Part38.

CriminalTax

Chapter2.ReviewofCriminalTaxCases

Section1.AdministrativeCases

38.2.1AdministrativeCases

38.2.1.1NoncomplexCases
38.2.1.2ComplexCases
38.2.1.3ProcessingAdministrativeCases
38.2.1.4TaxpayerConferenceProcedures
38.2.1.5SupplementalInvestigations
38.2.1.6CriminalEvaluationMemorandum
38.2.1.7PleaProgramCases
38.2.1.8ReleaseofInformation

38.2.1.1(08112004)
NoncomplexCases

1.Noncomplexcasesarethoseinwhichthetaxliabilityorunreportedincomeisestablishedbythespecificitemsmethodofproof,theappropriateamountofyearlyadditional
taxforcriminalpurposesismetforeachyear,andonlyminimaladjustmentstoCriminalInvestigationsrecommendedcomputationsarerequired.

2.Noncomplexcasesshouldbereviewedandevaluatedwithin45daysofreceipt.SeeCCDM38.2.1.3.

3.AninvitationforaconferencewillbeextendedinaccordancewithCCDM38.2.1.4.2.Normally,conferencesshouldbescheduledandheldwithin20daysofreceiptofthe
casetomeetthe45dayprocessingrequirement.Delaysorextensionsofthedateoftheconferencefortheconvenienceofthetaxpayerortaxpayersrepresentative
beyond20daysshouldbepermittedonlyiftheCriminalTaxattorneyandtheSpecialAgentinCharge(SAC)agreethataconferenceisnecessaryandwillnotextendthe
casecompletiondatebeyondthe45daylimit.

4.Afterreviewingthespecialagentsreportandexhibits,theCriminalTaxattorneypreparesanevaluationmemorandumfortheSACthatdiscussesthelegalissuesand
evaluatestheprosecutionpotentialofthecase.

38.2.1.2(08112004)
ComplexCases

1.Theexistenceofoneormoreofthefollowingfactorswillprecludetheclassificationofacaseasnoncomplex:

A.Casesestablishedbyanindirectmethodofproof,suchasnetworth,bankdeposits,percentagemarkup,etc.

B.Casesinvolvingtaxshelters

C.Grandjuryevaluations

D.Casesrecommendingaconspiracychargeunder18U.S.C.371

E.Casesinvolvingtechnicallydifficultquestionsregardingthetaxabilityofunreportedincomeordeductibilityofexpenses,e.g.,casesinvolvingIRC162(c)
deductions,valuationproblems,corporatediversions/constructivedividends,etc.

F.Casesinvolvingproblematicdefensesorjuryappealproblems,e.g.,solicitation,condonation,voluntarydisclosure,anddualprosecution,notwithstandinga
determinationthattheevidenceadequatelyrebutsthedefense

G.Caseslikelytogeneratesignificantlocal,regional,ornationalpublicitybecauseofthecharacterofthetaxpayer,e.g.,prominentpoliticiansornationallyknown
publicfigures

H.Church/FirstAmendmentissues

2.Complexcasesshouldbereviewedandevaluatedwithin60daysofreceipt.The60daysforcompletionoftheCriminalTaxattorneysreviewcanbeextendedan
additional15daysupontheapprovaloftheAreaCounsel(CT).SeeCCDM38.2.1.3.1,NonstatuteCases.

3.AninvitationforaconferencewillbeextendedinaccordancewithCCDM38.2.1.4.2.Normally,conferencesshouldbescheduledandheldwithin20daysofreceiptofthe
casetomeetthe60dayprocessingrequirement.Delaysorextensionsofthedateoftheconferencefortheconvenienceofthetaxpayerortaxpayersrepresentative
beyond20daysshouldbepermittedonlyiftheCriminalTaxattorneyandtheSACagreethataconferenceisnecessaryandwillnotextendthecasecompletiondate
beyondthe60daylimit.

4.Afterreviewingthespecialagentsreportandexhibits,theCriminalTaxattorneypreparesanevaluationmemorandumfortheSACthatdiscussesthelegalissuesand
evaluatestheprosecutionpotentialofthecase.

38.2.1.3(08112004)
ProcessingAdministrativeCases

1.Thefollowingrequirementsapplytoinsurethetimelyprocessingofcriminaltaxcases.

38.2.1.3.1(08112004)
NonstatuteCases

1.Finalactionontheprosecutionorprosecutionrelatedquestionshallbetakenwithin60daysfollowingreceiptofthespecialagentsreportincasesthathavenoimminent
statuteoflimitationsexpirationdates.Matterssuchastheofferingofaconferenceandrequestingasupplementalinvestigationessentialtothecaseshouldbepromptly
considereduponreceiptofthespecialagentsreport.
38.2.1.3.2(08112004)
StatuteCases

1.Whenpossible,theCriminalTaxattorneywillcompletehis/herreviewandsubmithis/herevaluationoftheprosecutionandprosecutionrelatedrecommendationtothe
SACnotlaterthan300dayspriortotheexpirationoftheearlieststatuteoflimitations.ForcaseswheredirectreferraltotheUSAttorneyisauthorized,Counselwill
completethereviewandsubmittheevaluationoftheprosecutionandprosecutionrelatedrecommendationstotheSACnotlaterthan155dayspriortoexpirationofthe
earlieststatuteoflimitations.

2.Caseswithanimminentstatuteoflimitationswillfirstbereviewedfromthestandpointofwhetherthelossoftheviolation(s)subjecttotheimminentstatuteoflimitations
wouldmateriallyaffectthecase.Acasemaybemateriallyaffectedbytheexpirationofthestatuteoflimitationswhenitpertainstothemajorand/orcriticaltaxyeare.g.,a
yearwiththehighestcriminaldeficiency,ayearessentialtoanindirectmethodofproofand/orayearimpactinguponthestandardsofprosecutions.

3.Caseswhereinclusionoftheviolation(s)subjecttotheimminentstatuteoflimitationsisessential,mustbeexpeditiouslyreferredtotheTaxDivisionortotheUSAttorney.If
the210day(or65day)periodhasexpired,thecriminalevaluationmemorandummustdiscussthecircumstanceswarrantinginclusionoftheviolation/year.

4.Intheeventinclusionoftheviolation(s)subjecttotheimminentstatuteoflimitationsisnotessentialtothecase,theCriminalTaxattorneyshouldrecommendtheyearbe
eliminatedandtheexclusionshouldbediscussedinthecriminalevaluationmemorandum.

38.2.1.3.3(08072008)
CasesRequiringSpecialProcessing

1.Casesinvolvingthefollowingsensitiveindividualsand/orissuesshouldbeforwardedtotheAssociateChiefCounsel(CriminalTax)forreview,evaluation,andpreparation
ofthecriminalevaluationmemorandum:

A.Currentlyservingelectedfederalofficials,(i.e.,MembersofCongress)

B.CurrentArticleIIIjudges,(i.e.,UnitedStatesDistrictCourtjudges)

C.CurrenthighlevelExecutiveBranchofficials,(i.e.,Cabinetlevelofficials)

D.Currentlyservingelectedstatewideofficials,(i.e.,Governor,AttorneyGeneral)

E.Currentmembersofthehighestcourtofastate

F.Currentlyservingmayorsofmunicipalitieshavingapopulationinexcessof250,000

G.Casesinvolvingperjury,subornationofperjury,orafalsedeclarationoccurringduringaUnitedStatesTaxCourtproceedingunder18USC1621,1622,and
1623

H.Taxsheltercaseswhereinoneormoreoftherecommendedchargesisaconspiracycharge,i.e.18USC371,basedontransactionsbetweentherecommended
defendantsandanIRSagentorcontrolledinformantactinginanundercovercapacity

I.WheretheproposedtargetisanIRC501(c)or(d)organization

J.Publiclytradedcompanies(definedascompaniesthathaveissuedsecuritiesthroughaninitialpublicofferingandwhosesharesaretradedontheopenmarket)

K.Companieswithannualgrossrevenuesexceeding$10,000,000,000.00

2.IRC7215Cases.ThedeterrenteffectofanIRC7215prosecutionisbaseduponthepotentialcriminalliabilityofanindividual.Incaseswherebothacorporationand
anindividualcanbeliableunderIRC7215,theCriminalTaxattorneyshouldrecommendprosecutionagainsttheindividualonly.Expeditiousprocessingofcriminal
withholdingtaxcasesisessentialtotheeffectivenessofthetrustfundprogram.

Note:

CasesinvolvingIRC7215aredirectlyreferredbyCriminalInvestigationtotheUSAttorney.

3.WheneverthesubjectofacriminalinvestigationinvolvedanindividualorentitywithinthepurviewofTEGE,theSACshouldbeinformedthatmatterneedscoordination
withtheDivisionCounsel/AssociateChiefCounsel(TEGE).OncetheSACapproves,theCriminalTaxattorneyshouldhandlethecoordinationwithTEGE.

38.2.1.4(08112004)
TaxpayerConferenceProcedures

1.OnceacaseisforwardedbyCriminalInvestigationtotheCriminalTaxattorneyforconsideration,thesetaxpayerconferenceproceduresaretriggered.Theconference
shouldnotbeaproformaexercise.

2.Thepurposeoftheconferenceistonotifythetaxpayerand/orrepresentativeofthespecialagentsprosecutionrecommendation,explaincriminaltaxprocedures,and
providethetaxpayeranopportunitytosupplyinformationthatmayberelevanttotheSACsultimatedeterminationofwhethertoreferthecasetotheTaxDivision.

3.Fromthetaxpayersstandpoint,theconferenceprovidesanopportunityforthetaxpayertobeheardbytheService.Inthisregard,additionalevidenceanddefensesofa
technicalorpolicynaturemaybepresented.

4.Pleabargaining,civilsettlementnegotiations,and/orcompromiseoftaxliabilitieswillnotbeconsideredordiscussedattheconference.

38.2.1.4.1(08112004)
GeneralAuthority

1.Authorityforholdingconferenceswithtaxpayersand/ortheirrepresentativesiscontainedin26C.F.R.601.501509.TheseregulationsapplytoallofficesoftheService
inallmattersunderthejurisdictionoftheServiceandapplytopracticebeforetheService.

2.TaxpayerconferencesincriminaltaxcasesarewithintheauthorityandaretheresponsibilityoftheSAC.TheCriminalTaxattorneyisanintegralpartnerintheprocessand
shouldtakeanactiveroleinthecoordinating,scheduling,andparticipatingintheseconferences.

38.2.1.4.2(08112004)
ConferenceOpportunity

1.Whileataxpayerconferenceisnotamatterofright,aninvitationforaconferencewillbeextendedunlessitisconcludedthatofferingaconferencewouldserveno
purpose.

A.Forexample,ifalertingthetaxpayertotheexistenceoftheinvestigationmayresultinphysicaldangertoawitnessorflightonthepartofthetaxpayer,offeringa
conferencewouldnotbeadvised.

B.Counselshouldconsultwiththeinvestigatingspecialagentregardingtheseissuespriortoofferingtheconference.
 2.Normally,onlyoneconferencewillbeaffordedtoeachtaxpayerinthecase.IfCriminalInvestigationandCounselpersonnelconcludeasecondconferencewouldaidin
resolvingquestionableissues,itshouldbegranted,recognizingtheneedforexpeditiousprocessingandavoidingunnecessarydelay.

38.2.1.4.3(08112004)
CasesWhereNoConferencewillbeHeld

1.Whenthereisagrandjuryinvestigation,orwhenthegrandjuryinvestigationresultsinacaseevaluation,notaxpayerconferencewillbeheldunlessrequestedbyaUS
AttorneyorDepartmentofJustice(DOJ).

2.InIRC7215cases,aconferencewillnotbeofferedunlessitcanbescheduledintimetomeetthe15dayprocessingrequirement.

38.2.1.4.4(08112004)
ConferenceProceduresinSensitiveCases

1.Thetaxpayerconferenceprocedurestobefollowedinsensitivecasesarethesameprocedurestobefollowedinnonsensitivecases,exceptthattheconferencesare
coordinatedbetweentheattorneyintheHeadquartersOfficeoftheAssociateChiefCounsel(CT)andtheDirectorofFieldOperations.

2.CounselsreviewandevaluationofsensitivecasesoccursintheOfficeoftheAssociateChiefCounsel(CT)andreferralofsensitivecasesforprosecutionrequiresthe
writtenconcurrenceoftheDirectorofFieldOperations.

38.2.1.4.5(08112004)
PromptSchedulingofConference

1.Withingenerallyfiveworkdaysafterassignmentofacriminalcase,theCriminalTaxattorneywillcoordinatewiththeSACtheissuanceofanotificationlettertothetaxpayer
orrepresentativeofferingaconferenceatalocationdesignatedbytheSAC.AttheoptionoftheSAC,theCriminalTaxattorneymaypreparetheletterfortheSACs
signaturetothetaxpayerorrepresentativeofferingaconferenceatalocationdesignatedbytheSAC.

2.Theconferenceshouldbescheduledapproximatelytwoweeksfromthedateoftheletter.Reasonablealternativesmaybepermittedfortheconvenienceofbothparties.
Thecasemaynotstagnate,however,awaitingaconvenientconferencedate.Delayoftheconferencebeyond30daysfromthedateofreceiptofthecaseshouldbe
permittedonlyinunusualcircumstancesandonlywiththeapprovaloftheAreaCounsel(CriminalTax).

38.2.1.4.6(08112004)
LetterOfferingaConference

1.Thefollowingtableillustratestherequirementsofaletterofferingaconference.

If
Avalidpowerofattorneyhasnotbeen
received
Avalidpowerofattorneyauthorizing
disclosureofthetaxinformationtothe
representativeisonfile.
Conference
letterissent Lettershouldcontain See
to
1.ThenatureofthecriminalrecommendationfromCriminalInvestigation
2.Theopportunityforaconference
Exhibit38.3.17,Letterto
3.Theproposeddate,time,andlocationoftheconference TaxpayerOfferingConference
Thetaxpayer 4.Thathe/shemayberepresentedattheconference,butthatlegal
representationwillnotbeprovidedbytheGovernment.
5.TheneedforaDeclarationofRepresentativeandaTaxInformation SeeExhibit38.3.17for
AuthorizationorPowerofAttorney(Form8821or2848)forallrepresentatives documentsrequiredfromthe
comingunaccompaniedbytaxpayers. taxpayersrepresentative.
The Exhibit38.3.16,Letterto
Thesameinformationlistedabove,withtheexceptionofitem5.
representative AttorneyOfferingConference

2.Evidenceofsettlementorattemptedsettlementofadisputedclaimisinadmissiblewhenofferedasadmissionofliabilityortheamountofliability.Fed.R.Evid.408.
Therefore,thefollowingsentencewillbeincludedinallconferenceletters:

"Pleasebeadvisedthatpleabargaining,civilsettlementnegotiations,and/orcompromiseoftaxliabilitieswillnotbeconsideredordiscussedattheconference
underanycircumstances."

Note:

SeeExhibit38.3.16andExhibit38.3.17athttp://publish.no.irs.gov/getpdf.cgi?catnum=39139.

38.2.1.4.7(08112004)
PersonsRecognizedasRepresentativesofTaxpayers

1.PursuanttoTreasuryDepartmentCircular230,Section10.3,thepersonsdescribedinparagraphs(2)through(6)maypracticebeforetheService.

2.AnyattorneywhoisnotcurrentlyundersuspensionordisbarmentfrompracticebeforetheInternalRevenueServicemaypracticebeforetheIRSbyfilingawritten
declarationthatheorsheiscurrentlyqualifiedasanattorneyandisauthorizedtorepresentthepartyorpartiesonwhosebehalfheorsheacts.

3.AnycertifiedpublicaccountantwhoisnotcurrentlyundersuspensionordisbarmentfrompracticebeforetheIRSmaypracticebeforetheIRSbyfilingawrittendeclaration
thatheorsheiscurrentlyqualifiedasacertifiedpublicaccountantandisauthorizedtorepresentthepartyorpartiesonwhosebehaveheorsheacts.

4.AnyindividualenrolledasanagentpursuanttothispartwhoisnotcurrentlyundersuspensionordisbarmentfrompracticebeforetheIRSmaypracticebeforetheIRS.

5.AnyindividualwhoisenrolledasanactuarybytheJointBoardfortheEnrollmentofActuariespursuantto29U.S.C.1242whoisnotcurrentlyundersuspensionor
disbarmentfrompracticebeforetheIRSmaypracticebeforetheIRSbyfilingawrittendeclarationstatingthatheorsheiscurrentlyqualifiedasanenrolledactuaryandis
authorizedtorepresentthepartyorpartiesonwhosebehalfheorsheacts.Practiceasanenrolledactuaryislimitedtorepresentationwithrespecttocertainissues
outlinedinSection10.3ofCircular230.

6.Anyindividualqualifyingunderparagraph(d)of10.5or10.7ofCircular230iseligibletopracticebeforetheIRStotheextentprovidedinthosesections.

38.2.1.4.8(08112004)
PersonsNotRecognizedasTaxpayerRepresentatives

1.NoofficeroremployeeoftheUnitedStatesintheexecutive,legislative,orjudicialbranchoftheGovernment,orinanyagencyoftheUnitedStates,includingtheDistrictof
Columbia,maypracticebeforetheIRS,exceptthatsuchofficeroremployeemay,subjecttotheconditionsandrequirementsoftheseregulationsandof18U.S.C.205,
representamemberofhis/herimmediatefamilyoranyotherpersonorestateforwhichhe/sheservesasguardian,executor,administrator,trustee,orotherpersonal
fiduciary.
 2.NoMemberofCongressorResidentCommissioner(electedorserving)maypracticebeforetheIRSinconnectionwithanymatterforwhichhe/shedirectlyorindirectly
receives,agreestoreceive,orseeksanycompensation.18U.S.C.205.

3.NoofficeroremployeeofanyState,orsubdivisionthereof,whosedutiesrequirehim/hertopassupon,investigate,ordealwithtaxmattersofsuchStateorsubdivision,
maypracticebeforetheIRS,ifsuchStateemploymentmaydisclosefactsorinformationapplicabletoFederaltaxmatters.

38.2.1.4.9(08112004)
TaxpayerWitnesses

1.Thetaxpayermaybringwitnessestotheconferences.Shouldthetaxpayerdesirethewitnesstoremainduringtheconference,duringtimeswhenthetaxpayersreturn
informationistobediscussed,thetaxpayersconsentmustbeobtainedbeforeanyServiceemployeemaydisclosethetaxpayersreturninformationinthepresenceofthe
witness.Thetaxpayermayprovideawrittenconsentorexpresslystatehisconsenttothedisclosureatthestartoftheconference.Serviceemployeesmaynotinferfromthe
taxpayerbringingawitnessthatthetaxpayerconsentstothedisclosureofhisreturninformation.Serviceemployeesshouldnoteinthecasefilethefactofthetaxpayers
oralconsent.SeeIRM11.3.3.2.1.

38.2.1.4.10(08112004)
ConferenceAttendees

1.AllconferencesshouldbeattendedbytheSAC(orASACupondesignationbytheSAC)andtheCriminalTaxattorneyassignedtothecase.TheCriminalTaxattorneywill
assistinthelegalandtechnicaldiscussion.AnofficialnotetakershouldbedesignatedandthatpersoncanbetheCriminalTaxattorney,theSACoranotherCounselor
CriminalInvestigationemployee.

2.Theattendanceofinvestigatingpersonnelattheconferenceisgenerallydiscouragedbecausethepresenceofinvestigatingpersonnelmaytendtoinhibitthetaxpayer
and/orthetaxpayersrepresentativeinafreediscussionofallfacetsofthecase.Nevertheless,withtheapprovaloftheSACandtheconcurrenceoftheCriminalTax
attorney,thespecialagentand/orrevenueagentmayattendtheconferenceiftheagentspresenceisessentialtohavingameaningfulconference.

38.2.1.4.11(10032007)
DocumentsRequiredfromtheTaxpayersRepresentatives

1.Priorto,oratthebeginningoftheconference,theSACmustascertainthatthetaxpayersrepresentative(s)hasfiledaDeclarationofRepresentativeaccompaniedbyeither
aForm8821,TaxInformationAuthorization(http://publish.no.irs.gov/getpdf.cgi?catnum=11596),oraForm2848,PowerofAttorneyandDeclarationofRepresentative(
http://publish.no.irs.gov/getpdf.cgi?catnum=11980).

A.TheTaxInformationAuthorization,signedbythetaxpayer,authorizesthetaxpayersrepresentative(s)toreceiveandinspectcertaintaxinformation.

B.ThePowerofAttorneynotonlyauthorizestherepresentative(s)toreceiveandinspectcertaintaxinformation,butalsogiveshim/hertheauthoritytoperformcertain
specificactsonbehalfofthetaxpayer(suchasexecutionofconsents,waivers,etc.).

2.TheprintedformsprovidedbytheGovernment(Forms2848and8821)neednotbeusedifadocumentcontainingthesameinformationfoundinsuchformsisfiledinlieu
oftheprintedforms.

3.TheSACandtheCriminalTaxattorneyshouldbefamiliarwithCircular230Forms2848and8821andtheinstructionsSubpartEofPart601ofTitle26,CodeofFederal
Regulations.SeeIRC6103and7213and18U.S.C.1905addressingpenaltiesforimproperdisclosureofinformation.

38.2.1.4.12(08112004)
ConferencePreparation

1.BeforetheconferencetheSACandtheCriminalTaxattorneywillreadthespecialagentsreportandbecomefamiliarwiththeexhibits,payingspecialattentionto
statementsofthetaxpayerandhis/herrepresentative,accountant,and/orreturnpreparermadeduringthecourseoftheinvestigation.

2.TheCriminalTaxattorneywillalsoexaminetheadministrativefile,includingtherevenueagentsreport,fornotationsofadditionalcontactswiththetaxpayerandforthe
originoftheinvestigation.TheCriminalTaxattorneyshouldpayparticularattentiontoanypriorstatementsofthetaxpayerandanyinconsistencyintheevidence.

3.TheSACandtheCriminalTaxattorneywillhaveapreparatorydiscussiontodeterminethegoals/objectivesoftheconference.Theyshouldalsoidentifyanyfactual
questionsforresolution.

38.2.1.4.13(08112004)
JointConference

1.AjointconferenceisoneinvolvingtwoormoretaxpayersagainstwhomCriminalInvestigationhasrecommendedprosecutionforthesamescheme(s)ortransaction(s)
givingrisetotherecommendedoffense.Thetaxpayersmayormaynotberepresentedbycounseland,ifrepresented,mayormaynotberepresentedbythesame
attorneys.

2.Jointconferencesinrelatedcriminaltaxcasesarenotgenerallyfavored.Ifrequestedbythetaxpayers(ortheirdulyauthorizedrepresentatives),ajointconferencemaybe
heldwherethereissufficientidentityoffactsandissuesandtheSACandtheCriminalTaxattorneyconcludethatajointconferencewillnotadverselyimpactthe
processingofthecriminalcase.TheSACisnotrequired,however,tograntarequestforajointconferenceeveninthosecaseswhereintherewouldbenoadverseimpact.

3.Whenajointconferenceisrequested,boththerequestandtheexpresspermissionofthetaxpayers(ortheirrepresentative(s))authorizingthedisclosureoftaxreturn
informationtotheirproposedcodefendantsand/orotherthirdpartiesinattendance,shouldbeobtainedinwriting.Ifthejointconferenceisheldattherequestofthe
authorizedrepresentativesofthetaxpayers,theSACshouldobtaininwriting,priortomakinganydisclosures,thefactthattherepresentativesareempoweredtoauthorize
thedisclosureoftaxreturninformationtotheotherprincipals.

4.Thewrittenrequestforajointconferenceandthetaxpayersauthorizationfordisclosureshouldbefullysetforthintheconferencememorandum.

38.2.1.4.14(08112004)
ConductingtheConference

1.SACsRole.TheSACischargedwithcontroloftheconferenceandisresponsibleforitsconductthroughout.TheconferenceshouldbeopenedwiththeSACsstatement
coveringthepointslistedin(a)through(h)below:

A.Iftheconferenceisattendedbyarepresentativeand/orwitnesses(withorwithoutthetaxpayer),verifythattheappropriatedocumentshavebeenexecuted.

B.Advisethattheinvestigationhasbeencompletedandthecaseagentisrecommendingthecaseforprosecutiononthespecificchargesandthatthe
recommendationmaybechangedbytheSAC.Emphasizethatnoformalchargeshavebeenmade.

C.Adviseastothemethodofproofusedintherecommendedcharges,suchas,specificitem,networth,etc.

D.Advisethetaxpayerofhis/herconstitutionalrightagainstselfincrimination.

E.AdvisethatunderdecisionallawandFederalRulesofEvidence,Rule801(d)(2)(C)and(D),admissionsmadebythetaxpayerand/orrepresentativeand
documentssubmittedmaybeusedagainstthetaxpayerinacriminalcase.IfthePowerofAttorneylimitstherepresentativesauthorityinregardtoadmissions,the
SACmayterminatetheconference.IftheSACdoesnotterminatetheconference,he/sheshouldinformtherepresentativethataconferenceundersuch
 circumstancesseverelylimitscommunicationandthattheSACandtheCriminalTaxattorneywillmerelylistentowhatevertherepresentativewishestosayin
regardtotheclientsdefense.

F.Ifthetaxpayeriswithoutlegalrepresentation,advisethathe/shemayhavelegalcounselofhis/herchoiceattheconferenceandthattheconferencecannormally
bedelayedforabriefperiodtoenabletheemploymentofcounsel,butthatcounselcannotbeprovidedatGovernmentexpense.

G.Advisethattheconferenceispurelyvoluntaryandmaybeterminatedbythetaxpayeratanypoint.

H.Advisethatthepurposeoftheconferenceistoprovideanopportunitytosubmitevidenceandofferanyexplanationorargumentonbehalfofthetaxpayeras
deemedappropriateandrelevanttothecase.

2.VicariousAdmissions.Rule801(d)(2)(C)oftheFederalRulesofEvidenceprovidesthatanadmissionofapartyopponentisnothearsay.Thestatementisofferedagainsta
partyandmaybeastatementbyapersonauthorizedbythepartytomakeastatementconcerningthesubject.Thisisknownasthevicariousadmissionsruleandoperates
toattributetothetaxpayeranystatementsmadebythetaxpayersrepresentativeduringthecourseofaconference.

A.ByDirectiveNo.8658(May14,1986),theTaxDivisionannouncedthatitwouldnotrelyonthevicariousadmissionsruletoattributetothetaxpayeranystatements
madebythetaxpayersrepresentativeataconferencebeforeTaxDivisionattorneys,exceptforstatementsconcerningtheauthenticationofwritteninstruments.

B.CriminalInvestigationpersonnelandtheCriminalTaxattorneywillcontinuetorelyonthevicariousadmissionsruleasprovidedbyRule801(d)(2)(C)oftheFederal
RulesofEvidence.

3.AmountofCivilTaxLiability.TheSACmayapprizethetaxpayerand/orrepresentativeofthefigurescomputed.Thecriminalfiguresmaybedisclosedwiththecaveatthat
theindictmentfiguresmayvaryortheindictmentmaycontainnoactualamounts.

4.DiscussionofCase.TheSACmay,athis/herdiscretion,andafterconsiderationofallaspectsofthecase,revealanddiscussfactsorelementsofthecasesoastomake
theconferenceasmeaningfulaspossibletoboththetaxpayerandtheGovernment.Caremustbeexercised,however,toprotecttheidentityofinformantsandother
witnesses.

5.RecordingofConference.TheSACshoulddiscouragetherecordingofconferencesbyataxpayerorhis/herrepresentative.Ifeitherthetaxpayerorhis/herrepresentative
insistsuponrecordingtheconference,theSACmustlikewiserecordtheconference,identifyingthosepersonsinattendance,thedate,place,andtime.Therecordingof
theconferenceshouldbemaintainedinthecriminalcasefile.

6.ReviewandReferralProcedures.TheSACshouldadvisethetaxpayerand/orrepresentativeofthereviewandreferralprocedures,aswellastheanticipatedtimeframe.

7.CommunicationofSACsDecision.Thetaxpayerand/orrepresentativeshouldbetoldthattheywillreceivealetternotifyingthemoftheSACsdecision.

38.2.1.4.15(08112004)
ConferenceMemorandum

1.Promptlyaftercompletionoftheconference,amemorandumwillbepreparedbytheCriminalTaxattorneyassignedtothecase.Thememorandumshouldbeasdetailed
aspossibleandcovereverythingthatoccurredorwasdiscussedattheconference.

2.Thememorandumwillinclude:

A.Dateandlocationoftheconference

B.Namesoftheindividualsinattendance

C.Factsrepresentingthepowerofattorneyanddeclarationfiled

D.Anyconstitutionalwarningsgiventotheattendingtaxpayer

E.Anystatementsandrepresentationsoffactsandlawandbywhommade

F.Anycopiesofwrittenstatementsordocumentssubmitted

3.Thememorandummaycontaincommentsregardingthedemeanorofthetaxpayerorwitnesseswhoarepresent,butshouldnototherwisecontaintheCriminalTax
attorneysopinionsregardingthevalidityofevidence(exceptasdiscussedattheconference)orhis/herviewsofthestrengthsorweaknessesofthecase.

4.ItwillbesignedbyeachoftheServicerepresentativeswhowerepresent.AcopyoftheconferencememorandumshouldbesenttotheAreaCounsel(CT).

5.Theconferencememorandum,aswellasthenotestakenduringtheconference,shouldbeincludedinthecasefile.Incertaincircumstances,thesedocumentsmaybe
madeavailabletothetaxpayerattrial,orduringcivilnegotiations.

6.TheoriginalandonecopyofthememorandumarereservedforDOJifprosecutionisultimatelyrecommended,withadditionalcopiesfortheCounselfile,andotherfiles
requiredbylocalinstructions.SeeExhibit38.3.18andExhibit38.3.19athttp://publish.no.irs.gov/getpdf.cgi?catnum=39139.

38.2.1.5(08112004)
SupplementalInvestigations

1.Afterreviewingthespecialagentsreportandrelatedexhibits,theCriminalTaxattorneymaydeterminethatadditionalevidenceisneededtosupportvariousaspectsof
proof.Sincesomequestionsmaybeansweredandothersmaysurfaceatthetaxpayerconference,itisnormallypreferabletodelayarequestforsupplemental
investigationuntilaftersuchconference.Multiplesupplementalrequestsshouldbeavoided,ifpossible.Wherefeasible,thenoteddeficienciesinproofshouldbe
discussedorallywiththespecialagent.TheattorneyshouldprepareamemorandumtoCriminalInvestigationdetailingthesupplementalinformationrequestedor
documentbyamemorandumtothefilethedateandnatureoftheoralrequest.AcopyofthewrittendocumentationshouldbeforwardedtotheAreaCounsel(CT).

2.Whenarequestforsupplementalinvestigationhasbeenmadeonaparticularcase,theattorneyshouldremindCriminalInvestigationthatthe45dayor60dayCounsel
processingperiodistolledfromthedateoftherequestuntiltherequestedresponseisreceived.

38.2.1.6(08112004)
CriminalEvaluationMemorandum

1.ThecriminalevaluationmemorandumtransmitstheCriminalTaxattorneysevaluationofthemeritsofthecriminalprosecutiontotheSAC.Thememorandumcontainsa
thoroughanalysisofthecase,anexplanationoftherecommendedcharges,adiscussionoftheevidenceavailabletoprovetherecommendedcharges,adiscussionof
foreseeableproblemsanddefenseswhetherraisedbythetaxpayerorhis/hercounselordeterminedbyanalysisofthecasefile,andtheCriminalTaxattorneys
concurrenceornonconcurrencewiththeprosecutionrecommendation.Thediscussionshouldbelimitedtothelegalanalysisanddetailsoftheparticularcase,andall
documentssubmittedonbehalfofthetaxpayerareforwardedwiththememorandum.

2.Thecriminalevaluationmemorandumismorethanmereparaphrasingofthespecialagentsreport.Itisanindependentcriticalanalysisofthecase,withoutundue
relianceuponeitherthephraseologyorconclusionsfoundinthespecialagentsreport.SeeExhibit38.3.110athttp://publish.no.irs.gov/getpdf.cgi?catnum=39139.

38.2.1.6.1(08112004)
ContentandStyle
 1.Althoughthecontentandeventhestyleofthememorandummustbetailoredtothecase,itshouldcontaintheinformationdiscussedinthissubsection.

2.CriminalSubjects.Thissectioncontainsthename,address,socialsecuritynumberand/oremployeridentificationnumberofallrecommendedpartiesreferredbyCriminal
Investigation.Iftherearerelatedcases,thenamesoftherelatedcriminalsubjectsshouldalsobeprovided.

3.CounselsRecommendation.ThissectioncontainsCounselsrecommendationastothecharge(s),year(s),numberofcount(s),venue,andstatuteoflimitations.(Ifthe
statuteoflimitationsisimminent,thenthedateshouldbebolded.)Counselshouldstatewhetherprosecutionisorisnotwarranted.Ifprosecutionisrecommendation,
whethertherecommendationconcurswiththeSpecialAgentsrecommendationordiffersfromtheSpecialAgentsrecommendation.

4.ExecutiveSummary.Inanutshell,eitherinashortparagraphorusingbullets,summarizethesubjectsactionsthatgiverisetothecriminalprosecutionrecommendation,
aswellasrelevantinformationimportanttothereader.Forinstance,includeornote:theamountoftaxdollars(includingrelevantconduct)harmtothegovernmentthe
indirectmethodofproofanexpiringstatuteoflimitationsinvestigativetechniquesand,thetechnicaltaxissue(s).

5.CriminalViolations.Discusstheprincipalevidenceavailabletoestablishtheelementsofthecriminaloffense(s).Subheadingsshouldbeusedforeachelementofthe
proposedcharge.Itemsofevidenceshouldbesetforthwithbulletstoseparateandgivethereaderanideaofhowmanyexhibits/howmuchevidencethereisonagiven
element.

6.DiscussionoftheLaw.Discussanylegal,procedural,and/orpolicyissuesregarding:

A.Venue

B.Statuteoflimitations

C.Howtheinvestigationoriginated(whenandbywhomthetaxpayerwasfirstcontacted)

D.Investigationtechniques

E.Aspectsofpersonalhistoryofsignificancetothecaseage,maritalstatusduringtheyearsatissue(especiallyincommunitypropertystates),health(ifamajor
problemisknown),education,andcriminalrecord

7.TaxLoss,Computations,MethodofProofandTechnicalTaxIssues.Inthissectionthetaxloss,computationsandmethodofproofshouldbenotedanddiscussedwhen
warranted.Whenapplicable,taxortaxrelatedissuesortechnicaltaxissuesshouldbediscussed.

8.CurrentLifestyle.Inthissection,updateinformationrelativetoeachsubjectscurrentlifestylejobhistoryfilinghistoryandaudithistory.Ifthisinformationisrelevanttothe
caseandnotreadilyavailable,thendiscussthisinthe"OtherIssuesandSuggestions"section.

9.Defenses.Discussdefensecontentionsorreasonablyprobabledefensesandavailablerebuttalevidence.Whennodefensesareforeseeable,sonote.

10.OtherIssuesandSuggestions.Discussproblems/issues/concernswiththecase.

11.Sentencing.Ineitherashortparagraphorbyusingbullets,summarizesentencing,includingtheaggravatingormitigatingoffenserelatedconduct.

12.Conclusion.Inthissectionnotewhethertheevidencereliedupontosupporttherecommendationissufficienttoindicateguildbeyondareasonabledoubtandwhether
thereisareasonableprobabilityofconviction.Inaddition,notethatCounselisclosingitsfileasofthedateofthismemorandum.

13.SignatureoftheCriminalEvaluationMemorandum.SignatureauthorityforcriminalevaluationmemorandarestswiththeAreaCounsel(CT),unlessdelegatedtothe
CriminalTaxattorney.

14.DistributionoftheCriminalEvaluationMemorandum.Thecriminalevaluationmemorandumisdistributedasfollows:

A.Theoriginalcriminalevaluationmemorandum,alongwiththespecialagentsreportandexhibitstotheSAC

B.Onecopyofthecriminalevaluationmemorandum,alongwithacopyofthespecialagentsreporttotheAreaCounsel(CT)

C.Onecopyofthecriminalevaluationmemorandum,alongwithacopyofthespecialagentsreporttotheAssociateChiefCounsel(CT)

38.2.1.7(08112004)
PleaProgramCases

1.TheExpeditedPleaProgram,assetforthinTaxDivisionDirective111,isdesignedtoexpeditethehandlingofcriminaltaxcaseswherethetaxpayer,throughhis/her
attorney,indicatesduringthecourseofanadministrativeinvestigationbeingconductedbyCriminalInvestigation,aninterestinenteringaguiltypleatosomeorallofthe
chargesandyearsunderinvestigation.Theprogramisintendedtodisposeexpeditiouslyoftheentirecriminalcase.Itisnotintendedtobeutilizedtolimitthetaxpayers
exposurebycurtailingorlimitingtheServicesinvestigation.Thefollowingfactorsshouldbepresent:

A.Thecaseinvolvesanadministrativeinvestigationinvolvinglegalsourceincome

B.Itisavailableonlytotaxpayerswhoarerepresentedbyanattorneywhomustinitiatepleadiscussionsand/ornegotiations

C.CriminalInvestigationhasnotinitiatedthesubjectofpleadiscussions

D.ThetaxpayerhasbeeninformedthattheServicehasnoauthoritytoengageinpleanegotiationsandthatonlyDOJcanengageinsuchnegotiations

E.ThetaxpayersattorneyhasprovidedawrittenstatementtoCriminalInvestigationconfirmingthetaxpayersdesiretoengageimmediatelyinpleanegotiationswith
DOJ

F.Thetaxpayerhasbeeninformedthathe/shewillberequiredtopleadtothemostsignificantviolationinvolved,consistentwiththeTaxDivisionsMajorCountPolicy

G.TheServicehastakenprecautionstoinsurethatinformationfurnishedbythetaxpayer,priortoformalpleadiscussionswithDOJ,willnotbeforeclosedfromfuture
useundertherestrictionsofFed.R.Crim.P.11(f),intheeventthatpleanegotiationsfail

H.TheServicehassufficientevidencetoconstituteareferablemattertotheTaxDivision

2.CriminalTaxattorneyPrereferralAssistance.AfterCriminalInvestigationreceiveswrittenconformationthatthetaxpayerwantstoengageimmediatelyinpleanegotiations
withDOJ,theCriminalTaxattorneywillprovideprereferralassistance,evaluating

A.WhethertheevidenceissufficienttomeettherequirementsofFed.R.Crim.P.11(b)(3)(i.e.,isthereafactualbasistosupportthepleaofguiltytoeachofthecounts
underinvestigation)and

B.Whetherthechargesunderinvestigationadequatelyaddressthecrime(s)committedbythetaxpayer.

3.ReviewandEvaluationProcedures.TheCriminalTaxattorneywillreviewthespecialagentsreportandexhibitsandprovideanevaluationoftheevidenceconsistentwith
thepleaprogramprocedurestotheSACviacriminalevaluationmemorandum.

4.ProceduresforNonProgramPleaAgreements.TheCriminalTaxattorneydoesnothaveauthoritytoconvertcasestotheExpeditedPleaProgramthatdonotmeetthe
previouslydiscussedcriteriahowever,thesituationmayarisethatwhilethecaseisbeingreviewed,thetaxpayerand/orthetaxpayerscounsel,expressesawillingnessto
enterintopleanegotiationswithDOJ.Ifthisoccurs,thecriminalevaluationmemorandumshouldnotethewillingnessofthetaxpayerand/ortaxpayerscounseltoplead
 guiltytothemajorcountestablishedbytheevidence.

38.2.1.8(08112004)
ReleaseofInformation

1.BecausetheIRSachievesthegreatestdeterrenteffectthroughnewscoverageofcriminaltaxprosecutions,theAttorneyGeneralhasapprovedtheissuancebytheService
ofappropriatepressreleases.Excessivepretrialpublicityconstitutesadangertoanindividualsrighttoafairtrial,andthusitisessentialthatServicepersonnelavoid
actionsthatmightprejudicethatright.Statutoryprohibitionsontheunauthorizeddisclosureofreturnandreturninformationmakeitimperativethatmaterialcontainedin
suchnewsreleasesbelimitedtofactsthatareamatterofpublicrecord.SeeIRC6103.

2.AllreleaseofinformationissubjecttoServiceproceduresandguidelinesbasedonDOJguidelines.

3.IRSpersonnelwillnotmakepublicstatements,newsreleases,orotherpublicdisclosuresconcerningadefendant,theevidence,orotheraspectsofacriminalmatter
anytimeduringtheinvestigationandresultingprosecution,exceptuponapprovalbyDOJ.

4.IRSpersonnelwillneitherencouragenorassistnewsmediaintelevisingorphotographingadefendantoraccusedpersonbeingheldortransportedinfederalcustody,
norwilltheymakephotographsofthedefendantavailabletothemedia.

5.Counselisnotauthorizedtomakenewsreleases.

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