Tax News

CCH (cch.taxgroup.com) reports:

  The U.S. District Court for the Southern District of Florida has denied Swiss banking giant UBS AG's motion to compel the government to provide certain discovery materials in efforts to unearth the names of U.S. taxpayers hiding assets abroad in the firm's accounts. The bank had argued that some of the information requested by the IRS in a "John Doe" summons (TAXDAY, 2009/02/20, M.1) was already within the IRS's possession. As a result, it sought discovery, cross-examination and potential in camera inspection of documents to determine what information was within the IRS's possession. The bank had also argued that there were alternative means of obtaining the information sought by the IRS.

  Instead, the court, in a July 7 order denying the motion to compel disclosure, gave the government a green light to continue with enforcing its John Doe summons, seeking the identities of U.S. customers of UBS for which the firm did not have Forms W-9, Request for Taxpayer Identification of Certification, or accurately and timely filed Forms 1099 reporting to the IRS amounts paid. The court held that enforcement of this summons should not be denied strictly because the IRS was in possession of some of the records sought. The IRS had pointed to controlling law in the Eleventh Circuit ( Davis,
81-1 USTC ¶9193), where appeal of the decision on the motion would lie.

  The court also ruled that reliance on voluntary disclosure and other filings by U.S. taxpayers did not provide an alternative means for the government to obtain the same information. The government had argued that, simply because some U.S. taxpayers had voluntarily disclosed their identities and the existence of a UBS bank account to the IRS, not all of the documents sought by the government's summons were in the IRS's possession. The taxpayer's filing of a TD F 90-22.1, Report of Foreign Bank and Financial Accounts, or disclosure of a secret bank account did not require the taxpayer to produce any of the UBS source documents requested.

  CCH Comment. Also on July 7, the Swiss government filed an amicus curiae brief against the government's efforts to enforce the IRS summons, asserting that UBS would be unable to comply with the summons without violating Swiss law. It stated, "The government of Switzerland will use its legal authority to ensure that the bank cannot be pressured to transmit the information illegally, including if necessary by issuing an order taking effective control of the data at UBS that is the subject of the summons and expressly prohibiting UBS from attempting to comply."

  CCH Comment. In response, House Ways and Means Select Revenue Measures Subcommittee Chairman Richard Neal, D-Mass., released a written statement, saying, "The statement from the Swiss government today does not look like a move toward greater openness to me. And, I don't find their willingness to provide information on tax evaders in the future particularly reassuring.... In my opinion, the current policy of protecting these tax evaders is simply unacceptable."

  By Torie Cole, CCH News Staff

UBS AG, DC Fla., 2009-2 USTC ¶50,478

Ways and Means Select Revenue Measures Subcommittee Press Release: Neal Critical of Swiss Bank Action

Other References:

 
Code Sec. 7602

  CCH Reference - 2009FED ¶42,827.562

  CCH Reference - 2009FED ¶42,827.570

  Tax Research Consultant

  CCH Reference - TRC IRS: 21,364