Four-year sentence for employment tax and PPP fraud upheld
United States v. Davis (11th Cir. 2025)
The Eleventh Circuit upheld a 48-month prison sentence for a business owner who diverted withheld payroll taxes and misused pandemic relief funds, finding the upward variance from sentencing guidelines reasonable.
Holding
The court held that Linda Davis’s four-year sentence for willful failure to pay over employment taxes was procedurally and substantively reasonable. The district court correctly considered the 18 U.S.C. § 3553(a) factors, justified an upward variance based on Davis’s repeated noncompliance and lack of restitution efforts, and did not rely on impermissible factors.
Why It Matters
Confirms that appellate courts defer heavily to district judges’ discretion in weighing § 3553(a) sentencing factors.
Reinforces that a taxpayer’s ability—but refusal—to pay restitution can justify a higher sentence.
Clarifies that failure to liquidate assets or make good-faith restitution payments may be treated as disregard for the law.
Illustrates how PPP loan fraud can aggravate sentencing in employment-tax cases.
Timeline
2017–2021: Davis withheld federal income and FICA taxes from employees but failed to remit them, diverting funds for personal use.
2021: Filed a false Form 941 to secure a $161,800 Paycheck Protection Program loan.
2023: Indicted on 19 counts, including employment-tax violations, false statements to a bank, and false statements to the IRS.
2024 (Jan 31): Initial sentencing hearing; the court adopted 18–24 months guidelines but expressed concern over limited restitution.
2024 (May 29): Continued sentencing; Davis had not sold assets as ordered.
2024 (Oct 16): Final sentencing; total restitution paid was $65,000; court imposed a 48-month term.
2025 (Oct 23): Eleventh Circuit affirmed.
Key Facts
Defendant: Linda Davis, owner of a pavement-maintenance company.
Offenses: Willful failure to collect or pay over employment taxes (26 U.S.C. § 7202) and related fraud conduct.
Tax loss: $557,249.62; PPP loan obtained fraudulently: $161,800.
Plea: Guilty to one count under § 7202; remaining counts dismissed.
Assets: Home valued at $500,000; three vehicles with $67,000 in equity.
Restitution escrow: $65,000 of $700,000 total agreed amount.
Guideline range: 18–24 months; imposed sentence: 48 months.
Statutory and Guideline Framework
Sentencing under 18 U.S.C. § 3553(a) requires courts to weigh:
The nature of the offense and the history of the defendant.
The need for punishment, deterrence, and respect for the law.
Available sentencing options.
The advisory guideline range.
Need for consistency and restitution.
The Eleventh Circuit reviews sentences for procedural and substantive reasonableness under an abuse-of-discretion standard, applying plain-error review when no objection is raised at sentencing.
Arguments
Defendant (Davis) argued:
The district court failed to consider all § 3553(a) factors properly.
The court overemphasized her restitution issues and ignored mitigating factors such as her lack of criminal history, family obligations, and cooperation.
The upward variance was excessive and based on impermissible factors.
Government argued:
The district court explicitly considered the § 3553(a) factors.
The sentence reflected Davis’s ongoing deception, refusal to sell assets, and conscious decision not to pay restitution.
The scale and duration of the conduct warranted the variance.
Court’s Reasoning
The district court stated on record that it considered “all the § 3553(a) factors,” satisfying procedural requirements.
The Eleventh Circuit held that explicitly discussing each factor is unnecessary when the record shows awareness and consideration.
Davis’s continued failure to pay restitution, despite means to do so, showed “disregard for the law” and “failure to accept responsibility.”
The court distinguished this case from United States v. Plate (11th Cir. 2016), which prohibits punishing defendants solely for inability to pay restitution. Davis’s problem was unwillingness, not inability.
The 48-month sentence, though above guidelines, was within the range of reasonable outcomes given the magnitude of the unpaid taxes, false PPP application, and continued concealment of assets.
No impermissible factors were identified; appellate precedent allows district courts to weigh aggravating conduct heavily even when unrelated counts were dismissed under a plea deal.
Forward-Looking Implications
Business owners who divert trust-fund taxes face heightened sentencing risk if they fail to make bona fide restitution efforts.
Courts may treat pandemic-related loan fraud as an aggravating factor even when charged separately or dismissed in a plea.
Defense counsel should document and demonstrate active asset liquidation before sentencing to mitigate upward variances.
The case underscores how plea agreements recommending leniency do not bind judges who find post-plea noncompliance.
Result
Judgment affirmed. The Eleventh Circuit upheld Davis’s 48-month imprisonment as procedurally and substantively reasonable.
The Takeaway
Upward variances are sustainable when a defendant with means fails to repay trust-fund taxes or cooperate in restitution, even after pleading guilty. The Eleventh Circuit deferred to the sentencing court’s assessment of credibility, deterrence, and respect for the law.
Citations
18 U.S.C. § 3553(a): Sentencing factors governing federal sentences.
26 U.S.C. § 7202: Willful failure to collect or pay over tax.
United States v. Plate, 839 F.3d 950 (11th Cir. 2016): Limits incarceration based solely on inability to pay restitution.
United States v. Oudomsine, 57 F.4th 1262 (11th Cir. 2023): Clarifies plain-error and reasonableness review standards.