Jeremy Temken Guest Blog and Article on Sentencing Statistics in Tax Cases (9/27/13)

The Supreme Court's decision in Booker v. United States gave district judges increased discretion in sentencing defendants convicted in federal courts. Statistics recently released by the United States Sentencing Commission demonstrate that judges have been exercising that discretion and sentencing more defendants below the applicable Guidelines ranges. The trend is especially stark in criminal tax cases. In the fiscal year ending September 30, 2012, only 36.9 percent of defendants convicted of tax offenses were sentenced within the applicable Guidelines range, and the vast majority of sentences below the Guidelines were predicated on defense motions with the resulting sentences falling substantially below the Guidelines. While the majority of defendants convicted of tax offenses are now receiving below Guidelines sentences, both the percentage of defendants convicted of tax offenses receiving some jail time and the average period of incarceration imposed have increased in the post-Booker era.

In my recent New York Law Journal article, "The Promise of ‘Booker’ Revisited," I discuss these statistics, as well as data reflecting the IRS's shifting enforcement priorities in this era of limited resources. My article may be viewed here.

Jeremy Temken.

Jeremy's bio is here.

JAT Note:  First, thanks to Jeremy for his excellent article.  I highly recommend it to readers.  Second, this afternoon, I will be participating in a sentencing panel at Villanova University Law School on sentencing in tax cases.  I probably will separately blog on some interesting sentencing matters from the panel and will incorporate some of Jeremy's excellent discussion.  I highly recommend his article to readers.

I do want to quote in full a paragraph from the article that I think are particularly insightful (footnotes omitted):

One way to assess the impact of Booker on tax sentences, is to compare both rates and length of incarceration of the 605 defendants sentenced during fiscal 2012 in cases in which a tax violation was the primary offense charged with those of the 480 tax defendants sentenced during fiscal 2003, the last full year before the Supreme Court’s decision in Blakely v. Washington, which struck down Washington State’s guidelines regime and served as a precursor to Booker. On first blush, the resulting data suggests that tax defendants have not benefited from Booker: the percentage of tax defendants who received some period of incarceration rose from 56.7 percent in 2003 to 64.3 percent in 2012, while the percentage of tax defendants who received probationary sentences with no element of confinement dropped from 21.3 percent in 2003 to 19.5 percent in 2012. Moreover, the median sentence imposed on all defendants convicted of tax offenses increased from eight months in 2003 to 12 months in 2012, and the median sentence imposed on defendants who received some period of incarceration went from 12 months in prison in 2003 to 18 months in prison in 2012.

The key background is that the tax loss levels were lowered for tax crimes, meaning that it took less tax loss to achieve a higher base offense level that, under the Guidelines calculations, means that the offense level for the sentencing table was often higher in 2012 for the same amounts of tax loss.  Yet the sentences were not worse.  That means that the judges are less comfortable that the Guidelines calculations are well calibrated for tax offenses.  This is a large issue and was discussed briefly by Steve Chanensen yesterday at the Villanova Seminar on Selective Issues in Tax Administration (Federal Tax Crimes Blog 8/31/13), here.  He was particularly concerned with whether the fraud Guidelines work and noted the parallel to economic loss for the fraud Guidelines and the tax Guidelines.  Apparently, the Commission is studying whether the role of economic loss should be mitigate to some extent and other relevant factors of culpability given more prominence.  Maybe that will lead to a discussion of the tax Guidelines as the Commission continues its work.  But I think it may be hard to give tax loss such prominence as a driver in tax sentencing if economic loss is lessened for fraud sentencing.