The Internal Revenue Service (IRS) has asked a judge to force Chicago-based accounting firm Grant Thornton LLP to name clients who may have been involved in “potentially abusive” tax shelter transactions.
The U.S. Department of Justice, working on behalf of the IRS, on Wednesday said it filed a petition in a Washington, D.C., federal court to enforce nine administrative summonses the IRS issued to Grant Thornton as part of the government’s crackdown on tax shelters.
A spokesman for Grant Thornton, the nation’s fifth largest accounting firm, said the action “comes as a total surprise to us, as we were given no advance notice that the matter was referred for summons enforcement.”
The company has cooperated with the IRS, he said, and has provided thousands of pages of documents in response to more than 40 previous summonses it received from the IRS.
Grant Thornton said it didn't know about the nine additional summonses until the IRS announced it was seeking a court order for the information.
“We are not engaged in the promotion of tax shelters and are disappointed that the IRS has taken the extraordinary step” of seeking enforcement from a federal court, the spokesman said.
Grant Thornton isn't the only accounting firm in the IRS's sights. This is the sixth time the agency has gone to court to enforce summonses against a firm it suspects of being a tax shelter promoter. Chicago’s BDO Seidman LLP, also a target of the IRS, is currently mired in a courtroom controversy as it seeks to keep its clients' information private.
About 100 of BDO Seidman’s clients plan to ask the U.S. Supreme Court to overturn a controversial finding by a federal Appellate Court that accounting firms can't use claims of client privilege to shield the identities of investors who seek advice on tax shelters (Crain’s, Aug. 11). BDO Seidman attorney Steven Brown said the firm will issue the request sometime in the next few weeks.
The IRS also has entered into court proceedings to gain information from now-defunct accounting giant Andersen, KPMG LLP, Dallas-based law firm Jenkens &Gilchrist and New York-based Diversified Group Inc. New York’s Merrill Lynch & Co. and Ernst & Young LLP, meanwhile, have agreed to pay fines to the government for promoting tax shelters.
To comply with the IRS requests, firms must identify taxpayers—individuals and corporations—that may have invested in tax shelters organized and sold by the firm.