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Ninth Court to Rule on 5th Amendment Privilege of Tax Records.

On Behalf of | Sep 18, 2012 | IRS |

The Recorder, a California legal publication, reports on oral argument in a Ninth Circuit case involving the act of production doctrine. Under this doctrine, a person can invoke his Fifth Amendment rights against the production of documents only where the very act of producing the documents is incriminating in itself. In other words, even though the contents of documents, or the actual documents themselves, may not be privileged, a witness under compulsion to produce the documents via subpoena or summons still has a Fifth Amendment privilege as to the testimony inherent in responding to a document summons.

To briefly recap the facts of this case, the taxpayer had delivered check ledgers, client billings, credit card statements and a day planner to her tax return preparer. While the documents were in the enrolled agent’s possession, the IRS obtained a search warrant for the taxpayer’s residence and business premises. The documents were reviewed by the enrolled agent for somewhere between 45 minutes and 2 and a half hours. The documents were adequately described in the search warrant, but, the IRS did not find the documents because they were at the enrolled agent’s office.

The IRS eventually contacted the enrolled agent, who in turn, called the taxpayer’s attorney to inform him of search warrant and to have him deliver the documents to the IRS. The attorney took possession of the documents later that day but delivered them to the taxpayer’s new attorney, Jay Weill. The return preparer said that she would not have given the documents to attorney if she had known he would not deliver them to the IRS. Apparently, the return preparer advised the IRS of the description of the documents and, using the description, the IRS issued a summons to Mr. Weill.

Mr. Weill, who was the longtime chief of the Tax Division at the U.S. attorney’s office in San Francisco, acknowledged Thursday that the documents themselves aren’t privileged, but maintained that the act of culling through the boxes and folders to produce them would be [privileged], absent a grant of use immunity.

The trial court ordered compliance with the IRS summons over the claim of the act of production privilege. The court reasoned:

1. The documents although currently possessed by an attorney, Mr. Weill, were not subject to an attorney-client privilege but were subject only to privileges the taxpayer might assert if she retained possession of the documents.

2. The documents were not subject to a Fifth Amendment privilege because they were pre-existing documents voluntarily prepared or retained by taxpayer. Therefore, there was no testimonial compulsion as to the contents of the documents.

3. The production of the documents are not subject to the Act of Production doctrine pursuant to which the act of producing documents can have testimonial aspects that are subject to the Fifth Amendment privilege.

The U.S. Court of Appeals for the Ninth Circuit sounded ready… to order… law firm to hand over a client’s tax records, despite the firm’s protest that doing so would violate attorney-client privilege.

U.S. Justice Department attorney Michael Haungs assured the court, “if they give us the boxes and accordion folders, that’s fine. That would completely satisfy. We don’t expect that anybody has to do any sorting or culling here.”

Judges Graber, Berzon and Senior Judge J. Clifford Wallace sounded sympathetic to Haungs’ argument that the existence, location and authenticity of the documents is “a foregone conclusion” under Supreme Court precedent, and therefore producing them would not violate the privilege.

We will keep you posted on how the Court ultimately rules.

To read the article click here, to listen to the oral argument click here.


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