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Income tax evasion convictions should have been grouped together under the sentencing guidelines

Defendant Register pled guilty to 17 counts of tax related offenses. Thirteen counts concerned his failure to pay to the I.R.S. taxes that had been withheld from wages of his company’s employees. The remaining counts concerned falsifying his individual federal income tax return. The defendant challenged the district court’s guideline calculation, claiming the court erred in refusing to group all the counts in a single group as “counts involving substantially the same harm.” In U.S. v. Register the 11th Circuit reversed the sentence.

Register was the owner and operator of Criminal Research Bureau, Inc., a provider of background-check service for employers. To manage his payroll, he used a payroll processing company that prepared his employee paychecks and submitted the necessary quarterly paperwork to the IRS. Register was responsible for paying the taxes withheld over to the IRS. For about 4 years he withheld federal income tax (FICA) from his employees but he never turned it over these funds to the IRS.

He also falsified his individual federal income tax returns during this same period by paying his personal expenses directly from the company bank account. When he file his own personal returns, (filed late) he generated W-2 Forms that falsely indicated that he had been paid wages and that federal income taxes had been withheld. He used those figures to enable him to fraudulently collect refunds for the tax years 2003 and 2004. In 2005 and 2006 he added himself to the CRB payroll as an employee with an annual salary of $234,000, but he falsified his 1040 to show his federal taxes had been withheld from his salary when in fact none had been withheld. As a result he collected refunds when in reality he owed large amounts of money for 2005 and 2006.

Under the sentencing guidelines counts are to be grouped together for purposes of calculating the appropriate guideline range when they involve substantially the same harm. Under section 3D1.2 of the guidelines, counts involve substantially the same harm when the offense level is determined largely on the basis of the total amount of harm or loss, the quantity of a substance involved, or some other measure of aggregate harm. Furthermore, counts involving offenses of the same general type of offense are grouped together.

The 11th Circuit reversed holding the counts should have been grouped together for the purpose of calculating the sentencing guidelines range. Under the guidelines grouping is required for the purpose of calculating the guidelines range whenever they involve “substantially the same harm.” The court of appeals found the offenses meet the criteria for grouping under the guidelines. Both sets of counts are of the same general type and closely related on the facts. Although the counts arise from various schemes, each involves a monetary objective. Both are tax offenses governed by the IRS and Part T of the sentencing guidelines. Though the guidelines for each set may be different, the base offense level for both starts with the amount of tax loss in the same Tax Table of guidelines section 2T4.1.