United States v. Black
2015 U.S. App. LEXIS 23080
7th Cir.2015Background
- Rex Black was convicted of obstructing IRS collection (26 U.S.C. § 7212(a)) and passing fictitious financial instruments after repeatedly submitting checks and bills of exchange drawn on closed accounts to satisfy a >$5 million tax debt determined by a 2000 IRS audit.
- The IRS assessed ≈$3.89 million (≈$2.2M tax) after the audit; penalties and interest increased the debt to ≈$5.36M. Multiple IRS liens were filed; Black submitted fraudulent instruments in lien amounts.
- Jury convicted Black on Counts 1, 2, 4–5; district court grouped offenses and applied U.S.S.G. § 2T1.1 (tax guideline) to calculate tax loss.
- The district court aggregated the face value of each fraudulent instrument (totaling >$14M), included penalties and interest, and determined a tax-loss bracket yielding a base offense level 26 (then 27) and a guidelines range of 70–87 months; it sentenced Black to 71 months.
- On appeal the Seventh Circuit held the district court misapplied § 2T1.1 by using aggregated face values instead of the tax revenue actually owed, concluded tax loss (pre-penalties/interest) was ≈$5.3M, and remanded for resentencing.
Issues
| Issue | Black's Argument | Government's Argument | Held |
|---|---|---|---|
| Proper measure of tax loss under U.S.S.G. § 2T1.1 | District court erred by aggregating face value of each fraudulent instrument; tax loss should be the tax (plus applicable penalties/interest) actually owed | Aggregation appropriate because defendant intended to cause loss equal to instruments' face value | Aggregation was improper under § 2T1.1; tax loss reflects amount of tax revenue owed and not received — here ≈$5.3M, not >$14M |
| Inclusion of penalties and interest in tax loss | Penalties/interest should not be included because Black was not charged under §§ 7201/7203 | Penalties/interest may be included when defendant’s conduct constituted willful evasion/failure to pay even absent conviction under those statutes | Penalties/interest may be included if conduct is tantamount to willful evasion/failure to pay (conviction not strictly required); district court may include them when supported by the record |
| Consideration of audit errors / unclaimed deductions | Tax loss should be reduced for audit overstatements and valid deductions | Government relied on audit figure; defendant bears burden to prove deductions | Defendant failed to meet his burden under § 2T1.1 comment amendment (must be related, ascertainable, and proven by preponderance); district court did not err in refusing reductions |
| Harmlessness of sentencing error | Sentence remains reasonable despite guideline miscalculation | Guideline calculation drove the sentence; government contends error was not outcome-determinative | Error in tax-loss calculation was not harmless; remand required for resentencing to correct guideline computation |
Key Cases Cited
- United States v. Chavin, 316 F.3d 666 (7th Cir. 2002) (tax-loss under § 2T1.1 should reflect tax revenue owed and not received; unclaimed deductions generally not considered absent meeting criteria)
- United States v. Thomas, 635 F.3d 13 (1st Cir. 2011) (district court may consider penalties and interest where defendant’s conduct constituted willful evasion/payment failure even if conviction narrowed to related counts)
- United States v. Abbas, 560 F.3d 660 (7th Cir. 2009) (procedural sentencing errors require review; harmless-error standard for guideline miscalculations)
- United States v. Williams-Ogletree, 752 F.3d 658 (7th Cir. 2014) (standard of review for tax-loss calculations: clear error)
- United States v. Gordon, 291 F.3d 181 (2d Cir. 2002) (tax-loss under § 2T1.1 intended to reflect government revenue loss)