The U.S. Sentencing Guidelines play an enormous role in federal sentencing. While courts are not required to follow the guidelines, the guidelines remain the starting point for determining a defendant’s ultimate sentence. For that reason, amendments to the guidelines are equally significant.

New Proposed Guideline Amendments

Recently, the United States Sentencing Commission — the body that studies and publishes the guidelines — announced several proposed amendments. Most media coverage has centered on the proposal to exclude acquitted conduct from consideration at sentencing. But another amendment is likely to have an even bigger effect, especially in white-collar cases. That amendment would establish that there is no distinction between actual and intended loss when calibrating the economic harm caused. If enacted, the proposed amendment would nullify the holding of a recent Third Circuit decision holding that only actual loss mattered and confirm that, under the guidelines, intended financial harm counts just as much.

Calculating “Loss” Under the Guidelines

Before imposing a sentence in cases involving fraud or other economic crime, a court must measure the monetary harm the defendant caused. In nearly every such case, the amount of “loss” is the biggest single driver of the guidelines.

The principal fraud guidelines appear in § 2B1.1 of the guidelines. And the text of that section provides a seemingly straightforward table that increases the “offense level” (i.e., the seriousness of the offense) as the loss increases. But what is “loss”?  

The guidelines include commentary that provides additional information on how to apply the guidelines. For “loss,” that commentary defines it as the greater of either (1) the actual loss (the pecuniary harm that actually resulted from the offense), or (2) the intended loss (the pecuniary harm that the defendant sought to inflict). Applying those definitions has long been uncontroversial. Courts uniformly deemed the commentary’s definition controlling, routinely considering both “actual loss” and “intended loss” when calculating the guideline range.

Third Circuit Rejects the “Intended Loss” Commentary

But in 2022, the Third Circuit rejected this approach in United States v. Banks, 55 F.4th 246 (3d Cir. 2022), holding that “the term ‘loss’ [wa]s unambiguous in the context of §2B1.1” and clearly referred to “actual loss.” According to Banks, relying on the non-binding commentary definition “impermissibly expands the word ‘loss’ to include both intended and actual loss.” In the Banks court’s view, the absence of any ambiguity precluded consideration of that commentary under existing Supreme Court precedent (Kisor v. Wilkie, 139 S. Ct. 2400 (2019)), and was inconsistent with the guideline. No other circuit court aligned with Banks, and it appeared that the Supreme Court may need to resolve the split between the Third Circuit and other circuit courts.  

The “Intended Loss” Amendment

With the new proposed amendments, however, it appears the issue will be resolved without Supreme Court action. Under the proposed changes, the commentary definition of “loss” would be incorporated into the body of the guideline, eliminating the distinction upon which Banks was premised. While the amendments have not yet been adopted, barring some unexpected change, they will take effect later this year. When they do, they will foreclose the argument that intended loss should be evaluated differently from actual loss. In the process, those amendments will likely relegate Banks to short-lived and narrowly applied precedent. Going forward, all circuits are expected to mandate that the proper measure of loss includes real and intended pecuniary harm.