Tax Promoter Audits and Investigations
Kostelanetz attorneys are, and have been, involved in some of the largest and most consequential tax adviser and promoter penalty matters in the country. Many of our attorneys have prior government experience investigating and prosecuting promoter cases on behalf of the government. Our team includes a former Acting Assistant Attorney General of the Department of Justice (DOJ) Tax Division, the former Chief of IRS Criminal Investigations, attorneys with civil and criminal DOJ Tax Division experience, attorneys formerly with the IRS Office of Chief Counsel, and former Assistant United States Attorneys.
Our Successful Representation of Tax Promoters and Advisers
Examples of Kostelanetz attorneys’ work on tax advisor and promoter penalty matters include: Prior Civil Examinations
Prior Criminal Investigations
m Successfully resolved a Justice Department investigation of a large international fiduciary company in connection with the Justice Department’s Swiss Bank Program. The department did not bring criminal charges or seek fines.
m Obtained the dismissal of all charges against the former Vice Chairman of Tax at KPMG, LLP, a Big Four accounting firm, in connection with that firm’s Son of Boss and related tax shelter activities, in what was then described as the largest tax shelter prosecution in United States history.
m Obtained acquittal after a jury trial of the former CEO of BDO Seidman, one of the largest accounting firms in the country. The defendant was charged with conspiracy to commit tax evasion in connection with the accounting firm’s involvement in Son of Boss and related tax shelters.
m Successfully prevented the indictment of a senior accountant of a Big Four accounting firm. The accountant was investigated for alleged participation in CDS-Add-On tax shelters.
m Successfully represented two Swiss banks in connection with the DOJ’s Swiss Bank Program. The banks entered into a deferred prosecution agreement and avoided indictment for helping U.S. taxpayers to underpay their U.S. taxes, in exchange for a negotiated penalty.
m Represented a former partner of a large accounting firm who was at the center of that firm’s tax shelter promotion activities. Successfully resolved the matter and obtained a very favorable sentence that was a fraction of what the government had sought.
m Convinced a state Attorney General’s Office to drop all charges against an accountant at a large nationwide accounting firm who was investigated for allegedly submitting fraudulent tax credit applications to the state taxing authority.
Current Civil Examinations
m Representing a real estate development company in one of the largest promoter penalty examinations involving SCETs. We are actively engaged with senior IRS National Office personnel, including IRS Chief Counsel’s Office. This matter is multifaceted and includes litigation of underlying transactions in the U.S. Tax Court and Federal District Court, a Justice Department grand jury investigation, and a class action lawsuit against sponsors of the conservation easement transactions.
m Advising another real estate developer in another of the largest promoter penalty examinations involving SCETs. This matter also involves litigation of the underlying transactions in the U.S. Tax Court and a class action lawsuit against sponsors of the conservation easement transactions.
m Representing a professional service provider in a promoter penalty examination involving SCETs.
m Representing an attorney and advisor in an IRS promoter penalty examination involving Puerto Rico residency issues.
m Representing a taxpayer in a promoter penalty examination involving U.S. Virgin Islands residency issues.
m Representing several sponsors and an advisor in promoter penalty examinations involving microcaptive insurance companies.
m Representing an AmLaw 200 law firm in a promoter penalty examination involving a former partner who structured and advised on Midco transactions. The case involves a criminal prosecution of the former partner and civil lawsuits by taxpayers/clients of the firm.
m Representing a taxpayer in a promoter penalty examination involving allegedly inflated valuations of works of art that were donated to a charity controlled by the taxpayer.
Current Criminal Investigations
m Representing the targets in one of largest DOJ SCET criminal investigations in a case that has involved both administrative and grand jury investigation phases.
m Representing two alleged promoters in criminal investigations involving Maltese pension plans.
Our Team’s Government Experience
m As head of the Justice Department’s Tax Division, Caroline Ciraolo was actively involved in all aspects of Tax Division operations, including active engagement with civil and criminal trial attorneys, management, and IRS personnel regarding civil and criminal promoter investigations and litigation.
m As Chief of IRS Criminal Investigations, Don Fort actively supervised several criminal investigations and prosecutions of tax shelter promoters.
m Lead attorney for IRS Chief Counsel team that provided guidance on the largest tax promoter penalty examination concluded as of 2010. The team assisted the IRS examination (Exam) team in developing Information Document Requests (IDRs), evaluating taxpayer responses, and conducting interviews of the promoter’s employees. Also worked with the Exam team in evaluating the amount of the tax loss attributable to the transactions and drafted the IRS closing agreement.
m Lead attorney for IRS Chief Counsel team handling one of the IRS’s largest promoter penalty investigations related to Son of Boss and its variants. Regularly worked with executives throughout the IRS, the Department of Justice, and the United States Attorney’s Office for the Southern District of New York. Also worked closely with the IRS’s collection function related to the assessment of promoter penalties, with a focus on the Collection Due Process rules and post-assessment, pre-collection Appeals rights.
m Advised senior Office of Chief Counsel and IRS leadership on promoter penalty examinations of the largest public accounting firms related to Son of Boss and its variants, including the negotiation of settlement terms for those examinations.
m Lead attorney for IRS Chief Counsel team handling the IRS’s first promoter penalty examination related to contingent fee research credit claims.
m Lead attorney for DOJ Tax Division in an investigation and prosecution of the promoters of a nationwide e-commerce tax fraud scheme involving the Americans with Disabilities Act.
m Lead attorney for DOJ Tax Division in an investigation and prosecution of the promoters of a nationwide tax fraud scheme involving the thoroughbred racehorse industry.
m Lead attorney for DOJ Tax Division in an investigation and prosecution of the promoters of a nationwide tax fraud scheme involving abusive trust arrangements.
