In 2018 the Taylor Lohmeyer Law Firm, an estate and tax planning firm, received a John Doe summons requesting names of clients to whom it had provided advice in transactions aimed at tax avoidance. The IRS had audited a Taylor Lohmeyer client for its use of off-shore entities and foreign accounts to avoid U.S. taxes, transactions on which the law firm had provided advice. The IRS wanted the identities of other Taylor Lohmeyer clients who were similarly advised.
Taylor Lohmeyer sought to quash the John Doe summons stating the information requested was protected by attorney-client privilege. The United States District Court for the Western District of Texas declined to quash the summons, as did the United States Court of Appeals for the Fifth Circuit. Taylor Lohmeyer sought review of the United States Supreme Court, but on October 4, 2021 its petition was denied.
Now that Taylor Lohmeyer has exhausted all judicial remedies to quash the John Doe summons it presumably must produce at least some of the information sought by the IRS. The concern is that the IRS could use its John Doe summons powers to target other tax planning law firms despite may attorneys’ beliefs that such information is privileged. Attorneys and their clients should have concern over what many perceive as an erosion of attorney client privilege to aid in criminal investigations. And attorneys should be wary the fact that an overly aggressive tax position could be cast by the government as a crime-fraud exception to attorney-client privilege. We’ll have to wait to see how this plays out.