7 August 2001

See contents of full IRS Handbook of Criminal Investigation: http://cryptome.org/irs-ci/irs-ci.htm

Handbook 9.1
CI Mission, Authorities, Organization and Directives


Chapter 2
AUTHORITY

Contents

[9.1] 2.1  (06-30-1998)
OVERVIEW

  1. The authority to enforce federal laws is derived from statutes. The statutes may assign the enforcement to a particular department such as the Treasury Department, an agency of a department such as the Internal Revenue Service (IRS), or imply that the enforcement falls to the legal arm of the government, the Department of Justice (DOJ).
  2. The various departments of the government delegate the authority to enforce the statutes through orders to agencies. The agencies then issues delegation orders (or rules) to specific functions and sometimes even specific positions of employment within the agency organization.
  3. This chapter will not discuss all the various authorities, but will focus on the following:
    • Authority to enforce crimes under the internal revenue laws.
    • Authority that form the basis of the duties of a special agent.
    • Authority to arrest and carry firearms.
    • Authority to compromise a tax investigation.
    • Authority to settle criminal cases.
    • Authority to seize property for forfeiture.
    • Conflict of laws.

[9.1] 2.2  (06-30-1998)
GENERAL AUTHORITY TO ENFORCE INTERNAL REVENUE LAWS

  1. Internal Revenue Code section 7608(b) provides the authority for investigating crimes arising under the Internal Revenue laws.
  2. Under Sections 7602 and 7622 of the Internal Revenue Code of 1954, through Treasury Order 150-10 the Commissioner and his or her designated officers and employees are authorized to examine any books, papers, records, or memoranda bearing upon the matters required to be included in the returns, to require and take testimony relative thereto, and to administer oaths.
  3. The IRS also has explicit enforcement responsibilities with regard to Title 18, United States Code sections 1956 and 1957, dealing with money laundering, and Title 31 USC 5311 et seq., dealing with the Bank Secrecy Act.
  4. By commissions given each officer of the CI activity, the Commissioner designates such individual as having the authority to perform all duties conferred upon such officers, under all laws and regulations administered by the IRS, including the authority to investigate, and to require and receive information as to all matters relating to such laws and regulations. Delegation Order No. 158 then authorizes the Chief, CI, to investigate violations of 18 USC 1956 and 1957 where the underlying conduct is subject to investigation under Title 26 or under the Bank Secrecy Act, as amended, 31 USC 5311-5326 (other than violations of 31 USC 5316).
  5. In Delegation Order No. 143, the Commissioner delegated the authority to initiate criminal investigations of financial institutions that are not currently examined by federal bank supervisory agencies, except for brokers or dealers in securities, to the Director of the National Operations Division and the Chiefs, CI, and to the Chief (CI), Assistant Commissioner (International). The Commissioner also delegated the authority to initiate Title 31 criminal investigations of banks and brokers or dealers in securities to the Assistant Commissioner, CI, pursuant to Treasury Order 150-10 and Directive 15-41, a Memorandum of Understanding approved September 6, 1985, a Clarification of Memorandum approved January 29, 1986, and 26 CFR 301.7701-9(c).
  6. Under the District Director, the Criminal Investigation responsibilities include the investigation of all alleged criminal violations arising under the Internal Revenue laws except those set out in the Chapter on Investigative jurisdiction.

[9.1] 2.3  (06-30-1998)
AUTHORITY FOR CERTAIN INVESTIGATIVE TECHNIQUES

  1. During the course of an investigation many different techniques are used to obtain information. The following subsections will discuss the authority granted to the special agent to perform a few of these.

[9.1] 2.3.1  (06-30-1998)
Authority to Interview

  1. Internal Revenue Code section 7602 authorizes the Secretary of the Treasury or his delegate to examine books and records and to take testimony under oath.
  2. Delegation Order No. 4 authorizes the special agent to issue and serve a summons, to examine books and records, to question witnesses, and to take testimony under oath.
  3. Delegation Order No. 37 authorizes the special agent to administer oaths and to certify such papers as may be necessary under the Internal Revenue laws and regulations.

[9.1] 2.3.2  (06-30-1998)
Authority to Issue Summons, Examine Records, and Take Testimony

  1. The authority granted to the Secretary or his or her delegate by IRC 7602 to issue a summons, examine records, and take testimony is granted to the Commissioner of Internal Revenue by Treasury Decision 6118 approved December 30, 1954, published in the Federal Register on December 31, 1954 (19 FR 9896), and in turn granted to special agents as well as various other Service employees by Delegation Order No. 4. Detailed information about the summons is found in the Summons Handbook.
  2. Delegation Order No. 4, as revised, authorizes the holders of the positions listed therein to perform the functions set out in sections 7602, 7603, 7604 and 7605(a) of the Internal Revenue Code of 1954. The listed position holders in Delegation Order No. 4, as revised, are also authorized by that Order to designate other Service employees before whom testimony will be given and papers produced. Delegation Order No. 4 also lists those who are designated to administer oaths or affirmations in Service matters (other than oaths of office) and to certify most Service documents.
  3. The provisions of the law relating to the use and enforcement of a summons are contained in the following sections of the Internal Revenue Code of 1954:
    1. IRC 7602--Examination of Books and Witnesses;
    2. IRC 7603--Service of Summons;
    3. IRC 7604--Enforcement of Summons;
    4. IRC 7605--Time and Place of Examination;
    5. IRC 7609--Special Procedures for Third-Party Summonses;
    6. IRC 7610--Fees and Costs for Witnesses;
    7. IRC 7622--Authority to Administer Oaths and Certify;
    8. IRC 7402--Jurisdiction of District Courts;
    9. IRC 7210--Failure to Obey Summons;
    10. IRC 6420(e)(2), 6421(f)(2), 6424(d)(2), and 6427(g)(2) (gasoline, lubricating oil, and fuel credits).
  4. Pursuant to 26 U.S.C. 7610, as enacted by Public Law 94-455, October 4, 1976 (Tax Reform Act of 1976) (IRC 7610), payments may be made to third parties who request reimbursement for costs incurred in complying with a summons. Payments may be made to third parties without the issuance of a summons for records needed in an investigation which are available to the general public, under IRC 7801. Beside these sections of the Internal Revenue Code, additional authority is taken from Treasury Department Order No. 150-37, dated March 17, 1955, and IRS Delegation Order No. 178.
  5. Delegation Order 178 governs matters delegated to the region and district. The Commissioner of Internal Revenue has delegated to the respective Regional Commissioners the authority to obligate appropriated funds for making payment for search costs, reproduction costs, and transportation costs in connection with complying with a third-party summons.

[9.1] 2.3.3  (06-30-1998)
Authority to Take Handwriting Exemplars

  1. Whenever an agent becomes aware that the authenticity or origin of a document may be questioned, he or she should attempt to obtain handwriting exemplars of the parties involved. The summoning of a taxpayer or other witness for the purpose of taking handwriting exemplars is within the authority of IRC 7602 U. S. v. Euge. This does not violate any Constitutional rights or policies enunciated by Congress. Compulsion of handwriting exemplars is neither a search or seizure subject to Fourth Amendment protections nor testimonial evidence protected by the Fifth Amendment privilege against self-incrimination. A handwriting exemplar is an identifying physical characteristic.

[9.1] 2.3.4  (06-30-1998)
Authority for Searches with Warrants

  1. The basic authority for making searches and seizures is in the Fourth Amendment to the Constitution of the United States which states: The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched and the persons or things to be seized. The Fourth Amendment protects individuals against unreasonable searches and seizures by the government. The scope of this protection extends to any area in which an individual has a reasonable expectation of privacy. Further, the fourth Amendment provides that all warrants shall be based upon probable cause and supported by oath or affirmation.
  2. Section 7302 of the Internal Revenue Code of 1954 provides that it shall be unlawful to have or to possess any property used, or intended for use, in violating the provisions of the Internal Revenue laws, or regulations prescribed under such laws, and that no property rights shall exist in any such property.
  3. Section 7608 of the Internal Revenue Code of 1954, as amended, authorizes special agents of CI to serve search warrants and to make seizures of personal property subject to forfeiture.
  4. A search warrant may be issued as provided in Chapter 205, Title 18, United States Code, and the Federal Rules of Criminal Procedure, for the search of the personal property used, or intended for use, in violation of the Internal Revenue laws or regulations.
  5. 18 USC 3105 and 3109, Rule 41 of the Federal Rules of Criminal Procedure (FRCrP), and 26 USC 7302, 7321, and 7608 contain the statutory authority pertinent to searches and seizures by special agents. Pertinent parts of Rule 41 provides for a warrant to be issued by a federal judge or magistrate upon the affidavit of a law enforcement officer. A warrant may be issued under this rule to search for and seize any of the following:
    1. Property that constitutes evidence of the commission of a criminal offense.
    2. Contraband, the fruits of crime, or things otherwise criminally
      possessed.
    3. Property designed or intended for use or which is or has been used as the means of committing a criminal offense.
    4. Person for whose arrest there is probable cause, or who is unlawfully restrained.
  6. The phrase, federal law enforcement officer, is used in this rule to mean any government agent, other than an attorney for the government as defined in Rule 54(c) who is engaged in the enforcement of the criminal laws and is within any category of officers authorized by the Attorney General to request the issuance of a search warrant.
  7. For more information concerning search authority and procedure see the Chapter on searches in the Investigative Techniques Handbook.

[9.1] 2.3.5  (06-30-1998)
Authority for Warrantless Searches

  1. Searches can be made without a warrant with the consent of the occupant of property or incident to a lawful arrest or search.
  2. A search without a warrant may be made with the consent of the person who has the right to give such consent. The consent must be voluntarily given, and not be the result of acquiescence to avoid making resistance. Any coercion will invalidate the search and seizure. The courts have held that only persons whose constitutional rights have been violated will be heard in objection to the search. The rights guaranteed are personal and may be waived only by the person having the right of immediate possession. One person may not waive such rights for another unless the person so waiving is in authorized possession of the premises.
  3. A person lawfully arrested may be searched without a warrant and the premises under his or her immediate custody and control may be searched for weapons.
  4. For more information concerning search authority and procedure, see the Chapter on searches in the Investigative Techniques Handbook.

[9.1] 2.4  (06-30-1998)
AUTHORITY TO ARREST

  1. The authority of special agents to make arrests is contained in IRC 7608, as amended. This section provides, in part, that a special agent is authorized: to execute and serve search warrants and arrest warrants, and serve subpoenas and summonses issued under authority of the United States; to make arrests without warrant for any offense against the United States relating to the Internal Revenue laws committed in his presence, or for any felony cognizable under such laws if he has reasonable grounds to believe that the person to be arrested has committed or is committing any such felony; and to make seizures of property subject to forfeiture under the Internal Revenue laws.
  2. The Supreme Court has stated that in the absence of a controlling federal statute, the law of arrest of the state where the arrest is made is controlling. In the absence of a statute authorizing a federal officer to make an arrest without a warrant, that officer has the same powers of arrest as a private citizen. A special agent's power to make an arrest without warrant as a private citizen, when valid under state law, is not made invalid because the crime is outside the scope of the Internal Revenue laws. An arrest without warrant is a serious matter and could subject the person making the arrest to criminal and civil liability for false imprisonment or false arrest. Therefore, in order for special agents acting as private citizens to be authorized to make a warrantless arrest, it is generally necessary that a violation constituting a felony be committed in their presence or the special agent reasonably believes the person whom he or she arrests has committed a felony.
  3. Every state has their own requirements in granting federal law enforcement officers state Peace Officer status. Even if Peace Officer status is recognized by your state, check with management in the IRS district before taking any position as a recognized Peace Officer. For information on the state recognition of federal law enforcement officers as Peace Officers, see Chapter 9.2.3, Use of Force Procedures, Exhibit 3-1, Peace Officer Status.

[9.1] 2.4.1  (06-30-1998)
Authority To Carry Firearms

  1. There is no specific statutory authority for special agents to carry firearms. The General Counsel, Department of the Treasury, has concluded that no specific authority is necessary "where a federal officer has authority to make an arrest, he or she has implied authority to carry firearms." Authority for special agents to make arrests is contained in 26 USC 7608(b).
  2. The authority to carry firearms is limited to the conduct of official duties in enforcing any of the criminal provisions of the Internal Revenue laws or other criminal provisions of laws relating to Internal Revenue where the enforcement is the responsibility of the Secretary or his/her delegate.
  3. Authority to carry or use privately owned weapons during off-duty hours is as a private citizen subject to local civil and criminal restrictions. Special agents may not use their position or credentials to qualify under state or local laws to purchase, license, carry, or use private weapons. Credentials may be displayed as occupational identification, upon request, but not to influence any decision a state or local law enforcement officer may make concerning the special agent's ability to carry a concealed weapon.

[9.1] 2.5  (06-30-1998)
AUTHORITY TO COMPROMISE A TAX INVESTIGATION

  1. The Secretary of the Treasury or the Secretary's delegate may compromise any civil or criminal tax case prior to referral to the DOJ (26 USC 7122(a)). The Secretary has delegated this authority to the Commissioner of Internal Revenue. (203 C.F.R. Sec. 601). Strict compliance with the statutory provisions is required to effect a compromise. Accordingly, attempted settlement by subordinate Service officials will not bar criminal prosecution. A valid compromise is as complete a discharge from prosecution as an acquittal by a jury.
  2. CI makes investigations of offers in compromise in cases in which criminal proceedings are pending only as specifically requested by the Chief Counsel or Regional Counsel.
  3. After referral of a case to the DOJ, authority to compromise rests with the Attorney General.
  4. Tender of tax or actual payment thereof prior to a verdict or plea of guilty is not a bar to criminal prosecution.

[9.1] 2.6  (06-30-1998)
AUTHORITY TO SETTLE CRIMINAL CASES

  1. When a taxpayer, represented by counsel, expresses a desire to negotiate a plea agreement prior to the formal completion of an administrative investigation, the special agent will advise taxpayer's counsel:
    1. The IRS does not have the authority to engage in plea investigations because this authority rests exclusively with the DOJ.
    2. Plea negotiations have to be conducted by either the United States Attorney's office or the Tax Division of the DOJ.

[9.1] 2.7  (06-30-1998)
AUTHORITY TO SEIZE PROPERTY FOR FORFEITURE

  1. The authority to seize assets for forfeiture comes from both the Internal Revenue law (Title 26 CFR) and Title 18 Code of Federal Regulations. For more information concerning seizure authority and procedure, see the Asset Seizure And Forfeiture Handbook.

[9.1] 2.7.1  (06-30-1998)
Title 26 Seizures

  1. Section 7608 of the Internal Revenue Code of 1954, as amended, authorizes special agents of CI to serve search warrants and to make seizures of personal property subject to forfeiture.
  2. Section 7302 of the Internal Revenue Code provides that it shall be unlawful to have or possess any property which is used, or intended for use, in violation of the Internal Revenue laws, or regulations prescribed under such laws. The Secretary or the Secretary's delegate is authorized by statute to seize such property (26 USC 7321). It provides further that no property rights shall exist in any such property, and that a search warrant may be issued as provided in Title 18, USC, Chapter 205, and the Federal Rules of Criminal Procedure, for the seizure of such property.
  3. A search warrant may be issued for seizure of property used or intended for use in violation of Internal Revenue laws. (Rule 41(b), F.R.Cr.P.). A seizure in violation of the Fourth Amendment will not sustain a forfeiture, (One 1958 Plymouth Sedan v. Pennsylvania) unless the property seized is contraband per se. (U.S. v. Jeffers; Trupiano v. U.S.)
  4. Delegation Order No. 157 authorizes special agents to seize personal property for forfeiture to the United States when involved, used, or intended to be used in violation of Internal Revenue laws other than Chapters 51, 52 and 53 of the Internal Revenue Code of 1954;

[9.1] 2.7.2  (06-30-1998)
Title 18 Seizures

  1. Title 18 USC 981 vests civil seizure and forfeiture authority in the Secretary of the Treasury relating to violations of:
    1. 31 USC 5313(a)
    2. 31 USC 5324(a)
    3. 18 USC 1956 (within the investigatory jurisdiction of IRS)
    4. 18 USC 1957 (within the investigatory jurisdiction of IRS)
  2. The Secretary of the Treasury through Treasury Order 101-45 delegated the authority to the Under Secretary (Enforcement). Treasury Directive 15-42 redelegated this authority to the Commissioner of IRS. The Commissioner issued Delegation Order 158 specifying various activities in the civil seizure/forfeiture process to different IRS officials.
  3. The criminal forfeiture process in Title 18, as it relates to IRS, is governed by four statutory authorities. Three of these authorities are incorporated into the money laundering criminal forfeiture statute by reference; and the fourth authority is a consequence of the fact that criminal processes are governed by the Federal Rules of Criminal Procedure (F.R.Cr.P.). These statutory authorities are as follows:
    1. Title 18 USC 982(b) which states that the provisions of Title 21 USC 853(c) and (e) through (p) shall govern the seizure and disposition of any property subject to forfeiture under Title 18 USC 982.
    2. Title 21 USC 853(e)(1) provides for a Temporary Restraining Order prior to the conclusion of a criminal investigation to preserve the availability of the property for forfeiture by restraining transfer of the property or further encumbrances.
    3. Title 21 USC 853(f) provides for the use of a seizure warrant for property subject to forfeiture under 18 USC 982 853(f).
    4. Pursuant to Title 21 USC 853(j) and by reference in Title 21 USC 881(d), civil forfeiture proceeds according to the Supplemental Rules of Certain Admiralty and Maritime Claims (Civil Judicial Forfeiture Procedures, Title 19 USC 1602 et seq. (Civil Administrative Forfeiture Procedures)).
    5. In addition, because criminal forfeiture is an integral part of the underlying criminal prosecution, the F.R.Cr.P. govern the general process by which property is criminally forfeited.

[9.1] 2.8  (06-30-1998)
CONFLICT OF LAWS

  1. The federal law prevails over state law (statutory or constitutional), and the state law, if in conflict, must yield. (Falsone v. U.S.)

Internal Revenue Manual  

Hndbk. 9.1 Chap. 2 AUTHORITY

  (06-30-1998)


05/02/2001 14:28:41 EST