OVDP 2009 FAQ 35 (5/30/11)

This blog will open a discussion of the IRS application of FAQ 35 of OVDP 2009. I received comments on this subject with respect to the other blog entries and thought it was time to devote a blog entry to the subject so that comments can be more easily located. The issue is nicely addressed in Charles P. Rettig and Kathryn Keneally, The Last, Best Chance to Disclose Foreign Financial Accounts and Assets—The 2011 Offshore Voluntary Disclosure Program and Beyond!, Journal of Tax Practice and Procedure 33, 43-44 (Feb.-March 2011)

In practice, FAQ 35 of the 2009 OVDP provided an opportunity to explain unique circumstances supporting an offshore penalty resolution different that as specified in the 2009 OVDP. Specifically,

Voluntary disclosure examiners do not have discretion to settle cases for amounts less than what is properly due and owing. These examiners will compare the 20 percent offshore penalty to the total penalties that would otherwise apply to a particular taxpayer. Under no circumstances will a taxpayer be required to pay a penalty greater than what he would otherwise be liable for under existing statutes. If the taxpayer disagrees with the IRS’s determination, as set forth in the closing agreement, the taxpayer may request that the case be referred for a standard examination of all relevant years and issues. At the conclusion of this examination, all applicable penalties, including information return penalties and FBAR penalties, will be imposed. If, after the standard examination is concluded the case is closed unagreed, the taxpayer will have recourse to Appeals.

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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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Tax Obstruction Crimes -- Section 7212 and Klein Conspiracy (5/26/11)

Today, I pick up a thought I threw out in a comment in my blog entry titled "Jury speaks in the Daugerdas Case -- Guilty! (5/24/11)" regarding the overlapping tax obstruction under Section 7212 and the Klein conspiracy crimes and convictions. Here are Judge Pauley's instructions on these crimes in Daugerdas. I present the tax obstruction charge first, although it was presented second in the charge to the jury:

Tax Obstruction Charge (Section 7212)

Counts 20 and 21: Corruptly Endeavoring to Obstruct and Impede the Functions of the IRS

Count 20 of the Indictment charges that, from in or about 1994 to in or about October 2005, defendants Guerin, Field, Brubaker, and Parse corruptly obstructed and impeded, and endeavored to obstruct and impede, the due administration of the Internal Revenue Laws.

Count 21 charges that, from in or about 1994 to in or about October 2005, defendant Daugerdas corruptly obstructed and impeded, and endeavored to obstruct and impede, the due administration of the Internal Revenue Laws.

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