Notwithstanding the Supreme Court’s 2005 decision in United States v. Booker, the United States Sentencing Guidelines play a significant role in the sentences imposed on defendants convicted of federal crimes. While the "influence of the guidelines…has diminished in fraud cases,"1 district judges are required to begin the sentencing process by properly determining the applicable guidelines range,2 and a recent report from the U.S. Sentencing Commission found that the majority of sentences are still within guidelines range.3
In tax cases, the "advisory" guidelines are predicated on an estimate of the "tax loss" associated with the defendant’s conduct. The rationale for this reliance on tax loss is the assumption that "a greater tax loss is obviously more harmful to the treasury and more serious than a smaller one with otherwise similar characteristics."4 The guidelines provide that, in the case of individuals, "tax loss" is presumed to be 28 percent of the underreported gross income or improperly claimed deductions, exemptions, or credits, "unless a more accurate determination of tax loss can be made."5 This begs the question of how a sentencing court goes about making a "more accurate determination of tax loss" in a given case.
