When I load up my mod on a fresh save, any crime done near the guard will be ignored. However, when I slap him with my sword once he responds properly and all crimes afterwords are properly responded to throughout the town. Im in a position where I have to put all my guards on sandbox mode and I would prefer not to. Anyone have any idea why this may be happening?

I tried to see if saving once and restarting the mod/game would change things but it didn't.

In the AI Data tab what morality are they on? Also what crime faction in the faction tab.

Morality is set to no crime and my crime faction is pointed to my new town crime faction as well as Whiterun being secondary.

Faction should be alright then. Put morality on any crime, see if that does anything.

Just checked. Same behavior.

He will come to the aid of citizen being attacked in front of him but will not arrest me if I sheath my sword. He will walk away and say, "I'll let it go, this time". He wont respond to crimes being committed out of his line of sight pretty much. If I commit a crime against him, he becomes the guard he is supposed to be, permanently. This only happens when I put my guards on patrol. Sandbox mode, they behave perfectly and respond to crimes nearly anywhere in my town.

I tried to see if it was specific NPCs but its not. It has something to do with the patrol package.

I think it depends on how much they like you. Sounds like when you are thane of a hold, they tend to ignore some crimes. You said Whiterun faction is in there too, maybe it's influencing it. Maybe certain perks revolving around crime has an impact. Are you testing on a new character? Do your citizens have the same crime faction and assigned the crime faction?

Also have you using http://www.youtube.com/watch?v=SNsKMyz1hCs on youtube? It's what I used to create my own crime and punishment system. They respond properly to violence and property crime in my mod.

I have been testing it on a new character. Made a new game just for the mod. I did come across that tutorial and it helped setup my jail or at least made sure I didn't make any mistakes.

My guards are all customized. Specific skill sets and none of them are duplicated. Perhaps this is part of the problem somewhere but again, everything works fine when they are not patrolling so IDK.

In my own mod I use linked markers and just have them patrol using them. They don't have any AI package at all as they don't seem to need them.

Worth a try, how do you link the guards to the patrol markers without a package? I should probably know the answer to this.

You can use XMarkerHeading, idle markers (patrolidlemarker, or idlepatrolmaker, something like that) is probably best to set up linked patrols. To test just place two markers and go into the LinkedRef tab of one, right click then select new, then select reference in render window and click on the next marker, that links them. Then you'll need to do the same with your guard, go into linked ref and select one of the markers so he/she is linked to them. Then select the markers and go into patrol data tab, and tick patrol data. The time underneath shows long the guard will stay near that marker before moving on to the next, but you don't have to use it.

Though it's better to read http://www.creationkit.com/Bethesda_Tutorial_Encounters it explains it better than my attempt, though it uses furniture rather than markers. Scroll down to where it says "Linked-Refs and Patrols".