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US Court Supports 'Required Records Doctrine'

by Leroy Baker, Tax-News.com, New York

27 December 2013


The United States Court of Appeals for the Second Circuit has ordered an individual to provide records of his foreign bank accounts to determine whether he used them to evade his federal income taxes, with the "required records exception" overriding the constitutional privilege against self-incrimination.

According to Treasury regulations, pursuant to the Bank Secrecy Act, "required records" must be retained by each US resident having a financial interest in or any other authority over any foreign bank account, and the records must include the names of the account holders, the banks, the account numbers and the maximum value of the account – all information that must be reported to the Commissioner of Internal Revenue.

The petitioner, a non-citizen permanent resident of the US, became the target of a grand-jury investigation in February last year seeking to determine whether he used secret foreign bank accounts to evade his federal income taxes. When the petitioner refused to comply with a grand jury subpoena for foreign bank-account records, the Government moved to compel him to comply.

The Second Circuit district and appeal courts, in United States v. John Doe – 13-403-cv, have now both ruled that the petitioner could not invoke his Fifth Amendment privilege against compelled self-incrimination, because the records fell within the "required records" doctrine recognized in Shapiro v. United States 335 U.S. 1 (1948).

The courts have concluded that, under the "required records" doctrine, the petitioner had no Fifth Amendment right to withhold the subpoenaed documents because he had voluntarily engaged in activity (the holding of foreign bank accounts) that subjected him to the regulatory recordkeeping requirements.

The court, for example, concluded that the information requested by the subpoena is "basic account information that bank customers would customarily keep, in part because they must report it to the Internal Revenue Service (IRS) every year as part of the IRS's regulation of offshore banking."

With this opinion, the 2nd Circuit has joined the 4 Circuit, 5th Circuit, 7th Circuit, 9th Circuit and 11th Circuit in holding that the required records doctrine overrides the Fifth Amendment's privilege against self-incrimination, and the Government has continued to issue grand jury subpoenas that target suspect activity relating to offshore banking.

TAGS: court | compliance | tax | tax compliance | law | banking | Internal Revenue Service (IRS) | tax authority | offshore | offshore banking | United States | regulation | individual income tax | Tax | Tax Evasion

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