April 17, 2008 Issue                                       

©2007 The Chestnut Hill Local

Hill man gets jail time for failing to pay income taxes
by PETE MAZZACCARO

The Internal Revenue Service wants you to know it is not taking failure to pay your taxes lightly.

Agents for the federal agency hand-delivered a case file to the Local last week outlining the guilty plea and sentencing of Chestnut Hill resident Thomas E. “Chip” Butler Jr. for five counts of willfully failing to file his federal income taxes from 2001 through 2005. The IRS said Butler, who earned more than $590,000 in that period as a partner in the law firm of Weber Gallagher Simpson Stapleton Fires & Newby LLP, owed more than $150,000 in taxes. All counts were misdemeanor charges.

Butler, a former assistant district attorney of Philadelphia and former president of the Chestnut Hill Community Fund, was sentenced April 7 to 30 days in prison plus one year of supervised release.

In addition to prison time, Butler must also complete 100 hours of community service. He has paid his outstanding federal tax balance and more than $3,000 in fines. According to court documents, the maximum sentence Butler could have received was five years in prison, one year of supervised release and $500,000 in fines.

According to the statement of facts contained in the guilty plea memorandum — the facts the IRS would have presented at trial — Butler first failed to file his personal income taxes for 2001. In 2002, Butler filed for an extension of his 2001 taxes and was informed by his accountant that he had until Oct. 15, 2002, to get him the appropriate information. According to the IRS, Butler never responded.

The memorandum reported that Butler did the same in 2003: he asked for an extension and received it and, again failed to respond to his accountant’s request for information.

In November of 2006, according to the memorandum, Butler became aware that the IRS was investigating him and sent the agency a check for $50,000 as partial payment of his outstanding tax balance. In December of 2007, he sent the IRS another check for the remainder of his tax balance, $108,167 .

Despite the payments, the IRS and the office of U.S. Attorney Patrick Meehan continued to press charges against Butler.

In an e-mail response to the Local, IRS special agent Shauna Frye said the fact that Butler paid his taxes did not make up for not filing his returns.

“Although he paid a portion of his tax liability upon learning of the investigation, and by the time he was sentenced he had paid the full liability, this does not change the fact that for tax years 2001 through 2005 he did not file or pay,” Frye wrote. “Our country’s system of taxation is based on voluntary compliance, not compliance once you are being investigated.”

As to making the determination that Butler willfully failed to file, Frye wrote:

“In the case of Butler, a number of factors indicated willfulness on his part.  One is simply the number of years that he did not file. It is highly unlikely that somebody would forget to file their tax returns for five years consecutively, especially with his education, background and the fact that prior to 2001 he had filed tax returns as required by law. Additionally, per the government’s sentencing memorandum, Butler’s accountant sent him numerous reminders that he needed to file his returns.”