contractor or Government agency, shall be suspended until 5 years after the termination of hostilities as proclaimed by a Presidential proclamation, with notice to Congress, or by a concurrent resolution of Congress.

Definitions of terms in section 103 of Title 41 shall apply to similar terms used in this section. For purposes of applying such definitions in this section, the term "war" includes a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. 1544(b)).

I have highlighted the portion upon which the Government is apparently relying.

I had not heard that the Government was doing that and have not researched the issue. The concern, of course, is that the statute of limitations is suspended on tax crimes as well as other crimes involving fraud or attempted fraud against the U.S. If any reader has any thoughts on this, I would appreciate hearing about it either as a comment to the blog or by separate email to jack@tjtaxlaw.com. I will post follow-through information as I learn it.

Update on 1/30/10:  See Erin M. Brown, Note: The Wartime Suspension of Limitations Act, the Wartime Enforcement of Fraud Act, and the War on Terror, 85 Notre Dame L. Rev. 313 (2009), here.  I think that the analysis and sources in the article will give ammunitiion to those who want to argue that plain vanilla tax crimes unrelated to the war effort should not be within the scope of 18 USC Section 3287.