Tax Evasion Prosecutions for Fiscal Year 2007

Lead Charge: 26 USC 7201 - Attempt to evade or defeat tax

Number Year-to-date	196
Percent Change from previous year	-5.3
Percent Change from 5 years ago	-8.4
Percent Change from 10 years ago	-49.4
Percent Change from 20 years ago	-68.7

Table 1: Criminal Prosecutions

The latest available data from the Justice Department show that during FY 2007 the government reported 196 new prosecutions with a lead charge of "26 USC 7201 - Attempt to evade or defeat tax". According to the case-by-case information analyzed by the Transactional Records Access Clearinghouse (TRAC), this number is down 5.3% over the past fiscal year when the number of prosecutions totaled 207.

About These Reports For many years, Tax Analysts and the Transactional Records Access Clearinghouse (TRAC) have vigorously exercised their rights under the Freedom of Information Act to obtain authoritative information from the Internal Revenue Service. Although the two public interest organizations have had a somewhat different focus, the ultimate goal was the same: to better understand how the IRS was going about achieving its difficult mission. Now TRAC and Tax Analysts have joined forces to offer a new series of monthly reports on a range of enforcement subjects, beginning with the use of the government's criminal powers. Forthcoming will be monthly reports on tax audits, collections and other related issues. In addition, more detailed information, obtained by following the "More" links, will be available at no cost for the first six months.

The comparisons of the number of defendants charged with offenses are based on case-by-case information obtained by TRAC under the Freedom of Information Act from the Executive Office for United States Attorneys (see Table 1).

The trend in criminal prosecutions under this lead charge has been consistently downward for at least two decades. For example, when this number of FY 2007 prosecutions of this type is compared with those five years ago when there were 214, the number of prosecutions is down 8.4 percent. Prosecutions over the past year are much lower when compared to ten and twenty years ago. Overall, the data show that prosecutions of this type are down 49.4 percent from the level of 387 reported in 1997 and down 68.7 percent from the level of 626 reported in 1987. Or stated another way, the level of prosecutions today are only half what they were ten years ago and less than one-third the level they were two decades ago.

The long term trend in prosecutions for these matters going back to FY 1987 is shown more clearly in Figure 1. The vertical bars in Figure 1 represent the number of prosecutions of this type recorded each fiscal year. Each presidential administration is distinguished by the color of the bars.

Figure 1: Criminal Prosecutions of 26 USC 7201 over the last 20 years

Leading Program Areas

Cases were classified by prosecutors into more specific types. During fiscal year 2007 all but one prosecution was termed a "White Collar Crime" offense. The remaining prosecution was classified under the "Narcotics/Drug" program area.

Last year was unusual in not having any other types of cases. For example, during FY 2006 there were three "Official Corruption" prosecutions, five "Government Regulatory" prosecutions, and even one case categorized as a "Domestic Terrorism Type" due to a concern for potential confrontations. Twenty years ago, it was also more common to see drug offenses prosecuted under this statute.

Figure 2: Prosecutions by Investigative Agency

Leading Investigative Agencies

The Internal Revenue Service was -- as one might expect -- the lead investigative agency for most prosecutions under this statute. The IRS accounted for 93.4 percent of prosecutions referred during FY 2007. See Figure 2.

The Justice Department accounted for the next largest group of ten referrals, including five from the Federal Bureau of Investigation. Two prosecution referrals came from other Treasury agencies, and one came from the Office of Inspector General of the Defense Department.

While most of the decline in prosecutions over the last twenty years has been because of a lower volume of referrals from the Internal Revenue Service, the declines were not limited to the IRS. Twenty years ago, for example, the referrals from the Justice Department accounted for 47 prosecutions rather than merely the ten last year.

Top Ranked Judicial Districts

Understandably, there is great variation in the number of prosecutions in each of the nation's ninety-four federal judicial districts. The districts registering the largest number of prosecutions with "attempt to evade or defeat the tax" as the recorded lead charge during the first twelve months of FY 2007 are shown in Table 2.

Judicial District Count Rank   N. Y., S 12 1 More Cal, C 11 2 More Texas, N 10 3 More N. J. 9 4 More Conn 7 5 More Ohio, N 7 5 More Penn, W 7 5 More Cal, N 6 8 More Nevada 6 8 More Ohio, S 6 8 More Table 2: Top 10 districts

The Southern District of New York (Manhattan)—with 12 prosecutions—was the most active through September 2007. The Central District of California (Los Angeles) ranked second with 11 prosecutions. The Northern District of Texas (Fort Worth) with 10 prosecutions ranked third. Thirty out of the 94 federal judicial districts had not a single prosecution recorded under 26 USC 7201 during all of fiscal year 2007. Clicking on the "More" link will give you the opportunity to obtain a report targeted to the prosecution of these matters in the Judicial District indicated in the table. See this page for a complete list of other judicial districts recording prosecutions last year under 26 USC 7201.

Copyright 2008, TRAC Reports, Inc. The Transactional Records Access Clearinghouse (TRAC) is a data gathering, data research and data distribution organization at Syracuse University. TRAC's purpose is to provide the American people — and institutions of oversight such as Congress, news organizations, public interest groups, businesses, scholars and lawyers — with comprehensive information about staffing, spending, and enforcement activities of the federal government.