IRS Names KPMG Tax Shelter Users In Court Filings

by Mike Godfrey, Tax-News.com, Washington

15 July 2002

The IRS last week revealed the names of dozens of US taxpayers who have taken advantage of tax shelters on the advice of international accounting firm KPMG.

This unusual move was the latest step in the Internal Revenue Service's campaign to clamp down on the use of 'improper' tax shelters by companies and individuals to minimize taxes, and early last week, the tax authority launched court actions against KPMG and BDO Seidman, the fourth and fifth largest accounting firms in the United States, requiring them to produce lists of clients which have been sold the shelters.

Historically, the agency has been careful to guard the identities of taxpayers who have not themselves been accused of wrongdoing, so the decision to make the names public in court filings has surprised and angered the accounting firm.

'It's disappointing that the IRS has deemed it appropriate to disclose the identity and embarrass individual taxpayers without having expressed any deficiencies in their transactions to the listed parties. Individual taxpayers have a right to expect privacy in the tax system, which has been violated as part of the IRS's public filing,' KPMG announced in a statement.

However, speaking to the Wall Street Journal on Friday, a spokesman for the tax agency attempted to justify the move by arguing that the public release of the client list was necessary in order to substantiate the case:

'Names were included to establish for the judge the basis of our allegation,' spokesman Frank Keith told the newspaper.

Among those revealed to have benefited from the tax shelters were: William E. Simon Jr, a California politician, and his late father, former Secretary of the Treasury William E. Simon Sr, Gary Winnick, the Chairman of Global Crossing Ltd, and the US Ambassador to Barbados, Earl N. Phillips Jr.

Both accounting firms have denied any wrongdoing, and in its most recent statement, KPMG asserted that: 'We provide tax planning services for clients in an appropriate manner.'

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