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e individual tax loss. The tax loss attributable to the defendant’s corporate tax return is $34,000 ($100,000 multiplied by 34%). The tax loss attributable to the defendant’s individual tax return is $28,000 ($100,000 multiplied by 28%). The tax loss for the offenses are added together to equal $62,000 ($34,000 + $28,000). Background: This guideline relies most heavily on the amount of loss that was the object of the offense. Tax offenses, in and of themselves, are serious offenses; however, a greater tax loss is obviously more harmful to the treasury and more serious than a smaller one with otherwise similar characteristics. Furthermore, as the potential benefit from the offense increases, the sanction necessary to deter also increases. Under pre-guidelines practice, roughly half of all tax evaders were sentenced to probation November 1, 2005 GUIDELINES MANUAL §2T1.3 – 301 – without imprisonment, while the other half received sentences that required them to serve an average prison term of twelve months. This guideline is intended to reduce disparity in sentencing for tax offenses and to somewhat increase average sentence length. As a result, the number of purely probationary sentences will be reduced. The Commission believes that any additional costs of imprisonment that may be incurred as a result of the increase in the average term of imprisonment for tax offenses are inconsequential in relation to the potential increase in revenue. According to estimates current at the time this guideline was originally developed (1987), income taxes are underpaid by approximately $90 billion annually. Guideline sentences should result in small increases in the average length of imprisonment for most tax cases that involve less than $100,000 in tax loss. The increase is expected to be somewhat larger for cases involving more taxes. Failure to report criminally derived income is included as a factor for deterrence purposes. Criminally derived income is generally difficult to establish, so that the tax loss in such cases will tend to be substantially understated. An enhancement for offenders who violate the tax laws as part of a pattern of criminal activity from which they derive a substantial portion of their income also serves to implement the mandate of 28 U.S.C. § 994(i)(2). Although tax offenses always involve some planning, unusually sophisticated efforts to conceal the offense decrease the likelihood of detection and therefore warrant an additional sanction for deterrence purposes. The guideline does not make a distinction for an employee who prepares fraudulent returns on behalf of his employer. The adjustments in Chapter Three, Part B (Role in the Offense) should be used to make appropriate distinctions. Historical Note: Effective November 1, 1987. Amended effective November 1, 1989 (see Appendix C, amendments 219-223); November 1, 1990 (see Appendix C, amendment 343); November 1, 1992 (see Appendix C, amendment 468); November 1, 1993 (see Appendix C, amendment 491); November 1, 1998 (see Appendix C, amendment 577); November 1, 2001 (see Appendix C, amendment 617); November 1, 2002 (see Appendix C, amendment 646). §2T1.2. [Deleted] Historical Note: Section 2T1.2 (Willful Failure To File Return, Supply Information, or Pay Tax), effective November 1, 1987, amended effective November 1, 1989 (see Appendix C, amendments 224-227), November 1, 1990 (see Appendix C, amendment 343), and November 1, 1991 (see Appendix C, amendment 408), was deleted by consolidation with §2T1.1 effective November 1, 1993 (see Appendix C, amendment 491). §2T1.3. [Deleted] Historical Note: Section 2T1.3 (Fraud and False Statements Under Penalty of Perjury), effective November 1, 1987, amended effective November 1, 1989 (see Appendix C, amendments 228-230), November 1, 1990 (see Appendix C, amendment 343), and November 1, 1991 (see Appendix C, amendment 426), was deleted by consolidation with §2T1.1 effective November 1, 1993 (see Appendix C, amendment 491). §2T1.7 GUIDELINES MANUAL November 1, 2005 – 302 – §2T1.4. Aiding, Assisting, Procuring, Counseling, or Advising Tax Fraud (a) Base Offense Level: (1) Level from §2T4.1 (Tax Table) corresponding to the tax loss; or (2) 6, if there is no tax loss. For purposes of this guideline, the "tax loss" is the tax loss, as defined in §2T1.1, resulting from the defendant’s aid, assistance, procurance or advice. (b) Specific Offense Characteristics (1) If (A) the defendant committed the offense as part of a pattern or scheme from which he derived a substantial portion of his income; or (B) the defendant was in the business of preparing or assisting in the preparation of tax returns, increase by 2 levels. (2) If the offense involved sophisticated means, increase by 2 levels. If the resulting offense level is less than level 12, increase to level 12. Commentary Statutory Provision: 26 U.S.C. § 7206(2) (other than a violation based upon 26 U.S.C. § 6050I). Application Notes: 1. For the general principles underlying the determination of tax loss, see §2T1.1(c) and Application Note 1 of the Commentary to §2T1.1 (Tax Evasion; Willful Failure to File Return, Supply Information, or Pay Tax; Fraudulent or False Returns, Statements, or Other Documents). In certain instances, such as promotion of a tax shelter scheme, the defendant may advise other persons to violate their tax obligations through filing returns that find no support in the tax laws. If this type of conduct can be shown to have resulted in the filing of false returns (regardless of whether the principals were aware of their falsity), the misstatements in all such returns will contribute to one aggregate "tax loss." 2. Subsection (b)(1) has two prongs. The first prong applies to persons who derive a substantial portion of their income through the promotion of tax schemes, e.g., through promoting fraudulent tax shelters. The second prong applies to persons who regularly prepare or assist in the preparation of tax returns for profit. If an enhancement from this subsection applies, do not apply §3B1.3 (Abuse of Position of Trust or Use of Special Skill). 3. Sophisticated Means.—For purposes of subsection (b)(2), "sophisticated means" means especially complex or especially intricate offense conduct pertaining to the execution or concealment of an offense. Conduct such as hiding assets or transactions, or both, through the use of fictitious entities, corporate shells, or offshore financial accounts ordinarily indicates sophisticated means. Background: An increased offense level is specified for those in the business of preparing or November 1, 2005 GUIDELINES MANUAL §2T1.6 – 303 – assisting in the preparation of tax returns and those who make a business of promoting tax fraud because their misconduct poses a greater risk of revenue loss and is more clearly willful. Other considerations are similar to those in §2T1.1. Historical Note: Effective November 1, 1987. Amended effective November 1, 1989 (see Appendix C, amendments 231 and 303); November 1, 1990 (see Appendix C, amendment 343); November 1, 1993 (see Appendix C, amendment 491); November 1, 1998 (see Appendix C, amendment 577); November 1, 2001 (see Appendix C, amendment 617). §2T1.5. [Deleted] Historical Note: Section 2T1.5 (Fraudulent Returns, Statements, or Other Documents), effective November 1, 1987, was deleted by consolidation with §2T1.1 effective November 1, 1993 (see Appendix C, amendment 491). §2T1.6. Failing to Collect or Truthfully Account for and Pay Over Tax (a) Base Offense Level: Level from §2T4.1 (Tax Table) corresponding to the tax not collected or accounted for and paid over. (b) Cross Reference (1) Where the offense involved embezzlement by withholding tax from an employee’s earnings and willfully failing to account to the employee for it, apply §2B1.1 (Theft, Property Destruction, and Fraud) if the resulting offense level is greater than that determined above. Commentary Statutory Provision: 26 U.S.C. § 7202. Application Note: 1. In the event that the employer not only failed to account to the Internal Revenue Service and pay over the tax, but also collected the tax from employees and did not account to them for it, it is both tax evasion and a form of embezzlement. Subsection (b)(1) addresses such cases. Background: The offense is a felony that is infrequently prosecuted. The failure to collect or truthfully account for the tax must be willful, as must the failure to pay. Where no effort is made to defraud the employee, the offense is a form of tax evasion, and is treated as such in the guidelines. Historical Note: Effective November 1, 1987. Amended effective November 1, 1989 (see Appendix C, amendment 232); November 1, 1991 (see Appendix C, amendment 409); November 1, 2001 (see Appendix C, amendment 617). §2T1.7. Failing to Deposit Collected Taxes in Trust Account as Required After Notice §2T1.9 GUIDELINES MANUAL November 1, 2005 – 304 – (a) Base Offense Level (Apply the greater): (1) 4; or (2) 5 less than the level from §2T4.1 (Tax Table) corresponding to the amount not deposited. Commentary Statutory Provisions: 26 U.S.C. §§ 7215, 7512(b). Application Notes: 1. If funds are deposited and withdrawn without being paid to the Internal Revenue Service, they should be treated as never having been deposited. 2. It is recommended that the fine be based on the total amount of funds not deposited. Background: This offense is a misdemeanor that does not require any intent to evade taxes, nor even that taxes have not been paid. The more serious offense is 26 U.S.C. § 7202 (see §2T1.6). This offense should be relatively easy to detect and fines may be feasible. Accordingly, the offense level has been set considerably lower than for tax evasion, although some effort has been made to tie the offense level to the level of taxes that were not deposited. Historical Note: Effective November 1, 1987. §2T1.8. Offenses Relating to Withholding Statements (a) Base Offense Level: 4 Commentary Statutory Provisions: 26 U.S.C. §§ 7204, 7205. Application Note: 1. If the defendant was attempting to evade, rather than merely delay, payment of taxes, an upward departure may be warranted. Background: The offenses are misdemeanors. Under pre-guidelines practice, imprisonment was unusual. Historical Note: Effective November 1, 1987. Amended effective November 1, 2004 (see Appendix C, amendment 674). §2T1.9. Conspiracy to Impede, Impair, Obstruct, or Defeat Tax November 1, 2005 GUIDELINES MANUAL §2T1.9 – 305 – (a) Base Offense Level (Apply the greater): (1) Offense level determined from §2T1.1 or §2T1.4, as appropriate; or (2) 10. (b) Specific Offense Characteristics If more than one applies, use the greater: (1) If the offense involved the planned or threatened use of violence to impede, impair, obstruct, or defeat the ascertainment, computation, assessment, or collection of revenue, increase by 4 levels. (2) If the conduct was intended to encourage persons other than or in addition to co-conspirators to violate the internal revenue laws or impede, impair, obstruct, or defeat the ascertainment, computation, assessment, or collection of revenue, increase by 2 levels. Do not, however, apply this adjustment if an adjustment from §2T1.4(b)(1) is applied. Commentary Statutory Provision: 18 U.S.C. § 371. Application Notes: 1. This section applies to conspiracies to "defraud the United States by impeding, impairing, obstructing and defeating . . . the collection of revenue." United States v. Carruth, 699 F.2d 1017, 1021 (9th Cir. 1983), cert. denied, 464 U.S. 1038 (1984). See also United States v. Browning, 723 F.2d 1544 (11th Cir. 1984); United States v. Klein, 247 F.2d 908, 915 (2d Cir. 1957), cert. denied, 355 U.S. 924 (1958). It does not apply to taxpayers, such as a husband and wife, who merely evade taxes jointly or file a fraudulent return. 2. The base offense level is the offense level (base offense level plus any applicable specific offense characteristics) from §2T1.1 or §2T1.4 (whichever guideline most closely addresses the harm that would have resulted had the conspirators succeeded in impeding, impairing, obstructing, or defeating the Internal Revenue Service) if that offense level is greater than 10. Otherwise, the base offense level is 10. 3. Specific offense characteristics from §2T1.9(b) are to be applied to the base offense level determined under §2T1.9(a)(1) or (2). 4. Subsection (b)(2) provides an enhancement where the conduct was intended to encourage persons, other than the participants directly involved in the offense, to violate the tax laws (e.g., an offense involving a "tax protest" group that encourages persons to violate the tax laws, or an offense involving the marketing of fraudulent tax shelters or schemes). Background: This type of conspiracy generally involves substantial sums of money. It also typically is complex and may be far-reaching, making it quite difficult to evaluate the extent of the revenue loss §2T1.9 GUIDELINES MANUAL November 1, 2005 – 306 – caused. Additional specific offense characteristics are included because of the potential for these tax conspiracies to subvert the revenue system and the danger to law enforcement agents and the public. Historical Note: Effective November 1, 1987. Amended effective November 1, 1989 (see Appendix C, amendments 233 and 234); November 1, 1993 (see Appendix C, amendment 491). * * * * * 2. ALCOHOL AND TOBACCO TAXES Introductory Commentary This section deals with offenses contained in Parts I-IV of Subchapter J of Title 26, chiefly 26 U.S.C. §§ 5601-5605, 5607, 5608, 5661, 5671, 5691, and 5762, where the essence of the conduct is tax evasion or a regulatory violation. Because these offenses are no longer a major enforcement priority, no effort has been made to provide a section-by-section set of guidelines. Rather, the conduct is dealt with by dividing offenses into two broad categories: tax evasion offenses and regulatory offenses. Historical Note: Effective November 1, 1987. §2T2.1. Non-Payment of Taxes (a) Base Offense Level: Level from §2T4.1 (Tax Table) corresponding to the tax loss. For purposes of this guideline, the "tax loss" is the amount of taxes that the taxpayer failed to pay or attempted not to pay. Commentary Statutory Provisions: 26 U.S.C. §§ 5601-5605, 5607, 5608, 5661, 5671, 5691, 5762, provided the conduct constitutes non-payment, evasion or attempted evasion of taxes. For additional statutory provision(s), see Appendix A (Statutory Index). Application Notes: 1. The tax loss is the total amount of unpaid taxes that were due on the alcohol and/or tobacco, or that the defendant was attempting to evade. 2. Offense conduct directed at more than tax evasion (e.g., theft or fraud) may warrant an upward departure. November 1, 2005 GUIDELINES MANUAL §2T3.1 – 307 – Background: The most frequently prosecuted conduct violating this section is operating an illegal still. 26 U.S.C. § 5601(a)(1). Historical Note: Effective November 1, 1987. §2T2.2. Regulatory Offenses (a) Base Offense Level: 4 Commentary Statutory Provisions: 26 U.S.C. §§ 5601, 5603-5605, 5661, 5671, 5762, provided the conduct is tantamount to a record-keeping violation rather than an effort to evade payment of taxes. For additional statutory provision(s), see Appendix A (Statutory Index). Background: Prosecutions of this type are infrequent. Historical Note: Effective November 1, 1987. Amended effective November 1, 1990 (see Appendix C, amendment 359). * * * * * 3. CUSTOMS TAXES Introductory Commentary This Subpart deals with violations of 18 U.S.C. §§ 496, 541-545, 547, 548, 550, 551, 1915 and 19 U.S.C. §§ 283, 1436, 1464, 1465, 1586(e), 1708(b), and is designed to address violations involving revenue collection or trade regulation. It is not intended to deal with the importation of contraband, such as drugs, or other items such as obscene material, firearms or pelts of endangered species, the importation of which is prohibited or restricted for non-economic reasons. Other, more specific criminal statutes apply to most of these offenses. Importation of contraband or stolen goods would be a reason for referring to another, more specific guideline, if applicable, or for departing upward. Historical Note: Effective November 1, 1987. Amended effective November 1, 1992 (see Appendix C, amendment 453); November 1, 2004 (see Appendix C, amendment 674). §2T3.1. Evading Import Duties or Restrictions (Smuggling); Receiving or Trafficking in Smuggled Property §2T3.1 GUIDELINES MANUAL November 1, 2005 – 308 – (a) Base Offense Level: (1) The level from §2T4.1 (Tax Table) corresponding to the tax loss, if the tax loss exceeded $1,000; or (2) 5, if the tax loss exceeded $100 but did not exceed $1,000; or (3) 4, if the tax loss did not exceed $100. For purposes of this guideline, the "tax loss" is the amount of the duty. (b) Specific Offense Characteristic (1) If the offense involved sophisticated means, increase by 2 levels. If the resulting offense level is less than level 12, increase to level 12. (c) Cross Reference (1) If the offense involves a contraband item covered by another offense

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