By Anthony Diosdi
Todd and Julie Chrisley, stars of the reality TV show “Chrisley Knows Best,” were recently found guilty by a federal court jury of tax evasion, conspiracy to commit bank fraud, and conspiracy to defraud the Internal Revenue Service (“IRS”). Julie Chrisley was also charged with wire fraud and obstruction of justice.
As with the Chrisleys, there is a tendency in criminal tax prosecutions to pile up charges and indict an individual for multiple years with a combination of revenue offenses and general federal criminal offenses as the situation warrants.
According to the United States Sentencing Commission, 68.7 percent of individuals convicted of tax fraud (tax crimes such as tax evasion) were sentenced to prison. The average sentence for tax fraud offenders was 16 months.
Todd and Julie Chrisley were convicted of a number of federal crimes. Each of these offenses carry potential long prison terms. Even though each of these offenses carry potentially long prison sentences, sentences in federal criminal offenses are typically determined from a sentencing table rather than per offense (However, the sentencing table is not mandatory). Many federal courts consider the sentencing table when determining a sentence. As a result, the sentencing guidelines may plan a significant role in determining how long Todd and Julie Chrisley may ultimately sit in a federal prison.
The sentencing table contains guidelines ranges in months of imprisonment. There is also an offense level (1 through 43) which forms a vertical axis of the sentencing table. In addition, a defendant’s criminal history category (1 through IV) forms the horizontal category of the table. The intersection of the offense level and the defendant’s criminal history on the sentencing table state the range in months of imprisonment for the offenses at issue.
An offense of tax evasion (which Todd and Julie Chrisley have been convicted of) is taken into consideration in determining the offense level in terms of “tax loss.” Where the offense is tax evasion, an amount of tax loss to the government is determined. The offense level increases by the amount an individual has attempted to evade, excluding penalties and interest. For purposes of applying the sentencing guidelines, the base offense level for tax evasion is 6. The base level is then increased as the tax loss the government increases.
Todd Chrisley falsely claimed on a radio program that he paid between $750,000 to $1 million in federal income taxes every year, even though he had not filed or paid his personal income tax for the 2013 through 2016 tax years. Todd Chrisley’s own statements can come back to haunt him when it comes time to determine the tax loss in this case for purposes of sentencing. If Todd and Julie Chrisley should have paid the IRS between $750,000 to $1 million in taxes between the 2013 and 2016 tax years, the tax loss for tax sentencing purposes could be significant.
The base offense level for sentencing purposes can also be increased by the specific characteristics of the criminal offense. In cases of tax evasion, the base offense level is raised by at least two levels: 1) if the defendant did not report or identify a source of income that exceeded $10,000 and/or 2) if the defendant used “sophisticated means” to impede discovery or the nature of the crime. The $10,000 threshold was likely exceeded in this case. Todd and Julie Chrisley may have also used “sophisticated means” to impede the discovery of taxable income.
According to a Press Release from the United States Attorney, the Chrisleys operated a loan-out company that received their income earned from their show and other entertainment ventures. To evade collection of a half a million dollars in delinquent taxes owned by Todd Chrisley, the Chrisleys opened and kept the corporate bank account only in Julie Chrisley’s name. One day after the IRS requested information about the bank account in Julie Chrisley’s name, the Chrisley’s transferred ownership of the corporate bank account to Todd Chrisley’s mother in an effort to further hide his income from the IRS. All this while, Todd Chrisley operated the loan-out company behind the scenes and controlled the company’s purse strings. This type of behavior will likely be characterized as “sophisticated means” to impede the collection of taxes and may result in a two level increase for sentencing purposes.
The sentencing table also looks at a defendant’s criminal behavior. A number of points dictate the criminal history category. Any additional points for previous criminal behavior may add to the number of months incarceration in the guidelines range for an offense level. It is unknown if Todd or Julie Chrisely had been convicted of a prior offense or offenses that could enhance their sentences.
Finally, if Todd or Julie Chrisely can clearly demonstrate acceptance of responsibility for his or her offense, the guidelines decrease the offense level by two points. In determining whether a defendant qualifies for a downward departure in the sentencing guidelines, the following is considered:
(A) truthfully admitting the conduct comprising the offense(s) of conviction and truthfully admitting or not falsely denying any additional relevant conduct for which the defendant is accountable. Note that a defendant is not required to volunteer, or affirmatively admit, or affirmatively admit, relevant conduct beyond the offense of conviction in order to obtain a reduction in a sentence. A defendant may remain silent in respect to relevant conduct beyond the offense of conviction without affecting his ability to obtain a reduction in his or her sentence. A defendant who falsely denies, or frivolously contests, relevant conduct that the court determines to be true has acted in a manner inconsistent with acceptance of responsibility, but the fact that a defendant’s challenge is unsuccessful does not necessarily establish that it was either a false denial or frivolous.
(B) Voluntary termination or withdrawal from criminal conduct or associations;
(C) Voluntary payment of restitution prior to adjudication of guilt;
(D) Voluntary surrender to authorities promptly after commission of the offense;
(E) Voluntary assistance to authorities in the recovery of fruits and instruments of the offense;
(G) Post offense rehabilitative efforts (e.g., counseling or drug treatment); and
(H) The timeliness of the defendant’s conduct in manifesting the acceptance of responsibility.
Julie Chrisley was convicted of wire fraud and obstruction of Justice in her role in attempting to evade collection of taxes. These convictions probably prevent a downward departure of her sentence. In Todd Chrisley’s case, the establishment of a loan-out company for the purposes of deceiving the IRS will likely prevent a downward departure of his sentence.
Ultimately, the sentencing judge will determine whether or not Todd and Julie Chrisely are sent to prison. If the model sentencing guidelines provide any clue as to Julie and Todd Chrisely’s fate, they should brace themselves for lengthy prison terms.
Anthony Diosdi is one of several tax attorneys and international tax attorneys at Diosdi Ching & Liu, LLP. Anthony Diosdi represents clients in all stages of international, federal, state, and local tax controversy- from audits through appellate litigation. Anthony Diosdi has significant experience resolving complex tax issues, including the handling of: offshore voluntary disclosure matters, criminal tax matters, grand jury investigations, tax court, claims court, and district court trials.
Anthony Diosdi is a frequent speaker at international tax seminars. Anthony Diosdi is admitted to the California and Florida bars.
Diosdi Ching & Liu, LLP has offices in San Francisco, California, Pleasanton, California and Fort Lauderdale, Florida. Anthony Diosdi advises throughout the United States. Anthony Diosdi may be reached at (415) 318-3990 or by email: adiosdi@sftaxcounsel.com.
This article is not legal or tax advice. If you are in need of legal or tax advice, you should immediately consult a licensed attorney.