Corporate & Partnership Voluntary Self-Disclosure Policy

Home » U.S. Department of Justice, Tax Division’s New Corporate & Partnership Voluntary Self-Disclosure Policy

Awards & Recognition

Table of Contents

Launched by the Income Tax Division of the DOJ, the New Corporate Voluntary Self-Disclosure Policy aims to enhance corporate & partnership tax compliance by incentivizing companies to disclose potential criminal federal tax law violations voluntarily. It essentially offers a lifeline to businesses seeking to rectify tax irregularities, allowing the corporation or partnership itself to secure amnesty and avoid criminal tax prosecution at the entity level. It also enhances cooperation with the Internal Revenue Service (IRS) in resolving the tax compliance issue at issue.

The policy applies to various business organizations, including partnerships, unincorporated associations, and government entities. It notably does not extend to sole proprietorships. These individual operational entities have another recourse: the IRS Voluntary Disclosure Practice, designed to encourage voluntary disclosure while providing potential routes to mitigate or circumvent criminal tax penalties.

Previously, voluntary disclosures to the IRS were limited to individual taxpayers. The new policy, however, mirrors the IRS’s voluntary disclosure program for corporate entities, enabling them to self-report potential tax crimes perpetrated by their employees, officers, directors. By doing so, companies can prevent criminal tax prosecution and align themselves with federal and California state government compliance requirements to some extent. It’s important to note that this amnesty may not extend to individual wrongdoers within the company, such as employees or directors. Disclosing misconduct to the Tax Division allows for a quicker investigation and holds the responsible parties accountable.

Under the policy, entities are encouraged to self-disclose to the Tax Division related to criminal violations of the federal internal revenue laws. However, this does not preclude the role of the IRS Voluntary Disclosure Practice. Closely held Companies might consider a strategic approach involving disclosures to both the DOJ Tax and IRS, enabling these bodies to ascertain the lead agency for compliance confirmation collaboratively.

The policy also promotes transparency by encouraging companies to disclose any misconduct, regardless of whether the government is aware of it. While such disclosures may not qualify for the full range of benefits, companies can still expect advantages like reduced penalties, avoidance of criminal prosecution at the entity level, and reputational safeguarding.

Introducing the “substantial compliance” concept also marks a significant policy shift. Here, even if a company’s self-disclosure doesn’t satisfy all criteria for voluntary self-disclosure, timeliness is regarded favorably. This policy change underscores the value of transparency and cooperation in addressing tax non-compliance, proactively encouraging companies to rectify tax filing errors or omissions.

For help making a voluntary corporate self-disclosure to the Department of Justice (DOJ) Income Tax Division, contact our experienced Dual-Licensed Tax Lawyers & CPAs at the Tax Law Offices of David W. Klasing by calling (800) 681-1295 or schedule a reduced rate initial consultation online here to learn more today.

Comprehending the Corporate Voluntary Self-Disclosure Policy

Understanding the fundamental criteria is crucial to gauge the value of the Corporate Voluntary Self-Disclosure Policy by the Department of Justice (DOJ) Tax Division. These conditions guide companies in making informed decisions and actions concerning the self-disclosure of potential criminal tax misconduct.

No Immunity for Individuals

A pivotal aspect to note is that corporate voluntary self-disclosure does not confer immunity upon any individual involved in the misconduct. It mainly applies to the disclosing entity. This varies dramatically from the IRS’s voluntary disclosure program which does provide immunity for the individuals that perpetrated the tax fraud at issue.

Tax Division’s Discretion, Confidentiality Assurance, and Potential Penalties

The DOJ Tax Division retains sole discretion in determining whether a disclosure qualifies under the voluntary self-disclosure program. Their decision is informed by a thorough assessment of the specific circumstances and facts disclosed in each case.

Confidentiality of the disclosed information is a priority for corporations & partnerships participating in the program. Information is generally not shared with other law enforcement or federal agencies without the entity’s consent, except in rare instances. This process respects and maintains the entity’s rights and privileges.

Failure to comply with Internal Revenue Code can invite severe civil and criminal tax repercussions. Criminal tax penalties could include substantial fines of up to $500,000 per tax crime or more, depending on the circumstances. Personal liability and potential imprisonment may befall individuals within the corporation / partnership responsible for the misconduct.

Additionally, corporations & partnerships could face civil penalties, including monetary damages, based on specific violations. At the Tax Law Offices of David W. Klasing, we offer guidance to corporations & partnerships navigating the intricate landscape of potential civil fraud penalties, which could be as high as 75% of the additional tax evaded.

Beyond financial penalties, corporations should be mindful of non-monetary consequences. A conviction for a tax crime could lead to lost business opportunities, federal & state contract restrictions, and significant damage to a corporation or partnership’s reputation, affecting consumer trust, brand reputation, and future business prospects. We are always ready to assist corporations & partnerships in managing these risks effectively.

Essential Criteria for Voluntary Self-Disclosure

Voluntariness of Disclosure: The disclosure of criminal misconduct must be voluntary and initiated independently by the company. It won’t be considered voluntary if there’s a pre-existing obligation to disclose due to regulations, contracts, or prior Department resolutions such as non-prosecution agreements or deferred prosecution agreements.
Timing of the Disclosure: The timing of the disclosure is critical in determining whether the disclosure is voluntary. The company must disclose the misconduct to the Tax Division:
- Before there’s an imminent threat of disclosure or government investigation
- Before the misconduct was publicly known or disclosed to the government
- Within a reasonably prompt time after the company becomes aware of the misconduct. It is up to the company to demonstrate the timeliness of the disclosure.
The Comprehensiveness of Disclosure: The disclosure must be comprehensive, including all relevant facts known to the company concerning the misconduct at the time of the disclosure. If the disclosure is based on a preliminary investigation or assessment, the company should clarify but fully disclose the known relevant facts. In addition, the company should preserve, collect, and produce relevant documents and provide timely factual updates.
Full Cooperation and Timely Remediation: Companies are expected to provide full cooperation, including the timely preservation and disclosure of all non-privileged facts and relevant documents. They should also undertake timely and appropriate remediation measures, demonstrating the enhancement or implementation of an effective compliance program.
Written Consent for Disclosure: Alongside a voluntary disclosure to the Tax Division, the company must provide written consent, under 26 USC § 6103(c), authorizing the IRS to disclose all relevant returns and return information to the Tax Division. This consent enables the Tax Division to consult with the IRS to evaluate and investigate voluntary self-disclosure.

By understanding and adhering to these conditions, companies can facilitate a smooth voluntary disclosure process while safeguarding their business interests and reputation.

Benefits of Voluntary Self-Disclosure

Voluntary self-disclosure policies encourage corporations & Partnerships to maintain transparency, accountability, and adherence to the legal system. Like other DOJ components, the Department of Justice (DOJ) Tax Division has laid out benefits that can serve as powerful incentives for corporations & partnerships to take this route.

However, it’s essential to clarify certain aspects. The DOJ Tax Division does not directly impose criminal tax penalties; that is a function of the courts. However, the DOJ Tax Division can opt not to seek an indictment, reducing the risk of a criminal tax prosecution being imposed on a corporation or a partnership.

The policy also offers civil and criminal sentencing reductions, but these might not be significantly material to corporations or partnerships. Unlike individuals, corporations & partnerships cannot be incarcerated, so there is no agreement on a sentencing range. However, corporations & partnerships can still benefit from reduced criminal tax penalties and fines, depending on their voluntary disclosure, cooperation, and remediation efforts.

The Role of Aggravating Factors and Recidivism

Before elaborating on the benefits of voluntary self-disclosure, it is critical to understand the role of aggravating factors and recidivism. They play a significant role in determining the resolution and whether the benefits of the DOJ’s voluntary self-disclosure program will actually apply.

Aggravating Factors and Recidivism: These include, but are not limited to, executive management’s involvement in the criminal tax misconduct, long-standing or pervasive criminal tax mischief throughout the company, prior civil findings of wrongdoing by the IRS related or similar to the criminal tax misconduct being disclosed, or criminal recidivism. A recidivist is someone who commits another crime after being released from prison.

The presence of an aggravating factor does not automatically disqualify the corporation or partnership the benefits of the program. The DOJ Tax Division will assess the relevant facts and circumstances to determine the appropriate resolution. However, suppose there is a presence of an aggravating factor or recidivism. In that case, the company may not enjoy the benefits of voluntary self-disclosure even if it fully cooperates and provides timely and appropriate remediation.

Why You Should Take Advantage of Voluntary Self Disclosure

Voluntary self-disclosure in tax matters manifests several benefits that foster adherence to legal requirements and strengthen a corporation or partnership’s ethical stance and reputation.

Ethical Commitment: Voluntary self-disclosure is a testament to a company’s commitment to upholding ethical standards. This transparency engenders trust among all stakeholders, including employees, customers, investors, and regulators, thereby solidifying the company’s integrity.

Promotion of Positive Business Culture: When misconduct is voluntarily disclosed, it stimulates a culture of accountability and openness within the company. This ethical commitment can boost responsible behavior among employees, potentially augmenting employee morale and productivity.

Risk Mitigation: Voluntary self-disclosure can act as a potent risk mitigation tool. By addressing potential issues proactively, corporations & partnerships can dictate their narrative, prevent potential reputational damage, and potentially minimize legal and financial penalties.

Preservation of Business Relationships: Voluntary self-disclosure can shield a company’s relationships with clients, partners, and other stakeholders. This proactive behavior can bolster trust and respect within the business community, safeguarding the company’s standing in the market.

Robust Compliance Programs: Voluntary self-disclosure allows corporations & partnerships to exhibit the effectiveness of their compliance programs and internal controls. This openness not only reassures stakeholders of the company’s diligent management but also strengthens the company’s reputation.

Proactive Management: Self-disclosure empowers a corporation to manage situations proactively. The company can work towards a controlled resolution rather than reacting to an externally initiated criminal tax investigation.

Potential for Reduced Penalties: The DOJ Tax Division’s policy stipulates that it might opt not to seek an indictment under specific conditions, effectively reducing the risk of imposing a criminal penalty on a corporation or partnership. However, this advantage hinges on the entities voluntary disclosure, cooperation, and remediation efforts.

Fine Range Reduction: The DOJ Tax policy allows for a potential reduction in the recommended acceptable ranges for fines. Corporations & partnerships meeting the policy’s criteria or demonstrating critical aspects such as cooperation stand to benefit from this fine reduction.

Absence of Sentencing Range: Since corporations & partnerships cannot be incarcerated, traditional sentencing ranges do not apply. Nonetheless, corporations & partnerships can still reap the benefits of reduced criminal tax penalties and fines under the DOJ Tax policy, subject to their voluntary disclosure, cooperation, and remediation efforts.

These benefits paint a more predictable picture for corporations & partnerships contemplating voluntary disclosure. The procedure, albeit challenging, can significantly lessen their legal exposure if navigated successfully.

Comprehensive Requirements for Full Cooperation

For a corporation to qualify for cooperation credit, it must fulfill the following comprehensive actions:

Timely Disclosure of All Non-Privileged Facts: The corporation must immediately disclose all non-privileged facts that pertain to criminal misconduct. This includes:

Facts uncovered during the company’s independent investigation;
Attribution of facts to specific sources, as long as it doesn’t infringe on attorney-client privilege;
Frequent updates on the progress of the company’s independent investigation; and
Identification of every individual involved in or responsible for the criminal misconduct, irrespective of their position, status, or seniority, which also includes the owners, shareholders, partners, employees, agents, contractors, or consultants of the company, its subsidiaries, and third parties, and all non-privileged information relating to the criminal tax misconduct and those individuals’ involvement.

The Tax Division will assess whether the company has made a thorough, unbiased inquiry, like conducting an independent internal investigation of the misconduct.

Proactive Cooperation: The company must proactively cooperate, not just reactively respond. This proactive approach includes the following:

Timely and voluntary preservation, collection, and disclosure of relevant documents and information;
De-confliction of witness interviews and other investigative steps to prevent the independent investigation from interfering with the Tax Division’s investigation;
Using the company’s best efforts to promptly secure the attendance and truthful statements or testimony of any current or former owner, shareholder, partner, employee, agent, contractor, or consultant of the company or its subsidiaries.
Providing the testimony of a competent witness, as needed;
Full and continued cooperation in any criminal or civil investigation by the Tax Division or IRS related to criminal tax misconduct, even if such cooperation extends beyond the term of any resolution.

Remediation Process and Requirements

A company will be considered for credit for timely and appropriate remediation upon fulfilling these steps:

Thorough Analysis: The company must demonstrate a comprehensive analysis of the causes of the criminal tax misconduct and, where appropriate, remediate to address the root causes;
Implementation of Compliance and Ethics Program: An effective compliance and ethics program must be implemented;
Disgorgement and Restitution: The company must disgorge the proceeds of criminal tax misconduct and pay any restitution or forfeiture;
Employee Discipline: Appropriate disciplinary action must be taken against employees involved in the misconduct;
Retention of Business Records: The company must appropriately retain business records and prohibit such records’ improper destruction or deletion; and
Additional Measures: The company must take any extra steps demonstrating recognition of the severity of the company’s criminal tax misconduct, acceptance of responsibility for it, and implementing measures to reduce the risk of repeating such behavior, including efforts to identify future risks.

By adhering to these requirements and steps, corporations can exhibit their commitment to rectifying misconduct, cooperating with authorities, and preventing future offenses.

Civil Penalties and Individual Accountability

Navigating the complex terrain of corporate & partnership criminal tax wrongdoing and its associated individual accountability requires very specific guidance, a role the Tax Law Office of David W. Klasing is well-equipped to fulfill. Our background education and decdes of experience is perfectly suited to assisting clients to comply with the Department of Justice’s policies and expectations while safeguarding your businesses interests and reputation.

Our approach emphasizes transparency and accountability. As the DOJ insists on full disclosure of all relevant facts about individual misconduct to be eligible for cooperation credit, we guide our clients in this disclosure process. We ensure the complete revelation of all pertinent facts regarding misconduct, covering individuals regardless of their position, status, or seniority.

We assist our clients in understanding the imperative of not selectively choosing what facts to disclose. Instead, we facilitate fully identifying all individuals involved or responsible for the misconduct. This thorough approach is crucial in securing cooperation credit from the DOJ, potentially mitigating legal repercussions.

It’s also important to note that the individuals involved in corporate or partnership wrongdoing may face civil or criminal liability, even if a corporation or partnership receives amnesty. At the Tax Law Office of David W. Klasing, we provide clear guidance on the implications of individual actions within corporate & partnership contexts and potential repercussions, thereby equipping our clients with knowledge and strategies to mitigate risks and safeguard their operations.

In all our engagements, we aim to uphold our clients’ reputations and standing in their business communities while ensuring their full compliance with legal requirements and ethical standards. By demystifying complex processes and regulations and offering a roadmap to compliance, we assist our clients in navigating the legal landscape surrounding and underlying the Tax Division’s New Corporate & Partnership Voluntary Self-Disclosure Policy confidently and responsibly.

How The Tax Law Office of David W Klasing Can Help

At the Tax Law Offices of David W. Klasing, our seasoned tax professionals are equipped to adeptly guide you through the complexities of the Tax Division’s New Corporate & Partnership Voluntary Self-Disclosure Policy. We understand its intricate nuances, from the entities it covers to the legal implications involved, enabling us to provide you with informed advice on the optimal course of action. Our team’s expertise extends beyond knowledge; we’ve garnered considerable practical experience in navigating voluntary disclosure practices and can help you leverage their benefits, even when full benefits might seem elusive. Our commitment is to aid you in achieving substantial compliance, thus minimizing your risk exposure and providing peace of mind that you stand in good stead with the tax authorities. Whether personal or business-related tax compliance matters, our award-winning team is always prepared to deliver clarity and guidance.

As your dedicated partner, we ensure you can confidently navigate the voluntary self-disclosure process while safeguarding your company’s reputation and business relationships. We appreciate the pivotal role of timing in making a disclosure, the necessity of meeting disclosure obligations, and the significance of the discretion exercised by the tax division. Our team is equipped to assist clients in preparing comprehensive initial disclosures, confirming that all pertinent facts, documents, and return information are presented transparently and cooperatively. By partnering with us, you are choosing a team that will meticulously address the unique challenges posed by disclosures and diligently works to prevent any potential abuse of discretion. Our tailored strategies, crafted from our expertise and commitment to your success, work towards minimizing legal risks while effectively addressing compliance and remediation requirements.

Let the experienced and dedicated dual-licensed Tax Attorneys and CPAs at the Tax Law Offices of David W. Klasing guide you through the voluntary disclosure process. By proactively disclosing your tax inaccuracies to the IRS before facing an audit or a criminal tax investigation, your chances of avoiding the most severe penalties significantly increase. We work to ensure taxpayers fully understand their options and the potential opportunities for mitigating their situation. Once equipped with this understanding, our experienced dual-licensed Tax Attorneys and CPAs handle every step of the process. Please schedule a consultation with our seasoned Tax Lawyers by calling us at 800-681-1295 or make a reduced-rate consultation online today.

You must hire an experienced and reputable criminal tax defense attorney to take you through the Tax Division’s New Corporate & Partnership Voluntary Self-Disclosure program. Only an Attorney has the Attorney-Client Privilege and Work Product Privileges that will prevent the very professional that you hire from potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended in a subsequent criminal tax audit, criminal tax investigation or criminal tax prosecution.

Moreover, only an Attorney can enter you into Tax Division’s New Corporate & Partnership Voluntary Self-Disclosure program without engaging in the unauthorized practice of law (a crime itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect your business if it does not fully qualify for the program.

As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, Kovel CPAs, and E.A.s, our firm provides a one-stop-shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and net worth. See our Testimonials to see what our clients have to say about us!

Here is a link to our YouTube channel: click here!

U.S. Department of Justice, Tax Division’s New Corporate & Partnership Voluntary Self-Disclosure Policy

Comprehending the Corporate Voluntary Self-Disclosure Policy

No Immunity for Individuals

Tax Division’s Discretion, Confidentiality Assurance, and Potential Penalties

Essential Criteria for Voluntary Self-Disclosure

Benefits of Voluntary Self-Disclosure

The Role of Aggravating Factors and Recidivism

Why You Should Take Advantage of Voluntary Self Disclosure

Comprehensive Requirements for Full Cooperation

Remediation Process and Requirements

Civil Penalties and Individual Accountability

How The Tax Law Office of David W Klasing Can Help

More Commonly Asked Tax Audit Questions

California Sales Tax Questions and Answers

Questions and Answers for Criminal Tax Representation

Tax Help Videos

Representing Clients from U.S. and International Locations Regarding Federal and California Tax Issues

Main Office

Satellite Offices