USSG § 2T1.6 Tax-Loss Rule: Excluding Employer-Portion FICA from “Tax Not Collected or Accounted For and Paid Over”

Introduction

In United States v. Donna Fecondo (3d Cir. May 26, 2026) (nonprecedential), the Court of Appeals for the Third Circuit vacated a sentence imposed for federal employment-tax offenses and remanded for resentencing. The appellant, Donna Fecondo, served as president of Joseph Silvestri & Son, Inc. (“JSSI”), where she was responsible for (i) withholding and remitting employees’ payroll taxes (including withheld FICA and federal income taxes) and (ii) paying the employer’s share of FICA taxes.

Fecondo pleaded guilty to six tax counts: two counts for failure to pay over employment taxes under 26 U.S.C. § 7202 (tax years 2015–2016) and four counts for failure to file returns under 26 U.S.C. § 7203 (corporate and individual returns for 2015–2016). The parties agreed that, for Guidelines purposes, no tax loss would be attributed to the § 7203 counts, leaving USSG § 2T1.6 (Failure to Collect or Truthfully Account for and Pay Over Tax) as the controlling guideline.

The core issue on appeal was whether the sentencing court could include approximately $1.8 million in unpaid employer-portion FICA taxes from 2009–2019 in the “tax loss” used to compute the base offense level under § 2T1.6, by treating those amounts as “relevant conduct” under USSG § 1B1.3.

Summary of the Opinion

The Third Circuit held that the District Court erred by including employer-portion FICA taxes in the § 2T1.6 tax-loss calculation. Section 2T1.6, by its text and by its relationship to the underlying statute of conviction, targets only “third-party taxes” that an employer is required to collect from employees (withheld taxes) and then pay over to the IRS.

Applying plain-error review (because the argument was raised for the first time on appeal), the court found:

  1. Error: employer-portion taxes are not included within § 2T1.6’s “tax not collected or accounted for and paid over.”
  2. Plainness: the mistake was clear from § 2T1.6’s language and the Supreme Court’s reasoning in Slodov v. United States.
  3. Prejudice: the Guidelines range would have dropped from 41–51 months to 33–41 months without the $1.8 million.
  4. Discretion to correct: a Guidelines-range error ordinarily satisfies the fourth prong because it risks unnecessary deprivation of liberty.

The court therefore vacated the sentence and remanded for resentencing.

Analysis

Precedents Cited

  • United States v. Abreu, 32 F.4th 271 (3d Cir. 2022)
    Role in the opinion: Cited for the standard that unpreserved issues at sentencing are reviewed for plain error under Fed. R. Crim. P. 52(b). It frames the appellate posture: Fecondo bore the burden to satisfy the four-part plain-error test.
  • United States v. Olano, 507 U.S. 725 (1993)
    Role in the opinion: Supplies the canonical four-prong plain-error framework: error, plainness, effect on substantial rights, and the discretionary fourth prong (fairness/integrity/public reputation). The court systematically applied each prong to the Guidelines miscalculation.
  • Slodov v. United States, 436 U.S. 238 (1978)
    Role in the opinion: The central substantive authority. The court relied on Slodov’s interpretation of 26 U.S.C. § 6672 (the civil “trust fund recovery penalty”), which Slodov described as addressing taxes that “require collection,” i.e., third-party taxes, and not “direct taxes such as employer FICA and income taxes.” The Fecondo panel treated this reasoning as applicable because § 7202 “tracks the wording” of § 6672 and shares its purpose, making Slodov’s “third-party tax” limitation persuasive for § 7202 and, by extension, for USSG § 2T1.6.
  • Watterson v. United States, 219 F.3d 232 (3d Cir. 2000)
    Role in the opinion: Used by analogy to show that “relevant conduct” cannot override a guideline’s specific metric for the base offense level. In Watterson, conduct in a school zone did not affect the base offense level under a guideline driven “solely by” drug quantity. Fecondo uses this as a structural principle: even broad relevant-conduct concepts must yield to an express, narrower guideline definition.
  • United States v. Chandler, 125 F.3d 892 (5th Cir. 1997)
    Role in the opinion: Quoted within Watterson for the same proposition: where a base offense level is determined by a specific factor (there, drug quantity), other facts (there, location) do not alter that base metric.
  • United States v. Clark, 237 F.3d 293 (3d Cir. 2001)
    Role in the opinion: Defines “plain” error as “clear under current law,” anchoring the second prong of the Olano test.
  • United States v. Stinson, 734 F.3d 180 (3d Cir. 2013)
    Role in the opinion: Supports two related propositions: (1) absence of directly on-point circuit precedent does not preclude a plain-error finding, and (2) where guideline text is clear, applying it contrary to its terms can be “plain.” The panel analogized: just as Stinson rejected extending a “financial institutions” enhancement to non-institution sources, Fecondo rejects extending § 2T1.6 beyond its text (third-party taxes) to employer-portion liabilities.
  • United States v. Dickerson, 381 F.3d 251 (3d Cir. 2004)
    Role in the opinion: Reinforces that clarity of the governing language can make an error plain. The court used Dickerson alongside Stinson to show that textual clarity can satisfy the “plainness” requirement.
  • United States v. Payano, 930 F.3d 186 (3d Cir. 2019)
    Role in the opinion: Provides the Third Circuit’s articulation of prejudice: a “reasonable probability” of a different result absent the error.
  • Molina-Martinez v. United States, 578 U.S. 189 (2016)
    Role in the opinion: Critical to the prejudice prong in Guidelines cases: an incorrect Guidelines range “most often will” establish a reasonable probability of a different outcome. This allowed the panel to treat the range shift (41–51 to 33–41 months) as inherently prejudicial.
  • United States v. Henderson, 64 F.4th 111 (3d Cir. 2023)
    Role in the opinion: Supports the fourth prong proposition that a Guidelines-range error ordinarily warrants correction.
  • Rosales-Mireles v. United States, 585 U.S. 129 (2018)
    Role in the opinion: Supplies the rationale for exercising discretion to correct Guidelines errors: the risk of unnecessary incarceration undermines the fairness and integrity of judicial proceedings. The panel applied Rosales-Mireles directly to justify remand.

Legal Reasoning

The opinion’s reasoning proceeds in two connected moves: (1) defining the substantive scope of § 2T1.6’s tax-loss measure, and (2) limiting the ability of “relevant conduct” to expand that measure.

1) Text and statutory symmetry: § 2T1.6 targets withheld (third-party) taxes

Section 2T1.6 sets the base offense level by reference to the tax table, keyed to:

“the tax not collected or accounted for and paid over.” (USSG § 2T1.6(a))

The court treated the verbs “collected” and “paid over” as terms of art that align with the employer’s duty to withhold taxes from employees and remit them to the IRS—obligations commonly described as “trust fund” taxes because the employer holds them in trust for the government. Employer-portion FICA, by contrast, is not “collected” from anyone; it is a direct employer liability.

The panel reinforced this textual reading by linking § 2T1.6 to the offense statute: 26 U.S.C. § 7202 punishes a person “required … to collect, account for, and pay over” a tax who willfully fails to do so. That language overlaps with 26 U.S.C. § 6672, and Slodov v. United States interprets that overlap as focusing on third-party (withheld) taxes rather than employer direct taxes. Thus, in the panel’s view, the guideline inherits the statute’s third-party focus.

2) “Relevant conduct” cannot override an express guideline limitation

The government’s main pathway was USSG § 1B1.3(a)(2), arguing that employer-portion unpaid taxes from 2009–2019 were part of the same course of conduct or common scheme and therefore should be included in tax loss.

The panel accepted that relevant conduct is broad as a concept, but held it operates only within the structure set by the applicable guideline. Because § 2T1.6 defines the base offense level using only tax loss tied to amounts “not collected … and paid over,” the guideline itself supplies a boundary. In that framework, employer-portion FICA is not merely additional loss—it is a different category of tax liability that falls outside § 2T1.6’s measuring rule.

The opinion’s use of Watterson v. United States underscores a general sentencing principle: when the Guidelines specify the variable that determines the base offense level, courts should not use relevant conduct to substitute a different variable.

3) Plain-error application is driven by text, Supreme Court guidance, and Guidelines centrality

The remaining prongs follow established Supreme Court and Third Circuit doctrine:

  • Plainness: Even without on-point circuit precedent, the combination of § 2T1.6’s plain text and Slodov’s third-party/direct-tax distinction made the mistake “clear under current law” (drawing on United States v. Clark and United States v. Stinson).
  • Prejudice: The opinion treats the 8-month downward shift at the bottom of the range (41 to 33 months) as sufficient under Molina-Martinez v. United States, without requiring an elaborate showing of what the sentencing judge “would have done.” The panel also discounted the government’s attempt to re-route the $1.8 million into other counts on appeal, noting the government’s express representation below that “no tax loss should be calculated for Counts 3, 4, 5, and 6.”
  • Fourth prong: Relying on Rosales-Mireles v. United States (and United States v. Henderson), the panel treated an erroneous range as ordinarily warranting correction because it creates an unjustified risk of extra incarceration.

Impact

Although labeled “NONPRECEDENTIAL” under Third Circuit I.O.P. 5.7, the decision is still important as a roadmap for litigants and sentencing courts confronting § 7202/§ 2T1.6 calculations.

  • Constrained § 2T1.6 tax-loss base: The opinion squarely rejects folding employer-portion FICA into § 2T1.6’s tax-loss figure, even if the employer-portion nonpayment is continuous and factually intertwined with the failure to pay over withheld taxes. Practically, it narrows sentencing exposure in many payroll-tax cases where both categories of liabilities are delinquent.
  • Limits on relevant conduct where guideline text is specific: Fecondo reinforces a broader interpretive approach: relevant conduct does not authorize courts to expand a guideline beyond the specific conduct category the guideline measures. This reasoning may be invoked in other guideline contexts that use similarly constrained definitions.
  • Charging and plea-negotiation effects: If employer-portion tax liabilities cannot be counted under § 2T1.6, prosecutors may respond (in appropriate cases) by (i) charging additional offenses that invoke different guidelines, (ii) litigating whether other counts (e.g., § 7203 or tax evasion) should carry tax loss under a different guideline framework, or (iii) pursuing upward variances under 18 U.S.C. § 3553(a) based on overall tax delinquency (subject to procedural safeguards). The panel expressly “g[a]ve no opinion” on whether the district court should entertain the government’s alternative § 2T1.1 theory on remand, leaving that battle open.
  • Appellate posture: The case confirms that even unpreserved Guidelines issues can yield resentencing when the guideline text is clear and the error materially alters the range—consistent with modern Supreme Court emphasis on the anchoring role of the Guidelines.

Complex Concepts Simplified

  • Employment taxes: Payroll-related federal taxes. Here, they include (a) amounts withheld from employees’ pay (employee FICA and income tax withholding) and (b) amounts the employer owes itself (employer-portion FICA).
  • Third-party (trust fund) taxes: Taxes collected from someone else (employees) and held by the employer to transmit to the IRS. The employer is a conduit and fiduciary for these funds.
  • Employer-portion FICA: The employer’s own payroll-tax obligation; it is not withheld from wages and not “collected” from employees.
  • USSG § 2T1.6: The sentencing guideline that applies to willful failure to collect or pay over taxes under 26 U.S.C. § 7202. It sets the base offense level by the amount of “tax not collected or accounted for and paid over.”
  • Tax loss / Tax Table (USSG § 2T4.1): A schedule that converts a dollar loss amount into an offense level.
  • Relevant conduct (USSG § 1B1.3): A rule allowing sentencing to account for certain related acts beyond the specific counts of conviction. Fecondo clarifies that relevant conduct operates within, not outside, the boundaries of the applicable guideline’s definitions.
  • Plain-error review: A stringent appellate standard applied when a party did not raise an issue in the trial court. The appellant must show a clear error that likely mattered and that should be corrected to protect the system’s fairness.

Conclusion

United States v. Donna Fecondo holds that, for sentencing under USSG § 2T1.6 (the guideline tied to 26 U.S.C. § 7202), “tax not collected or accounted for and paid over” is limited to third-party withheld taxes and does not include employer-portion FICA, even if the employer-portion liability is part of the same general pattern of noncompliance. The decision also reinforces a structural Guidelines principle: broad relevant-conduct rules cannot be used to override a guideline’s express, narrower tax-loss definition. While nonprecedential, the opinion offers a clear interpretive template likely to influence payroll-tax sentencing disputes in the Third Circuit and beyond.