Customer Lists

[LPC]

Returning to the question of whether William Benson should be required to produce a customer list to the IRS, I found a Third Circuit opinion in which the court upheld the forced disclosure of customers over objections based on the 1st Amendment, the court declaring that "the government has a compelling interest, among other things, in determining whether [Thurston] Bell's customers filed fraudulent returns in violation of the Internal Revenue Code," citing First Nat'l Bank of Tulsa v. Dep't of Justice, 865 F.2d 217, 220 (10th Cir. 1989). United States v. Bell, 2005 TNT 133-15, No. 04-1640 (3d Cir. 7/12/2005), affirming 2004 TNT 23-17, No. 1:CV-01-2159 (U.S.D.C. M.D. Pa. 1/10/2003).

I looked at the First National Bank of Tulsa decision, and I am not sure that it is squarely on point, because it dealt with the records of an organization that operated as a kind of private bank, so that the records requested were financial and the membership identifications were, in a sense, incidental.

Although the fact that Larry Becraft was the attorney for the appellant is suggestive.

A district court that cited the First National Bank of Tulsa decision wrote the following:

The Government's only objection to the Magistrate's finding is that the recommended Order contained therein does not require Defendant to provide the Government with a list identifying (with names, mailing and e-mail addresses, phone numbers, and social security or taxpayer-identification numbers) all persons and entities to whom he has sold his corporation sole and claim of right programs. The Government maintains that this information is necessary to ensure that Defendant's customers are complying with internal revenue laws and to monitor whether Defendant is complying with other parts of the injunction, once entered, such as the requirement that the injunction be sent to all of Defendant's former customers. "Although the First Amendment does protect many forms of expression, including the right to disagree with the law, it does not protect speech which is directed toward producing imminent lawless action or which proposes illegal activity or transactions." Abdo v. United States, 234 F. Supp. 2d 553, 569 (M.D.N.C. 2002), aff'd mem., 63 Fed. Appx. 163 (4th Cir. 2003) (citing Village of Hoffman Estates v. Flipside, Hoffman Estates, Inc., 455 U.S. 489, 102 S.Ct. 1186, 71 L.Ed.2d 362 (1982); Brandenburg v. Ohio, 395 U.S. 444, 89 S.Ct. 1827, 23 L.Ed.2d 430 (1969)). Furthermore, the Government has a compelling interest in Defendant's customer list. See First. Nat. Bank of Tulsa v. U.S. Dept.of Justice, 865 F.2d 217 (10th Cir. 1999) (holding the investigation into compliance with tax laws and enforcement of same is a compelling interest outweighing any concerns regarding First Amendment associational rights)

United States v. Richard M. Blackstock, 2005 TNT 59-10, No. 04-CV-253-TCK-PJC (N.D.Okl. 3/21/2005) (injunction against "claim of right" promoter).

And the US has not yet filed a motion to alter or amend the judgment, but Benson has, basically claiming that there are issues of material facts.

[wserra]

Here, the Service seeks Benistar's client list to further the investigation of Benistar for violation of 26 U.S.C. § 6700, and specifically to determine whether those clients claimed tax benefits, what statements Benistar actually made to its clients, and to assess the total tax loss involved.
...
Benistar further argues that the Service's investigation is a pretext for investigating Benistar's clients without complying with the John Doe rules of 26 U.S.C. § 7609. However, where a summons serves the dual purposes of investigating both known and unknown taxpayers, the Service need not comply with Section 7609. Tiffany Fine Arts, Inc. v. United States, 469 U.S. 310, 105 S.Ct. 725, 83 L.Ed.2d 678 (1985). The sole inquiry in determining whether a summons is dual-purpose is whether the requested information is relevant to the investigation of the known taxpayer. Id. at 323, 105 S.Ct. 725. As discussed above, we see no error in the district court's finding that the client list is relevant to the Benistar investigation.

Benistar 419 Plan Services, Inc. v. United States, 144 Fed.Appx. 902 (2d Cir. 2005) (summary order).

[Judge Roy Bean]

This may appear to be a fine line, but there is a difference between a "client" and someone who simply purchases an intellectually offensive book.

[LPC]

This may appear to be a fine line, but there is a difference between a "client" and someone who simply purchases an intellectually offensive book.

There is also a difference between:

a. Someone who has bought a book explaining why a tax return is not required and has filed returns that, as far as the IRS can tell, reported all income (according to W-2s, 1099s, and other third-party reports); and

b. Someone who has bought the same book and not filed any tax return even though there are third-party reports showing income.

Getting the customer list from someone like Bill Benson seems like a good, cost-effective way to identify taxpayer b. There is simply no reason to believe that the IRS has any interest in taxpayer a once his returns have been identified and the sources of income confirmed.

In an ideal world, an IRS with an appropriate budget would have the systems in place to match informational reports with returns for all taxpayers, but it obviously is not happening, and getting customer lists from abusive tax shelter promoters seems like a good way to backstop the system.

[ASITStands]

Here, the Service seeks Benistar's client list to further the investigation of Benistar for violation of 26 U.S.C. § 6700, and specifically to determine whether those clients claimed tax benefits, what statements Benistar actually made to its clients, and to assess the total tax loss involved.
...
Benistar further argues that the Service's investigation is a pretext for investigating Benistar's clients without complying with the John Doe rules of 26 U.S.C. § 7609. However, where a summons serves the dual purposes of investigating both known and unknown taxpayers, the Service need not comply with Section 7609. Tiffany Fine Arts, Inc. v. United States, 469 U.S. 310, 105 S.Ct. 725, 83 L.Ed.2d 678 (1985). The sole inquiry in determining whether a summons is dual-purpose is whether the requested information is relevant to the investigation of the known taxpayer. Id. at 323, 105 S.Ct. 725. As discussed above, we see no error in the district court's finding that the client list is relevant to the Benistar investigation.

Benistar 419 Plan Services, Inc. v. United States, 144 Fed.Appx. 902 (2d Cir. 2005) (summary order).

Ah! A light bulb just went off in my head.

After a criminal conviction, the government may seek penalty under section 6700 or 6701. In order to make a proper determination, the government would require information on which client did what when.

I have been opposed to the government obtaining client lists, on the basis of privacy, but I see the connection in imposing further sanction, and I see the government's justification.

[.]

In an ideal world, an IRS with an appropriate budget would have the systems in place to match informational reports with returns for all taxpayers, but it obviously is not happening

They claim to match each and every one of them, but have problems with missing or bogus iinformation, as would anyone.

Why do you say it's not happening, assuming you mean with regard to accurately filed returns containing legitimate information?

How would a larger budget have any possibility of making any substantial dent in the pile of those who submit false TINs either intentionally or because they were provided false TINs by employees?

[Judge Roy Bean]

Well, if the efficacy of having the information about a taxpayer's intellectual persuits is there, let's take this to its extreme but logical conclusion.

How about we get Google to provide the IP's of people who do certain kinds of searches? How about all those who searched for "show me the law" or that were presented with a certain kind of ad, say, from The We the People Foundation or The Law Research Group?

If the rationale applies to lists of "interested" potential miscreants who bought something, why wouldn't it apply to someone who went looking for it?

Technologically, it's a no-brainer. Legally, it's utterly terrifying to anyone with any concern for privacy and the tenets of freedom of association and thought.

[RyanMcC]

Well, if the efficacy of having the information about a taxpayer's intellectual persuits is there, let's take this to its extreme but logical conclusion.

How about we get Google to provide the IP's of people who do certain kinds of searches? How about all those who searched for "show me the law" or that were presented with a certain kind of ad, say, from The We the People Foundation or The Law Research Group?

Or better yet, every visitor to this forum. Clearly everyone here has read tax protestor literature so why not just check up on everyone here, ya know, just incase..

Afterall, there is a diffrence between:

a. Someone who has read a post explaining why a tax return is not required and has filed returns that, as far as the IRS can tell, reported all income (according to W-2s, 1099s, and other third-party reports); and

b. Someone who has read the same post and not filed any tax return even though there are third-party reports showing income.


Post your real names below:

[LPC]

How about we get Google to provide the IP's of people who do certain kinds of searches? How about all those who searched for "show me the law" or that were presented with a certain kind of ad, say, from The We the People Foundation or The Law Research Group?

If the rationale applies to lists of "interested" potential miscreants who bought something, why wouldn't it apply to someone who went looking for it?

Google has not promoted an abusive tax shelter in violation of section 6700.

The injunction requiring the customer information is part of the remedy for violating section 6700. Without a violation of section 6700, there is nothing to remedy.

[Quixote]

In an ideal world, an IRS with an appropriate budget would have the systems in place to match informational reports with returns for all taxpayers, but it obviously is not happening

They claim to match each and every one of them, but have problems with missing or bogus iinformation, as would anyone.

Why do you say it's not happening, assuming you mean with regard to accurately filed returns containing legitimate information?

How would a larger budget have any possibility of making any substantial dent in the pile of those who submit false TINs either intentionally or because they were provided false TINs by employees?

In addition, most of the revenue of retail level businesses is not subject to any reporting requirement. E.g., McDonald's doesn't get a 1099-misc for every Big Mac it sells.

[webhick]

In addition, most of the revenue of retail level businesses is not subject to any reporting requirement. E.g., McDonald's doesn't get a 1099-misc for every Big Mac it sells.

Well, not since the Hamburgler was caught near the copier surrounded by empty bottles of white-out and a copy of CtC down his pants.

[Judge Roy Bean]

...Google has not promoted an abusive tax shelter in violation of section 6700.

Of course, it isn't Google that's promoting tax abuses. They're just the advertising vehicle.

paynoincometax.com still shows up on the first page of a Google search for "income tax." Devvy Kidd's site comes up on the second. It shouldn't surprise anyone that there were too many pages to review (23M+), but conspiracyplanet.com shows up on page seven.

Googling 'not paying income tax' (without quotes) generated 2.46M hits, with Irwin's site on top and Devvy's a few lines down.

But back on point, where does one draw the line on finding out what someone seeks to learn about? If we're going to use lists of curious people from which to glean a list of potential suspects, there needs to be a limit to that kind of snooping somewhere deeper in the data food chain.