More on New DOJ Tax Position on FBAR Sentencing Guidelines (11/9/17)

At the 34th Annual National Institute on Criminal Tax Fraud in Las Vegas, a senior DOJ Tax CES attorney, Mark Daly, discussed DOJ Tax's new policy to seek sentencing under the Part 2S Guidelines rather than under the Part 2T Guidelines.  See DOJ Announces Major New Shift in Criminal Sentencing in Offshore Tax Matters (JD Supra 12/8/17), here.

I had previously discussed that shift in Another FBAR Plea And Notice of Government Change of Position on Applicable Guidelines (Federal Tax Crimes Blog 10/27/17), here.  The JD Supra article provides more detail on the consequences of that shift.

First, since the SG § 2S1.3 Guideline range is based on the value of the offshore account rather than the tax loss associated with the account, the dollar amount and resulting Guideline range is likely to be multiples of the Guideline range that would have been calculated under 2T1.1.  The JD Supra article says:

Daly gave the example of his United States v. Kim case in the Eastern District of Virginia, where the Part 2T tax loss was on the order of $150,000, but the Part 2S1.3 value was $28 million. Depending upon the circumstances, that could be a ten-fold increase in the sentence. In Kim, the DOJ asserted that Part 2S1.3 was the correct guideline, but due to a prior agreement with the defendant, the DOJ would in that case agree to sentencing based on Part 2T. Daly stated that the DOJ intended its language asserting that Part 2S1.3 was the correct guideline as a warning to the defense bar in other such cases.

In addition, the JD Supra article says:

The second problem is that Part 2S1.3 allows for a 2-level enhancement where a defendant has also been convicted of an offense under subchapter II of chapter 53 of title 31–which includes filing a false or misleading FBAR. Because an FBAR must be filed each year along with the tax return, the DOJ will now seek to add charges under title 31 chapter 53 to obtain a 2-level enhancement at sentencing.

To trace this through the Guidelines, SG § 2S1.3(b)(2) provides:

(2)       If the defendant (A) was convicted of an offense under subchapter II of chapter 53 of title 31, United States Code; and (B) committed the offense as part of a pattern of unlawful activity involving more than $100,000 in a 12-month period, increase by 2 levels.

Application Note 3 says:

3.      Enhancement for Pattern of Unlawful Activity.—For purposes of subsection (b)(2), "pattern of unlawful activity" means at least two separate occasions of unlawful activity involving a total amount of more than $100,000 in a 12-month period, without regard to whether any such occasion occurred during the course of the offense or resulted in a conviction for the conduct that occurred on that occasion.

The inference of the article is that if the contemporaneous filing of the false FBAR or failure to file the FBAR occurs at the same time that the tax return willfully failing to report the income is filed, this two level enhancement will automatically apply.

The question is whether, in any event, courts will continue the pattern of Booker downward variances consistent with the level of sentencing under Booker variances when they applied the tax Guidelines.  I would expect criminal defense attorneys to submit detailed charts or spreadsheets showing the pattern of sentencing in the past and urging that the sentences be consistent with that pattern.  That was done in the Warner case, apparently to good effect, and I am sure in other cases as well.  I expect that to occur in the future.  I am not sure how the Courts will react to the Government's Eureka moment as to the appropriate Guidelines calculation.  I suspect that Courts will continue to apply Booker variances, and that, at the end of the day, even if the § 2S1.3 Guidelines are applied, the final Booker sentence will be the roughly same as the Booker sentence would have been had the tax Guidelines applied.  That is just my speculation.

And, I expect that, if available, a Government offer as to a plea deal for either a tax crime (evasion or tax perjury) or FBAR crime, a defendant should seriously consider the tax crime.

The article reports that Daly said that DOJ Tax policy guidance on the new position would be "forthcoming."