January 15, 1993
Honorable Abraham N. M. Shashy, Jr.
Chief Counsel
Internal Revenue Service
Washington, D.C. 20224
Attention:Barry J. Finkelstein
Assistant Chief Counsel (Criminal Tax)
Interpretation of Tax Division Directive No. 96
Dear Mr. Shashy:
I appreciate the opportunity that I had to meet with Mr. Finkelstein and
the Deputy Regional Counsel for Criminal Tax on December 15, 1992. Face-to-face
discussions of issues that concern all of us are always helpful. In our
discussions, we left one issue involving referral of electronic filing (ELF)
cases unresolved, and I am writing to express my views on that topic.
Tax Division Directive No. 96 delegated to the United States Attorneys the
authority to authorize grand jury investigations of matters under the purview of
the Tax Division in certain, limited circumstances. Counsel in the regions have
interpreted the scope of that delegation of authority differently in situations
involving schemes that recruit individuals to file fraudulent returns in their
own names, using their own social security numbers. Tax Division Directive No.
96 provides that United States Attorneys may authorize grand jury investigations
in cases prosecutable under 18 U.S.C. 286, 287 where:
- * * * an individual (other than a return preparer as defined in Section
7701(a)(36) of the Internal Revenue Code) for a single tax year, has filed or
conspired to file multiple tax returns on behalf of himself/herself, or has filed
or conspired to file multiple tax returns in the names of nonexistent taxpayers
or in the names of real taxpayers who do not intend the returns to be their own,
with the intent of obtaining tax returns to which he/she is not entitled. All
other cases must be referred to the Tax Division for authorization of the grand
jury investigation.
Deputy Regional Counsel Shipley and Waller have interpreted the phrase
"in the names of real taxpayers who do not intend the returns to be their own"
to exclude situations in which the target has recruited real individuals to file
returns in their names. They have reasoned that even though the information used
on the return is fictitious, the "taxpayers" have filed returns that affect those
taxpayers' accounts and that can be treated as their returns by the Service.
They have concluded that such cases fall outside the terms of Directive No. 96
and must be referred to the Tax Division to authorize the grand jury
investigation. Other regions have reasoned that the "taxpayers" involved in
such situations do not intend the returns to be their real returns, and thus
referral directly to the United States Attorneys for grand jury investigation is
permitted under Directive No. 96.
We agree with Messrs. Shipley and Waller that when real individuals file
returns using their own names and social security numbers the case falls outside
Tax Division Directive 96. The "taxpayer" intends to file a tax return in his
or her own name, and the Service must treat that filing as a "return." Thus,
such cases must be referred to the Tax Division and cannot be directly referred
to the United States Attorneys. The purpose of Directive No. 96 was to extend
to the United States Attorneys the authority to institute grand jury
investigations in cases in which they already had authority to authorize
prosecutions (18 U.S.C. 286, 287 charges in false paper return cases) and in
other false claims cases falling into that same pattern. The prior delegation
of authority did not extend to the United States Attorneys the authority to
authorize prosecution of an individual who filed a return in his or her own name,
using the correct social security number. The facts that the taxpaye
rs are not targets of the investigation and that the real target may know that
such returns are fictitious does not bring the case within Directive 96, and such
cases may not be referred directly to the United States Attorneys.
I would appreciate it if you would insure that my views on this subject are
communicated to the Deputy Regional Counsels for Criminal Tax. If Mr.
Finkelstein or any of the Deputy Regional Counsel have further comments or
questions on this issue, they may contact me or our ELF coordinator, Tony
Whitledge.
Sincerely,
JAMES A. BRUTON
Acting Assistant Attorney General
Tax Division
| October 1997
| Tax Resource Manual 17
|