US Court Grants IRS Request for “John Doe” Summons for Offshore Records in 30 Countries

On March 28, 2002, U.S. District Judge Phyllis Hamilton of the U.S. District Court or the Northen District of California in San Francisco granted the IRS request to serve a “John Doe” summons, finding that the IRS had shown “there is a reasonable basis for believing” many of these cardholders were not complying with U.S. income tax laws. On March 25, 2002, the Internal Revenue Service petitioned for authority to serve a “John Doe” summons for records from VISA International for the year 1999, 2000, and 2001 of cards issued by foreign banks in more than 30 countries that it characterized as tax havens. The use of “John Doe” summons indicates an effort to pursue enforcement actions against Americans with credit card accounts in offshore financial centers (OFCs) who appear to be using them to evade taxes. The reduction of Criminal Investigators (Cis) and retirement of the bulk of the senior Cis have made new criminal tax prosecutions fall two-thirds compared to what they have been for many decades. The resources problem will constrain the actual number of cases brought against U.S. persons using OFCs notwithstanding the use of John Doe summonses.