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lawsuitjurisdictionstatuteappealcompliancestatute of limitations
jurisdictionstatuteappealstatute of limitations

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Doe v. KPMG, LLP, 398 F.3d 686, 95 A.F.T.R.2d 2005-742, 2005-1 USTC P 50,161

Facts

In September 2000, the IRS published Notice 2000–44, requiring promoters of certain tax shelters to maintain and disclose participant lists. Taxpayers John Doe I and John Doe II purchased a Short Option Strategy shelter from KPMG to reduce their tax liabilities. Following an IRS investigation into KPMG's compliance with the notice, KPMG received multiple summonses demanding client information. The taxpayers filed a lawsuit to prevent KPMG from disclosing their identities, leading to the IRS's intervention to protect its interests regarding the statute of limitations for tax assessments.

In September 2000, the Internal Revenue Service (“IRS”) published Notice 2000–44, which requires organizers and promoters of certain tax shelters to maintain lists of participants and to provide those lists to the IRS upon request.

Issue

Whether the district court had the authority to apply equitable tolling to the statute of limitations under Internal Revenue Code § 6501.

This appeal challenges the district court's jurisdiction to apply equitable tolling to the statute of limitations of Internal Revenue Code § 6501.

Rule

Equitable tolling cannot be applied to extend the three-year statute of limitations for tax assessments as established by I.R.C. § 6501.

The statute here at issue prohibits the imposition of equitable tolling to prevent expiration of the statute of limitations.

Analysis

The court analyzed the statutory language of I.R.C. § 6501, which explicitly outlines the three-year limitations period and the specific exceptions that allow for tolling. It concluded that since Congress did not include a provision for equitable tolling, the district court lacked jurisdiction to apply such a principle. The court referenced the Supreme Court's decision in United States v. Brockamp, which similarly held that tax statutes are not subject to equitable tolling.

Our reading of the statute answers that question in the negative.

Conclusion

The Court of Appeals reversed the district court's order for equitable tolling, affirming that the IRS could not extend the statute of limitations through equitable means.

The judgment of the district court is REVERSED.

Who won?

The IRS prevailed in the case because the Court of Appeals determined that equitable tolling was not permissible under the Internal Revenue Code, thus protecting the statute of limitations.

The IRS is unable to rely on general equitable principles to protect its right to collect taxes from citizens where the statute does not allow equitable tolling.

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