If you’re going to cheat, we’re not going to make it easy for you.
That’s the message that the US Court of Appeals (DC Circuit) sent to potential tax evaders late last week. The Court refused to grant the law firm of Mayer Brown access to certain Internal Revenue Service (IRS) documents under the Freedom of Information Act (FOIA) because it felt that the documents might lead to more tax evasion.
Mayer Brown had asked for a number of IRS records, including settlement guidelines for the prosecution of the now infamous Lease-In/Lease-Out (LILO) transactions. The request was not filed on behalf of a client, but Mayer Brown itself, in 2004. The IRS did not want to release the information, citing concerns that the records could be used to build a better mousetrap tax scheme. The Court of Appeals shared this concern, noting that studying the guidelines might result in the knowledge of “how to best structure an evasion so as to avoid the maximum enforcement efforts of the IRS.”
In other words, the judges saw no good reason for disclosing the documents and lots of potential for bad acts. That begs the question, though, as to whether that should be enough of a reason to keep the documents sealed. Your thoughts?
Sounds like a lose-lose situation to me. On one side, releasing the documents might result in more evasion or less documented structure on the part of the IRS. On the other side, you have “Security thru obscurity” which creates a sort of uneven playing field for the defendants and an unchecked government procedure, which should never make anyone happy.
Is that right?