WASHINGTON (CBS.MW) – U.S. Justice Department, Internal Revenue Service and Treasury officials served a first-ever “John Doe” summons to a law firm Thursday, alleging the promotion of illegal tax shelters.
The summons, served to the Chicago office of Dallas-based law firm Jenkens & Gilchrist, names one attorney in particular at the firm believed to promote offshore activity that allows high-end clients to report losses in lieu of capital gains at a cost to the federal government.
The IRS estimates the Jenkens & Gilchrist investigation covers “a conservative estimate” of $2.4 billion in reported tax losses among some 600 filers that should have been reported as taxable gains, with some individual misreporting estimated at $4 million or more.
Through its “John Doe” summons the IRS is hoping to discover the names of the alleged abusers.
IRS Chief Counsel B. John Williams said the agency believed attorney-client privilege does not apply because the attorney was acting as a promoter of the investment shelters, beyond legal advice.
“We will use all tools available to us to ensure that promoters and investors are complying with the tax laws and will not hesitate to serve John Doe summonses, in addition to regular summonses, to make sure that we preserve the statute of limitations for investors,” said Williams.
He went on to say that the IRS hopes the summons sends a message to would-be promoters and abusers that the government has a means to reveal their identity.
Officials told reporters Thursday that they have about 95 ongoing audits of tax shelter promoters currently and have issued more than 250 summonses to 35 believed promoters, seeking evidence of compliance with registration and abusive transaction disclosure requirements and the release of investor names.