                          113 T.C. No. 14



                    UNITED STATES TAX COURT



          MARTIN AND BARBARA SCHACHTER, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent*



    Docket No. 2939-96.             Filed September 14, 1999.


         Held: No credit is allowed against civil
         fraud additions to tax for a criminal fine
         imposed under sec. 7201, I.R.C., and 18
         U.S.C. secs. 371, 3622, and 3623 (Supp. II,
         1984).


    Martin A. Schainbaum and David B. Porter, for petitioners.

    Paul J. Krug, for respondent.




*
     This Opinion supplements our Memorandum Opinion in Schachter
v. Commissioner, T.C. Memo. 1998-260.
                                 - 2 -




                         SUPPLEMENTAL OPINION

     SWIFT, Judge:     This matter is before us under Rule 155 on

the parties' disputed computations of the decision to be entered

herein.

     The issue for decision is whether petitioners should be

allowed a credit against civil fraud additions to tax for a

$250,000 criminal fine imposed on petitioner Martin Schachter

(petitioner).

     Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the years in issue, and

all Rule references are to the Tax Court Rules of Practice and

Procedure.

     On September 23, 1993, petitioner pleaded guilty under

section 7201 to one count of income tax evasion and to one count

of conspiracy under 18 U.S.C. section 371 (1988) to defraud the

United States with respect to his individual Federal income tax

liability for 1986.    In connection with the above plea, under the

authority of 18 U.S.C. sections 3622 and 3623 (Supp. II, 1984),

now repealed and replaced by 18 U.S.C. sections 3572 and 3571

(1994), respectively, a Federal District Court judge sentenced

petitioner to serve 2 years in prison, to pay a fine of $250,000

(criminal fine), and to pay restitution to the Internal Revenue

Service of $161,845.

     After petitioner's criminal conviction and sentencing,
                                                   - 3 -

       respondent determined and we sustained income tax deficiencies

       and civil fraud additions to tax relating to petitioners' tax

       years 1985, 1986, 1987, and 1988.                 See Schachter v. Commissioner,

       T.C. Memo. 1998-260.

              In their respective Rule 155 computations, without

       application of the claimed credit for the $250,000 criminal fine,

       the parties agree that petitioners are liable for the following

       deficiencies and additions to tax:

                                                      Additions to Tax
                     Sec.        Sec.        Sec.       Sec.       Sec.        Sec.      Sec.
                     6653        6653        6653       6653       6653        6653      6653      Sec.
Year   Deficiency   (a)(1)    (a)(1)(A)   (a)(1)(B)    (b)(1)   (b)(1)(A)   (b)(1)(B)   (b)(2)     6661

1985   $163,048       --            --        --      $81,524       --         --        **      $40,762
1986    163,948       --          $179         *         --     $120,280       **        --       40,987
1987    109,791       --           662         *         --       72,408       **        --       27,448
1988     21,488      $39            --        --       12,262       --         --        --        5,372


                              *   50 percent of interest due on portion of
                                  underpayment attributable to negligence.

                             **   50 percent of interest due on portion of
                                  underpayment attributable to fraud.



              Throughout litigation of this case, petitioners have

       maintained that imposition of the civil fraud additions to tax on

       top of petitioner’s 2-year prison sentence and the $250,000

       criminal fine would constitute double jeopardy and would violate

       the U.S. Constitution.             The Supreme Court, however, has held that

       Congress may impose both criminal and civil sanctions with regard

       to the same acts without violating the double jeopardy clause of

       the U.S. Constitution.             See Helvering v. Mitchell, 303 U.S. 391,

       399 (1938); see also Hudson v. United States, 522 U.S. 93 (1996);
                                - 4 -

Kennedy v. Mendoza-Martinez, 372 U.S. 144 (1963); Spies v. United

States, 317 U.S. 492 (1943); Grimes v. Commissioner, 82 F.3d 286

(9th Cir. 1996), affg. Ward v. Commissioner, T.C. Memo. 1995-286.

     In Spies v. United States, supra at 495 (citing Helvering v.

Mitchell, supra), in explaining that Congress may impose both

criminal and civil sanctions in enforcing the tax laws, the

Supreme Court stated that “invocation of one does not exclude

resort to the other.”   See also United States v. Sabourin, 157

F.2d 820, 821 (2d Cir. 1946); and Schwener v. Commissioner, T.C.

Memo. 1987-594, for the same proposition.

     In light of Helvering v. Mitchell, supra, and the subsequent

cases, in Schachter v. Commissioner, supra, we rejected

petitioners' double jeopardy argument, and we sustained

respondent’s determination of the civil fraud additions to tax.

     In the current computational dispute, petitioners do not

again dispute -- under the double jeopardy clause of the U.S.

Constitution -- imposition of both criminal and civil sanctions

with regard to the same acts.   Rather, petitioners argue that the

$250,000 criminal fine that was imposed on petitioner should be

allowed as a credit against the civil fraud additions to tax for

1985, 1986, 1987, and 1988 that were determined by respondent

against petitioner and that were sustained in our prior opinion.

     Helvering v. Mitchell, supra, and its progeny do not

directly address whether taxpayers have a right to credit against

civil fraud additions to tax the amount of related criminal
                               - 5 -

fines.

     Petitioners' argument is premised on the notion that the

$250,000 criminal fine did not constitute punishment, that it

served only remedial purposes, and that it should be treated as

restitution.   Petitioners then appear to argue that, because

respondent routinely would reduce outstanding civil income tax

deficiencies by the amount of restitution, petitioners should be

allowed to reduce the civil fraud additions to tax by the

$250,000 criminal fine.

     Petitioners also argue that the sentencing factors listed in

18 U.S.C. section 3622, which Federal District Court judges take

into account in imposing fines under 18 U.S.C. section 3623,

support petitioners' contention that the $250,000 criminal fine

imposed on petitioner should be regarded as remedial in nature

and as restitution for petitioners' civil fraud additions to tax.

     Respondent disagrees with petitioners' characterization of

the $250,000 criminal fine as remedial in nature.    Respondent

argues that Congress enacted 18 U.S.C. section 3623 to provide

Federal District Court judges with alternative means to punish

criminals and to deter future criminal behavior.    Because

criminal fines and civil fraud additions to tax serve different

congressional purposes, respondent argues that petitioners should

not be allowed a credit against the civil fraud additions to tax

for petitioner's $250,000 criminal fine.   We agree with

respondent.
                                 - 6 -

     The Supreme Court has described civil fraud additions to tax

as established “for the protection of the revenue and to

reimburse the Government for the heavy expense of investigation

and the loss resulting from the taxpayer's fraud.”    Helvering v.

Mitchell, 303 U.S. at 401; see also Louis v. Commissioner, 170

F.3d 1232, 1235 (9th Cir. 1999), affg. T.C. Memo. 1996-257;

Thomas v. Commissioner, 62 F.3d 97, 100 (4th Cir. 1995), affg.

T.C. Memo. 1994-128; Ames v. Commissioner, 112 T.C. 304 (1999).

     In Ianniello v. Commissioner, 98 T.C. 165, 182 (1992), we

rejected arguments under the Double Jeopardy Clause of the U.S.

Constitution that civil fraud additions to tax should not be

imposed on top of criminal forfeitures under the Racketeer

Influenced and Corrupt Organizations Act (RICO), 18 U.S.C.

sections 1961-1968 (1988).   We concluded in that case that

criminal forfeitures under RICO constitute punishment for

commission of crimes while civil fraud additions to tax

constitute remedial penalties.    We explained that a --


     fine and term of imprisonment imposed on the taxpayer
     after conviction for personal income tax evasion is
     punishment for the commission of a crime, and not
     reimbursement for costs incurred by the United States
     in investigating the taxpayer's fraud.


Ianniello v. Commissioner, supra at 183.

     Petitioners argue that the decision in Ianniello v.

Commissioner, supra, is distinguishable from the instant case

because Federal District Court judges have more discretion in
                                - 7 -

imposing criminal fines than in imposing criminal forfeitures.

The point, however, is not the degree of discretion a judge has

in imposing a criminal fine but whether the purpose of the

criminal fine is punishment.

     The legislative history of 18 U.S.C. sections 3622 and 3623

indicates that fines imposed under these provisions were intended

by Congress to constitute punishment for criminal acts.    In 1984,

Congress passed the Criminal Fine Enforcement Act of 1984,

Pub. L. 98-596, 98 Stat. 3134, in order to encourage the more

frequent use of fines as an alternative to, or as an addition to,

imprisonment.   See H. Rept. 98-906, 1 (1984).   Pursuant to

section 6(a) of the Criminal Fine Enforcement Act of 1984, 98

Stat. 3136, sections 3622 and 3623 were added to 18 U.S.C.

chapter 229 (Fines, Penalties and Forfeitures).    Under 18 U.S.C.

section 3623, the amount of criminal fines that a judge could

impose on individuals or corporations was increased.    See H.

Rept. 98-906, supra at 15-16.   The House report accompanying the

Criminal Fine Enforcement Act of 1984 explains that under prior

law fines were regarded as too low to deter criminal conduct, and

hence Congress established higher maximum fine levels.    H. Rept.

98-906, supra at 16.

     The increased maximum fine levels under 18 U.S.C. section

3623 were tempered somewhat by 18 U.S.C. section 3622, which

required judges, in determining appropriate fines to impose, to

consider factors such as a convicted offender's ability to pay
                                 - 8 -

and whether restitution was ordered.1    H. Rept. 98-906, supra

at 4, 13-15.



1
     18 U.S.C. sec. 3622 provides as follows:

     SEC. 3622.    Factors relating to imposition of fines

          (a) In determining whether to impose a fine and the
     amount of a fine, the court shall consider, in addition to
     other relevant factors--

                  (1) the nature and circumstances of the offense;

               (2) the history and characteristics of the
          defendant;

               (3) the defendant's income, earning capacity, and
          financial resources;

               (4) the burden that the fine will impose upon the
          defendant, any person who is financially dependent on
          the defendant, or any other person (including a
          government) that would be responsible for the
          welfare of any person financially dependent on the
          defendant, relative to the burden that alternative
          punishments would impose;

               (5) any pecuniary loss inflicted upon others as a
          result of the offense;

               (6) whether restitution is ordered and the amount
          of such restitution;

               (7) the need to deprive the defendant of illegally
          obtained gains from the offense;

               (8) whether the defendant can pass on to consumers
          or other persons the expense of the fine; and

          *         *       *       *       *       *        *

          (b) If, as a result of a conviction, the defendant has
     the obligation to make restitution to a victim of the
     offense, the court shall impose a fine or penalty only to
     the extent that such fine or penalty will not impair the
     ability of the defendant to make restitution.
                                 - 9 -

     Clearly, however, 18 U.S.C. section 3623 was enacted to

encourage judges to impose more fines as punishment, and

18 U.S.C. section 3622 simply provides guidance to judges in

deciding whether to impose a fine as punishment, and if a fine is

to be imposed, the amount of the fine.       The factors listed in 18

U.S.C. section 3622 do not convert the purpose of criminal fines

imposed under 18 U.S.C. section 3623 into something other than

punishment.

     We note that if we were to allow a credit against civil

fraud additions to tax for criminal fines, Congress' intent in

making taxpayers responsible for a portion of the Government's

cost in detecting, investigating, and prosecuting a taxpayer's

fraud would be substantially frustrated.

     Other arguments made by petitioners have been considered and

are without merit.   We reject petitioners' claim to a credit

against civil fraud additions to tax for the $250,000 criminal

fine.

     To reflect the foregoing,

                                         Decision will be entered in

                                 accordance with respondent's

                                 computations.
