Principal Comments on Unclaimed Deductions and Losses in Sentencing Tax Loss Determinations

Principal Comments on Unclaimed Deductions and Losses in Sentencing Tax Loss Determinations

The Sentencing Commission has received comments and testimony from principal constituents as to the issue of whether unclaimed deductions and credits should be permitted to reduce the tax loss in the critical tax loss calculation for sentencing purposes. The sentencing tax loss, like the loss in other financial crimes, is the most influential determinant in the sentencing guidelines calculations in most cases. I have previously discussed this and cited to an article by Messrs. Toscher and Perez. See The Role of Unclaimed Deductions in Computing Tax Loss For Sentencing (3/1/13), here.

I offer the following comments principally to DOJ Tax's comments urging that unclaimed deductions and credits not be considered for the tax loss determination. Here are some key excerpts from the DOJ Tax letter that should set the stage for persons generally familiar with the issue:

"Tax loss" under the Guidelines is distinct from a tax deficiency in a civil tax case or an order of restitution. Tax loss, by definition, should address the entirety of the harm intended by the defendant, including for example the harm caused by concealment through omitting certain deductions. It is only through civil enforcement that the government should be charged with determining the correct tax liability, and restitution serves merely as an aid in the collection of that liability.

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