Restitution in Criminal Tax Cases
Victims of federal crimes have a right to “full and timely restitution, as provided in law.” Lacking the inherent authority to order restitution, courts can only order restitution when provided by statute. Once a court has ordered restitution, other governmental organizations play a role in enforcing the order and collecting the restitution, such as the Department of Justice, the Financial Litigation Units of the U.S. Attorney’s Office, and the IRS. Both the Victim Witness Protection Act of 1982 (VWPA) and the Mandatory Victim Restitution Act of 1996 (MVRA) provide restitution for certain tax offenses under Title 18. Both acts are quite different, however, in the amount of discretion the district court has in ordering restitution.
Victim Witness Protection Act of 1982
The VWPA provides some discretion for district courts in awarding restitution. The VWPA states that a court may order payment of restitution to the victim of a Title 18 offense. Parties that were not victims of the offense may also receive court-ordered restitution if provided in a plea agreement. The VWPA broadly defines victim to include “any person directly or proximately harmed” by the crime, including the United States and its agencies (e.g., the IRS).
In deciding whether to award restitution, the VWPA directs courts to consider (1) the amount of the loss, (2) the defendant’s financial resources, (3) the financial needs and earning ability of the defendant and her dependents, and (4) the complication and prolongation of the sentencing process due to ordering restitution weighed against the victim’s need for restitution. In addition to these factors, the court is free to consider anything else it deems appropriate. Once the court decides that restitution should be made, federal law mandates that restitution cover the full amount of the victim’s loss, regardless of the defendant’s financial circumstances. Thus, although the court has discretion under the VWPA as to whether restitution is an appropriate remedy, it does not have discretion as to the amount of restitution that the defendant must pay.
Mandatory Victim Restitution Act of 1996
Unlike the VWPA, the restitution provisions of the MVRA are mandatory. The restitution mandate applies to offenses against property under Title 18, including fraud and deceit, as well as any crime causing pecuniary loss to a victim. Under the MVRA, “property” includes money.
While the court generally must order restitution under the MVRA for Title 18 crimes, it can decline to order restitution when (1) the number of identifiable victims is so large as to make restitution impracticable, or (2) the burden of complicating or prolonging sentencing to make fact findings related to the cause or amount of loss outweighs the victim’s need for restitution.
Like the VWPA, the court can only order restitution payments to parties other than the victim when directed under a plea agreement. Also like the VWPA, a court is bound to order restitution under the MCRA in the full amount of the victim’s loss.
Application to Title 26 Tax Crimes: Probation and Supervised Release
While the VWPA and the MVRA provide restitution for crimes under Title 18, many tax crimes fall under Title 26; thus, a court may only order restitution for Title 26 tax crimes when contained in a plea agreement, or as a condition for supervised release or probation. Courts have the power to order a defendant to pay restitution as a discretionary condition of probation under 18 U.S.C. Sec. 3563(b) (“the probation statute”), or as a condition of supervised released under 18. U.S.C. Sec. 3583(d) (“the supervised release statute”).
The probation statute provides for mandatory restitution as a condition of probation in cases falling under §§ 3663, 3663A, and 3664. The statute allows discretionary restitution for the same crimes, as well as others normally outside the scope of the VWPA and the MVRA. Normally, these acts are limited in application to (1) Title 18 offenses, (2) certain Title 29 offenses, (3) violations of certain provisions of the Controlled Substances Act, and (4) offenses causing physical injury or pecuniary loss.
The supervised release statute provides for mandatory restitution as a condition of supervised release in sentences for certain felonies or misdemeanors. The statute further allows for discretionary restitution under the same conditions as the probation statute.
Thus, courts have the option of imposing restitution for Title 26 tax crimes pursuant to a plea agreement or, as recognized and prescribed by the federal Sentencing Guidelines, as a condition of probation or supervised release.
Turning a Criminal Restitution Order Into a Civil Tax Assessment
Since the introduction of § 6201(a)(4) in 2010, Title 26 tax restitution orders can by statute be converted into civil tax assessments. As provided by the statute, the IRS can make such an assessment as soon as appeals have concluded in the criminal case.
The Tax Court held in Carpenter v. Commissioner that allowing the defendant to pay restitution pursuant to a payment schedule does not limit the IRS’s power to assess and collect taxes immediately under § 6201(a)(4).  The Carpenter court ordered the defendant, Randy Carpenter, to pay restitution after Carpenter pled guilty to falsifying his 2005 and 2006 federal income tax returns. While the court’s order stated that restitution was “due and payable immediately,” the order also allowed Carpenter to pay $100 per month beginning 60 days after being released from prison.
Despite the fact that Carpenter would not be released until May of 2016, the IRS began collection efforts in January. The IRS assessed the restitution to Carpenter as a tax under the power of § 6201(a)(4), then demanded full payment from the him by February 1, 2016. When Carpenter failed to pay by this date, the IRS sent him a Notice of Intent to Levy Carpenter’s State tax refund or other property, including Social Security benefits, if he failed to either call the IRS immediately or pay the amount listed directly to the IRS by May 12, 2016. Carpenter refused to pay and contested the IRS’s ability to use liens and levies to enforce the district court’s restitution order, particularly when doing so would be in excess of the payment schedule set by the sentencing court.
The Tax Court rejected both of Carpenter’s contentions. The court found statutory support for the IRS’s general assessment authority through a plain language interpretation of § 6201(a)(4). Citing statutory exemptions from time constraints on the IRS’s ability to assess and bring actions to collect restitution, the court found that Congress intended to expand the IRS’s independent collection authority. Further, a court’s restitution order is due immediately unless specified otherwise by the sentencing court. To determine when restitution is due, federal courts compare the judge’s oral pronouncement at the time of sentencing to the written judgment. If the two conflict, the oral pronouncement prevails. Although the sentencing court can decline to order that restitution is due immediately, and thus limit the government’s collection power to the terms of the payment schedule set by the court, the mere presence of a payment schedule does not so limit the government when the court orders immediate payment of restitution. Thus, in Carpenter the Tax Court held that the IRS was not limited in its collection efforts to the payment schedule since the sentencing court had ordered immediate payment of restitution.
Time Limitations on Restitution Collection
The government can generally enforce restitution within the later of 20 years from the entry of judgment, or 20 years after the defendant is released from prison. While courts have allowed collection of restitution outside of the period of supervised release or probation, the IRS internally maintains that when restitution is ordered solely as a condition of supervised release or probation, it can only be collected once the condition is met—that is, during the period of supervised release or probation.
In criminal tax cases prosecuted as the loss of government property (i.e., money) under the VWPA, an appropriate amount of restitution would be the return of the property withheld—that is, taxes withheld—or payment of an amount equal to the property’s value at the date of sentencing. Restitution is limited to compensating victims for actual loss caused by the crime; any other relevant conduct of the defendant not related to the underlying offense cannot give rise to compensable restitution damages.
Exceptions to this bar include crimes involving a scheme, conspiracy, or pattern of criminal activity as an element of the offense, such as conspiracy to defraud or mail fraud. In these cases, restitution may include losses caused by acts of related conduct even if such conduct was not part of the underlying conviction. In conspiracy cases, the defendant can be liable for the victim’s resulting losses that were reasonably foreseeable.
Generally, penalties are excluded from the calculation of loss; however, a defendant can be liable for penalties if the defendant agrees to pay penalties in a plea agreement, or when the offense of the conviction involves the willful failure to pay penalties (i.e., willful evasion of payment under § 7201 and willful failure to pay under § 7203).
Modification of Restitution Orders
Restitution orders can only be modified in four limited situations. First, when the order contains an arithmetical, technical, or other clear error, the court can modify the order within 14 days. Second, a court can modify an order that has been appealed and remanded. Third, the court may amend the order to include the victim’s additional losses discovered after proceedings have concluded if the victim can show good cause for failing to show those losses in the initial proceedings. Finally, a change in the defendant’s financial circumstances can warrant modification of a payment schedule, but this will not allow for a modification of the amount.
 18 U.S.C.A. § 3771.
 Pub. L. No. 97-291, 96 Stat. 1248 (codified as amended in scattered sections of 18 U.S.C., with restitution provisions at 18 U.S.C. § 3663).
 Pub. L. No. 104-132, § 204(a), 110 Stat. 1227 (codified as amended at 18 U.S.C. § 3663(A).
 See 18 U.S.C.A. § 3663A(a)(1) (stating that when sentencing a defendant pursuant to the MVRA, the court “shall order . . . that the defendant pay restitution”).
 See USSG § 5E1.1(a)(2); Gall v. United States, 21 F.3d 107, 109-10 (6th Cir. 1994).
 See 26 U.S.C. § 6201(a)(4).
 152 T.C. 202, 220, 222.
 18 U.S.C. § 3613(b).
 See, e.g., United States v. Rostoff, 164 F.3d 63, 66-68 (1st Cir. 1999).
 PMTA 2018-19 (8/23/18) at 2-3, https://www.irs.gov/pub/lanoa/pmta-2018-19.pdf.