part9-29
- 9.5.11.1
Overview - 9.5.11.2
Bribery & Undue Influence - 9.5.11.3
Forcible Rescue of Seized Property - 9.5.11.4
Offers in Compromise - 9.5.11.5
Wagering - 9.5.11.6
Excise Tax
-
This section details investigations categorized
as “other specialized investigations”
. The topics outlined
in this section are:-
Bribery & Undue Influence
-
Forcible Rescue of Seized Property
-
Offers In Compromise
-
Wagering
-
Excise Tax
-
Collateral Investigations
-
Probation Revocation Investigations
-
Voluntary Disclosure Practice
-
Armed Escorts Assignments
-
Protection and Maintenance of Informants and Witnesses
-
-
Soliciting information or influencing an IRS employee
in his/her official capacity is explicitly prohibited by statute. This section
discusses investigations of bribery and investigations of Executive Branch
employees who try to influence the action of IRS employees.
-
The principal elements of a bribe are: promising,
offering, or giving of a thing of value to an officer or an employee of the
United States, or anyone acting on behalf thereof, for the purpose of influencing
his/her official conduct. -
To “offer”
and to ”
give”
a bribe are distinct crimes even when part of a single transaction.
The test of whether a single transaction includes distinct offenses of offering
and of giving a bribe is whether the separate acts have been committed with
the requisite criminal intent. -
Regardless of the occasion, the statute is violated
when a bribe is given or an offer of a bribe is made and the acceptor or offeree
of the bribe is a person described in the statute.
-
The Treasury Inspector General for Tax Administration
(TIGTA) and the Federal Bureau of Investigation (FBI) investigate allegations
of bribery, including attempted bribery of IRS employees and investigations
where IRS employees are suspected of soliciting or receiving bribes. Investigative
authority also includes investigations where non-IRS personnel are alleged
to have solicited or received bribes while employed by the IRS. -
The Treasury Inspector General for Tax Administration
investigates all charges of attempted bribery of IRS employees. -
The Treasury Inspector General for Tax Administration
should notify Criminal Investigation (CI) of any attempt to bribe IRS personnel
when the bribe attempt may have tax related issues within CI jurisdiction.
This notification will be done when TIGTA determines that the tax investigation
or other action by CI will not interfere with or affect the investigation
of the attempted bribery. -
When there has been an allegation of an acceptance
of a bribe, CI may work a joint investigation with TIGTA by inquiring into
the attempted evasion of income tax as to the amount of bribe received and
any other possible tax violations that pertain to the alleged bribe.
-
Except when executing search and/or arrest warrants,
when a special agent is offered a bribe, or believes that an offer will be
made, he/she shall:-
attempt to hold the matter in abeyance by avoiding any statement or implication
about whether or not he/she will accept the bribe -
immediately report the matter, by telephone, to TIGTA and to his/her Supervisory
Special Agent (SSA) -
submit, as soon as possible, a memorandum to TIGTA detailing the full
circumstances concerning the matter; the special agent will route the memorandum
as directed by TIGTA or his/her representative on a case-by-case basis -
avoid any unnecessary discussion of the investigation and cooperate with
TIGTA in the investigation
-
-
If a bribe offer occurs during the execution of
a search or arrest warrant, the special agent should prepare a sworn statement
as to what was said by the offerer. The special agent should establish, from
the words and conduct of the offerer, that his/her intent was that of offering
a bribe to a special agent. The special agent should be able to testify about
the conduct of the parties, their conversations, and any transactions that
took place. -
If during an arrest the bribe offer is made by
someone other than the person under arrest, the individual making the offer
should also be placed under arrest and charged with offering a bribe. -
If the offer is made by someone already under
arrest, additional charges for offering the bribe should be recommended against
that individual. -
If money has been handed to the special agent,
he/she should make a list of the serial numbers and denominations in the presence
of at least one other special agent and note any other distinguishing features.-
The special agent should then put the money in an
envelope or in some other suitable container and seal it in a way that the
seal will have to be broken to get to the contents. -
The special agent should take the container to the
field office cashier or cashier’s representative for safekeeping. -
The cashier or cashier’s representative must
keep the container in the exact condition in which it was received. -
The special agent should explain the chain of custody
procedure to the cashier or cashier’s representative so the chain of
custody will be preserved.
-
-
If currency and/or other valuables have been passed
on to the special agent, the special agent should adhere to proper evidentiary
procedures. -
Criminal Investigation will notify TIGTA of the
bribe offer as soon as possible.
-
If an allegation or overture of bribery is made
during a grand jury investigation, CI will inform TIGTA of the allegation
or overture as well as the name of the attorney for the government assigned
to the investigation. -
The information provided in the initial report
should be limited to the information detailed above in subsection 9.5.11.2.3.1,
Attempted Bribery During the Execution of a Search or Arrest Warrant. -
Criminal Investigation will inform the attorney
for the government of the incident and relate that the matter has been reported
to TIGTA. -
The Treasury Inspector General for Tax Administration
will contact the attorney for the government regarding the allegation or overture.
Any subsequent investigation by TIGTA will be coordinated with the attorney
for the government and CI.
-
Title 26 USC §7217 makes it unlawful for
any person to request an IRS employee to conduct or terminate an audit or
investigation. The prohibition applies to both direct requests and requests
made through an intermediary. As there are limited exceptions to this prohibition,
each request must be evaluated individually. Any employee receiving any such
request shall report the incident to TIGTA.
-
Criminal Investigation has the responsibility
for conducting investigations involving forcible rescue or dispossession of
property seized under the Internal Revenue laws, except property seized by
the Bureau of Alcohol, Tobacco and Firearms (ATF). -
Theft of government property, including seized
property which has been adjudicated as government property and seized property
which has been turned over to the US Marshal Service in a libel proceeding,
falls within the jurisdiction of the Federal Bureau of Investigation.
-
The essential elements of 26 USC §7212(b)
are:-
forcible rescue or attempt to forcibly rescue
-
property that was validly seized pursuant to 26
USC
-
-
The essential elements of 18 USC §2233 are:
-
forcible rescue or dispossession or an attempt to
forcibly rescue or dispossess -
property taken, detained, or seized under authority
of a revenue law of the United States or by any person authorized to make
searches and seizures
-
-
A rescue of seized property prosecution recommendation
may be made if:-
There has been a seizure, levy, or other taking,
which is sufficient to put the individual on notice that the property is under
process of seizure for taxes. -
There is a retaking by physical force, stealth,
or in any other manner, that indicates a willful defiance of the legal process.
-
-
Investigations interpreting forcible rescue under
both 26 USC §7212(b) and 18 USC §2233 permit prosecution against
any individual who rescues or dispossesses, or attempts to rescue or dispossess,
property of which the government has taken legal possession. -
By current practice, determination of whether
an alleged forcible rescue is to be investigated by CI or the FBI depends
on whether the property was taken before or after it was adjudicated government
property. Before undertaking an investigation, the special agent should first
determine if it is to be handled by CI, as set forth above in subsection 9.5.11.3,
Forcible Rescue of Seized Property. -
If the investigation is within CI jurisdiction,
the special agent should initially determine whether the property had been
validly seized under the USC, and then determine whether it was forcibly rescued
or had an attempt to forcibly rescue it been made. -
The underlying seizure must be valid on its face
before it can be considered a forcible rescue investigation under 18 USC §2233
or 26 USC §7212(b). A seizure valid on its face will generally support
a rescue conviction even if the seizure could be invalidated by a court. It
should be shown the person retaking the property had knowledge of the seizure
or of the fact the property was in the possession of the government. It is
not a defense that the person retaking the property claims to be the real
owner or claims the property was seized by mistake. A person’ s remedy
is judicial, not self-help. -
To determine whether the property has been validly
seized:-
Examine the file relating to the seizure and obtain
certified copies of all the documents that give legal basis to the seizure. -
Interview all officers, employees, or other persons
that have knowledge of the circumstances that led up to the seizure and/or
those that relate to the actual seizure. -
Establish that a notice of seizure was attached
to the property.
-
-
“Forcible”
does not necessarily
mean actual physical violence to an officer. It includes threatening language
and/or conduct intended to intimidate the revenue officer to make him/her
stop the performance of his/her official duty. It has been held that a forcible
rescue under 26 USC §7212(b) includes the use of force against property,
such as the breaking of a bank window, the removal of the IRS seal on a safe
deposit box, and the removal of the box and its contents from the bank. -
To determine whether there has been a forcible
rescue or an attempted forcible rescue, the special agent should:-
Interview all individuals who witnessed the incident
to determine the facts that led up to and pertain to the actual seizure and
whether any threatening language, as well as a description of any menacing
gestures, instruments, or weapons were used during the forcible rescue. -
Obtain any instruments or weapons used by the assailant
and get the names and addresses of witnesses who can identify them. -
Establish what knowledge the subject had that the
property was under seizure when the forcible rescue was committed or attempted.
(See IRM 9.4.12, Arrests).
-
-
The elements essential to constitute an offense
under this section are: corruptly, or by force, or threats of force (including
any threatening letter or communication), endeavored to impede or obstruct
the due administration of the Internal Revenue laws. -
This section provides for the punishment of threats
or threatening acts against agents of the IRS, officers or employees of the
United States and/or members of the families of such persons due to the performance
by such agents or officers or employees of their official duties. -
The Conference Committee’s Report (House
and Senate) states that: “Subsection (a) of 26 USC §7212
is broader than 18 USC §111, relating to persons assaulting, resisting,
or impeding certain officers or employees of the United States while engaged
in the performance of their official duties, in that 26 USC §7212(a)
covers force or threats of force (including any threatening letter or communication)
or corrupt solicitation. Threats of force have been defined as meaning threats
of bodily harm to the officer or employee of the United States or members
of the families of such persons, on account of the performance by such agents
or officers or employees of their official duties.” -
“Corruptly”
refers to an attempt
to influence any official in his/her official capacity under this title by
any improper inducement. For example, an offer of a bribe or a passing of
a bribe to an IRS employee for the purpose of influencing the performance
of his/her official duties is corrupt interference with the administration
of Federal laws.
-
Although there is some overlap between 18 USC
§111 and 26 USC §7212(a), the latter is broader because it includes
the use of force or threats of bodily harm against an officer or employee
of the United States acting in his/her official capacity under the Internal
Revenue laws and/or any member of his/her family. -
Under 26 USC §7212(a) a threat of force is
chargeable only as a misdemeanor even if it consists of pointing a rifle at
the agent. -
Title 18 USC §111 makes it an offense to
assault, resist, oppose, impede, intimidate, or interfere with officers or
employees designated under 18 USC §1114 (including IRS employees), and
provides a much more severe punishment when the act is committed with a deadly
or dangerous weapon. -
Investigations under 18 USC §111 have not
required proof of knowledge of the official capacity of the person assaulted.
-
The Treasury Inspector General for Tax Administration
has primary responsibility over 26 USC §7212(a) allegations which involve
broad-based, systemic attempts to corruptly interfere with or impede tax administration
generally, and/or any actions designed to harass IRS employees or interfere
with activities or functions of IRS personnel. This could include the filing
harassing liens designed to intimidate, influence, tamper with, or retaliate
against IRS employees and their families, or other related persons such as
witnesses and informants, as well as the filing of fictitious Forms 8300 on
public officials not directly involved in tax administration. Also included
are acts which collectively constitute a broad-based, systematic attempt to
corruptly interfere with or impede tax administration generally, as opposed
to a substantive tax offense. -
Criminal Investigation has investigative responsibility
over 26 USC §7212(a) corrupt interference allegations that involve substantive
tax violations of non-employees or interference with the activities within
the responsibility of CI. Criminal Investigation also has investigative responsibility
for forcible rescues under 26 USC §7212(b). -
There are instances in which jurisdictional overlap may occur between
TIGTA and CI. In these instances, it is essential that TIGTA and CI management
communicate effectively in order to avoid the duplication of investigative
efforts and facilitate joint investigations when appropriate. -
All reports of assaults or threats against IRS
employees must be forwarded directly to or through appropriate supervisory
channels to TIGTA. -
Criminal Investigation will assist TIGTA in urgent
or emergency situations. The Treasury Inspector General Tax Administration
will evaluate the situation. If it is determined that the deployment of TIGTA
personnel is not required, TIGTA may request assistance from CI to conduct
the investigation of the alleged threat or assault and will be provided with
a copy of the investigative report. -
In emergency forcible interference situations
where an employee is in imminent danger of physical harm, CI will respond
immediately. -
When an assault or threat occurs in the course
of an armed escort or during execution of search, seizure, or arrests warrants,
CI may take appropriate enforcement action, such as placing the attacker under
arrest. Criminal Investigation will promptly notify TIGTA and provide documentation
concerning the incident and the action taken. The Treasury Inspector General
Tax Administration will determine what investigation by TIGTA is warranted
and will initiate appropriate processing of Potentially Dangerous Taxpayer
(PDT) determinations.
-
When an employee believes he/she has been assaulted,
threatened, or harassed, the employee should personally visit or telephone
the servicing TIGTA office as soon as practicable to report the circumstances
of the incident. The employee should furnish the taxpayer’ s full name
and Social Security Number (SSN) and Employer Identification Number (EIN),
if appropriate.
-
Employees must report to TIGTA all assaults, threats,
or forcible interference against them in the course of their official duties
and all assaults or threats against members of their families when made to
impede the performance of the employee’s official duties. -
Employees should report these incidents by telephone
or in person to their local TIGTA office as soon as possible after they occur.
-
Interference investigations may arise quite suddenly
during a seizure or some other enforcement, levy, or collection action. The
information pertaining to the incident will be promptly reported directly
to the SSA and the Special Agent in Charge (SAC). The SAC will continue to
monitor the investigation because of the hazard posed to the investigating
officer and because of the impact these investigations have on the enforcement
system of the IRS. -
Criminal Investigation is responsible for investigating instances of
interference when there is no threat or assault. However, when an assault
or threat occurs in the course of a CI armed escort assignment or during the
execution of a search, seizure or arrest warrant, CI may take appropriate
enforcement action, such as placing the attacker under arrest. Criminal Investigation
will promptly notify TIGTA and provide documentation concerning the incident
and the action taken. -
The Treasury Inspector General Tax Administration has the primary responsibility
to investigate instances involving assaults upon and threats to IRS employees.
The Treasury Inspector General Tax Administration will determine what investigation
by TIGTA is warranted and will initiate appropriate procession of the PDT. -
The special agents will fully cooperate with TIGTA
and furnish all pertinent information. The special agent should prepare a
comprehensive memorandum of activity and diagram, photograph, or videotape
the premises where the assault, menacing gestures, and/or threatening language
occurred.
-
The PDT identifies taxpayers who pose a threat to the safety of IRS
employees and their families when the employee’s official duties may
require personal contact with such taxpayer. -
The Treasury Inspector General for Tax Administration is responsible
for conducting PDT investigations and forwarding the investigative finding
to the IRS Office of Employee Protection. -
The IRS Office of Employee Protection is responsible for the management
and administration of the PDT database. The IRS Office of Employee Protection
is located in Detroit and is under the direction of Small Business/Self-Employed
(SB/SE) Director of Compliance Area 6. The Director of Compliance Area 6 makes
all PDT determinations after reviewing TIGTA’s investigative reports. -
If a local IRS executive does not concur with the Director of Compliance
’s determination, the matter is referred to General Legal Services for
reconsideration. General Legal Services is responsible for making the final
determination.
-
The laws relating to offers in compromise are
set forth in 26 USC §7121, 26 USC §7122, 26 USC §7123, and
26 USC §7206(5). Compromise procedures are also discussed in IRM 8.13.2,
Offers in Compromise.
-
Criminal Investigation is concerned with the following
types of offers in compromise:-
alleged fraudulent offers
-
offers involving joint investigations by CI with
the other operating divisions in which the criminal aspects have been completed -
offers made while criminal proceedings are pending
-
-
Special agents should acquaint themselves with
the contents of the sections of the USC dealing with offers in compromise
and the pertinent sections of IRM 8.13.2, Offers in Compromise.
-
An investigation of a fraudulent offer is referred
by the other operating divisions upon suspicion or discovery of the falsity
of material statements made in, or in connection with, an offer in compromise. -
The concealment of property, false statements,
or falsifying and destroying records in connection with any compromise may
result in criminal penalties. -
The principal elements are the willful:
-
concealing from any officer or employee of the United
States any property belonging to the estate of a taxpayer or any other person
liable in respect to the tax due -
receiving, withholding, destroying, mutilating,
or falsifying any book, document, or record of the taxpayer or any other person
liable in respect to the tax due -
making a false statement relating to the estate
or financial condition of the taxpayer or other person liable in respect to
the tax due
-
-
Criminal Investigation will investigate, report,
and process such investigations in the same manner as other tax fraud investigations.
(See subsection 9.5.11.4.5, Offers in Compromise Reports below.) -
Investigations of concealment involve identifying
all assets belonging to the subject or to any other person liable in respect
to the tax due. Establishing willfulness and intent is the same as in other
tax fraud investigations using techniques set forth in IRM 9.1.3, Criminal
Statutory Provisions and Common Law. -
Investigations involving the receipt, withholding,
destruction, mutilation, or falsification of any book, document, or record
is investigated in the same manner as any other tax fraud investigation. The
special agent will gather evidence to document the commission of the fraudulent
act and that the act was committed willfully & with the intent to defraud
the government. -
The investigative techniques used to prove false
statements are similar to those used in the investigation of violations of
18 USC §1001, False Statements and 18 USC §1621, Perjury.
-
Offers involving joint investigations with the
other operating divisions in which the criminal aspects have been completed
will be examined solely by the responsible operating division. Except as noted
in paragraph 2 below, the Territory Manager of the other operating division
will, after completion of the examination, refer the entire file to the SAC
for concurrence or comment when all of the following conditions exist:-
the merits of the ad valorem fraud or negligence
penalty are involved -
the offer involves an investigation in which the
special agent has written the final report and recommended the assertion of
such a penalty -
the other operating division contemplates recommending
acceptance of the offer
-
-
If the sole issue presented by the offer in compromise
is the ability to pay, referral to CI will not be made. -
The SAC should indicate his/her concurrence with
the recommended disposition of the offer by memorandum and return the entire
file to the other operating division for processing. -
If the SAC does not concur and no agreement can
be reached with the other operating division as to the disposition of the
offer, the matter should be elevated to the Director, Field Operations and
the respective operating division’s Area Director to resolve any differences.
Guidelines concerning the disposition of offers in compromise are contained
in IRM 8.13.2, Offers in Compromise.
-
The Chief Counsel represents the Commissioner
in the consideration of offers in compromise relating to situations in which
there is either pending litigation or in which litigation will ordinarily
arise, including investigations in which a recommendation for prosecution
has been made. The Chief Counsel has authorized Division Counsel to process
such matters. -
The Area Director will record all such offers
in compromise and forward the offer to the appropriate Division Counsel. Investigation
of the offer will be made thereafter only as specifically requested by the
Counsel office with jurisdiction. -
Requests may be made by Counsel for an examination
or investigation of a taxpayer’s financial status in connection with
an offer in compromise submitted in an investigation in which criminal proceedings
are pending in the Department of Justice (DOJ), or with the US Attorney. When
such an examination or investigation is conducted, it shall be conducted jointly
by CI and the respective operating division. -
There is no standard format for reports emanating
from joint investigations of a taxpayer’s financial status in connection
with an offer in compromise. Special agents preparing such reports will be
guided by the particular request and by the instructions contained in IRM
8.13.2, Offer in Compromise.
-
Reports relating to offers in compromise in joint
investigations, in which the criminal aspects have been closed and in which
the SAC concurs with the disposition recommended by the other operating division,
will be returned to the referring operating division along with a memorandum
of concurrence for further processing. -
If the SAC does not concur with the recommended
disposition, and agreement cannot be reached with the referring operating
division as to the disposition of the offer, the file will be forwarded to
the Director, Field Operations for resolution. Thereafter, the report will
be processed in accordance with regular operating divisions, Appellate, and
Division Counsel procedures. -
If criminal proceedings are pending in DOJ or
in the US Attorney’s office, any report related to offers in compromise
shall be forwarded by the SAC to DOJ after review by the Criminal Tax (CT)
Counsel.
-
Each SAC is responsible for identifying noncompliance
in the wagering tax area. -
The SAC shall maintain liaison with local and
state law enforcement officials to keep current with wagering enforcement
problems in his/her field office and to identify violators who warrant action
by CI. In all such contacts, IRS personnel shall adhere to existing disclosure
provisions; particularly, 26 USC §4424 and 26 USC §6103. (See IRM
9.3.1, Disclosure) -
Because of limited resources, CI will focus its
primary enforcement efforts at independent initiation and development of investigations
against important operators and situations involving widespread noncompliance.
Investigations developed by local and state authorities will not be adopted
for criminal investigation unless they present instances of flagrancy or situations
where there is high potential. -
Information, which lacks criminal potential for
CI, will be referred to Small Business/Self Employed (SB/SE) Compliance Programs
for further screening for possible civil tax collection potential. -
There are special disclosure restrictions regarding wagering investigations.
(See IRM 9.3.1, Disclosure (subsection on Wagering Tax Investigation.))
-
Department of Justice, Tax Division has taken
the position that wagering excise or occupational tax investigations are not
generally high priority investigations. The SAC will meet with the United
States or Strike Force Attorney to discuss these types of wagering tax investigations
to determine if they are prosecutable under DOJ, Tax Division standards. Disclosure
of information for this purpose is permissible under 26 USC §4424. -
The attorney for the government should be informed
that any information gleaned from data subject to 26 USC §4424 must be
used only for the administration of civil or criminal enforcement of the USC,
and that such information may not be used for intelligence or prosecutorial
purposes such as the enforcement of gambling offenses set forth in Title 18
of the USC or any other non-tax administration purpose.
-
Wagering taxes include three types of ”
excise taxes.”
The applicable taxes are:-
wagering excise tax (26 USC §4401) —
applicable to the acceptor of wagers (principal) -
special tax (26 USC §4411) — applies
to both the acceptor and the receiver of wagers (agent) -
wagering registration (26 USC §4412) on Form
11C is required of anyone who has to pay the special tax
-
-
Title 26 USC §4401 imposes an excise tax
on wagers. The excise tax on wagers authorized under state law was reduced
to 0.25 percent. The excise tax on wagers that are not authorized under state
law remains at 2 percent. Where both authorized and unauthorized wagers are
involved, the 0.25 percent rate will apply only to those wagers which are
authorized under state law. The remaining (or unauthorized) wagers will be
taxed at 2 percent. -
The wagering excise tax (26 USC §4401) is
applicable to the acceptor of wagers (principal) while the special tax (26
USC §4411) applies to both the acceptor and the receiver of wagers (agent).
In addition, pursuant to 26 USC §4401(c), an individual may become liable
for the excise tax in the event that he/she is liable for the special tax,
as an agent for a principle, and fails to disclose the identity of his/her
principle. Title 26 USC §4412 provides that each person required to pay
a special tax under 26 USC §4411 shall register with the designated IRS
official in charge of the IRS territory office where the wagering business
is conducted. Form 11C is used for the registration.
-
Wager—The term “wager”
means any wager with respect to a sports event or a
contest placed with a person engaged in the business of accepting such wagers;
any wager placed in a wagering pool with respect to a sports event or a contest,
if such pool is conducted for profit; and any wager placed in a lottery conducted
for profit. -
Lottery—The term “lottery”
includes the numbers game, policy, and similar types
of wagering. The term does not include:-
any game of the type in which the wagers are placed,
the winners are determined, and the distribution of prizes or other property
is made in the presence of all persons placing wagers -
any drawing conducted by an organization exempt
from tax under 26 USC §501 and 26 USC §521, if no part of the net
proceeds derived from such drawing inures to the benefit of any private shareholder
or individual
-
-
The elements of a wagering tax violation subject
to criminal sanctions under 26 USC §7203 are:-
the wagering activity must be subject to the wagering
tax laws (26 USC §4421) -
failure of the person to register and pay the special
tax before accepting the wager and/or failure of the person to file wagering
excise tax returns and pay tax -
evidence to prove that the person willfully failed
to comply with the law
-
-
In addition to proving the above elements, the
government must prove affirmative acts that indicate a willful intent to evade
or defeat the tax in order to sustain a violation of 26 USC §7201. -
Proof of willfulness is not required for a violation
under 26 USC §7262, which provides a $1,000 to $5,000 fine for any wagering
activity whereby a person’s liable for the special tax but fails to
pay it.
-
In determining the amount of any wager, all charges
incident to the placing of such wager shall be included. However, if the taxpayer
establishes, in accordance with regulations prescribed by the Secretary or
his/her delegate, that an amount equal to the tax has been collected as a
separate charge from the person placing such wager, the amount so collected
shall be excluded.
-
Every person required to pay the excise tax imposed
by 26 USC §4401 shall keep a daily record showing the gross amount of
all wagers for which he/she is liable in addition to all other records required
pursuant to 26 USC §6001. An agent or employee, shall keep a daily record
of wagers received, commissions retained, and amount turned over to his principal.
The records required to be maintained by principal and agent shall at all
times be open for inspection by revenue officers. The records shall be maintained
for a period of at least three years from the date the wager was received. -
Monthly returns of the excise tax on wagers must
be filed on Form 730, Tax on Wagering. The taxes are due and payable to the
designated operating division, without notice from the IRS, on or before the
last day of the month following that for which it is made. -
Each person who is engaged in the business of
accepting wagers shall be liable for and shall pay the tax on all wagers placed
with him/her. Each person who conducts a wagering pool or lottery shall be
liable for and shall pay the tax on all wagers placed in such pool or lottery. -
A person is engaged in the business of accepting
wagers if they routinely accept wagers for which they assume the risk of profit
or loss depending upon the outcome of the event or contest with respect to
the wager accepted. To be engaged in the business of accepting wagers, a person
need not be engaged in the business to the exclusion of all other activities
or even primarily engaged. -
Courts have ruled that a single transaction does
not constitute engaging in the business of wagering unless additional evidence
reveals otherwise. However, a single wagering transaction made under circumstances
that indicate it is made in the usual course of business may make the person
liable for the special tax. The chance for successful prosecution is better
if there is evidence the person accepted several wagers and competent witnesses
are available to testify as to the passage of money and its acceptance as
wagers.
-
No excise tax shall be imposed on:
-
any wager placed with or placed in a wagering pool
conducted by a pari-mutuel wagering enterprise licensed under state law -
any wager placed in a coin-operated device or on
any amount paid in lieu of inserting a coin, token, or similar object to operate
such a device -
any wager placed with the state or with its authorized
employees or agents in a sweepstakes, wagering pool, or lottery conducted
by that state agency acting under the authority of state law
-
-
The tax imposed by 26 USC §4401 applies only
to wagers which are:-
accepted in the United States
-
placed by a person who is in the United States
-
placed by a person who is a citizen or resident
of the United States -
placed by a person in a wagering pool or lottery
conducted by a person who is a citizen or resident of the United States
-
-
Title 26 USC §4411 imposes a special tax
of $500 per year to be paid by each person who is liable for the tax under
26 USC §4401 or is engaged in receiving wagers for or on behalf of any
person so liable. In states where wagers are authorized, the special tax will
be $50 per year. However, in order to qualify for the $50 rate, all wagers
accepted must be specifically authorized by the state where they were accepted. -
The application of 26 USC §4411 may be illustrated
by the following examples:-
“A”
is engaged in the business
of accepting horse race bets and employs 10 persons to receive, on his/her
behalf, wagers that are transmitted by telephone. “A”
also
employs a secretary and a bookkeeper. “A”
and each of
the 10 employees who receive wagers by telephone on “A ’s
”
behalf of are liable for special tax. The secretary and bookkeeper
are not liable for the special tax unless they also receive wagers for “A.” -
“B”
operates a numbers game
and has an arrangement with 10 persons who are employed in such capacities
as bootblacks, elevator operators, news dealers, etc., to receive wagers from
the public on his/her behalf. “B”
also employs ”
C”
to collect the wagers received from the 10 persons and to deliver
such wagers to “B.”
“C”
performs no
other services for “B.”
“B”
and the
10 persons who receive wagers on his/her behalf are liable for the special
tax. “C”
is not liable for the special tax since he/she
is not engaged in receiving wagers for “B.”
-
-
The special tax imposed by 26 USC §4411 must
be paid before an individual or firm engages in accepting wagers. The special
tax is computed as of the first day of July each year or the first day that
wagers are accepted. In the former investigation, the special tax shall be
computed for one year but, in the latter, it shall be prorated from the first
day of the month in which wagers were accepted, to and including the 30th
day of June.
-
Title 26 USC §4412 provides that each person
required to pay a special tax under 26 USC §4411 shall register with
the designated service official in charge of the IRS territory where the wagering
business is conducted. In the event a firm or company conducts the wagering
business, the names and places of residence of the persons constituting the
firm or company shall be registered. -
Form 11C, Occupational Tax and Registration Return
for Wagering is used for registration and requires:-
the name and place of residence of taxpayer
-
whether he/she is liable for the excise tax
-
each place of business where the wagering activity
is carried on -
the name and place of residence of each person who
is engaged in receiving wagers for him/her -
whether he/she is engaged in receiving wagers for
or on behalf of any person subject to the excise tax -
the name and place of residence of each such person
-
-
See IRM 20.1.2, Failure to File/Failure to Pay
Penalties for penalties relating to failure to file tax returns and failure
to pay taxes.
-
The SAC will ensure that leads involving major
customers of bookmakers are followed up for income tax purposes. Income tax
information obtained by a special agent during a wagering investigation will
be summarized on Form 3949, Criminal Investigation Information Report Referral,
and submitted to his/her SSA who will forward the lead to the Lead Development
Center (LDC). (See IRM 9.4.1, Investigative Initiation (subsection on Information
Items.)) -
In determining whether information received during
wagering investigations has tax consequences, data reported on tax returns
and results of prior investigations may need to be considered. If tax returns
or other data are not readily available, the information may be placed in
a pending status until the tax returns are obtained. -
Upon receiving the requested returns, the SSA
will forward the information item to the SAC for processing. The SAC may defer
acting on leads involving customers until the criminal investigation against
the bookmaker is concluded. The SAC, in determining when to act on these leads,
should consider such factors as the civil and criminal statute of limitations
as well as the effect IRS action may have on pending investigations.
-
Primary enforcement efforts in the wagering tax
area shall be aimed at the independent initiation and development of criminal
investigations against major operators and financiers along with situations
involving widespread noncompliance. IRS efforts will strive to promote balanced
enforcement with respect to investigations of wagering occupational, wagering
excise, and income tax violations on identified subjects. -
Generally, a major wagering operation is one comprised
of five or more individuals who conduct, finance, manage, supervise, direct
or own all or part of a gambling business and meet one or more of the following
criteria:-
has a daily gross of over $2000
-
conducts business at more than one location
-
actively handles lay-off bets
-
is a principal of the operation
-
is notorious or powerful with respect to local criminal
activity
-
-
Investigations not meeting the criteria may be
investigated and recommended for prosecution only if they are associated with
and are simultaneously submitted for prosecution as a package with an investigation
meeting the criteria. -
The most frequently used criminal statutes in
wagering tax violations are:-
willful attempt to evade or defeat the payment of
wagering tax (26 USC §7201) -
willful failure to file return or supply information
(26 USC §7203) -
failure to pay special wagering tax (26 USC §7262)
-
-
Violation of 26 USC §7262, which provides
a maximum penalty of $5,000 for not paying the special tax imposed by 26 USC
§4411, is committed in the judicial district where the wager was accepted.
Therefore, venue lies in the judicial district where the wager was accepted
without regard to the location of the territory office. -
The statute of limitations with regard to both
excise and occupational wagering taxes (26 USC §7201 or 26 USC §7203)
is 6 years from the date of the last overt act. -
Collateral violations related to wagering, such
as filing false claims, conspiracy, and false statements, may also incur penalties
prescribed by 18 USC §287, 18 USC §371, and 18 USC §1001. -
Title 26 USC §4424 was intended to remove
any constitutional challenges regarding enforcement of the wagering taxes
resulting from improper disclosure of wagering tax information.
-
Investigations of wagering tax violations usually
require the surveillance of violators and localities to obtain evidence of
the underlying wagering activity. When appropriate, this evidence can be used
to obtain probable cause for issuance of search warrants. In the affidavit
for a search warrant, the special agent must state that IRS records were searched,
and by whom, for the wagering tax stamp. See IRM 9.4.9, Search Warrants, Evidence,
and Chain of Custody, for information concerning affidavits for search warrants. -
If during the course of the investigation, a special
agent participates in any type of game which requires continuous play and
is exempt from wagering excise tax (i.e., blackjack, poker, craps or roulette),
the accountability for amounts wagered, won or lost, will be determined at
the conclusion of play. The computation will be made by comparing the amount
on hand at the conclusion of the wagering activity to the amount at the outset
of play. -
Winnings on wagers placed by special agents may
be treated the same as other profits which inure to the government in ongoing
undercover operations. If winnings are to be held for use as evidence, the
special agent will follow procedures for the safekeeping, control, and disposition
of seized money as discussed in IRM 9.7, Asset Seizure and Forfeiture.
-
An excise tax is a duty imposed upon the manufacture,
sale, or consumption of commodities within the country, and upon certain occupations. -
Some taxes are merely regulatory while others
are imposed for both regulatory and revenue generating purposes. Most excise
taxes, however, are levied exclusively for the purpose of generating revenue.
-
Income taxes are based on net income or net profits
and are graduated. Excise taxes are not graduated and may be based upon any
of the following factors:-
selling price of merchandise or facilities
-
services sold or used
-
number, weight, or volume of units sold, and
-
nature of occupation
-
-
Certain excise tax returns are required to be
filed on either a fiscal year or calendar year basis. In general, excise tax
returns are filed on a calendar quarter year basis. Income tax returns are
required to be filed on either a fiscal year or calendar year basis.
-
Assessments of additional or delinquent excise
taxes are referred to as “additional taxes.”
In income
tax investigations, such assessments are known as “deficiencies.
”
There are many types of civil penalties specifically applicable to
excise tax investigations. Civil penalties in income tax investigations are
limited to three types: delinquency, negligence, and fraud. See IRM 9.5.13,
Civil Considerations.
-
While income tax investigations may be appealed
to the US Tax Court without prepayment of the taxes, excise tax investigations
cannot be appealed to the US Tax Court. An appeal by an excise tax litigant
must be made to either the US Court of Claims or the US District Court, and
then only upon prepayment of some amount of outstanding tax.
