Contents

• [9.6] 2.1 Overview

• [9.6] 2.2 Expidited Plea Referrals In Proposed Plea Agreement Situations
  • [9.6] 2.2.1 Procedures Prior to District Counsel Pre-Referral Assistance
  • [9.6] 2.2.2 Pre-Referral Assistance From District Counsel
  • [9.6] 2.2.3 Special Agent Report
    • [9.6] 2.2.3.1 Concurrence or Non-concurrence of Chief Regarding Prosecution Reports

• [9.6] 2.3 Pleas Involving Title 18 Seizures and Forfeitures

• [9.6] 2.4 Sentencing Process
  • [9.6] 2.4.1 Communication with Probation Officers

[9.6] 2.1  (04-26-1999)
Overview

1. The sentencing process may occur as a result of a plea agreement or a guilty plea or as a result of the taxpayer being found guilty after a trial.
2. This Chapter provides guidelines and procedures for processing referrals in proposed plea agreement situations. These procedures are designed to assist a taxpayer currently under investigation, who is represented by counsel, to negotiate a plea agreement.
3. The chapter also provides guidance to the special agent for communication with probation officers.
4. This chapter contains the following sections:
   1. Program for Simultaneous Referrals in Proposed Plea Agreement Situations
   2. Pleas Involving Title 18 Seizures and Forfeitures
   3. Sentencing Process

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[9.6] 2.2  (04-26-1999)
Expidited Plea Referrals In Proposed Plea Agreement Situations

1. Grand Jury investigations are not eligible for inclusion in the simultaneous plea program.
2. A taxpayer may enter into a plea agreement with the government at any stage of an investigation. Criminal Investigation (CI) does not have authority to initiate plea negotiations with the taxpayer as this authority rests solely with the Department of Justice (DOJ). A taxpayer must be represented by counsel to initiate plea discussions or negotiations.

   NOTE:

   If a taxpayer who is not represented by counsel expresses an interest in plea negotiation discussions, advise the taxpayer that in order to participate, he or she must be represented by counsel.

3. In an administrative investigation, when a taxpayer, through counsel, expresses a desire to participate in the expedited plea program, inform the taxpayer and his or her counsel that the willingness to enter into plea negotiations with DOJ in no way precludes the taxpayer's ultimate civil tax liability.
4. Investigations processed under these procedures:
   1. Do not require the same degree of preparation as normal administrative tax investigations since they will not go to trial.
   2. Do require that sufficient evidence be obtained in order to constitute a referable matter.
5. The IRS will take precautions to ensure that information furnished by the taxpayer, prior to formal plea discussion with DOJ, will not be foreclosed from future use under the restrictions of Rule 11(e)(6) of the Federal Rules of Criminal Procedure in the event that plea negotiations fail by reason of withdrawal or rejection by DOJ.
6. All references to the United States Attorney and DOJ includes the designated liaison attorneys for the program in each office.
7. For a plea agreement to be acceptable, it must:
   1. establish culpability for the violation charged;
   2. include the most significant violation;
   3. consider the totality of the fraud committed by the taxpayer;
   4. not reduce tax return felony counts to misdemeanors;

   NOTE:

   Investigations in which the taxpayer does not appear willing to enter an acceptable plea and where the investigation has not established the general scope of the taxpayer's culpability are inappropriate for inclusion in this program.

[9.6] 2.2.1  (04-26-1999)
Procedures Prior to District Counsel Pre-Referral Assistance

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 that:
   1. Authority to engage in plea negotiations rests exclusively with DOJ.
   2. The Service will make a referral to the DOJ by forwarding a written proposal to enter a plea of guilty to the charges being investigated from the taxpayer's counsel . If approved by DOJ, Tax Division it will be referred to the appropriate United States Attorney's office for plea negotiations.
   3. Plea negotiations have to be conducted by either the United States Attorney's office or the Tax Division of DOJ.
   4. The taxpayer must submit to an interview by the Special Agent and anything said or any information furnished can be used against the taxpayer in a criminal prosecution.
   5. That the taxpayer must provide all records or information in his or her possession or to which the taxpayer has access to the Service for the years implicated.
   6. The charges being investigated and any proposal to enter into plea negotiations can be referred to DOJ only after CI is able to corroborate the elements of the offense being investigated or the admissions being made by the taxpayer (e.g., gross income in a 7203 investigation or documentation relating to an unreported material matter in a 7206 (1) investigation, etc.). CI must have sufficient evidence to constitute a referable matter to DOJ.
2. The investigating special agent should review all records with sufficient particularity to insure that there are no significant undiscovered issues or tax losses in the case that have not been taken into account in assessing the merits of the referral to DOJ, Tax Division.
3. The special agent should secure and review the taxpayer's returns for all years subsequent to the years under investigation and any open prior years to address any issues raised by those returns in assessing the merits of the referral.
4. The special agent should inquire and obtain the details, if appropriate, as to any other (open or closed) federal, state, or local investigations relating to the taxpayer.

[9.6] 2.2.2  (04-26-1999)
Pre-Referral Assistance From District Counsel

1. If CI determines that a referral for plea negotiations would be in the best interests of the government, District Counsel will be contacted for pre-referral assistance on the issues of whether:
   1. The presently available evidence is sufficient to meet the requirements of Federal Rules of Criminal Procedure Rule 11(f) in that there is a factual basis to support the plea of guilty to each of the counts considered for referral;
   2. The charges established by the investigation adequately address the crime(s) committed by the taxpayer.
2. If District Counsel concurs with CI that a referral should be made, District Counsel will contact the taxpayer's counsel orally or in writing to:
   1. Confirm that the taxpayer wants to enter into plea negotiations with DOJ.
   2. Remind the taxpayer and his counsel of the charges being investigated and that the government will only consider a plea that adequately addresses those specific charges, i.e., the government will generally be looking for a plea of guilty to one or more of the specified charges.
   3. Confirm that the taxpayer is willing to be interviewed by the Special Agent and that the taxpayer will submit all records or information in his or her possession or to which he or she has access to the Service for the years implicated.
3. If the taxpayer's counsel wants to proceed with negotiations, District Counsel will request the taxpayer's counsel to provide a written statement that confirms the taxpayer's wish to immediately engage in plea negotiations with the United States Attorney or DOJ.

[9.6] 2.2.3  (04-26-1999)
Special Agent Report

1. After the written statement is provided, District Counsel will request that CI prepare and forward a modified Special Agent Report (SAR) which sets forth:
   1. The taxpayer's identification, personal history and a history of business or income-producing activities.
   2. The nature of the taxpayer's fraudulent activity and the evidence, including available exhibits, to support acceptance of a plea to the charges under investigation.
   3. Any indication of non-tax crimes (federal, state, or local) for which the taxpayer may be or has been under investigation.
   4. A recommendation for prosecution.
   5. Documentation that the taxpayer and/or the representative have provided all available records for all years implicated in the investigation so it is clear there are no significant uncovered issues in the case which have not been taken into account in assessing the merits of the case. This documentation should include all relevant conduct which is necessary for presentation to the court for sentencing purposes.
   6. A description of the nature and extent of the records supplied and the specific conclusions reached by the special agent and/or revenue agent who reviewed them.
   7. Documentation of interview(s) with the taxpayer that reflects a thorough review of the issues in the case. (The taxpayer must submit to interview(s).)
   8. A complete and thorough discussion of the nature and extent of the taxpayer's cooperation.
   9. A summary and evaluation of the taxpayer's returns for all years under investigation, and subsequent to the years under investigation, addressing any issues raised by those returns in assessing the merits of the case. This summary will, where practical, include a computation reflecting the tax ramifications of the taxpayers' actions.
   10. A discussion as to the potential range of sentences the taxpayer may receive based on the evidence available for use in the Sentencing Guidelines.
2. District Counsel will review the SAR for legal sufficiency pursuant to these guidelines. If it is determined that prosecution is warranted, District Counsel will refer the case to the DOJ, Tax Division recommending prosecution and the initiation of plea negotiations in accordance with the written request of taxpayer's counsel.
   1. All exhibits to the SAR will be forwarded to the United States Attorney.
   2. A copy of the SAR without exhibits will be forwarded to Assistant Attorney General, Tax Division, Criminal Section, DOJ, 950 Pennsylvania Avenue, NW, Room 4744, Washington, DC 20530-0001, Attn: Chief, (Southern, Northern, Western) Enforcement Section, 202-514-2901. (Send to the attention of the appropriate Enforcement Section Chief.)
   3. The title page of the SAR will state that this matter involves a proposed plea agreement and is a limited referral to DOJ only for purposes of negotiation and, if possible, finalizing a plea.
   4. The District Counsel attorney will telephone the DOJ liaison attorney to state that such a report is being submitted to them. The DOJ attorney will contact District Counsel by telephone to acknowledge receipt of the report.
3. DOJ, Tax Division has 30 days after receipt of the referral from District Counsel to authorize prosecution consistent with the proposed plea bargain or disapprove the negotiation of such a plea.
4. If DOJ, Tax Division objects to proceeding with the plea discussions or the evidence submitted is insufficient to meet the requirements of Rule 11(e)(6), the Tax Division will immediately notify District Counsel. DOJ, Tax Division will then notify the taxpayer's counsel in writing that the case is being returned to the Internal Revenue Service, and all exhibits and files will be returned to the Service. The liaison attorney with DOJ, Tax .
5. If DOJ, Tax Division authorizes prosecution, it will refer all documents to the appropriate United States Attorney's Office who may then undertake plea negotiations with the taxpayer and his or her Counsel. The United States Attorney's Office may accept a plea to the specified major count without further authorization form the Tax Division. If the United States Attorney's office desires to accept a plea to any count other than the specified major count, the approval of DOJ, Tax Division is required.
6. No information or evidence submitted to the United States Attorney by the taxpayer or counsel during the course of plea negotiations will be forwarded to the IRS unless they expressly authorize the IRS' use of such information. In these situations, a written waiver of the FRCP Rule 11(e)(6) restrictions should be obtained.
7. Upon return of a case, the IRS, after considering all relevant facts, will determine whether to continue with the investigation.
8. This procedure is designed to accommodate both the interests of taxpayers who desire a speedy resolution of the investigation and prosecution and the interests of the government in obtaining an appropriate resolution with the appropriate expenditure of investigative and prosecutorial resources.
9. Taxpayers requesting use of the early referral procedures will be expected to cooperate with the IRS in the determination and satisfaction of their civil tax liabilities as well as the criminal aspects. In the event the criminal investigation is completed by use of these procedures without establishing the appropriate civil deficiencies, the civil investigation will be completed by the Examination Division of the IRS.

[9.6] 2.2.3.1  (04-26-1999)
Concurrence or Non-concurrence of Chief Regarding Prosecution Reports

1. The Chief and Branch Chief will indicate approval of the special agent's recommendation in prosecution reports by notation on the original and all copies of the report. No other notations, check marks, alterations, or marginal memoranda shall be made on such reports or on the exhibits.
2. If the Chief or Branch Chief does not concur in the recommendation of the special agent, the Chief will prepare a separate memorandum setting forth the special reasons for the non-concurrence.
3. The Chief will request a written opinion and recommendations from the Director of Investigations on each investigation in which he or she does not concur. After receipt of the opinion and recommendation from the Director of Investigations, the Chief, as the representative of the District Director, will make the final decision as to the disposition of the investigation.

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[9.6] 2.3  (04-26-1999)
Pleas Involving Title 18 Seizures and Forfeitures

1. The plea agreement must include a violation of one of the following offenses charged in the indictment or criminal information to ensure forfeitability of the property:
   1. 18 USC § 1956
   2. 18 USC § 1957
   3. 18 USC § 1960
   4. 31 USC § 5313(a)
   5. 31 USC § 5324(a)
2. Additional requirements on plea agreements are contained in TEOAF Directive 17.

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[9.6] 2.4  (09-08-1998)
Sentencing Process

1. The ultimate goal of every criminal prosecution is not merely obtaining a conviction, but obtaining a sentence sufficient to discourage similar criminal violations. Therefore, the special agent should devote the same attention and energy to the sentencing process as to the investigation and trial processes.

[9.6] 2.4.1  (09-08-1998)
Communication with Probation Officers

1. Whenever a conviction is obtained, the special agent should determine the identity of the probation officer assigned to prepare the pre-sentence report, and furnish a copy of the special agent's report and any other information which may be relevant in setting forth the full magnitude of the defendant's conduct.

   NOTE:

   At a minimum, this information should include the sentencing computation prepared by the special agent, an account of the harm caused to the government or other victims, an explanation of the applicability of any sentencing factors listed in the Federal Sentencing Guidelines Manual, and any indications of any other relevant conduct which might be useful to the probation officer in preparing the pre-sentence report and sentencing recommendation.

2. Upon conviction, the special agent's report may be disclosed to a probation officer for the purpose of preparing the report contemplated by Rule 32(c) of the Federal Rules of Criminal Procedure. The disclosure of special agents' reports to probation officers is authorized by IRC § 6103(h)(4). However, information contained in the report shall not be disclosed if such disclosure would identify a confidential informant or seriously impair a civil or criminal tax investigation.
3. Occasionally U.S. Probation Officers will request tax information from the Service as part of a presentence investigation in a non-tax criminal matter. Disclosures may be made to probation officers in these circumstances only as provided in IRC § 6103(c). Treasury Regulation 301.6103(c)-1 provides the format that must be followed in any taxpayer authorization or waiver that is submitted for the purpose of allowing a probation officer to receive tax information.
4. The special agent must emphasize, to both the probation officer and the Assistant United States Attorney, the importance that CI attaches to the sentence imposed. It is vital to point out the effect that the sentence may have on IRS compliance efforts among similarly situated individuals.
5. Following conviction for criminal tax violations, courts in some instances specify the sentence imposed is conditioned upon satisfactory settlement and/or payment of civil liability for taxes and penalties. The Chief, CI will take whatever steps are necessary to initiate appropriate legal action in any instance where the taxpayer has failed to comply with the conditions of the sentence. Internal Revenue Code 6103(h)(4) permits the disclosure of information contained in Taxpayer Delinquent Account files to a U.S. Probation Officer in a judicial proceeding pertaining to tax administration for the purpose of informing the court of any non-compliance with the terms of the taxpayer's sentence.