Re: Clarification of Tax Division Policy Concerning the Charging of Tax Crimes
as Mail Fraud, Wire Fraud, or Bank Fraud (18 U.S.C. §§ 1341, 1343, 1344)
or as Predicates to a RICO Charge or as the Specified Unlawful Activity Element
of a Money Laundering Offense
The purpose of this directive is to clarify Tax Division policy concerning
the charging of tax crimes as mail fraud, wire fraud, or bank fraud (18 U.S.C.
§§ 1341, 1343, 1344), or as predicates to a RICO charge or as the
specified unlawful activity element of a money laundering offense. Although
primarily concerned with tax crimes charged as mail fraud, [FN1] wire fraud, or
bank fraud, either directly or as a basis for some other charge, the policy
stated herein is equally applicable to tax crimes charged under any statute --
be it one found in Title 26 or one found in Title 18 or any other title of the
United States Code.
FN1. Tax Division policy concerning the charging of tax crimes as mail fraud
violations, either independently or as predicate acts underlying a RICO charge,
is set out in Section 6-4.210 of the United States Attorneys' Manual, Filing
False Tax Returns : Mail Fraud Charges or Mail Fraud Predicates for RICO.
This directive clarifies that policy and explains how it fits into the overall
Tax Division jurisdiction over criminal proceedings arising under the internal
revenue laws.
The extent of Tax Division jurisdiction in the criminal arena is set out
in section 70(b), Subpart N, Part O of Title 28 of the Code of Federal
Regulations (28 C.F.R. § 0.70(b)). That section provides that, with a few
specified exceptions, all "[c]riminal proceedings arising under the internal
revenue laws" * * * "are assigned to and shall be conducted, handled, or
supervised by, the Assistant Attorney General, Tax Division * * *." Tax Division
jurisdiction, thus, depends not on the particular criminal statute utilized in
charging the defendant, but on the nature of the underlying conduct. Whenever
the violation can be said to be one arising under the internal revenue laws, Tax
Division authorization is required before bringing any charges, irrespective of
the statute or statutes under which they are brought. [FN2] In general, an
offense can be said to arise under the internal revenue laws when it involves (1)
an evasion of some responsibility imposed by the Internal Reven
ue Code, (2) an obstruction or impairment of the Internal Revenue Service, or (3)
an attempt to defraud the Government or others through the use of mechanisms
established by the Internal Revenue Service for the filing of internal revenue
documents or the payment, collection, or refund of taxes.
FN2. The authorization of the Tax Division is also required in any case which
involves parallel state and federal tax violations and the charges are based on
the parallel state tax violations.
In particular, this means that the authorization of the Tax Division
is required before charging mail, wire or bank fraud, either independently or as
predicate acts to a RICO charge or as the specified unlawful activity element of
a money laundering charge, when the mailing, wiring, or representation charged
is used to promote or facilitate any criminal violation arising under the
internal revenue laws. In the exercise of its prosecutorial discretion, the Tax
Division will grant such authorization only in exceptional circumstances. As a
general rule, the use of such charges will not be approved (1) when the only
mailing charged is a tax return or other internal revenue form or document, or
a tax refund check; (2) when the only wire transmission is a transmission of tax
return information to the IRS or the transmission of a refund to a bank account
by electronic funds transfer; or (3) when the mailing, wiring, or representation
charged is only incidental to a violation arising u
nder the internal revenue laws (for example, although the mailing of a set of
instructions to a cohort in a tax shelter scheme might support a mail fraud
charge, such a mailing would be considered incidental to the primary purpose of
the scheme which is to defraud the United States by abetting the filing of false
income tax returns).
Normally, violations arising under the internal revenue laws should be
charged as tax crimes and the specific criminal law provisions of the Internal
Revenue Code should form the focus of prosecutions when essentially tax law
violations are involved, even though other crimes may have been committed. [FN3]
Thus, for example, the filing of a false tax return, which almost invariably
involves either a mailing or, in the case of an electronically-filed return, an
interstate wiring, is a tax crime chargeable generally under 26 U.S.C. 7206(1)
(if the violator is the taxpayer), 26 U.S.C. 7206(2) (if the violator is, for
example, a tax return preparer or promoter of a fraudulent tax scheme), or under
18 U.S.C. 287. Moreover, in the exercise of its prosecutorial discretion, the
Tax Division will only authorize tax charges or false claims charges, and will
not authorize mail, wire or bank fraud charges, where the United States is
defrauded in a revenue raising capacity and is the only one
defrauded. Tax charges and the false claims statutes are the established means
for litigating such criminal tax matters.
FN3. Pursuant to 28 C.F.R. 0.70(b), the Tax Division has traditionally
authorized prosecution of certain crimes under various provisions of Title 18
(e.g., 18 U.S.C. §§ 286, 287, 371, and 1001). While Title 26 offenses
are the preferred vehicle for criminal tax prosecutions, charges for offenses
arising under the internal revenue laws have never been limited to that
title.
A mail, wire, or bank fraud charge arising out of a scheme to defraud
the Government through the use of the revenue laws might be appropriate in
addition to, but never in lieu of, other charges based on violations of the
internal revenue laws, however, where the Government has also lost money in a
non-revenue raising capacity or individuals or other entities have been the
financial victims of the crime. The bringing of such charges will seldom, if
ever, be justified by the mere desire to see a more severe term of imprisonment
or fine imposed. Rather, they must serve some federal interest not adequately
served by the bringing of traditional tax charges. Each individual case will be
reviewed to determine whether it warrants the use of charges in addition to the
appropriate Title 26 charges or Title 18 charges (i.e., §§ 286, 287, 371,
1001).
For example, in an electronic filing fraud, a bank making a refund
anticipation loan for the amount of the fictitious refund claim may be the
financial victim in the scheme, and bank fraud charges, drafted to reflect that
the bank was victimized by the scheme, may be appropriate. Similarly, in motor
fuel excise tax evasion schemes and fraudulent tax shelter schemes in which
individuals or entities other than the United States are demonstrably victimized
in a direct, substantial and measurable way that will be charged, the use of mail
or wire fraud charges may also be appropriate in a particular case.
A similar policy will be followed with respect to RICO or money laundering
charges predicated on mail, wire, or bank fraud violations which involve
essentially only a federal tax fraud scheme. Tax offenses are not predicate acts
for RICO or specified unlawful activities for money laundering offenses -- a
deliberate Congressional decision -- and converting a tax offense into a RICO or
money laundering case through the charging of mail, wire or bank fraud based on
a violation of the internal revenue laws as the underlying illegal act could be
viewed as circumventing Congressional intent unless circumstances justifying the
use of a mail, wire or bank fraud charge are present.
A United States Attorney who wishes to charge a RICO violation in any
criminal matter arising under the revenue laws must obtain the authorization of
the Tax Division prior to alleging the predicate act, [FN4] and must obtain the
authorization of the Organized Crime and Racketeering Section of the Criminal
Division prior to charging a RICO violation. The Tax Division and the Organized
Crime and Racketeering Section will approve the use of the RICO statute in
revenue matters as appropriate. In addition, traditional tax charges must also
be brought, as noted above, and the prosecution package must allow for
forfeitures under the Internal Revenue Code.
FN4. Tax Division authorization is also required when the predicate act is
based on a state tax violation.
Tax Division authorization is also required before a money laundering
charge may be brought where the specified unlawful activity is based on a
violation arising under the internal revenue laws. [FN5] The Tax Division will
approve the use of mail fraud, wire fraud, or bank fraud as the specified
unlawful activity only in cases that meet the requirements set forth in this
Directive. When a request is made to include such a money laundering charge in
an indictment, the Tax Division will consult with or refer the case to the Money
Laundering Section of the Criminal Division, as the case may require, prior to
authorizing the money laundering charges or the use of one of the fraud statutes
as the specified unlawful activity. See USAM 9-105.00, as amended by
bluesheet dated October 1, 1992. The Tax Division should be consulted early in
any investigation to determine whether mail fraud, wire fraud, or bank fraud
charge are appropriate.
FN5. This is in addition to the requirement that Tax Division authorization
is required for any prosecution under 18 U.S.C. § 1956(a)(1)(A)(ii).
JAMES A. BRUTON
Acting Assistant Attorney General
Tax Division
APPROVED TO TAKE EFFECT ON: March 30, 1993
| October 1997
| Tax Resource Manual 18
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