KPMG Must Turn Tax Shelter Documents Over To US Federal Court

by Mike Godfrey, Tax-News.com, Washington

03 January 2003

International accounting firm, KPMG has been ordered to turn over to a US federal court documents relating to tax shelter arrangements despite the company's claim that to do so would violate client confidentiality, according to a Wall Street Journal report published on Tuesday.

In his ruling late last month, Chief US District Judge Thomas Hogan reasoned that of the 30 sample documents provided by the auditor, only four could be said to contain privileged information. He ordered KPMG to submit all documents withheld during the ongoing tax shelter investigation to the court, which will review them and decide whether the Internal Revenue Service should be permitted access to the paperwork.

According to the WSJ, KPMG argued that it has acted in a cooperative manner - having handed over some 400 boxes of documents to date - but that the IRS's demands over the course of the five month investigation have been: 'extremely broad, incredibly burdensome, and in many respects, unenforceable'.

The accounting firm was keen to point out this week that the federal court ruling is not the final word on the matter, however. KPMG spokesman, Bob Zitlinger, speaking to the Journal, explained that:

'Based on the court's ruling, there is not yet a final determination in this matter. The IRS enforcement proceeding is 'held in abeyance' pending the outcome of the magistrate's findings.'

The magistrate in question is former Judge Patrick J. Attridge, who has been appointed to examine all of the documents that were withheld and to evaluate the assertions of privilege in the light of this recent ruling. He will then submit a report and recommendation to the court.

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