John Doe Summonses & Statutes Of Limitations (5/27/11)

This week, a district court denied an IRS request for an order authorizing issuance of a John Doe Summons.  Readers will recall that Section 7609(f) permits the IRS to issue John Doe Summonses seeking tax related information and documents about unknown taxpayers. These taxpayers are unknown, so the IRS cannot give notice to the taxpayers who can then contest the summons. So, Congress required that a federal district judge approve the issuance of the summons.

The IRS sought the court order authorizing it to serve a John Doe summons to the California Board of Equalization for certain a certain discrete record set that would help the IRS identify persons making gift transfers to non-spouse related parties which, the IRS imagined, might have compliance issues with the gift tax. I won't get into the details of the focus of the IRS's interest, since the principal focus would be civil compliance initiatives. The judge refused to authorize the summons, finding that the IRS had not shown that the information and documents were not otherwise reasonably available. Further, although dismissing the motion for authorization without prejudice on the basis stated, the Court cautioned that, if the IRS were to repackage the motion, the court had some serious concerns about whether the IRS could otherwise qualify.  The opinion is here.
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Court Holds Criminal Statute of Limitations Commences on Due Date of Return and Summons Suspends for Husband but not Wife

In United States v. Buckler, 2011 U.S. Dist. LEXIS 39839 (WD KY 2011), the court made two holdings relevant for this blog in a criminal tax prosecution of husband and wife.

First, the Court held that the criminal statute of limitations for a return filed before the normal due date of the return (April 15 for individuals) commences on the normal due date (April 15), thus making the indictment timely. The Court cited for this proposition Section 6513(a) and United States v. Habig, 390 U.S. 222, 225 (1968). Section 6513(a) provides that "For purposes of section 6511," which deals with claiming refunds, (i) the statute of limitations commences on the due date rather than an earlier filed date and (ii) the due date "shall be determined without regard to any extension of time granted the taxpayer and without regard to any election to pay the tax in installments." Section 6531, dealing with criminal statutes of limitation, provides that "for the purpose of determining [such] periods of limitation . . . the rules of section 6513 shall be applicable." In Habig, the defendant sought to interpret the bold faced provision of Section 6513(a) to mean that it applied to returns filed after the due date, so that returns filed during the extension period required a due date commencement of the civil and criminal statute of limitations. The Habig Court rejected that argument, holding that returns filed after the due date have their statutes of limitation commence on the date of filing rather than the earlier due date of the return. In Buckler, the return was filed before the normal due date and hence fell squarely within the rule that the return is deemed filed on the normal due date of the return.
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Suspension of Statute of Limitations Period During Request for Foreign Assistance to Obtain Evidence

18 USC Section § 3292 provides that, if the Government makes an official request to a foreign government to obtain evidence in that country and thereafter applies to a district court for an order to suspend the statute of limitations, upon appropriate proof that the official request was made and that the requested evidence is in the foreign country, the district court "shall suspend the running of the statute of limitations for the offense." The suspension period is from the date of the request to the foreign country until the foreign court or authority takes final action on the request, with a maximum of 3 years.  The DOJ CTM discussion of this provision is at CTM 7.06 (2008 ed.).

In Jenkins v. United States, ___ F.3d ___ (9th Cir. 2011), the Ninth Circuit applied this suspension statute in a straight-forward manner. One key holding is worth noting, even though it is a straight forward application of the statute.

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Is the Criminal Statute of Limitations Suspended under the Wartime Suspension Act?

There are rumors that the government in a tax shelter case is seeking to suspend the criminal statute of limitations under the "wartime suspension act", 18 USC Section 3287. The text of the statute is:

When the United States is at war or Congress has enacted a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. 1544(b)), the running of any statute of limitations applicable to any offense (1) involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not, or (2) committed in connection with the acquisition, care, handling, custody, control or disposition of any real or personal property of the United States, or (3) committed in connection with the negotiation, procurement, award, performance, payment for, interim financing, cancelation, or other termination or settlement, of any contract, subcontract, or purchase order which is connected with or related to the prosecution of the war or directly connected with or related to the authorized use of the Armed Forces, or with any disposition of termination inventory by any war contractor or Government agency, shall be suspended until 5 years after the termination of hostilities as proclaimed by a Presidential proclamation, with notice to Congress, or by a concurrent resolution of Congress.

Definitions of terms in section 103 of Title 41 shall apply to similar terms used in this section. For purposes of applying such definitions in this section, the term "war" includes a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. 1544(b)).

I have highlighted the portion upon which the Government is apparently relying.

I had not heard that the Government was doing that and have not researched the issue. The concern, of course, is that the statute of limitations is suspended on tax crimes as well as other crimes involving fraud or attempted fraud against the U.S. If any reader has any thoughts on this, I would appreciate hearing about it either as a comment to the blog or by separate email to jack@tjtaxlaw.com. I will post follow-through information as I learn it.

Update on 1/30/10:  See Erin M. Brown, Note: The Wartime Suspension of Limitations Act, the Wartime Enforcement of Fraud Act, and the War on Terror, 85 Notre Dame L. Rev. 313 (2009).  I think that the analysis and sources in the article will give ammunitiion to those who want to argue that plain vanilla tax crimes unrelated to the war effort should not be within the scope of 18 USC Section 3287.