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Heavyeight bout: IRS vs technology giant
Taxand USA examines the ongoing federal tax controversy between a technology giant, the Internal Revenue Service and a law firm with billions of dollars at stake.
This government-private sector partnership was made possible by the issuance of a new treasury regulation just weeks after the IRS engaged the law firm to assist with the case. The IRS claims that the purpose for issuing the regulation was to “clarify” that outside parties could participate in the interrogation process and other key tasks undertaken in IRS examinations. Although some observers have expressed concern that this novel type of arrangement could threaten longstanding internal controls established by Congress within the statute to protect the relationship between the IRS and taxpayers, the IRS believes its interpretation of the statute is spot on.
The other side thinks otherwise and has counterpunched by filing a motion with the court that requests a limited evidentiary hearing to demonstrate an IRS abuse of power and limited document discovery.
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If left sustained, this bold move by the IRS could trigger a power shift whose consequences may not be known for some time. We are continually reminded, with each exchange of punch and counterpunch, about the challenges each party faces to protect its vital interests while maintaining a healthy respect and appreciation for our system of checks and balances.