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March 30, 2026 Get Citation Alerts Download PDF Add Note

Paul Daugerdas v. CIR

Court of Appeals for the Seventh Circuit

• Citations: None known
• Docket Number: 25-1055

• Judges: Scudder

• Opinion

• Authorities (2)

• Cited By (0)

• Summaries (0)

• Similar Cases (2.9K)

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Combined Opinion

                        by [Michael Yale Scudder Jr.](https://www.courtlistener.com/person/8633/michael-yale-scudder-jr/)

In the

United States Court of Appeals
For the Seventh Circuit

No. 25-1055
PAUL M. DAUGERDAS,
Petitioner-Appellant,

v.

COMMISSIONER OF INTERNAL REVENUE,
Respondent-Appellee.

Appeal from the United States Tax Court.
No. 7350-20L — Joseph Robert Goeke, Judge

SUBMITTED NOVEMBER 04, 2025 — DECIDED MARCH 30, 2026

Before SCUDDER, KIRSCH, and JACKSON-AKIWUMI, Circuit
Judges.
SCUDDER, Circuit Judge. This appeal presents an issue of
first impression for us and indeed all circuit courts: whether
the Tax Code, and specifically 26 U.S.C. § 6201 (a)(4)(A), au-
thorizes the Internal Revenue Service to assess and collect res-
titution following a person’s conviction of a federal tax-re-
lated crime under Title 18. We hold that the answer is yes, and
we reach that conclusion against a record showing that Paul
2 No. 25-1055

Daugerdas designed, promoted, and implemented a fraudu-
lent tax shelter that perpetrated massive losses on the U.S.
Treasury. He was then indicted and convicted in the Southern
District of New York of multiple crimes, including under 18
U.S.C. § 371 for conspiring to defraud the Internal Revenue
Service. The district court in Manhattan sentenced Daugerdas
to 15 years’ imprisonment, ordered forfeiture of $164.7 mil-
lion, and required him to pay $371 million in restitution to the
U.S. Treasury.
After the Second Circuit affirmed the convictions and sen-
tence, the IRS invoked its own authority in § 6201(a)(4)(A) to
impose parallel civil restitution in the same total amount of
the criminal restitution obligation ($371 million) and to file a
notice of federal tax lien in Cook County, Illinois, where
Daugerdas resided. The Tax Court sustained these adminis-
trative actions, rejecting Daugerdas’s contention that Con-
gress has not authorized the IRS to impose a parallel restitu-
tion obligation, especially one with a different payment
schedule than entered in his criminal case. Seeing no error, we
affirm.
I
In 2013 a federal jury in Manhattan found Daugerdas
guilty of one count of conspiracy to defraud the IRS (18 U.S.C.
§ 371), one count of mail fraud (18 U.S.C. § 1341), four counts
of client tax evasion (26 U.S.C. § 7201), and one count of ob-
structing the internal revenue laws (26 U.S.C. § 7212 (a)). His
sentence brought with it an obligation to pay restitution of
$371,006,397 jointly and severally with his co-conspirators for
the tax losses resulting from the fraud perpetrated on the U.S.
Treasury. The district court established a schedule of pay-
ments requiring Daugerdas to pay 10% of his gross monthly
No. 25-1055 3

income starting 30 days after his release from prison. The Sec-
ond Circuit affirmed Daugerdas’s convictions and sentence.
See United States v. Daugerdas, 837 F.3d 212 (2d Cir. 2016).
Relying on its authority under 26 U.S.C. § 6201 (a)(4)(A),
the IRS then commenced administrative proceedings and it-
self assessed the full amount of the criminal restitution on
Daugerdas. The result did not change Daugerdas’s total resti-
tution obligation of $371 million. But it did mean that the full
amount of the restitution became immediately due and paya-
ble. The Service also filed a notice of federal tax lien (often
shorthanded as an NFTL) in the same amount against
Daugerdas’s property. In the proceedings that followed,
Daugerdas challenged the IRS’s authority to assess and collect
the full amount of restitution, including on such an acceler-
ated payment schedule.
After the IRS’s Office of Appeals rejected Daugerdas’s po-
sition, he petitioned the Tax Court for review. He did not chal-
lenge his overarching restitution obligation or its amount—
nor could he have done so in administrative proceedings be-
fore the IRS, see 26 U.S.C. § 6201 (a)(4)(C). Daugerdas instead
focused on the Service’s authority to make the full amount of
restitution immediately due and payable, an obligation that
likely threatened or reinforced his swift financial ruin.
The Tax Court agreed with and entered judgment for the
Commissioner, concluding that § 6201(a)(4)(A) authorized
the IRS to assess restitution ordered for tax-related offenses
under Title 18, including for conspiring to defraud the U.S.
Treasury through the use of a fraudulent tax shelter. The Tax
Court also decided that the IRS was not bound to follow the
payment schedule set by the district court at sentencing.
4 No. 25-1055

Daugerdas then petitioned for our review.
II
We review decisions of the Tax Court “in the same manner
and to the same extent as decisions of the district courts in
civil actions tried without a jury.” 26 U.S.C. § 7482 (a)(1). The
parties agree that this means we should undertake our own
independent review of the authorities relied on by the Tax
Court in its summary judgment order. See Freda v. Comm’r of
Internal Revenue, 656 F.3d 570, 573 (7th Cir. 2011).
A
In assessing whether the IRS has the authority to assess
and collect restitution imposed for Title 18 offenses, we begin
with the language of 26 U.S.C. § 6201 (a)(4)(A):
The Secretary [of the Treasury or his delegate]
shall assess and collect the amount of restitution
under an order pursuant to section 3556 of title
18, United States Code, for failure to pay any tax
imposed under this title in the same manner as
if such amount were such tax.
See also id. § 7701(a)(11)(B) (defining “Secretary”).
By its terms, the provision imposes an obligation on the
Secretary of the Treasury—to assess and collect restitution or-
dered pursuant to § 3556 of the Federal Criminal Code. For its
part, § 3556, in turn, allows district courts “in imposing a sen-
tence” to impose restitution according to the Victim and Wit-
ness Protection Act, 18 U.S.C. § 3663, but requires district
courts at sentencing to order restitution according to the Man-
datory Victims Restitution Act, 18 U.S.C. § 3663A.
No. 25-1055 5

This case involves the mandatory restitution obligation
Congress created in § 3663A. While that provision makes no
reference to federal tax offenses or violations charged under
Title 26, it does require district courts, as relevant here, to im-
pose restitution for any criminal offense against property un-
der Title 18. See 18 U.S.C. § 3663A(c)(1)(A)(ii). Daugerdas’s
conviction under § 371 for conspiring to defraud the IRS con-
stituted such an offense.
On this much the parties agree. Where they disagree is
over whether the assessment-triggering language within
§ 6201(a)(4)(A) applies in a circumstance where the underly-
ing criminal offense creating a restitution obligation arises not
under the Tax Code, but instead under Title 18. Or, to put the
question in the terms Congress used in § 6201(a)(4)(A), does a
criminal violation under § 371 for conspiracy to defraud the
IRS authorize the Secretary of the Treasury to “assess and col-
lect the amount of restitution under an order pursuant to [18
U.S.C. § 3556 ] for failure to pay any tax imposed under this
title in the same manner as if such amount were such tax”?
The Tax Court answered in the affirmative and, in our
view, got the analysis exactly right. The federal district court
in New York, in sentencing Daugerdas, imposed $371 million
of restitution pursuant to § 3556 (and, by extension, pursuant
to the cross reference within § 3556 to § 3663A) for conspiring
to defraud the IRS—for criminal conduct not only rooting it-
self in a “failure to pay” taxes imposed under Title 26 (the In-
ternal Revenue Code), but also for a crime against property
within the meaning of § 3663A(c)(1)(A)(ii). So the IRS acted
within the authority Congress conferred in § 6201(a)(4)(A) of
the Tax Code in administratively assessing against Daugerdas
6 No. 25-1055

restitution of $371 million for the tax shelters he designed and
promoted to defraud the U.S. Treasury of tax revenue.
B
Daugerdas does not dispute much of this analysis. In no
way does he contest that the criminal conspiracy of which he
was convicted defrauded the U.S. Treasury of tax receipts.
Nor does he contest the amount of any restitution obliga-
tion—$371 million. Rather, he limits his challenge to the con-
tention that the Secretary’s authority to assess restitution
must arise not from a Title 18 conviction, but instead “for fail-
ure to pay any tax imposed under this title”—in short, for and
only for restitution resulting from a conviction under Title 26.
Put another way, he emphasizes that his § 371 conviction falls
outside the authority Congress gave the IRS in
§ 6201(a)(4)(A).
But that position rewrites § 6201(a)(4)(A). Daugerdas ig-
nores that Congress conditioned the administrative assess-
ment of restitution on whether such an obligation arose under
18 U.S.C. § 3556 “for failure to pay” taxes owed under Title
26. That is precisely the analysis the IRS undertook by as-
sessing $371 million in restitution upon seeing that the federal
criminal court imposed the same obligation for Daugerdas’s
engagement in a conspiracy to defraud the Treasury of at least
that much tax revenue.
Even more, Daugerdas’s construction of § 6201(a)(4)(A)
would empty the provision of meaning. If Congress wanted
to limit the provision’s applicability to cases in which the de-
fendant committed a Title 26 offense, it could have said so by
altogether omitting the cross reference to § 3556. The inclu-
sion of the cross reference matters, for it applies in a case like
No. 25-1055 7

this to trigger the mandatory assessment of restitution under
§ 3663A for tax-related Title 18 offenses against property, of
which Daugerdas’s § 371 conspiracy conviction qualifies.
Nor do we see any infirmity in the lien the IRS imposed
on Daugerdas’s property. Indeed, the New York district
court’s imposition of criminal restitution at sentencing acted
as “a lien in favor of the United States on all property and
rights to property of the person fined as if the liability of the
person fined were a liability for a tax assessed under the In-
ternal Revenue Code of 1986.” 18 U.S.C. § 3613 (c) (expressly
referencing restitution assessments imposed pursuant to 18
U.S.C. § 3663A); see also United States v. Miller, 39 F.4th 844,
846 (7th Cir. 2022) (“Upon entry of judgment, the order for
payment of restitution became a lien in favor of the govern-
ment on all of [defendant’s] property and rights to prop-
erty.”).
By extension, the IRS acted within its authority when it
filed its own lien and a corresponding NFTL on Daugerdas’s
property. See 26 U.S.C. § 6321 (“If any person liable to pay any
tax neglects or refuses to pay the same after demand, the
amount (including any interest, additional amount, addition
to tax, or assessable penalty, together with any costs that may
accrue in addition thereto) shall be a lien in favor of the
United States upon all property and rights to property,
whether real or personal, belonging to such person.”); see also
id. § 6323(a) & (f)(1) (NFTL provisions).
In attempting to salvage his position, Daugerdas points to
the Tax Court’s decision in Klein v. Commissioner of Internal
Revenue, 149 T.C. 341, 355–58 (2017), as part of contending that
Congress’s intent with § 6201(a)(4)(A) was limited. In Klein,
he tells us, the Tax Court described the “modest aim” of
8 No. 25-1055

§ 6201(a)(4)(A) as no more than “to allow the IRS to create an
account receivable against which the restitution payments can
be credited.” Id. at 357 (cleaned up). On this view, as Dauger-
das would have it, the IRS entered an administrative order of
restitution to keep its own internal accounting straight—to
create a record that he owed $371 million in restitution so it
would know the amount against which to apply installment
payments.
We doubt Congress’s objective was entirely clerical. Re-
gardless, our interpretation of 26 U.S.C. § 6201 (a)(4)(A) does
not unsettle such a limited understanding. Assuming Con-
gress enacted § 6201(a)(4)(A) to close an internal accounting
gap, our reading of the provision would allow the IRS to close
that gap in cases like this where the Service assesses restitu-
tion following a qualifying tax-related Title 18 conviction.
C
We come in closing to Daugerdas’s alternative contention
that, even if the IRS had authority to impose a parallel admin-
istrative restitution obligation, it lacked authority to establish
a payment schedule that differed from the one the district
court entered as part of his criminal sentencing. On this score,
Daugerdas points to the language Congress used in
§ 6201(a)(4)(A) and contends that if the IRS’s administrative
assessment of restitution derives from “an order pursuant to
section 3556 of title 18,” then the criminal restitution order
controls in all respects, including to define the payment
schedule. The practical consequence of Daugerdas’s position
is clear: he wants to limit the IRS to collecting 10% of his gross
monthly income—the same limit contained within his judg-
ment of conviction.
No. 25-1055 9

We cannot agree. Although the district court at sentencing
must order restitution equal to the value of the victim’s loss,
regardless of the defendant’s ability to pay, 18 U.S.C.
§ 3664 (f)(1)(A), the court also must consider the financial re-
sources, projected earnings, and financial obligations of the
defendant when deciding the schedule under which the resti-
tution is to be paid, id. § 3664(f)(1)(B)(2).
But the IRS is not bound or limited by these considerations
in imposing parallel restitution pursuant to § 6201(a)(4)(A).
To the contrary, § 6201(a)(4)(A) expressly instructs the IRS to
assess and collect the criminal restitution amount “in the
same manner as if such amount were such tax.” And we see
nothing requiring the IRS to consider the taxpayer’s ability to
pay before initiating efforts (through lien and levy) to collect
all or part of the restitution. Nor have we identified anything
limiting the Service’s authority to establish its own schedule
for the collection of the restitution.
Finally, Daugerdas misses the mark in contending that our
analysis offends principles of separation of powers. There is
nothing unconstitutional about Congress, through provisions
in both Title 18 and Title 26, enacting measures to address the
assessment and collection of restitution in criminal cases in-
volving the underpayment of federal taxes. Nor has Dauger-
das pointed to any action taken by the IRS that suggests any
infringement on the “judicial Power” conferred in Article III
of the Constitution.

For these reasons, we AFFIRM the Tax Court’s entry of
judgment for the Commissioner of Internal Revenue.