Tax Administration: IRS' Efforts to Place More Emphasis on Criminal Tax
Investigations (Letter Report, 11/06/97, GAO/GGD-98-16).
The Internal Revenue Service's (IRS) Criminal Investigation Division
investigates tax fraud and helps other law enforcement agencies to
investigate financial crimes, such as money laundering, linked to
narcotics trafficking. In the early 1990s, IRS raised questions about
the Division's investigative priorities because they increasingly
involved nontax investigations that supported national drug and crime
policies--even as the tax gap grew to $128 billion for 1992. This
concern prompted the Division to devote more resources to tax
investigations. This report discusses the steps that the Division has
taken since the early 1990s to increase the time spent on tax
investigations versus nontax investigations. It also highlights the
investigations initiated by the Division, as well as referrals to U.S.
Attorneys for prosecution and court sentences on the basis of these
investigations, for fiscal years 1990 through 1996.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: GGD-98-16
TITLE: Tax Administration: IRS' Efforts to Place More Emphasis on
Criminal Tax Investigations
DATE: 11/06/97
SUBJECT: Tax administration
Agency missions
Tax evasion
Investigations by federal agencies
Tax nonpayment
Tax violations
IDENTIFIER: IRS Criminal Investigation Management Information System
DOJ Organized Crime Drug Enforcement Task Force Program
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Cover
================================================================ COVER
Report to the Commissioner, Internal Revenue Service
November 1997
TAX ADMINISTRATION - IRS' EFFORTS
TO PLACE MORE EMPHASIS ON CRIMINAL
TAX INVESTIGATIONS
GAO/GGD-98-16
IRS' Criminal Investigation Division
(268768)
Abbreviations
=============================================================== ABBREV
CID - Criminal Investigation Division
CIMIS - Criminal Investigation Management Information System
DI - Director of Investigation
DIT - Direct Investigative Time
IRS - Internal Revenue Service
OCDETF - Organized Crime Drug Enforcement Task Force
Letter
=============================================================== LETTER
B-275359
November 6, 1997
The Honorable Michael Dolan
Acting Commissioner of Internal Revenue
Dear Mr. Dolan:
The Internal Revenue Service's (IRS) Criminal Investigation Division
(CID) investigates tax fraud and assists other law enforcement
agencies in investigating financial crimes, such as money laundering
associated with narcotics trafficking. In the early 1990s, IRS
studies raised questions about CID's investigative priorities because
they increasingly comprised nontax investigations that supported
national drug and crime policies to the detriment of tax
investigations, even as the estimated tax gap grew to about $128
billion for 1992.\1 This concern caused CID to revise its
investigative strategy, thereby focusing more resources on tax
investigations. As part of this revised strategy, in fiscal year
1995 CID established fraud and narcotics as its main investigative
program areas. The fraud program was further subdivided between tax
gap fraud and other fraud, thus enabling CID to track resources
applied specifically to tax gap investigations.
This report, which we prepared under our basic legislative
responsibilities, discusses the actions CID has taken since the early
1990s to increase the time spent on tax investigations versus nontax
investigations. It also highlights the investigations initiated by
CID, as well as referrals to U.S. Attorneys for prosecution and
court sentences based on these investigations, for fiscal years 1990
through 1996.
--------------------
\1 The tax gap is defined as total tax liability less taxes paid
voluntarily. IRS' tax gap reports do not indicate how much of the
tax gap is attributable to fraud.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
Between fiscal years 1990 and 1992, IRS data show that the percent of
time spent on tax gap investigations decreased by 10 percentage
points, continuing a downward trend since the early 1980s. On the
basis of the recommendations of two IRS studies done in the early
1990s, CID began in October 1993 taking actions designed to increase
the amount of time its agents spent conducting tax investigations.
Specifically, CID reorganized its administrative functions and
operations with the intent of better targeting resource allocations.
It also consolidated and recategorized its program areas with an
objective of better tracking its investigations. In addition, as of
fiscal year 1996 CID established goals for the percent of time to be
spent on its investigations, particularly for tax gap investigations.
Since these actions were initiated, the percent of time spent on tax
gap investigations has increased by 13 percentage points from a low
of 46 percent in 1992 to 59 percent in 1996.\2
Overall, the 59 percent in fiscal year 1996 represented a net
increase of 3 percentage points over the fiscal year 1990 level.
Between fiscal years 1992 and 1996, there was an increase in the
percent of tax gap investigations that CID initiated and in the
percent of referrals to U.S. Attorneys for prosecution based on tax
gap cases; since fiscal year 1994, the percent of court sentences
based on tax gap cases has also increased. However, as of fiscal
year 1996 the increases in these indicators have not been enough to
match fiscal year 1990 levels.
--------------------
\2 At our request, CID staff used the characteristics defined in
fiscal year 1995 for investigations conducted under its main program
areas--fraud and narcotics--to identify the amount and percent of
time applied to these types of investigations between fiscal years
1990 and 1994. The fraud program was further broken out by tax gap
and other fraud. They did the same for the number and percent of (1)
CID investigations initiated, (2) referrals to U.S. Attorneys for
prosecution based on CID cases, and (3) court sentences based on CID
cases.
BACKGROUND
------------------------------------------------------------ Letter :2
CID carries out IRS' criminal law enforcement responsibilities under
three principal statutes. Under title 26 U.S.C., IRS has authority
to investigate alleged criminal tax violations, such as tax evasion
and filing a false tax return. Under title 18 U.S.C., IRS has
authority to investigate a broad range of fraudulent activities, such
as false claims against the government and money laundering. Under
title 31 U.S.C., IRS is responsible for enforcing certain
recordkeeping and reporting requirements of large currency
transactions, such as cash bank deposits of more than $10,000. In
carrying out its responsibilities, CID coordinates as necessary with
IRS' District Counsel, the Tax Division within the Department of
Justice (Justice), and local U.S. Attorneys to prosecute violators
of these statutes.
Combating money laundering and other financial crimes is considered a
high priority by both Justice and the Department of the Treasury
(Treasury). According to Justice officials, because of CID's
expertise in conducting detailed financial investigations, U. S.
Attorneys and law enforcement agencies routinely rely on CID's
assistance in investigating financial crimes, particularly those
involving money laundering related to narcotics trafficking. In
addition, CID agents have access to tax information, which they can
use to develop financial investigations more fully. CID is also
involved in ongoing efforts to identify and investigate emerging
financial crimes, such as health care and bankruptcy fraud.
According to CID officials, although such assistance places competing
demands on CID's time, it also aids in establishing the cooperative
environment conducive to getting CID's tax cases prosecuted and in
obtaining information that can lead to criminal tax investigations.
Historically, CID's total staffing and budget have represented about
5 percent of IRS' overall resources. As of the end of fiscal year
1996, CID had the full-time equivalent of 4,504 staff, including
3,065 special agents, and a budget of $366 million. CID is also
reimbursed for some of the assistance it provides to other law
enforcement agencies, particularly Justice's Organized Crime Drug
Enforcement Task Force (OCDETF) program.\3
--------------------
\3 OCDETF is a federal interagency coordinated effort to investigate
and prosecute major drug organizations, particularly those with
connections to organized crime. Under a reimbursement agreement with
Justice, CID is reimbursed up to the level allowed by Congress for
the cost of its agents' salaries when assisting in OCDETF
investigations. According to data provided by CID officials, between
fiscal years 1990 and 1996, CID provided $130 million in assistance
to the OCDETF program over and above the $205 million received in
reimbursement from Justice.
SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :3
To determine the actions CID has taken since the early 1990s to
increase the time spent on tax investigations relative to nontax
investigations, we interviewed senior CID officials in IRS' National
Office, officials from both the Tax and Criminal Divisions in
Justice, and officials from the Office of the Under Secretary for
Enforcement in Treasury. We interviewed the CID officials because of
their responsibilities in managing CID operations and setting
division policies. Justice and Treasury officials were interviewed
to obtain their opinions regarding CID's (1) assistance in narcotics
and money laundering investigations and (2) increased emphasis on tax
investigations. We also reviewed CID's annual goals and objectives
and annual performance reports for fiscal years 1990 through 1996, as
well as relevant documentation on the reorganization of its
administrative functions and operations.
To determine the types of investigations initiated and the results of
referrals to U.S. Attorneys for prosecution and sentences resulting
from these prosecutions, we analyzed IRS' Criminal Investigation
Management Information System (CIMIS) data. CID uses CIMIS data to
track the status and overall results of its criminal investigations,
including the direct investigative time (DIT) expended on
investigations. DIT is the amount of time that CID agents spend
directly working on investigations. We selected fiscal years 1990
through 1996 to identify CID's investigative trends in order to
capture data from the time of the IRS studies that raised concerns
about CID's investigative priorities through fiscal year 1996, the
most recent period for which data were available.
We obtained and analyzed CIMIS data to identify nationwide by fiscal
year (1) the number and results of various types of CID
investigations, and (2) the principal sources of information that led
to CID investigations. CID staff, at our request, reconfigured CIMIS
data for fiscal years 1990 through 1996 to reflect the current IRS
field alignment of 4 regions and 33 districts, as well as CID's
current program areas--fraud and narcotics--with fraud further broken
out between tax gap fraud and other fraud. Other than reconciling
the totals from CIMIS data extracts to CID annual performance
reports, we did not verify the accuracy of the CIMIS data.
We did our work from October 1996 to August 1997 in accordance with
generally accepted government auditing standards. The work was done
at IRS' National Office and Southeast Regional Office; IRS' Georgia,
South Florida, and Delaware-Maryland District Offices; and at U. S.
Attorney's offices in the Northern District of Georgia, the Southern
District of Florida, and the Maryland District. We selected the
offices we visited because of the proximity of our staff working on
this assignment.
We requested comments on a draft of this report from the Acting
Commissioner of Internal Revenue and the Attorney General. Their
comments are discussed at the end of this letter.
ACTIONS TO INCREASE DIRECT
INVESTIGATIVE TIME SPENT ON TAX
INVESTIGATIONS
------------------------------------------------------------ Letter :4
In the early 1990s, concerns raised in IRS studies regarding CID's
investigative priorities spurred CID to take actions to increase the
amount of time its agents spent on tax investigations. Between
fiscal years 1990 and 1992, the percent of DIT spent on tax gap
investigations decreased from 56 percent to 46 percent; since then,
the percent of DIT spent on tax gap investigations increased to 59
percent as of fiscal year 1996. CID has established a range of 57 to
61 percent of DIT to be spent on tax gap investigations as its goal
for fiscal year 1997 and beyond.
Subsequent to hearings on IRS employee misconduct in 1989 before the
Subcommittee on Commerce, Consumer and Monetary Affairs, House
Committee on Government Operations, the Commissioner of Internal
Revenue appointed an independent panel to review various concerns
raised during the hearings, including issues relating to criminal
investigations. In its October 1990 report, the panel stated that
there had been a significant decrease in CID resources applied to tax
investigations and a corresponding increase in resources applied to
nontax investigations. The panel believed that CID's work priorities
were not properly aligned with IRS' strategic goal of increasing
taxpayers' compliance with the tax laws. The panel recommended that
CID (1) establish a criminal enforcement policy in line with IRS'
overall efforts to increase compliance with the tax laws, (2) ensure
that its allocation of resources and mix of cases are consistent with
such a policy, and (3) closely monitor and control implementation of
this policy through the National Office.
Also, to address concerns about whether CID's workload was properly
balanced between tax and nontax investigative efforts, IRS convened a
study group that included representatives from Justice and Treasury.
The study group's August 1991 report found that CID resources used
for tax investigations had declined about 18 percentage points
between fiscal years 1980 and 1990; on that basis, the study group
recommended that resources devoted to tax investigations be increased
and that future resources devoted to narcotics investigations be
limited to the amount expended in fiscal year 1991. The IRS
Executive Committee agreed with these recommendations, and in June
1992 CID initiated an action plan to implement them.
The actions led to a reorganization of CID, which began in October
1993 and was fully implemented in October 1994. The reorganization
was done in part with the intent of giving CID's national office a
better means to control and monitor field activities to keep them
aligned with national policies and objectives as recommended by the
review panel and the study group. In terms of its organizational
structure, CID was reduced from 7 regions and 63 districts to 4
regions and 34 districts.\4 In addition, the position of Director of
Investigation (DI), reporting directly to the IRS National Office
Assistant Commissioner for Criminal Investigation, was established in
each region to oversee and coordinate investigative activities. The
DIs replaced seven former Assistant Regional Commissioners for
Criminal Investigation, who reported directly to the Regional
Commissioners. The DIs are responsible for ensuring that CID field
offices adhere to national office program objectives and policies.
Another action CID took to better track the allocation of its
resources to tax versus nontax investigations was to consolidate its
major program areas and to establish a specific category for tax gap
investigations. In fiscal year 1995, CID consolidated the five
program areas under which investigations had been categorized and
tracked--narcotics, organized crime, public corruption, financial
compliance, and other illegal crime--into two principal program
areas--fraud and narcotics. The fraud program was subdivided into
tax gap fraud and other fraud. Tax gap fraud pertains to
investigations of legal industries with alleged criminal tax
violations.\5 The other fraud category involves investigations of
illegal industries or money laundering investigations with no
tax-related charges.\6 The narcotics program primarily relates to
investigations of money laundering activity by individuals and
organizations involved in narcotics trafficking.
Beginning in fiscal year 1996, CID set specific national goals for
the percent of DIT to be used on tax gap and narcotics investigations
to help ensure that additional resources would be allocated to tax
gap investigations. The fiscal year 1996 DIT goals were 58 percent
for tax gap investigations--1 percent higher than the actual DIT for
fiscal year 1995--and 24 percent for narcotics investigations--the
same as the actual DIT for fiscal year 1995.
Since CID began taking these actions, DIT applied to tax gap
investigations has increased. (See fig. 1.) According to data
provided by IRS, the percent of time applied to tax gap
investigations for fiscal years 1993 through 1996 increased 13
percentage points. As of fiscal year 1996, CID applied 59 percent of
DIT to tax gap investigations, exceeding its goal by 1 percentage
point, while applying 22 percent of DIT to narcotics investigations,
2 percentage points short of its goal.
Figure 1: Percent of
Nationwide DIT by Type of
Criminal Investigation-- Fiscal
Years 1990 Through 1996
(See figure in printed
edition.)
Source: GAO analysis of IRS data.
According to CID national office officials, the goal for the amount
of DIT to be allocated to tax gap investigations in fiscal year 1997
is a range of 57 to 61 percent, and the goal for narcotics
investigations is a range of 23 to 25 percent. They stated that
these goals, which are expected to be the goals for the next few
years, were developed with input from the DIs. It is CID officials'
judgment that these goals will enable CID to (1) conduct
investigations in support of IRS' strategic goal of increasing
compliance with the tax laws; (2) contribute to the government's
efforts in combating narcotics and money laundering; and (3) continue
allocating some of its investigative time to cases involving emerging
financial crimes, such as health care fraud.
--------------------
\4 CID was subsequently reduced to 33 districts when IRS' district
office reorganization took place in fiscal year 1996.
\5 According to CID officials, although tax gap investigations
usually result in prosecution and sentencing for Title 26 violations,
they may also involve certain Title 18 violations, such as defrauding
the government or filing a false claim. They further stated that
they prefer prosecution and sentencing under Title 26, but they will
opt to use Title 18 when they feel certain that Title 26 charges will
not hold up in court.
\6 Investigations of illegal industries with alleged criminal tax
violations are included in the other fraud program.
TRENDS IN THE NUMBER AND
RESULTS OF CID INVESTIGATIONS
FOR FISCAL YEARS 1990 THROUGH
1996
------------------------------------------------------------ Letter :5
CID considers completed investigations that merit referral to the
U.S. Attorneys for prosecution as an important step toward the
eventual prosecution, conviction, and sentencing for criminal tax
violations and related financial crimes. By publicizing convictions,
CID hopes to deter others from engaging in such criminal activity and
to promote voluntary compliance with the tax laws. Consequently, CID
uses statistical data from CIMIS to track the number and percent of
investigations initiated, as well as the number and percent of
referrals made to U.S. Attorneys for prosecution and sentences
handed down by the U.S. courts based on CID cases. CIMIS data show
that the percent of tax gap investigations initiated, the percent of
tax gap cases referred to U.S. Attorneys for prosecution, and the
percent of court sentences based on tax gap cases have all begun to
increase since CID increased the time spent on tax gap
investigations. However, as of fiscal year 1996, the increases have
not been enough to match fiscal year 1990 levels for these
indicators.
TRENDS IN THE TYPES OF
INVESTIGATIONS INITIATED
---------------------------------------------------------- Letter :5.1
As shown in figure 2, tax gap investigations represented 54 percent
of all CID investigations initiated in fiscal year 1996. This is an
increase over the fiscal year 1992 level of 47 percent and just under
the fiscal year 1990 level of 55 percent. The figure also shows that
between fiscal years 1990 and 1996, narcotics investigations
decreased from 30 percent to 25 percent of all CID investigations
initiated. Other fraud investigations were 6 percentage points
higher in fiscal 1996 than in fiscal year 1990.
Figure 2: Percent of Criminal
Investigations Initiated
Nationwide by Type--Fiscal
Years 1990 Through 1996
(See figure in printed
edition.)
Source: GAO analysis of IRS data.
TRENDS IN INVESTIGATIONS
REFERRED TO THE U.S.
ATTORNEYS FOR PROSECUTION
---------------------------------------------------------- Letter :5.2
Figure 3 shows that, in general, the percent of CID cases being
referred to the U.S. Attorneys for prosecution for tax gap fraud
since fiscal year 1992 has increased, while the percent of other
types of referrals--narcotics and other fraud cases--either declined
or remained somewhat stable. Specifically, tax gap referrals
represented 47 percent of all CID referrals in fiscal year 1996
compared to 39 percent in fiscal year 1992 and 49 percent in fiscal
year 1990.
Figure 3: Percent of Referrals
for Prosecution Nationwide by
Type of CID Investigation--
Fiscal Years 1990 Through 1996
(See figure in printed
edition.)
Note: Referrals for prosecution in a particular fiscal year do not
necessarily relate to the year the case was initiated.
Source: GAO analysis of IRS data.
TRENDS IN SENTENCES FROM
CASES REFERRED TO THE U.S.
ATTORNEYS FOR PROSECUTION
---------------------------------------------------------- Letter :5.3
Court sentences--including incarceration, probation, and fines--based
on tax gap investigations decreased from 54 percent of all court
sentences based on CID investigations in fiscal year 1990 to a low of
37 percent in fiscal year 1994. Since that time tax gap sentences
have increased to 44 percent of all court sentences for CID cases as
of fiscal year 1996. Overall, sentences based on narcotics
investigations increased from 32 percent to 39 percent of all court
sentences based on CID investigations between fiscal years 1990 and
1993, then decreased to 31 percent as of fiscal year 1996. (See fig.
4.)
Figure 4: Percent of Sentences
Nationwide by Type of CID
Investigation-- Fiscal years
1990 Through 1996
(See figure in printed
edition.)
Note: Sentences in a particular fiscal year do not necessarily
relate to the year the case was initiated or referred to a U.S.
Attorney for prosecution.
Source: GAO analysis of IRS data.
Additional information relating to CID's investigations between
fiscal years 1990 and 1996 is shown in appendixes I, II, III, and IV.
Appendix I shows the number of staff days applied nationwide by type
of criminal investigation. Appendix II contains information on the
percent of DIT applied to each type of criminal investigation by IRS
location. Appendix III shows the numbers of investigations,
referrals to the U.S. Attorneys for prosecution, and court sentences
by type of criminal investigation. Appendix IV discusses the
principal sources of information on which CID's investigations were
based.
AGENCY COMMENTS AND OUR
EVALUATION
------------------------------------------------------------ Letter :6
IRS and the Department of Justice each provided comments on a draft
of this report. Each agency generally agreed with the information
presented in the report and offered technical comments, which we have
incorporated where appropriate.
---------------------------------------------------------- Letter :6.1
Copies of this report are being sent to the Chairmen and Ranking
Minority Members of the Senate Committee on Finance, the Senate
Committee on Governmental Affairs, the House Committee on Ways and
Means, and the House Committee on Government Reform and Oversight;
the Chairman and Ranking Minority Member of the Subcommittee on
Treasury, General Government, and Civil Service, Senate Committee on
Appropriations; and the Chairman and Ranking Minority Member of the
Subcommittee on Treasury, Postal Service, and General Government,
House Committee on Appropriations; various other congressional
committees; the Secretary of the Treasury; the Attorney General; and
other interested parties. We will also make copies available to
others upon request.
Major contributors to this report are listed in appendix VI. Please
contact me on (202) 512-9110 if you or your staff have any questions
about this report.
Sincerely yours,
Lynda D. Willis
Director, Tax Policy and
Administration Issues
INVESTIGATIVE TIME APPLIED
NATIONWIDE BY TYPE OF CRIMINAL
INVESTIGATION IN FISCAL YEARS 1990
THROUGH 1996
=========================================================== Appendix I
This appendix presents the nationwide number of staff days applied
directly to the major types of Criminal Investigation Division (CID)
investigations. This does not include staff days applied to
noninvestigative activities, such as training.
Table I.1
Number of Direct Staff Days Applied
Nationwide by Type of Criminal
Investigation in Fiscal Years 1990
Through 1996
Number of staff days by fiscal year
----------------------------------------------------------------------
Type of
investig
ation 1990 1991 1992 1993 1994 1995 1996
-------- -------- -------- -------- -------- -------- -------- ----------
Fraud
Tax gap 273,192 262,544 253,245 278,261 301,640 328,595 361,494
Other 43,906 66,923 110,107 115,942 96,753 98,002 98,032
Narcotic 160,988 169,882 170,665 168,116 159,357 138,356 134,794
s
Informat 9,757 15,444 16,516 17,391 11,383 11,530 18,381
ion
items
================================================================================
Total 487,842 514,793 550,533 579,711 569,133 576,483 612,702
direct
staff
days
--------------------------------------------------------------------------------
Note 1: Investigative time spent following up on information
provided to CID that indicates potential criminal violations prior to
initiation of an investigation is categorized as information items.
Note 2: Totals do not add due to rounding.
Source: GAO analysis of IRS data.
PERCENT OF DIRECT INVESTIGATIVE
TIME APPLIED TO CID INVESTIGATIONS
IN FISCAL YEARS 1990 THROUGH 1996
========================================================== Appendix II
This appendix shows the percent of direct investigative time (DIT)
applied to the major types of CID investigations nationwide, by
regions, and by district offices from fiscal years 1990 through 1996.
For fiscal year 1996, CID set national DIT goals of 58 percent for
tax gap investigations and 24 percent for narcotics investigations.
To achieve these goals, CID requested that the Directors of
Investigation for each region help to ensure that the regional DIT
was within a range of 58 to 60 percent for tax gap investigations and
24 to 26 percent for narcotics investigations.
Table II.1
Percent of Total DIT Applied to Tax Gap
Investigations by Location in Fiscal
Years 1990 Through 1996
Percent of DIT by fiscal years
------------------------------------------------------
Location 1990 1991 1992 1993 1994 1995 1996
------------------------ ------ ------ ------ ------ ------ ------ ------
Nationwide 56 51 46 48 53 57 59
Midstates Region 51 45 40 43 47 54 56
Midwest 52 46 44 50 55 57 62
Arkansas-Oklahoma 55 40 34 43 49 57 57
Houston 55 50 45 52 54 56 49
Illinois 61 56 47 50 50 55 59
Kansas-Missouri 54 53 44 42 48 53 61
North Central 58 48 53 56 60 64 73
North Texas 47 38 37 33 33 49 56
South Texas 26 26 18 20 32 46 34
Northeast Region 61 57 53 53 56 58 61
Brooklyn 71 70 65 62 66 62 60
Connecticut-Rhode Island 61 60 58 58 64 69 74
Manhattan 55 44 50 47 51 52 56
Michigan 60 58 55 55 58 58 60
New England 49 51 44 48 49 50 58
New Jersey 64 62 57 54 63 64 64
Ohio 60 48 42 45 50 55 63
Pennsylvania 64 64 51 52 52 57 62
Upstate New York 72 64 64 64 66 63 64
Southeast Region 54 49 46 49 55 58 59
Delaware-Maryland 56 51 47 52 55 59 59
Georgia 59 50 47 59 56 57 60
Gulf Coast 65 54 57 57 64 64 61
Indiana 70 63 58 59 60 67 66
Kentucky-Tennessee 60 52 44 47 58 58 57
North-South Carolina 39 36 41 39 50 55 57
North Florida 46 45 41 40 46 49 52
South Florida 39 39 34 41 51 50 55
Virginia-West Virginia 61 55 53 50 60 65 64
Western Region 55 51 41 45 50 56 60
Central California 56 58 53 53 58 56 58
Los Angeles 60 52 45 50 60 62 68
Northern California 61 51 36 47 45 54 57
Pacific Northwest 49 50 43 47 50 49 57
Rocky Mountain 54 49 34 38 48 57 60
Southern California 51 48 41 37 42 53 58
Southwest 55 49 38 49 53 59 62
--------------------------------------------------------------------------------
Note: Percentages have been rounded to the nearest whole percent.
Source: IRS Criminal Investigation Management Information System
data.
Table II.2
Percent of Total DIT Applied to
Narcotics Investigations by Location in
Fiscal Years 1990 Through 1996
Percent of DIT by fiscal years
------------------------------------------------------
Location 1990 1991 1992 1993 1994 1995 1996
------------------------ ------ ------ ------ ------ ------ ------ ------
Nationwide 33 33 31 29 28 24 22
Midstates Region 37 38 36 35 32 25 26
Midwest 33 39 37 32 29 25 26
Arkansas-Oklahoma 21 28 27 25 21 19 16
Houston 34 35 37 32 33 30 40
Illinois 30 31 33 28 28 24 24
Kansas-Missouri 34 34 34 33 30 23 21
North Central 34 34 29 22 24 19 12
North Texas 33 34 36 41 39 22 19
South Texas 65 63 54 64 50 34 46
Northeast Region 28 29 28 26 26 25 23
Brooklyn 14 14 17 15 19 23 23
Connecticut-Rhode Island 31 25 23 21 19 13 10
Manhattan 38 43 36 36 35 35 32
Michigan 27 26 27 25 24 26 25
New England 43 34 30 23 25 22 20
New Jersey 25 25 28 26 26 24 21
Ohio 26 32 29 31 26 26 22
Pennsylvania 26 25 30 28 29 25 25
Upstate New York 21 25 21 22 23 17 12
Southeast Region 34 35 30 28 26 23 21
Delaware-Maryland 35 36 31 30 30 23 26
Georgia 29 32 29 23 27 25 21
Gulf Coast 27 30 25 24 23 20 22
Indiana 18 18 20 20 21 18 17
Kentucky-Tennessee 25 26 18 21 19 16 14
North-South Carolina 43 45 34 35 30 23 23
North Florida 37 35 29 25 22 17 12
South Florida 56 52 46 39 33 35 27
Virginia-West Virginia 30 31 30 29 25 21 19
Western Region 33 31 32 28 28 23 19
Central California 36 34 26 19 21 19 14
Los Angeles 36 34 31 31 29 21 19
Northern California 28 28 33 26 28 22 22
Pacific Northwest 35 28 27 24 26 26 20
Rocky Mountain 33 32 32 27 27 21 18
Southern California 41 39 39 35 34 29 24
Southwest 25 27 37 30 26 17 12
--------------------------------------------------------------------------------
Note: Percentages have been rounded to the nearest whole percent.
Source: IRS Criminal Investigation Management Information System
data.
Table II.3
Percent of Total DIT Applied to Other
Fraud Investigations by Location in
Fiscal Years 1990 Through 1996
>Percent of DIT by fiscal years
------------------------------------------------------
Location 1990 1991 1992 1993 1994 1995 1996
------------------------ ------ ------ ------ ------ ------ ------ ------
Nationwide 9 13 20 20 17 17 16
Midstates Region 11 15 21 19 18 19 17
Midwest 11 11 16 13 11 15 10
Arkansas-Oklahoma 20 30 36 29 28 22 25
Houston 9 13 17 14 12 12 10
Illinois 6 8 16 18 18 17 14
Kansas-Missouri 10 10 19 22 19 22 15
North Central 7 16 17 20 15 15 13
North Texas 18 25 27 25 27 28 24
South Texas 9 10 28 15 18 19 20
Northeast Region 8 11 16 18 15 14 13
Brooklyn 13 12 15 19 12 12 13
Connecticut-Rhode Island 5 12 16 19 15 16 14
Manhattan 6 9 10 13 11 10 9
Michigan 10 13 14 15 14 11 12
New England 6 12 22 25 23 24 20
New Jersey 8 9 13 18 10 11 13
Ohio 10 16 23 20 20 15 11
Pennsylvania 7 9 18 19 17 16 10
Upstate New York 6 10 13 12 10 19 22
Southeast Region 9 13 21 20 16 17 18
Delaware-Maryland 6 9 19 16 14 16 13
Georgia 8 15 22 17 16 18 18
Gulf Coast 6 13 15 16 9 15 16
Indiana 8 15 17 16 13 10 12
Kentucky-Tennessee 14 20 35 29 20 23 26
North-South Carolina 16 18 24 24 18 21 19
North Florida 14 17 26 31 27 30 31
South Florida 4 7 16 15 12 11 15
Virginia-West Virginia 7 12 15 18 13 13 15
Western Region 8 15 24 25 19 19 19
Central California 7 6 18 27 19 23 27
Los Angeles 2 12 22 17 9 14 11
Northern California 8 17 28 25 24 22 18
Pacific Northwest 12 18 27 27 21 22 20
Rocky Mountain 10 18 32 33 24 20 20
Southern California 3 8 16 25 20 15 15
Southwest 15 20 22 19 18 20 23
--------------------------------------------------------------------------------
Note: Percentages have been rounded to the nearest whole percent.
Source: IRS Criminal Investigation Management Information System
data.
THE NUMBER AND RESULTS OF CID
INVESTIGATIONS IN FISCAL YEARS
1990 THROUGH 1996
========================================================= Appendix III
This appendix presents information on the number of CID
investigations that were initiated, the number of investigations in
which CID recommended prosecution, and the number of sentences
resulting from prosecutions from fiscal year 1990 through fiscal year
1996. According to CID officials, completing an investigation and
subsequently prosecuting and sentencing the subject of the
investigation may take a year or more. As a result, the number of
prosecution recommendations and sentences shown in a particular
fiscal year in tables III.2 and III.3 may not have resulted from the
investigations initiated in the corresponding fiscal year in table
III.1.
Table III.1
Number of CID Investigations Initiated
Nationwide in Fiscal Years 1990 Through
1996
Number of investigations initiated by fiscal year
------------------------------------------------------
Type of investigation 1990 1991 1992 1993 1994 1995 1996
------------------------ ------ ------ ------ ------ ------ ------ ------
Fraud
Tax gap 2,895 2,530 3,098 2,927 2,602 2,506 2,857
Other 781 822 1,345 1,396 1,103 1,201 1,144
Narcotics 1,603 1,866 2,095 1,825 1,641 1,293 1,333
================================================================================
Total investigations 5,279 5,218 6,538 6,148 5,346 5,000 5,334
--------------------------------------------------------------------------------
Source: IRS Criminal Investigation Management Information System
data.
Table III.2
Number of CID Investigations Referred to
the U.S. Attorney for Prosecution
Nationwide in Fiscal Years 1990 Through
1996
Number of investigations referred by fiscal year
------------------------------------------------------
Type of investigation 1990 1991 1992 1993 1994 1995 1996
------------------------ ------ ------ ------ ------ ------ ------ ------
Fraud
Tax gap 1,574 1,561 1,642 1,805 1,535 1,579 1,708
Other 430 605 937 1,009 889 891 865
Narcotics 1,226 1,511 1,673 1,453 1,321 1,145 1,032
================================================================================
Total referrals for 3,230 3,677 4,252 4,267 3,745 3,615 3,605
prosecution
--------------------------------------------------------------------------------
Source: IRS Criminal Investigation Management Information System
data.
Table III.3
Number of Sentences Nationwide Resulting
from CID Investigations in Fiscal Years
1990 Through 1996
Number of sentences by fiscal year
------------------------------------------------------
Type of investigation 1990 1991 1992 1993 1994 1995 1996
------------------------ ------ ------ ------ ------ ------ ------ ------
Fraud
Tax gap 1,310 1,344 1,203 1,225 1,194 1,104 1,223
Other 333 402 459 630 805 736 691
Narcotics 766 1,039 973 1,197 1,236 961 863
================================================================================
Total sentences 2,409 2,785 2,635 3,052 3,235 2,801 2,777
--------------------------------------------------------------------------------
Source: IRS Criminal Investigation Management Information System
data.
SOURCES OF INFORMATION THAT
RESULTED IN CID INVESTIGATIONS IN
FISCAL YEARS 1990 THROUGH 1996
========================================================== Appendix IV
CID relies on various sources of information for initiating its
investigations, including information from (1) within IRS, such as
from the Examination Division; (2) other government sources, such as
U.S. Attorneys; (3) currency transaction reports; and (4) the
public. Although information from other government sources may
result in various types of CID investigations, including tax fraud,
information from within IRS predominantly results in tax fraud
investigations. Information provided from within IRS and by other
government sources accounted for about 75 percent of the total CID
investigations initiated each year for fiscal years 1990 through
1996. As shown in figure IV.1, investigations based on information
provided by other government sources increased from about 45 percent
in fiscal year 1990 to about 51 percent in fiscal year 1996.
Investigations based on information provided from within IRS
fluctuated from about 32 percent in fiscal year 1990 to about 29
percent in fiscal year 1996.
Figure IV.1: Percent of
Investigations Initiated
Nationwide by Selected
Sources-- Fiscal Years 1990
Through 1996
(See figure in printed
edition.)
Source: GAO analysis of IRS data.
In 1991, a study group convened to examine CID's workload and to
recommend changes to better balance, direct, and strengthen its
future investigative activities recommended that IRS reemphasize its
internal fraud referral program. In an effort to increase the
quality of internal fraud referrals from other IRS groups to CID that
may lead to tax fraud investigations, IRS established formal fraud
referral procedures effective for fiscal year 1996. This included
establishing the position of fraud coordinator in each district
office to act as a focal point for fraud referrals. According to CID
officials, the objective of these procedures is to increase
coordination between CID and other IRS functions, particularly the
Examination Division, in an effort to ensure that only cases
involving potential criminal fraud, rather than civil fraud, are
referred to CID. CID officials further stated that it is too soon to
determine the overall success of the new procedures.
(See figure in printed edition.)Appendix V
COMMENTS FROM THE INTERNAL REVENUE
SERVICE
========================================================== Appendix IV
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix VI
GENERAL GOVERNMENT DIVISION,
WASHINGTON, D.C.
Charlie Daniel, Assistant Director
Mark Gillen, Assistant Director
Robert McKay, Evaluator-in-Charge
James O'Donnell, Evaluator
Charles W. Woodward, III, Senior Evaluator
ATLANTA FIELD OFFICE
A. Carl Harris, Assistant Director
Clarence Tull, Senior Evaluator
Sally P. Gilley, Evaluator
*** End of document. ***