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    Document Summary
    - Report Published -

    House Document No. 53

    Document Title
    A Study of the Criminal Penalty Provisions in Title 58.1 for Noncompliance with the Commonwealth's Tax Laws

    Department of Taxation

    Enabling Authority
    HR 83 (Regular Session, 1989)

    Executive Summary
    House Resolution 83 of the 1989 Session of the General Assembly requested the Tax Commissioner to examine the criminal penalty provisions in Title 58.1 and to determine how they relate to the federal penalty provisions to ensure they continue to be appropriate, equitable and effective.

    Under federal law, criminal tax offenses and penalties are consolidated in one chapter of the Internal Revenue Code, and are classified by conduct. More reprehensible conduct, such as fraud with the intent to evade tax, is punished more severely than willful failure to perform a known tax duty. Virginia provides for separate provisions for each offense for each type of tax imposed under Title 58.1, sometimes resulting in inconsistent punishment for similar conduct. Virginia's maximum penalties are much less severe than corresponding federal penalties, and Virginia law does not provide greater maximum penalties for tax evasion through fraudulent conduct.

    The Internal Revenue Code provides a three-year statute of limitations period for the prosecution of tax crimes, with a six-year limitations period applicable to offenses involving certain fraudulent conduct. Virginia's limitations period is one year for misdemeanors; almost all offenses in Title 58.1 are misdemeanors. Virginia's current enforcement efforts are weakened because of the short limitations period available to discover and investigate tax crimes.

    The determination of venue (a jurisdiction in which a defendant may be prosecuted) is clear under federal law. Venue is proper either where the offense originated, continued, or was completed. Virginia's venue provision states that prosecution shall take place in the county or city in which the offense was committed. However, it is not always clear where some tax crimes take place; it could be where a fraudulent return is prepared, mailed, or received.

    A meeting of a tax advisory group and the results of surveys distributed to the local assessing officers and Commonwealth's Attorneys led to the formulation of four recommendations:

    (1) Amend Va. Code 19.2-8 to provide for a longer statute of limitations for the prosecution of certain fraudulent criminal violations under Title 58.1;

    (2) Enact a new Va. Code 19.2-245.2, to clarify the venue provision for the prosecution of criminal violations under Title 58.1;

    (3) Enact a new section in Title 58.1, which would define a felony provision for tax evasion applicable to any tax imposed in Subtitle I (Taxes Administered by the Department of Taxation); Subtitle II (Taxes Administered by Other Agencies) except for Chapters 25, 26, and 27; or which are governed by Subtitle III (Local Taxes) of Title 58.1; and

    (4) Request the Virginia Code Commission to revise the criminal tax penalties of Title 58.1 by consolidating them in a separate chapter and reclassifying them as appropriate.

    The implementation of these recommendations, when coupled with pending enhanced enforcement efforts, would help ensure the criminal penalty provisions in Title 58.1 continue to be appropriate, equitable and effective in addressing violations of the Commonwealth's tax laws.