In the
United States Court of Appeals
For the Seventh Circuit

Nos. 00-1451 & 00-1452

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

THOMAS W. TWIEG and CONSTANCE A. TWIEG,

Defendants-Appellants.



Appeals from the United States District Court
for the Eastern District of Wisconsin.
No. 99 CR 109--J.P. Stadtmueller, Chief Judge.


Argued September 26, 2000--Decided February 1, 2001




  Before COFFEY, RIPPLE, and ROVNER, Circuit Judges.


  ROVNER, Circuit Judge. Thomas and Constance Twieg
pled guilty to three counts of filing false
federal income tax returns in violation of 26
U.S.C. sec. 7206(1), based upon their failure to
report all of the business receipts from the
carpet sales and installation business which they
operated from 1990 through 1996. The individual
tax returns filed by the Twiegs for 1991 through
1995 underreported the receipts from the business
by more than $1.3 million. In addition, a return
filed by Thomas Twieg for 1990 failed to report
over $98,000 in business receipts. Because there
was no indication that Constance Twieg was aware
of the underreporting on the 1990 return, she was
not held accountable for the tax losses
associated with the 1990 return.


  At sentencing, the court was required to
calculate the tax loss resulting from the offense
pursuant to U.S.S.G. sec. 2T1.1 (1998). The court
determined that Thomas Twieg was responsible for
tax losses totaling $141,170 for the years 1990
through 1995, of which $107,586 represented his
liability for normal income taxes and $33,584 was
attributable to unpaid self-employment taxes.
With respect to Constance Twieg, the court found
tax losses amounting to $127,716, of which
$100,700 stemmed from unpaid normal income taxes
and $27,016 related to self-employment taxes. The
court rejected the Twiegs’ argument that self-
employment taxes should be excluded from the "tax
loss" under sec. 2T1.1, and the Twiegs appeal
that determination. The inclusion of the self-
employment taxes increased the base offense level
for each defendant by one level.


  The sole issue on appeal is whether the
district court erred in including self-employment
taxes in the calculation of the "tax loss" under
the Sentencing Guidelines. We begin with the
plain language of the Guidelines provision at
issue. United States v. Andreas, 216 F.3d 645,
676 (7th Cir. 2000) ("When construing the
Guidelines, we look first to the plain language,
and where that is unambiguous we need look no
further.") Section 2T1.1(c)(1) of the Guidelines
provides that "if the offense involved tax
evasion or a fraudulent or false return . . . the
tax loss is the total amount of loss that was the
object of the offense (i.e. the loss that would
have resulted had the offense been successfully
completed)." The Notes following the section
state that for offenses involving the filing of
a tax return in which gross income was
underreported, the tax loss shall equal 28% of
the unreported gross income plus 100% of any
false credits claimed, "unless a more accurate
determination of the tax loss can be made." sec.
2T1.1(c)(1), Note (A). (The parties here
proceeded under the theory that a more accurate
determination was possible, and apparently a
higher tax loss figure would have resulted from
application of the 28% presumption.) Finally, the
Application Note to that provision clarifies, in
relevant part, that all violations of the tax
laws should be considered in calculating tax
loss:

In determining the total tax loss attributable to
the offense (see sec. 1B1.3(a)(2)), all conduct
violating the tax laws should be considered as
part of the same course of conduct or common
scheme or plan unless the evidence demonstrates
that the conduct is clearly unrelated.

U.S.S.G. sec. 2T1.1, Application Note 2.


  Nothing in that language indicates that self-
employment taxes should be excluded from the
calculation of tax loss. The Twiegs do not deny
that the failure to pay the self-employment taxes
constituted "conduct violating the tax laws."
Thus, by the plain language of the Guidelines it
should be considered in calculating tax loss.
They nevertheless raise a number of arguments for
excluding self-employment taxes, which we will
briefly address.


  The Twiegs point out that sec. 2T1.1 was
amended in 1993, and assert that a comparison of
the pre- and post-1993 language reveals an intent
to exclude self-employment taxes. The amendment
consolidated a number of tax violations into one
guideline, whereas they previously had been
addressed in multiple guidelines provisions. As
a result, the title of Subpart 1 describing the
type of taxes included within sec. 2T1.1 was
amended from "Income Taxes" to "Income Taxes,
Employment Taxes, Estate Taxes, Gift Taxes, and
Excise Taxes (Other Than Alcohol, Tobacco, and
Custom Taxes)." According to the Twiegs, all of
the listed classes of taxes are included seriatim
in separate chapters of the Internal Revenue
Code, and self-employment taxes are included in
a separate chapter not specifically listed. They
conclude that the failure to list the self-
employment taxes indicates an intent to exclude
them.


  An examination of the structure of the Internal
Revenue Code, however, turns their argument on
its head. The Internal Revenue Code is divided
unofficially into a number of Subtitles, of which
the first four are "Subtitle A   Income Taxes,"
"Subtitle B   Estate and Gift Taxes," "Subtitle
C   Employment Taxes," and "Subtitle D
Miscellaneous Excise Taxes." Within "Subtitle A
  Income Taxes" are a number of chapters,
including Chapter 2 "Tax on Self-Employment
Income." Thus, the structure of the Code
indicates that self-employment taxes are a
subcategory of "Income Taxes." Rather than
supporting an argument for excluding those taxes,
an examination of the structure indicates they
should be included in tax loss under the category
of "income tax." If we read the Guidelines
language as tracking the structure of the Code,
then anything included within those four
subtitles would presumably fall within "tax loss"
under the Guidelines, including self-employment
taxes. The plain language, then, indicates an
inclusive approach to determining tax loss, and
provides no support for excluding self-employment
taxes. The Twiegs’ attempts to divine a contrary
intention by the Sentencing Commission through
various methods are speculative at best. In the
end, the plain language evidences no intent to
exclude unpaid self-employment taxes, and appears
to include all actual tax loss incurred as a
result of the conduct that violated the tax laws.
  The Twiegs also assert that there is no tax
loss to the government because the self-
employment taxes are essentially payments to a
government retirement plan, and the failure to
pay the taxes will result in a loss to the
individual because it will decrease the benefits
for which he is eligible upon retirement. That
argument is meritless. The failure to pay the
self-employment taxes results in a loss to the
government of at least the present value of the
tax payments, and possibly the future value as
well because the individual may never become
entitled to collect those payments. As the Twiegs
well know, the self-employment tax is not a
personal retirement account in which the Twiegs’
payments are dedicated to them and which the
government cannot use. The failure to pay self-
employment taxes that are owed results in a tax
loss to the government, not just the Twiegs.


  The Twiegs also argue that the inclusion of the
self-employment tax thwarts the Guidelines’
purpose of achieving uniformity, because self-
employed individuals face higher sentences than
those employed by others who are not themselves
responsible for paying taxes towards retirement.
Any difference in the sentence, however, is
attributable to the difference in tax violations
by the individuals. The self-employment tax, like
other taxes such as capital gains or gift taxes,
will not apply to all persons at all times. It is
not unequal treatment to hold persons accountable
for the failure to pay taxes that were owed by
them. That others are not subject to a similar
tax obligation, and thus are not sentenced for
failure to fulfill that obligation, is
meaningless in this context. Moreover, at least
one court has included delinquent social security
taxes in the calculation of "tax loss," thus
indicating that the analogous taxes for others
may be included in tax loss as well. See United
States v. Martinez-Rios, 143 F.3d 662 (2d Cir.
1998).


  Finally, the Twiegs assert that United States
v. Hunerlach, 197 F.3d 1059 (11th Cir. 1999),
confronted a similar question and excluded the
amount in question, and they urge us to follow
the reasoning of that case. Yet Hunerlach is
quite different from the situation before us, and
in fact again supports the opposite result. In
Hunerlach, the court faced the issue of whether
interest and penalties should be included in the
"tax loss." Id. at 1069-70. The Guidelines
defined tax loss as the "total amount of the loss
that was the subject of the offense," and the
court held that the provision was ambiguous in
the context of interest and penalties. Id. The
court pointed out, however, that Application Note
1 unequivocally stated that "[t]he tax loss does
not include interest and penalties," and
therefore held that interest and penalties were
not included in tax loss under the Guidelines.
Id. at 1070, citing U.S.S.G. sec. 2T1.1 comment.
(n.1) (1997). There is no similar comment
included in the Guidelines that indicates an
intent to exclude self-employment taxes, and
therefore Hunerlach is unhelpful. Moreover, in
the present case we are not addressing interest
and penalties, with respect to which the
provision covering "tax loss" is ambiguous, but
are considering the unpaid "taxes" themselves,
which fall within the plain meaning of the words
"tax loss" and the corresponding definition.


  Accordingly, neither Hunerlach nor any of the
other arguments raised by the Twiegs provides
support for reversing the decision of the
district court regarding the meaning of "tax
loss." For the above reasons, the decision of the
district court is affirmed.
