I am looking forward to speaking about sentencing and other post-trial issues in criminal tax cases on October 21, 2015 at the 2015 seminar on Emerging Ethical Issues in Tax Practice for the New Jersey Institute of Continuing Legal Education. This seminar, now in its fifth year, will be held at the Crowne Plaza in Fairfield, New Jersey from 4 pm to 8 pm. I will be joined by the seminar’s host, Charles E. Falk, who will discuss current ethical issues in tax cases, and Michael J. Sullivan, who will discuss selected issues presented by criminal tax cases prior to sentencing. The seminar will provide both CLE credit for members of the New York, New Jersey or Pennsylvania bars, as well as CPE credit for CPAs.
One issue that I will discuss will be the upcoming amendment to the tax table, set forth at Section 2T4.1 of the Federal Sentencing Guidelines. Very generally, tax loss drives the base offense level in almost every criminal tax case; the greater the loss, the higher the offense level. The base offense level, which is subject to further upward or downward adjustments, in turn drives a defendant’s advisory sentencing range under the Guidelines. The amended tax table, which will take effect on November 1, 2015, is set forth on pages 19 and 20 of this document. The amendment adjusts the tax table for inflation – a correction that has been a long time coming – and thereby increases the loss amounts associated with each offense level. As an example, the current version of the tax table provides that a tax loss of more than $1 million will produce a base offense level of 22, which – in the absence of any other adjustments – creates an advisory Guidelines sentencing range of 41 to 51 months of incarceration for a defendant with no criminal history. The amendment will raise the threshold for a base offense level of 22 to a tax loss of more than $1.5 million. And so on. The last time that the tax table was amended was in 2001, to provide relatively higher Guideline ranges for the higher tax loss amounts, and relatively lower Guidelines ranges for the lower loss amounts.
Obviously, tax loss is extremely important to calculating the advisory Guidelines range, and it also can have significant consequences with respect to subsequent civil tax liability. Further, courts often view the raw loss figure as a benchmark for the seriousness of the case. However, because even a large difference in competing tax loss figures can sometimes make a difference of only two offense levels, particularly at the higher levels in which the dollar ranges become broader and broader (for example, under the amended tax table, the next step up to an offense level of 24 requires a tax loss that exceeds $3.5 million), litigants should remember that there can be a point of diminishing returns to fighting over tax loss. Sometimes, the more important considerations are offense-level enhancements (such as, for example, an “aggravated” or leadership role in the offense), which, particularly when aggregated, can drive up a defendant’s offense level much higher than some amount of additional tax loss. Of course, downward variances from the advisory Guidelines range based on mitigating factors also remain at the heart of any defendant’s approach to sentencing.