Scott Michel Leads Discussion of Offshore Issues at Criminal Tax Conference

Speaking at the American Bar Association's National Institute on Criminal Tax Fraud and Institute on Tax Controversy panel moderated by Scott D. Michel of Caplin & Drysdale in Las Vegas, IRS and DOJ officials discussed a number of topics about offshore enforcement, foreign bank issues and voluntary disclosures. 

IRS representatives offered hints about the near future of John Doe summonses, acknowledging that taxpayers could expect to see more of them soon adding that IRS interest has expanded beyond banks to facilitators.  The panel discussed the implications on the increasing inflow of information to the IRS, and how this might impact a taxpayer’s ability to refrain from complying with certain IRS summonses or grand jury subpoenas based on Fifth Amendment grounds.  A recent Second Circuit summons case, U.S. v. Greenfield, had held for the taxpayer on this issue where the government failed to prove that the testimonial representations entailed in his act of production were not “foregone conclusions.”

"Greenfield was a pretty unique case because the government's evidence to support this so-called foregone conclusion was just incredibly flimsy," Scott Michel of Caplin & Drysdale said. But he cautioned the government will be able to amass more information as it comes in from correspondent banks, media leaks, and whistleblowers. "So when these subpoenas are served beyond the period required by the required records doctrine, in my view, the government is going to have more going for it to establish the foregone conclusion than they did in the case of Greenfield," Michel said.

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The panel also discussed the difficulties faced by practitioners in doing due diligence and reaching proper reporting standards for taxpayers entering the IRS streamlined program.

Under streamlined procedures, taxpayers must certify, under penalties of perjury, that previous compliance failures were non-willful. Michel argued practitioners still struggled with what the standard was for making that judgment.

"We all live in a tax world where we are familiar with concepts like reasonable basis . . . or substantial authority, or more likely than not. It seems to me that there is a tension here between the absolute black-and-white component of a penalty of perjury certification . . . and these sorts of traditional standards," Michel said. "The scary thing to me, and I think a lot of others, is it is probably not good enough to have a reasonable basis."

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Excerpt taken from the article "IRS Offers Hints About Future of John Doe Summonses" by Andrew Velarde for Tax Notes.