United States v. KPMG: Does Section 6103 Allow the IRS to Put Taxpayer Names on the Front Page of the Wall Street Journal?
29 Pages Posted: 15 Feb 2010
Date Written: September 1, 2003
On July 12, 2002, the headline of the Wall Street Journal (hereinafter WSJ) read "IRS Releases Names of People in Disputed KPMG Tax Shelters." The article contained the names of several prominent taxpayers, including the current Republican nominee for Governor of California, a deceased champion stock car racer, a deceased former Secretary of the Treasury, and the CEOs of several public companies. The article had culled the names of the taxpayers from a public filing of a lawsuit instigated by the Internal Revenue Service (hereinafter IRS) against KPMG LLP (hereinafter KPMG), a "Big Four" accounting firm. The lawsuit between the IRS and KPMG was a summons enforcement action in which the IRS was requesting KPMG to turn over certain taxpayer documents relating to alleged tax shelters promoted by KPMG and entered into by the named taxpayers. KPMG had previously invoked attorney-client and section 7525 privileges on behalf of the taxpayers in an attempt to prevent the release of the taxpayer documents to the IRS. As part of the invocation of privilege, KPMG had to provide the IRS with a privilege log that set forth the names of the taxpayers relating to the alleged privileged documents. Historically, the names of taxpayers in such a privilege log would not be released by the IRS, even in a summons enforcement action. The publication of names caused a large backlash among certain commentators and Freedom of Information Act requests were sent to the U.S. Treasury Department, n15 the IRS n16 and the U.S. Department of Justice (hereinafter DOJ) seeking to discover internal government documents as to who made this decision and how it was made.
Section 6103 of the Internal Revenue Code of 1986 (hereinafter the Code) provides that certain taxpayer information is confidential as between the IRS and the taxpayer, subject to certain exceptions. Section 7431 of the Code provides redress for taxpayers in which such confidential taxpayer information is improperly released. What follows is a discussion of whether the disclosure activities of the IRS in the KPMG case have violated the provisions of section 6103 of the Code and whether there is taxpayer redress for such violations under section 7431 of the Code
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