4.00 TAX DIVISION POLICIES AND PROCEDURES

Updated May 2001

4.01     VOLUNTARY DISCLOSURE
4.01[1]  Policy Respecting Voluntary Disclosure
4.01[2]  Timeliness of Disclosure
4.01[3]  Cooperation of Taxpayer

4.02     DUAL PROSECUTION AND SUCCESSIVE PROSECUTION
4.02[1]  Applicability of Policy
4.02[2]  Tax Prosecutions
4.02[3]  Pretrial Diversion

4.03     INCARCERATED PERSONS
4.03[1]  General
4.03[2]  Prosecution of Incarcerated Persons

4.04     HEALTH POLICY
4.04[1]  General Policy
4.04[2]  Court Determination of Health Status

4.05     MENTAL INCOMPETENCY
4.05[1]  Evaluation at Administrative Level
4.05[2]  Insanity Defense Reform Act of 1984

4.06     SEARCH WARRANTS
4.06[1]  Generally
4.06[2]  Procedures Under Directive No. 52

4.07     APPEALS

4.08     REQUESTS FOR TRIAL ASSISTANCE

4.09     STATUS REPORTS

4.10     RETURN OF REPORTS AND EXHIBITS


There are numerous policies governing the operation of the Department of 
Justice, many of which are set forth in the United States Attorneys' 
Manual (USAM).  Some of these policies, as implemented by the Tax 
Division and not otherwise covered in this Manual, are discussed in the 
sections which follow.
 
 
                4.01  VOLUNTARY DISCLOSURE

4.01[1]  Policy Respecting Voluntary Disclosure

      Prior to 1952, it was the policy of the Treasury Department not to
recommend criminal prosecution where a taxpayer voluntarily revealed his
commission of a tax crime to an appropriate IRS official before any investigation
of his affairs had commenced.

      Due to the controversy which ensued in the courts over what constituted a
true "voluntary disclosure," and because it was difficult, "and sometimes
impossible" to ascertain administratively whether the taxpayer had made a
voluntary disclosure or had merely discovered he was under investigation, the
Treasury Department abandoned this policy on January 10, 1952.  Treasury
Department Information Release No. S-2930, 1952 C.C.H., ¶ 6079.  
See United States v. Shotwell Manufacturing Co., 355 U.S. 233, 
235 n.2 (1957).

      In 1961, the Internal Revenue Service adopted an "informal" policy
regarding voluntary disclosure, under which it considered voluntary disclosure,
along with other facts and circumstances, on a case-by-case basis in determining
whether or not to recommend prosecution.  See Statement of 
Commissioner Mortimer M. Caplin, News Release IR-432, Dec. 13, 1961; IRM 
Part IX, §9781- 342.14 and CCDM Part (31)134.

      In December 1992, the IRS clarified, but did not change, its "informal"
policy, noting that, in the past, it had not generally recommended prosecution
if the taxpayer:

      1.    Informed the IRS of the failure to file for one or more taxable
            years;

      2.    Had only legal source income;

      3.    Made the disclosure prior to being contacted by the IRS in the form
            of a telephone call, letter, or personal visit informing the
            taxpayer that he is under criminal investigation;

      4.    Filed a true and correct tax return or cooperated with the IRS in
            ascertaining his correct tax liability; and 

      5.    Made full payment of amounts due, or in those situations where the
            taxpayer was unable to make full payment, made bona fide
            arrangements to pay.

"Peterson [IRS Commissioner Shirley D. Peterson] Formalizes Practice of Not
Prosecuting Non-Filers Who Come Forward."  BNA Daily Tax Report (Dec. 7, 1992). 
See United States v. Knottnerus, 139 F.3d 558, 559-560 (7th 
Cir. 1998) (holding that prior visit by special agent disqualified defendant 
from voluntary disclosure program).

      However, the 1992 clarification by the Service created confusion as to the
application of the voluntary disclosure policy with respect to nonfilers. 
See United States v. Tenzer, 127  F.3d 222, 226-28 (2d Cir. 
1997), vacated in part and remanded on other grounds, 213 F.3d 34, 
40-41 (2d Cir. 2000).  Thus, in 1995, the Service reinstated its former 
voluntary disclosure practice, eliminated the language relative to 
nonfilers, and modified the triggering event example.  

      Currently, the Service's voluntary disclosure practice is that a voluntary
disclosure will be considered along with all other factors in a case in
determining whether criminal prosecution will be recommended.  Under the
Service's practice, a voluntary disclosure occurs when the communication is: (1)
truthful; (2) timely; (3) complete; and (4) the taxpayer shows a willingness to
cooperate, and, in fact cooperates, with the Service in determining his or her
tax liability.  A disclosure is timely if received before: (1) the Service has
initiated an inquiry that is likely to lead to the taxpayer and the taxpayer is
reasonably thought to be aware of that activity; or (2) some event known by the
taxpayer occurred which event is likely to cause an audit into the taxpayer's
liabilities.  The Service tests voluntariness by the following factors: (1)
actual status of the Service's awareness of the taxpayer as to specific tax
investigation potential; (2) taxpayer's knowledge or awareness of the Service's
interest; and (3) taxpayer's fear of a "trigger" or "potential trigger" to make
the Service aware of violations (where the disclosure is 'triggered' by an event
which would have led the Service to the fraud, the disclosure is not considered
to be voluntary).   See United States v. Knottnerus, 139 F.3d 
at 559-560;  United States v. Tenzer, 127  F.3d at 226-228.

      At present, the Department of Justice continues to give consideration to
a "voluntary disclosure" on a case-by-case basis in determining whether to
prosecute but such disclosure is not conclusive on the issue.  See 
United States v. Hebel, 668 F.2d 995 (8th Cir. 1982). Specifically, 
the Tax Division considers the timeliness of the disclosure and whether the 
taxpayer fully cooperated with the Government in deciding whether a 
disclosure was voluntary.


4.01[2]  Timeliness of Disclosure

      There are two elements to a voluntary disclosure:  (1) it must be made
timely and (2) the taxpayer must thereafter fully cooperate with the government. 
There has been considerable debate among practitioners as to the meaning of
"timely."  Some argue that the test for timeliness should be strictly objective,
that is, a disclosure is timely if the disclosure is made before the taxpayer's
return is selected by the Internal Revenue Service for audit regardless of the
taxpayer's motivation for making the disclosure.  Under this approach, a
disclosure would not be timely if the return had been selected for audit, even
if the taxpayer did not know that the return had already been selected for audit
at the time of the disclosure.

      The objective test does have simplicity of application in its favor.  On
the other hand, if all of the circumstances are considered, then whether or not
a return has been selected for audit at the time of disclosure is not necessarily
conclusive.  For example, if the disclosure followed closely upon an IRS inquiry
directed to a third party which reasonably could be anticipated to lead to
selection of the taxpayer's return for audit, then the disclosure reasonably
could be described as "triggered," rather than as "voluntary."  Although not yet
subject to audit, the taxpayer was obviously attempting to place himself or
herself in the best light possible after concluding that an audit was inevitable. 
United States v. McCormick, 67 F.2d 867, 868 (2d Cir. 1933). 
Conversely, if the taxpayer was in fact clearly unaware that his or her 
return had been selected for audit at the time of the disclosure and 
"triggering" circumstances are absent, then seemingly consideration should 
be given for having come forward voluntarily.  Cf. United States 
v. Levy, 99 F. Supp. 529, 533 (D.Conn. 1951).  Similarly, there may be 
situations where an audit is already in progress, and the taxpayer discloses 
a transaction that almost certainly would not have been found by the 
auditing agent.  On a strictly objective test, the disclosure of the unknown 
transaction would not be a "timely disclosure" since the return was under 
audit.   

      Because the objective test is essentially arbitrary, the Department has
rejected it, and, instead, favors an "all events" test in assessing whether a
disclosure was timely.  That is, a disclosure is not timely if:

      1.    The IRS has already initiated an inquiry that is likely to lead to
            the taxpayer and the taxpayer is reasonably thought to be aware of
            that activity;  or

      2.    Some event occurred before the disclosure which the taxpayer
            probably knew about and which event is likely to cause an audit into
            the taxpayer's liabilities, e.g., a newspaper article high-lighting
            commercial bribery in a particular industry or corruption in a
            governmental office. Cf. United States v. 
            McCormick, 67 F.2d 867 (2d Cir. 1933).


4.01[3]  Cooperation of Taxpayer

      If it is concluded that the disclosure was timely, a second point of
inquiry is whether the taxpayer has fully cooperated with the IRS in ascertaining
and paying the taxes owed.  Thus, the Department's position on cooperation is
that the taxpayer must make a full disclosure of all facts and cooperate with the
Service in determining the proper amount of taxes owed.  If the taxes are not
paid because of a claim of inability to pay, then full and accurate disclosure
must be made by the taxpayer of his financial position.

      At bottom, application of the "voluntary disclosure" policy is an exercise
of prosecutorial discretion that does not, and legally could not, confer any
legal rights on taxpayers.  Whether there is or is not a voluntary disclosure is
only a factor in evaluating a case, and even if there has been a voluntary
disclosure, prosecution and conviction may still result.  In short, a voluntary
disclosure is not a bar to prosecution, but merely a factor to be considered. 
See United States v. Hebel, 668 F.2d 995 (8th Cir. 1982). 
See February 17, 1993, Tax Division memorandum on Tax Division 
Voluntary Disclosure Policy from Acting Assistant Attorney General James 
A. Bruton, Tax Division.  A copy of this memorandum is contained in Section 
3.00 of this Manual. 


        4.02  DUAL PROSECUTION AND SUCCESSIVE PROSECUTION

4.02[1]  Applicability of Policy

      The dual and successive prosecution policy establishes guidelines for the
exercise of discretion by appropriate officers of the Department of Justice in
determining whether to bring a federal prosecution based on substantially the
same act(s) or transactions involved in a prior state or federal proceeding.  The
purpose of this policy is to vindicate substantial federal interests through
appropriate federal prosecutions, to protect persons charged with criminal
conduct from the burdens associated with multiple prosecutions and punishmentsfor
substantially the same act(s) or transaction(s), to promote efficient utilization
of Department resources, and to promote coordination and cooperation between
federal and state prosecutors.  The policy "precludes the initiation or
continuation of a federal prosecution, following a state or federal prosecution
based on substantially the same act(s)  or transaction(s) unless three
substantive prerequisites are satisfied: first, the matter must involve a
substantial federal interest; second, the prior prosecution must have left that
interest demonstrably unvindicated; and third, applying the same test that is
applicable to all federal prosecutions, the government must believe that the
defendant's conduct constitutes a federal offense, and that the admissible
evidence probably will be sufficient to obtain and sustain a conviction by an
unbiased trier of fact." USAM 9-2.031.  For an example of a 
dual prosecution, see Thompson v. United States, 444 U.S. 248 
(1980). For examples of successive prosecution, see Rinaldi v. 
United States, 434 U.S. 22 (1977);  Petite v. United States, 361 
U.S. 529 (1960).  Parenthetically, the Petite case has given its name 
to both components of the policy, i.e., the courts have used the "Petite 
Policy" interchangeably for both dual and successive prosecutions.  
Cf. Thompson, 444 U.S. at 249. 

      The policy is set forth in detail in USAM, § 9-2.031. In 
order to prevent unwarranted dual or successive prosecutions, the policy 
requires that authorization be obtained from the appropriate Assistant 
Attorney General prior to initiating or continuing the federal prosecution. 
USAM, § 9-2.031.  In criminal tax cases, this is the Assistant 
Attorney General, Tax Division.  28 C.F.R., §§ 0.70, 0.179.  

      The United States will move to dismiss any prosecution governed by this 
policy in which prior approval was not obtained, unless the appropriate Assistant
Attorney General retroactively approves it on the following grounds: first, that
there are unusual or overriding circumstances justifying retroactive approval,
and second, that the prosecution would have been approved had approval been
sought in a timely fashion.  Appropriate administrative action may be initiated
against prosecutors who violate this policy.  USAM, § 9-2.031.

      Requests for the authorization of dual or successive federal prosecutions
are evaluated on a case-by-case basis by the appropriate Assistant Attorney
General based on the factors set forth in USAM, § 9-2.031. A 
federal prosecution will not be authorized unless the state/prior federal 
proceeding left substantial federal interests demonstrably unvindicated.  
Even so, a dual or successive prosecution is not warranted unless a 
conviction is anticipated.  If the state/prior federal proceeding resulted 
in a conviction, prosecution normally will not be authorized unless a 
substantially enhanced sentence in the subsequent federal prosecution is 
anticipated.


4.02[2]  Tax Prosecutions>

      It can be argued that neither the dual nor the successive prosecution
policy really applies to income tax prosecutions because even if the acts and
transactions of the prior prosecution were the same income-producing activities,
the tax crime did not take place until the following year when the fraudulent
income tax return was filed or the failure to file happened.  In other words, the
failure to report income is not usually an element of the prior criminal
proceeding, e.g., an embezzlement charge.  Nevertheless, in the exercise of its
prosecutorial discretion, the Tax Division adheres to the letter and spirit of
these policies in conformity with USAM, § 9-2.031.

      Similarly, the dual and successive prosecution policy technically is not
implicated when venue considerations precluded joinder of all the offenses in one
judicial district, when the defendant opposed a single trial, or when the
evidence was not obtained until after the earlier prosecution was commenced.  As
a practical matter, however, when a tax case is being evaluated before
indictment, the better course is not to rely on these technical points to
conclude that the dual and successive prosecution procedures need not be
followed.  Under its discussion of these policies, the United States 
Attorneys' Manual specifically states that prosecution will not be 
authorized unless a conviction is anticipated for the subsequent case, and 
it is thought that the second conviction will result in a substantially 
enhanced sentence.  USAM, § 9-2.031.

      For example, assume that tax and non-tax charges arising out of the same
transactions are brought, and venue precludes trying all of the charges in the
same district.  If the non-tax charges are tried first and result in a
substantial sentence, then it is questionable whether the government should
subsequently proceed with the tax charges if an enhanced sentence cannot be
anticipated, unless the federal interest was not substantially vindicated by the
earlier prosecution because of circumstances extraneous to the case.

      In the final analysis, when there is a question as to the applicability of
the dual and successive prosecution policies, the procedures set forth in
USAM, § 9-2.031 should be followed.  If the facts are compelling 
in support of the conclusion that the federal interest has not been 
substantially vindicated, securing the Assistant Attorney General's 
authorization does not impose a substantial burden to processing a case 
through the Tax Division.  Conversely, if it is determined that the 
subordinate reviewing attorney erred in not obtaining the authorization of 
the appropriate Assistant Attorney General, then there is a substantial 
danger that all the effort spent in securing a conviction will have gone for 
naught.


4.02[3]  Pretrial Diversion>

      While no specific reference is made to pretrial diversion in the section
of the United States Attorneys' Manual dealing with dual and 
successive prosecution, the safer course is to consider pretrial diversion 
as within the context of these two policies even though jeopardy has not 
attached in that situation.  This approach comports with the Department's 
traditional policy of applying the policy in a common sense, non-technical 
fashion in order to effectuate its salutary objectives. 

      USAM, § 9-22.000 does address the pretrial diversion 
program, but requires, among other things, prior Tax Division approval in 
all cases under its jurisdiction.  The Tax Division's long-standing, strict 
policy is that criminal tax cases should not be disposed of under the 
Department's pretrial diversion program.  This policy is stated in the 
transmittal letter that accompanies all criminal tax cases sent from the Tax 
Division to a United States Attorney's office.  Accordingly, criminal tax 
defendants should not be given pretrial diversion treatment.


                   4.03  INCARCERATED PERSONS

4.03[1]  General>

      Whenever a proposed tax defendant is incarcerated on other charges, an
initial determination must be made as to whether the Department's policies on
dual and successive prosecution (Petite Policy) are applicable.  See 
4.02, supra.  If they are, the procedures for those policies are 
controlling and must be followed.  If it is determined that there is no 
connection, direct or indirect, between the acts and transactions underlying 
the conviction(s) for which the proposed defendant is presently incarcerated 
and the contemplated tax- related prosecution, then other considerations 
nevertheless come into play in determining whether prosecution should be 
initiated or declined.  These considerations are discussed in the section 
which follows.


4.03[2]  Prosecution of Incarcerated Persons>

      Principles of Federal Prosecution, as reprinted in USAM, 
§ 9-27.000, provides as follows (USAM, § 9-27.230):

      A.    In determining whether prosecution should be declined because no
            substantial Federal interest would be served by prosecution, the
            attorney for the government should weigh all relevant
            considerations, including:

      1.    Federal law enforcement priorities;

      2.    The nature and seriousness of the offense;

      3.    The deterrent effect of prosecution;

      4.    The person's culpability in connection with the offense;

      5.    The person's history with respect to criminal activity;

      6.    The person's willingness to cooperate in the investigation or
            prosecution of others; and

      7.    The probable sentence or other consequences if the person is
            convicted.

      The above list of relevant considerations is not intended to be all-
inclusive and in a given case one factor may deserve more weight than it might
in another case.  USAM, § 9-27.230, Subsection B.

      Principles of Federal Prosecution further emphasizes the weight 
to be given the probable sentence in the determination as to whether 
criminal proceedings should be instituted as follows (USAM, § 
9-27.230(B)(8)):

      8.    The Probable Sentence

            In assessing the strength of the Federal interest in prosecution,
            the attorney for the government should consider the sentence, or
            other consequence, that is likely to be imposed if prosecution is
            successful, and whether such a sentence or other consequence would
            justify the time and effort of prosecution.  If the offender is
            already subject to a substantial sentence, or is already
            incarcerated, as a result of a conviction for another offense, the
            prosecutor should weigh the likelihood that another conviction will
            result in a meaningful addition to his/her sentence, might otherwise
            have a deterrent effect, or is necessary to ensure that the
            offender's record accurately reflects the extent of his/her criminal
            conduct. * * * (I)f the person is on probation or parole as a result
            of an earlier conviction, the prosecutor should consider whether the
            public interest might better be served by instituting a proceeding
            for violation of probation or revocation of parole, than by
            commencing a new prosecution.  The prosecutor should also be alert
            to the desirability of instituting prosecution to prevent the
            running of the statute of limitations and to preserve the
            availability of a basis for an adequate sentence if there appears to
            be a chance that an offender's prior conviction may be reversed on
            appeal or collateral attack.

      This concept is probably best understood by example.  Assume that the
contemplated tax defendant is presently incarcerated for the killing of his
spouse, committed in the heat of passion without any income-producing
ramifications, that all appellate stages have been exhausted, and that 10 years
are left to be served on his sentence.  If the tax case involves nothing more
than the skimming of income from the proposed defendant's sole proprietorship,
it would be pointless to institute a criminal tax case, for there is no reason
to believe that, even if convicted, a meaningful additional sentence would be
imposed.  The specific deterrent value to be derived from that case would be
marginal.  Under this hypothetical, it would be a more efficient use of resources
to resort to an "adequate non-criminal alternative to prosecution," 
e.g., "civil tax proceedings."  Principles of Federal 
Prosecution, USAM, § 9-27.250, Subsection B.  

      Conversely, if the tax crime was accomplished by a sophisticated scheme,
such as promoting a widespread fraudulent tax shelter or refund scheme,
prosecution could be appropriate even though the likelihood of an enhanced
sentence for the tax crime would be remote.  In that instance, the conviction for
the tax crime could serve to deter other individuals from embarking on the same
scheme. 

      There will obviously be situations between these two extremes.  For
example, if only one year is left to be served on the nontax conviction, there
may be a reason for concluding that the tax prosecution could result in a
substantial, additional sentence.  Another example is the submission of
fraudulent returns claiming refunds by a prisoner with a long term yet to be
served.  A tax prosecution, as a practical matter, may not lengthen the actual
time ultimately served, but it might deter other prisoners from adopting the
scheme.

      The effect of present incarceration on the prosecution decision is to be
made on a case-by-case basis.  Incarceration, of itself, does not implicate any
formal policy of the Department, and the personal authorization of the Assistant
Attorney General is not a condition precedent to the institution of criminal
proceedings simply because the proposed defendant is currently in jail. 
Incarceration, however, should alert the reviewing attorney to the possibility
of the dual and successive prosecution policies being an issue.


                       4.04  HEALTH POLICY
                       
4.04[1]  General Policy 

      On February 19, 1953, the Attorney General ordered the abandonment of the
so-called "health policy" in criminal tax cases.  Department of Justice Press
Release, February 19, 1953.  The Treasury Department had earlier rescinded its
identical policy on December 11, 1951.  The question of whether an individual
could physically survive the stress and strain of a trial is, therefore, no
longer a controlling consideration in deciding for or against a tax prosecution
at the administrative level.  The Department's position is that whether a
taxpayer should or should not be tried because of health reasons is a matter
which can best be decided by the trial court, rather than on an administrative
basis.  Only when it is clear beyond all doubt that a proposed defendant will
never be able to stand trial because of a terminal physical condition is a case
disposed of for reasons of health at the administrative level.


4.04[2]  Court Determination of Health Status 

      After the filing of an indictment or information, physical health questions
should be left to the defendant to raise.  The defense is customarily raised by
way of a motion for continuance.  The issues basically are whether the defendant
is able to assist his counsel in his defense and/or whether the strain of a trial
will pose a serious threat to the defendant's health.  The United States Attorney
should ensure that the health facts and the court's decision are made a matter
of record.  The following course is to be followed in this connection:  (1) the
special agent of the Internal Revenue Service should be asked to conduct a
discrete investigation to determine the extent of the defendant's daily
activities and to eliminate the possibility of malingering; (2) a request should
be made of the court to have a court-appointed physician conduct an examination
and, if possible, this should include a necessary period of observation in a
hospital; and (3) there should be a hearing in open court to disclose for the
record the results of (1) and (2) above and to enable the court to make a
finding.

      The court's finding probably will not embrace a prognosis beyond the
immediate necessity for a continuance.  But if the record, as developed, makes
it apparent that the defendant cannot ever stand trial, the United States
Attorney should request authority from the Tax Division to dismiss the indictment
or information.  If the physical condition is only temporarily disabling, only
a continuance should be permitted. 


                   4.05  MENTAL INCOMPETENCY 

4.05[1]  Evaluation at Administrative Level

      In criminal tax cases, where the taxpayer is in a money-producing activity
during the prosecution years, lack of mental responsibility defenses are highly
questionable.  Because of the nature of criminal tax cases, it would be rare for
a case to be referred to the Tax Division for prosecution by the Internal Revenue
Service where there is clear and convincing evidence of a mental defense calling
for a decision not to prosecute at the administrative level.  In the usual case
where there are allegations of a mental disorder, the case is evaluated at the
administrative level in the framework of whether there is guilt beyond a
reasonable doubt and a reasonable probability of conviction.

      The net result is that except for cases where very serious mental disorders
are obvious, the Tax Division takes the position that it is up to the court to
determine whether a taxpayer is competent to stand trial.  This determination
should be made after an indictment has been returned or an information filed in
accordance with the appropriate judicial procedures.  See, in this connection,
the discussion which follows in Section 4.05[2], Insanity Defense Reform 
Act of 1984.


4.05[2]  Insanity Defense Reform Act of 1984

      The Comprehensive Crime Control Act of 1984, Pub. L. No. 
98-473, 98 Stat. 1837, made a significant series of changes in numerous 
areas of the federal criminal justice system.  Chapter IV of the Act 
contains the Insanity Defense Reform Act of 1984, Pub. L. No. 98-473, 
98 Stat. 1837, 2057, which governs, among other things, the insanity defense 
and the determination of mental competency to stand trial.  Where 
applicable, the provisions of the Insanity Defense Reform Act can have a 
significant bearing on the administrative evaluation of criminal tax cases 
as well as on trial procedures.    See USAM, § 9-9.000 
and USAM, § 9- 18.000.    

      Section 4241 of Title 18 governs procedures for the determination of
competency to stand trial and related commitments of the defendant.  Under
Section 4241, if competency is perceived to be an issue by the prosecutor, by
defense counsel, or by the court itself, a psychiatric examination may be ordered
and a hearing is to be held on the defendant's competency to stand trial. 
See USAM, § 9-9.000 and USAM, § 9-18.000.


                     4.06  SEARCH WARRANTS 

4.06[1]  Generally

      Department of Justice policy formerly required that all search warrants in
criminal tax cases be approved in advance by the Tax Division.  This policy was
based upon the premise that the law on search warrants was so unsettled that
strict scrutiny was warranted.  As case law concerning search and seizure
developed, it became clear that, upon a showing of probable cause, the government
could conduct reasonable searches for the purposes of obtaining documentary
evidence establishing the commission of a crime.  

      With case law becoming more settled, the Assistant Attorney General, Tax
Division, by Directive No. 52 (January 2, 1986), which superseded an earlier 1984
Directive No. 49, delegated to certain personnel in United States Attorneys'
offices the authority to approve the execution of certain limited Title 26 or
tax-related Title 18 search warrants directed at offices, structures, premises,
etc., of targets or subjects of the investigation.  The existing authority
delegated to United States Attorneys' offices and the authority reserved to the
Tax Division contained in Tax Division Directive No. 52, is reproduced in Section
3.00 of this Manual.  See also USAM, § 6-4.130.


4.06[2]  Procedures Under Directive No. 52

      In those instances where authority to approve a search warrant has been
delegated to the United States Attorney's office, a direct request for a search
warrant may be made by District Counsel, I.R.S., to the United States Attorney's
office.  Note, however, that in the United States Attorney's office, the only
persons who can approve the application for a search warrant are the United
States Attorney, the First Assistant United States Attorney, or the Chief of the
Criminal Division in the office.  This authority to approve cannot be delegated
to anyone else in the office of the United States Attorney.

      The name and telephone number of the Assistant United States  Attorney(s)
in each office who, in addition to the United States Attorney, is authorized to
approve search warrants under the delegated authority is to be forwarded to the
Tax Division.  The names will be retained in the Tax Division files, with a copy
given to the Internal Revenue Service.

      Because the questions of privilege and status in the investigation remain
sensitive legal issues, the Tax Division has delegated the authority to approve
search warrants in tax cases only in those limited instances where the search
warrant is directed at offices, structures, or premises owned, controlled, or
under the dominion of the subject or target of a criminal investigation.  The
subject, or target, moreover, must not fall into the eight exempted categories
listed in the delegation order (Directive No. 52, para. 4).  The exempted
categories, which include accountants, lawyers, physicians, public
official/political candidates, members of the clergy, news media representatives,
labor union officials, or officials of 501(c)(3) tax exempt organizations, are
deemed to be of such a sensitive nature that prior approval of the Tax Division
is still required before a search warrant is obtained.

      Aside from questions of strict legality, search warrants in tax
investigations involve potential problems and issues intrinsic to tax cases.  The
concept of seizing personal or business books and records as the evidence or
instrumentality of a crime is not as direct or simple as the seizure of
contraband.  These documents can contain information considered to be personal
and confidential, and these very same documents, which, by their own nature, are
not unusual, illegal, or dangerous, will be the evidence or the instrumentality
of the crime to be charged.  In addition to the controversial nature of such a
seizure of documents, the requirement that the items to be seized must be named
with specificity is more difficult to meet.  In tax cases, the warrant must be
specific, not only regarding the items to be seized and the place searched, but
a specific time frame must also be stated, e.g., records for the 
years 1996 and 1997.


                          4.07  APPEALS

      The procedures and rules governing appeals are set forth in the
USAM, § 2-1.000 et seq., and § 9-2.170, and should 
be reviewed and followed when handling a criminal tax or other appellate 
matter. Attention is called to the particular following procedures set forth 
in the USAM.

       In all cases resulting in adverse decisions, all recommendations for and
against appeal, the filing of a petition for certiorari, and direct appeal to the
Supreme Court must be authorized by the Solicitor General.  This includes
interlocutory appeals under 28 U.S.C., Sec. 1292(b) and litigation in state
courts subject to review by a higher state court or by the United States Supreme
Court.  It also includes the filing of an amicus curiae brief, petitions seeking
mandamus or other extraordinary relief, and the filing of a suggestion for a
rehearing en banc.  USAM, § 2-2.120 and § 9-2.170.

      The United States Attorney has the appellate responsibility for the
handling of criminal tax cases in the courts of appeals that have been tried by
the United States Attorney unless the Assistant Attorney General, Tax Division,
elects that the Tax Division handle a particular category of cases or a case on
appeal.  USAM, § 2-3.100.

      The Tax Division, and specifically the Criminal Appeals & Tax Enforcement
Policy Section (CATEPS), has the appellate responsibility for the handling of
criminal tax cases that have been tried by personnel of the regional Criminal
Enforcement Sections of the Tax Division.  USAM, § 2-3.100.

      The need for immediate reporting of adverse decisions, whether at the trial
level or the appellate level, is stressed in USAM, § 2-2.110 as 
follows:

            In any civil or criminal action before a United States District
      Court or a United States Court of Appeals, in which the United States is
      a litigant, and a decision is rendered adverse to the government's
      position, the U.S. Attorney must immediately transmit a copy of the
      decision to the appellate section of the division responsible for the
      case.

      To secure the necessary authority from the Solicitor General to appeal or
not appeal a criminal tax case, the United States Attorney or the Chief of the
appropriate regional Criminal Enforcement Section of the Tax Division "must
promptly" make a report to the Chief, Criminal Appeals & Tax Enforcement Policy
Section (CATEPS), Tax Division. See USAM, § 2-2.110, et 
seq.  The Tax Division prefers that such reports be made promptly by 
telephone to the Chief of CATEPS at (202) 514-3011.  

      Following receipt of an adverse decision, CATEPS solicits the views of the
regional Criminal Enforcement Section of the Tax Division, the United States
Attorney, and the Internal Revenue Service on appropriate further action.  CATEPS
then prepares a Tax Division memorandum for the Solicitor General which reflects
the views and recommendation of the Tax Division, as well as the views of those
solicited.  In cases tried by Criminal Enforcement Section personnel of the Tax
Division, the Tax Division prosecutor should confer with the United States
Attorney with respect to the recommendation to be made by the Criminal
Enforcement Section to CATEPS.  USAM, § 2-3.100. 

      For these and other issues relating to appeals in criminal tax cases,
contact the Chief, CATEPS, Tax Division at (202) 514-3011.


               4.08  REQUESTS FOR TRIAL ASSISTANCE

      While United States Attorneys usually have the initial responsibility for
the trial of criminal tax cases, the Criminal Enforcement Sections of the Tax
Division have staffs of highly qualified and specialized criminal tax trial
attorneys who will prosecute or render assistance in the trial of criminal tax
cases upon request.  The assistance, for example, may be in the form of a senior
Criminal Enforcement Section attorney of the Tax Division assuming all trial
responsibilities of a particular case or in the form of a junior attorney of the
Tax Division acting as co-counsel with an Assistant United States Attorney.

      If trial assistance is needed, the request should be in writing, stating
the relevant reasons, and made well in advance of any court setting.  Requests
for assistance should be addressed to the Chief of the appropriate Criminal
Enforcement Section, Tax Division, Department of Justice, Washington, D.C. 20530. 
Where time is a factor, the request may be by phone to the appropriate Chief. 
Such telephone requests should be confirmed in writing.  See Section 
1.02 of this Manual, supra.

 
                    4.09  STATUS REPORTS

      After criminal tax cases have been referred to a United States 
Attorney, it is essential that the Tax Division be kept advised of all 
developments.   As the case progresses, the minimum information 
required for the records of the Tax Division is as follows:

      1.    A copy of the indictment returned (or no billed), or the 
            information filed, which reflect the date of the return or 
            filing, and the date of any no bill;

      2.    Date of arraignment and kind of plea; 

      3.    Dates of trial; 

      4.    Verdict and date verdict returned; 

      5.    Date and terms of sentence; and 

      6.    Date of appeal and appellate decision.

      It is important that information regarding developments in pending 
cases be provided to the Tax Division in a timely manner in order that the 
Department's files reflect the true case status and so that, upon completion 
of the criminal case, the case can be timely closed and returned to the 
Internal Revenue Service for the collection of any revenue due through civil 
disposition.  USAM § 6-4.248.

 
               4.10  RETURN OF REPORTS AND EXHIBITS

      Upon completion of a criminal tax prosecution by a final judgment and the
conclusion of appellate procedures, the United States Attorney should return to
witnesses their exhibits.  All other grand jury material should be retained by
the United States Attorney under secure conditions, in accordance with the
requirement of maintaining the secrecy of grand jury material.  Fed. R. Crim. P.
Rule 6(e).                            

      All non-grand jury reports, exhibits, and other materials furnished by the
Internal Revenue Service for use in the investigation or trial should be returned
by certified mail, return receipt requested, to the appropriate District
Director, Internal Revenue Service, Attention: Chief, Criminal Investigation
Division, as directed in the Tax Division's letter authorizing prosecution, or
as directed by Regional Counsel in cases directly referred to the United States
Attorney.