CCA 1105037: Restitution for Title 26 tax violations may be assessed as tax

Plain-English summary

Chief Counsel advice summarized legislation concerning restitution in criminal tax cases. It stated that the Act amended IRC § 6201 to let the IRS assess and collect court-ordered restitution for unpaid Title 26 taxes in the same manner as tax. The advice interpreted the assessed amount as limited to losses attributable to Title 26 violations, not tax-related charges under Title 18. It also explained the collection limitations, the role of IRC §§ 6502 and 6201, and the need for restitution orders to identify each tax year and amount.

Ruling snapshot

• Question: How may the IRS assess and collect court-ordered restitution for unpaid Title 26 taxes?
• Outcome: Advice given.
• Key authorities: IRC §§ 6201(a)(4)(A) and 6502(a); 18 U.S.C. §§ 3663 and 3663A; the Firearms Excise Tax Improvement Act of 2010.

Full text (IRS public release)

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ID: CCA-111811-10 Number: 201105037
Release Date: 2/4/2011
Office:
UILC: 9999.99-99

From: --------------------------
Sent: Thursday November 18, 2010 11:32 AM
To: --------------------------
Cc:
Subject: Restitution

Attached is a brief summary (outline) of the restitution legislation I used for my presentation. Let me know
if you have any questions.

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Attachment:

                                                       RESTITUTION

The Firearms Excise Tax Improvement Act of 2010 was signed into law on August 16, 2010,
and became effective immediately.

The Act amends IRC § 6201 (Assessment Authority) to allow the IRS to assess and collect
restitution ordered by the court for failure to pay any tax imposed under Title 26 in the same
manner as if such amount were such tax.

Our interpretation is that the assessed amount is limited to losses attributable to Title 26
violations and does not include Title 18, tax-related charges.

   ·    The IRS may now assess and collect the amount of court ordered restitution without
        going through the civil assessment process.
   ·    Further, the Act restricts the defendant from challenging the assessment related to
        the order of restitution.
   ·    Since the assessment is limited to the amount ordered as restitution, the amount of
        restitution calculated becomes more important and should identify each tax year and
        the specific sum that applies to each tax year.
   ·    It would appear that the Act does not prevent the IRS from assessing a civil tax in
        excess of the restitution amount under the normal assessment procedures.
   ·    The general 10-year statute of limitations for collection applies to any tax liability
        assessed under IRC § 6201(a)(4)(A). The IRS may also file suit under IRC § 6502(a),
        to reduce the assessment to judgment before the end of the 10-year period to avail
        itself of 20-year judgment lien.

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  ·    SB/SE Technical Services will be tasked with making the assessments.
  ·    A cross functional team has been formed to develop new procedures after a
       restitution assessment is made. One of the issues to be addressed is what
       government agency will have primary responsibility to insure that restitution is
       collected.

WORKING GROUP

The issue of restitution in criminal tax cases was addressed by an IRS-DOJ working group in
2004. The group was tasked with addressing the concern that many defendants, despite being
convicted of tax crimes, were escaping all responsibility for the payment of taxes associated
with their offenses of conviction. One of the most significant problems identified by the group
was the Service’s lack of a unified process regarding the collection, monitoring, and
processing of a restitution payment to a taxpayer’s account. This was caused by the
Service’s inability to treat the restitution amount as an assessed tax.

Federal Courts lack the power to impose restitution as an independent part of a sentence
without a statutory grant of authority. Two statutes confer on courts the power to order
restitution as an independent element of the sentence. (18 USC §§ 3663 & 3663A). Offenses
under Title 26 are not explicitly covered by 18 USC §§ 3663 & 3663A.

Even if an offense is not covered by 18 USC §§ 3663 & 3663A, a court may order restitution as
a condition of probation or as a condition of supervised release.

Another option for restitution is pursuant to a plea agreement. A court may order restitution
beyond the loss suffered from the offense of conviction if the parties agree.

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The USAM contains restitution plea language that all AUSA’s should be familiar with.

Points to Consider:

1. Important to consider restitution in plea agreements.
2. With assessment on books, much easier to track – will not result in improper
   refunds like sometimes happened in the past.
3. Restitution limited to Title 26 taxes.
4. Tax amounts should be calculated with better accuracy (amount/year).