Second Circuit Affirms Conviction; Includes Tax Interest and Penalties as Relevant Conduct (4/14/20; 4/21/20)

In United States v. Adams, ___ F.3d ___ (2d Cir. 2020), here, the Second affirmed the conviction and sentencing of Adams after he pled guilty to a six-count superseding indictment charging:

Counts One, Three, and Five charged Adams with making and subscribing to false tax returns for the years 2009, 2011, and 2012, in violation of 18 U.S.C. § 2 and 26 U.S.C. § 7206(1). Counts Two and Four charged Adams with tax evasion in 2011 and 2012, in violation of 18 U.S.C. § 2 and 26 U.S.C. § 7201. Count Six charged Adams with attempting to interfere with the administration of the internal revenue laws, in violation of 18 U.S.C. § 2 and 26 U.S.C. § 7212(a).

The key holdings are (as described in the Court captions are):

1.  Adams Is Not Entitled to Withdraw His Guilty Plea.
2.  The district court properly calculated the Tax Loss
3. The District Court Properly Concluded That Adams Obstructed Justice
4. Although the District Court Erred in Ordering the Payment of Immediate Restitution, the Court Had the Authority to Order Restitution as a Condition of Supervised Release
5. Adams's Double Jeopardy Claim Has Been Waived
6.  Adams Was Not Deprived of His Right to a Fair and Impartial Tribunal

The opinion is routine and, for purposes of this blog does not warrant discussion except I do address the Tax Loss Calculation because of its reminder of relevant conduct:

The tax loss calculation included penalties and interest.  Normally, the tax loss calculation would only include penalties and interest if the taxpayer were convicted of evasion of payment of the assessed amounts.  (The tax loss for evasion of assessment does not include interest and penalties.)  That taxpayer was not convicted of evasion of payment; hence he urged that the tax loss should not include those amounts.  The Court held, however, that evasion of payment was relevant conduct (cleaned up):

Since the statutory reference in § 2T1.1 n.1 does not require a charge or conviction to be applicable to a defendant's case, we hold that, under U.S.S.G. § 2T1.1 application note 1, the exception permitting interest and penalties to be included in the tax loss calculation for "willful evasion of payment cases" under 26 U.S.C. § 7201 and "willful failure to pay cases" under 26 U.S.C. § 7203 can be applied based on uncharged relevant conduct constituting violations of those statutes. Thus, even where a defendant has not been convicted of willful evasion of payment under § 7201 or willful failure to pay under § 7203, penalties and interest may still be included in the tax loss calculation if the object of the offense is to avoid the tax, penalties, and interest.

JAT Comment (added 4/16/20 11:00am):

1.  From what I recall over the years, the tax loss calculation for counts of conviction for tax crimes related to assessment (rather than collection), such as evasion of assessment and tax perjury, have not included penalties and interest in the tax loss calculation.   Perhaps my memory fails me, but I just don't recall that  the tax loss calculation included interest and penalties.  SG § 2T1.1 n. 1, here, says:  " The tax loss does not include interest or penalties, except in willful evasion of payment cases under 26 U.S.C. § 7201 and willful failure to pay cases under 26 U.S.C. § 7203."  Conceptually, if a person intended to evade assessment, it is not much of a leap, if a leap at all, to say that the person intended to avoid the interest and penalties on the tax that he or she avoided assessment.  So, I wonder if this is an opening that the Government might exploit in some cases to sweep into the loss calculation penalties and interest.  Of course, given the ranges in the Tax Table in § 2T4.1, here, including the interest and penalties may not change the offense level so it may not be that big a deal.  But one should remember that the civil fraud penalty is 75% which draws interest from the due date of the return, so the tax loss would be substantially increased so as to, depending up the loss, move up one offense level.  (The same would be true of a fraudulent failure to file penalty that goes up to 75%.)

2.  Added 5/21/20 4:00 pm: Jeremy Temkin, a frequent writer on tax crimes subjects for the New York Law Journal, has this post on Adams:  Jeremy Temkin, Financial Considerations for Sentencing in Federal Tax Prosecutions, New York Law Journal 5/21/20), here.  Highly recommended.