Wednesday, February 5, 2014

TRAC Posts Statistics on Criminal Tax Enforcement Related to IRS Referrals (1/5/14)

Transactional Records Access Clearinghouse (TRAC) issued a report titled IRS Criminal Prosecutions Rise Under Obama.  The report is here.  The report indicates:

1.  "The number of criminal prosecutions referred each year by the Internal Revenue Service (IRS) has risen by nearly a quarter — 23.4 percent — during the Obama administration when compared with the Bush years. "

2. "Convictions are also drawing slightly longer average prison terms — 27 months under Obama versus 25 months under Bush (see Table 1)."

3. "For both administrations, the odds have been roughly 50-50 that federal prosecutors will accept an IRS referral for criminal prosecution."

4. "[A] surge in IRS criminal investigations referred under Obama has fueled an increase in the number of cases prosecuted."

5. "Last year was a banner year for criminal prosecutions referred by the IRS. During FY 2013 the government reported 2,010 new prosecutions, a jump of 30.6 percent over the past fiscal year when the number of prosecutions totaled 1,539."

6.  The report contains a graph (Figure 1) showing the number of criminal tax prosecutions for each year in the past 20 years.  The graph shows 1993 as the high years, with a steady downward trend until the Bush years are reached in 2001, with a stead level until about 2010, a slight increase in 2011 and 2012 and a jump in 2013, but still in 2013 not as high as in 1993.

7.  The top-ranked "lead" charges are, in order,

  • tax perjury (§ 7206(2), here), 
  • tax evasion (§ 7201, here), 
  • fraudulently converting public money, property or records (18 USC 641, here), 
  • conspiracy (18 USC 371, here), 
  • false claims (18 USC 287, here), 
  • conspiracy to defraud by false claims (18 USC 286, here), 
  • money laundering (18 USC 1956, here
  • mail fraud (18 USC 1341, here), 
  • fraud and related activity re identity (18 USC 1028, here), and 
  • Structuring transactions to evade reporting requirements (31 USC 5324, here).  

I should note that I would not classify 18 USC 641 as a tax crime, but all the rest (including the last which is identity theft tax crime, would be classified as tax crimes.  As to 18 USC 641, I searched the Tax Notes database and found only one case that prosecuted under 18 USC 641.  Tax Notes may have missed some or even many of them, but it is on the lookout for tax-related cases, so the dearth of 18 USC 641 cases suggests only that the tax community may not view these as tax crimes.  Finally, I note that that statute is not listed on the IRS web site for IRM 9.1.3  Criminal Statutory Provisions and Common Law, here.

A word of caution about statistics:  Benjamin Disreali is said to have quipped that “there are lies, damned lies, and statistics.”  I am not suggesting that TRAC is lying or misinterpreting the data.  This invites inquiry into its data.  TRAC says that it obtained the data from FOIA responses to request to the Executive Office for United States Attorneys and the Office of Personnel Management.  I don't have that data and don't know how those offices compile and present the data that TRAC obtained and analyzed.

I may try to dig into some of this data later, but the one immediate question I have relates to the statement in paragraph 3 that DOJ Tax rejects 50% of IRS referrals.  Based on historical practice in this area, that number seems high.  Moreover, that high rejection rate does not appear consistent with the statistics that the IRS posts on its web site.  (There is a trove of links to CI data here.)  Parsing those statistics, I have kept a running spreadsheet for the years 2012-2013 for certain key data, including IRS referrals and DOJ Tax prosecutions.  The data I have gleaned from the IRS reporting show a DOJ Tax rejection  percentage for all IRS referrals (tax and other financial crimes) in the years 2002-2103 between 8% and 18%., with the aggregate percentage rejected of 11%.  Tax crimes only show a wider variance for rejections -- low of 7% and high of 24%.  But, in any event, according to the IRS's statistics and my limited anecdotal information of experience and observing the tax crimes scene, the actual reject rate is nowhere near 50%, as reported by TRAC.

I would appreciate comments from readers who may have insight into these statistics or the data sets behind them.


  1. 31 USC 5324 "structuring" is part of the banking code and should not be considered a tax crime; indeed there are cases in which not only was there no related tax underpayment (not just no tax crime but no tax underpayment) and perhaps not even any intent to evade reporting requirements.

  2. "Under Obama" in the headline seems to imply that Obama's presidency somehow is a causal effect, and this may not be the case. The UBS-related prosecutions, for example, would likely have occurred anyway regardless of who was in the White House.

  3. another look at the IRS from a former insider :
    Jack, I guess just business as usual for such a big organization

  4. I truly like to read your post. Thank you so much for taking
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