On July 12, 2000, criminal referral authority was transferred from the Office of Chief Counsel to IRS-CI. It is now CI's responsibility to ensure that criminal tax and/or tax related investigations are properly closed in order to allow civil tax enforcement procedures to begin or resume. IRS operating divisions may not proceed civilly until the criminal tax and/or tax related investigation is closed and any referral to the Department of Justice (DOJ) is terminated. Generally, termination of the referral is accomplished by a letter from DOJ. However, DOJ has delegated preparation of the letter terminating the referral from the IRS by way of the automatic closing procedures.

DOJ has agreed to immediate and automatic closing of the following tax and tax-related criminal investigations (both administrative and grand jury), without express written DOJ authorization:

Where investigations are closed pursuant to the automatic closing procedures, the SAC will notify DOJ, Tax Division.

In order to close a criminal tax or tax-related investigation that was referred to DOJ, Tax Division which fails to come within the automatic closing procedures, CI must receive formal notice from DOJ, Tax Division that the department's file is closed. The special agent or the SSA will be responsible for requesting the closing letter from DOJ, Tax Division.

The Criminal Investigation Management Information System (CIMIS) closing procedures are also found in this section.

This section covers procedures for the following types of investigations that fall within the automatic closing procedures:

This section covers procedures for forwarding the tax information to the appropriate operating division for assessment or collection where the criminal aspects of an investigation are concluded.

This section deals with post-closing civil and administrative activities.

This section also covers closing procedures on discontinued administrative and grand jury investigations.

IRM 9.1.2, Authority, states guidance about the basic responsibilities related to taxpayer rights, employee contact information, oral and written communication, and the authority for conducting criminal investigations that special agents should understand and apply in the performance of their duties.

See IRM 25.26.1.1.1, Authority, for delegated authority relating to IRM 9.5.14, Closing Procedures.

The Director, FC is responsible for providing policy and guidance for CI employees and ensuring consistent application of policy and closing procedures for the business unit and in accordance with DOJ policies.

The Director, FC is responsible for developing, maintaining, and overseeing this IRM and ensuring compliance with current policies and procedures.

The Director, Advanced Analytics & Innovation is responsible for the delivery of policy and guidance that impacts CIMIS processes.

Program Goals - The information explained in this IRM describes CI closing procedures that special agents must understand and apply in the performance of their job duties to prepare timely and accurate closing procedures, including notifying our civil and law enforcement partners of investigation outcomes.

Program Reports – Information regarding the reporting of program objectives, specifically as it relates to closing reports with conditions of probation and criminal restitution forwarded to our civil partners, are included in, but not limited to, monthly reconciliation reports, CIMIS reports and Business Performance Reviews. These reports provide reliable and timely information. Periodic program reviews are conducted to:

Program Effectiveness – Program effectiveness is measured by the FC program manager that leads the Conditions of Probation/Criminal Restitution Coordinators across the various field offices and monitors case closing timeliness and accuracy, specifically as it relates to cases with conditions of probation and criminal restitution.

The Director, FC and Director, Advanced Analytics & Innovation will:

CI Headquarters (HQ) FC provides recommendations and best practices for the various field offices. The SAC of the field office determines which recommendations and best practices will be adopted for each particular field office.

The Director, FC will review and oversee their program as well as ensure employee compliance with all applicable elements of this IRM.

The table lists commonly used acronyms and their definitions:

IRM 5.8.4.24.1, Offers in Compromise Submitted that Include Restitution.

IRM 5.8.7, Offer in Compromise, Return, Terminate, Withdraw, and Reject Processing.

IRM 5.8.8, Offer in Compromise, Acceptance Processing.

IRM 9.3.1, Disclosure.

IRM 9.4.1.4.1.5, Direct Referrals - Prime Leads.

IRM 9.4.2.6.3.1, SCIP - Investigation Selection.

IRM 9.5.11, Other Investigations.

IRM 9.5.13.5, Offers in Compromise.

IRM 9.5.13.5.1, Offers in Pending Criminal Investigations.

IRM 9.6.2, Plea Agreements and Sentencing Process - Criminal Investigation.

IRM 9.9.4, Criminal Investigation Management Information System Data Fields.

IRM 25.26.1, Restitution, Criminal Restitution and Restitution-Based Assessments.

The amount of restitution ordered by the Court payable to the IRS creates two separate debts for the same liability. The first debt is the "restitution judgment" which the Department of Justice Financial Litigation Unit is responsible for collecting. The second debt is the "restitution-based assessment" which will be assessed and collected by the IRS in the same manner as if it was a tax. These two separate debts provide two different means for collection, but the liability cannot be collected twice.

When the court orders an individual convicted of a tax or tax-related crime to perform certain conditions of probation at sentencing, such as payment of taxes/restitution, the special agent should work with the AUSA to get the amounts of restitution ordered by tax year or tax period entered into the court record along with the total amount of criminal restitution. This is particularly important in Grand Jury tax investigations because the special agent report and other documents created cannot be provided to our civil counterparts.

Within thirty (30) days of final adjudication, for all cases involving an order of criminal restitution payable to the IRS, the special agent will complete Form 14104 as an attachment to the Form 13308, Criminal Investigation Closing Report and send the package forward to the IRS’s civil functions. It is the responsibility of the special agent to notify the civil functions of the total amount of restitution attributable to each tax year or period. This is necessary for SBSE Technical Services Criminal Restitution branch to properly create the restitution-based assessment and input the amounts into the tax module. (See the Form 14104 for additional detailed routing information).

The total amount listed on the Form 14104 MUST equal the EXACT amount listed on the Judgement and Commitment Order (J&C) and the amounts must be broken down by tax period. SBSE Tech Services cannot make these determinations on their own. In RPP cases, the client list must be attached to the Form 14104 with amounts broken down by tax year.

In cases where Criminal Restitution has been ordered, the Form 4135, CI Control Notice should be completed and forwarded to the Centralized mailbox for controls; CI-CONTROLS@ci.irs.gov with the CI closing package. This should ensure the 91X controls are removed or the proper controls are in place prior to the civil function attempt to institute the restitution-based assessment.

At the time of the case sentencing, CIMIS should be updated. Any months to serve, probation terms, fines, criminal restitution ordered to the IRS ONLY and conditions of probation expiration date should be entered. See IRM 9.5.14.17 for details relating to CIMIS entries.

The information available for use by the other operating divisions in the assessment or collection of tax following a criminal investigation depends upon whether an investigation was conducted administratively or through the grand jury process.

Upon the completion of the defendant’s probation term two actions will be taken:

The description for these results can be found in the CIMIS reference materials. Note: Justification for a CIMIS entry of "will not be met" will be maintained in the administrative case file.

The 910 controls can be removed prior to the end of the probation term but only if all IRS conditions of probation have been satisfied. For example, defendant A has a probation term of 24 months. The J&C orders restitution to be paid and amended returns filed. If the restitution is paid and the amended returns are filed prior to the end of the 24 months, the 910 controls can be removed.

The Tax Reform Act of 1969 changed the name of the Tax Court of the United States to the U.S. Tax Court and established it as a court of record under Article I, Section 8, Clause 9, of the Constitution. It is now part of the Judicial Branch of government. In addition to the powers it already possessed, the U.S. Tax Court has been given the power to punish contempt of its authority, and to enforce its decisions by issuing any writ, etc., which a U.S. District Court can issue (26 USC 7441-7456).

In a U.S. Tax Court trial, evidence is admitted and excluded much as it would be in a civil non-jury trial in the U.S. District Court. In general, the Commissioner of the IRS' determination of deficiency is presumed to be correct unless the taxpayer produces credible evidence with respect to any factual issue relevant to ascertaining the correct tax liability, or any item of income reconstructed solely through the use of statistical information on unrelated taxpayers. In these investigations, the IRS has the burden of proof with respect to the issue(s) in question (Tax Court Rules of Practice) (26 USC 7491(a) and (b)). The IRS has the burden of proof where the IRS has asserted the civil penalty. The evidence in that respect must be "clear and convincing," not "beyond a reasonable doubt" as in a criminal investigation, but more than a "mere preponderance." The failure of the IRS to prevail on the fraud issue does not relieve the taxpayer of the burden of overcoming the prima facie correctness of the determination of the deficiencies unless the exceptions noted above are present or the assessment was not made within the applicable statute of limitations.

Record of the disposition of the criminal investigation against a taxpayer is admissible in the U.S. Tax Court on the issue of fraud. Despite an acquittal in a criminal investigation, the same evidence may be sufficient to prove fraud in the civil investigation.

A conviction for attempted tax evasion in the U.S. District Court is conclusive in U.S. Tax Court proceedings as to the fraud issue, on the same facts and particularly on the same amounts.

A plea of guilty can be used as an admission of the taxpayer in a civil matter concerning taxes and penalties against the taxpayer based on the same facts.

A plea of nolo contendere subjects the defendant to the same punishment as a plea of guilty but does not mean the defendant admits the charges. It cannot be used against them as an admission in any civil suit for the same act.

A guilty plea in a criminal investigation will be received by the U.S. Tax Court as an admission to be given weight according to the circumstances. A plea to tax evasion may be sufficient to establish civil fraud for the same facts and tax/tax years. However, such a plea in a failure-to-file investigation may constitute only a willful omission and passive neglect to perform a statutory duty and not render the taxpayer liable for the fraud penalty.

The Commissioner is not barred from assessing the fraud penalty by the taxpayer’s filing correct amended returns and paying additional taxes due after filing fraudulent returns; or the death of the taxpayer, since the penalty is for an offense against property rights and not personal rights.

It is the special agent's responsibility during a criminal investigation for the development of evidence to sustain the ad valorem additions to the tax (except those concerning tax estimations). Consequently, during a U.S. Tax Court trial where the fraud penalty is at issue, the special agent is often a principal witness for the government.

It is the duty of the special agent in the preparation for trial and the presentation of the investigation in U.S. Tax Court to consult with and assist the Counsel attorney assigned to the matter.

Counsel normally will request from the SAC, copies of any reports and supporting data in the investigation which were prepared by the special agent, to be used solely in connection with the preparation of the matter before the U.S. Tax Court. Counsel will not use the information for the purpose of evaluating the merits of the criminal investigation.

The SAC will identify issues and items in the Criminal Investigation Closing Package which need to be protected from disclosure to the extent possible under the requirements of the U.S. Tax Court.

Requests relating to grand jury investigations will be referred to CT Counsel.

Information developed during the course of an administrative investigation can be used by the other operating divisions in the assessment and collection of a tax liability. The SSA will communicate the withdrawal to the cooperating and/or referring group manager of the other operating division. If a fraud referral prompted the investigation, the SSA will also communicate the withdrawal to the Fraud Referral Specialist, Group Manager.

The special agent will prepare a report of discontinued investigation. If the investigation was tax or tax-related the appropriate Criminal Investigation Closing Package (See IRM 9.5.14.5) will be prepared.

The discontinued investigation report will include:

When the SAC approves a final report discontinuing a tax or tax-related administrative investigation, they will promptly forward the reports to the TM of Technical Services and Advisory Technical Services and ensure the Form 4135 is completed within five days of the investigation closing.

If a grand jury investigation does not result in a prosecution recommendation, the special agent will prepare a discontinued investigation final report similar to the administrative discontinued final report and address it to the AUSA.

The special agent should prepare separate exhibit folders for information developed during the administrative aspects of the investigation (if there were any) and for documents governed by Rule 6(e). Grand jury information should be clearly labeled, and the SAC should not give copies of documents containing grand jury information to any person not specifically on the grand jury access list.

Discontinued grand jury investigations do not fall under the automatic closing procedures. Accordingly, it is necessary to obtain concurrence from the AUSA overseeing the grand jury investigation regarding the decision to discontinue the investigation. The special agent or the SSA will be responsible for requesting the closing letter from DOJ, Tax Division. (See IRM 9.5.14.1)

At the conclusion of a grand jury investigation that does not result in a criminal prosecution, within five workdays the SAC will ensure that a closing letter is prepared. The letter should include the following (see Exhibit 9.5.14-4, Closing of Discontinued Tax Grand Jury Investigation Letter - a template for the letter exists on the Financial Crimes SharePoint site.):

The SAC will ensure the closing letter is mailed to DOJ, Tax Division, Chief of the Criminal Enforcement Section, and copies to the AUSA and CT Counsel when the grand jury investigation involves tax or tax-related violations.

If the investigation was tax or tax-related, the special agent will prepare a Criminal Investigation Closing Package. (See IRM 9.5.14.5)

In Grand Jury investigations, the closing report will be prepared in accordance with Rule 6(e) in that matters occurring before the grand jury will not be disclosed.

Information developed during the course of a grand jury investigation typically cannot be used by other operating divisions in the assessment and collection of a tax liability unless a Rule 6(e) Order is obtained by the AUSA. (See IRM 9.3.1, Disclosure)

If a field office decides to withdraw from a Simultaneous Criminal Investigation Program (SCIP) investigation, (See IRM 9.4.2.6.3.1, SCIP - Investigation Selection):