United States v. BDO Seidman

The Internal Revenue Service (plaintiff) (IRS) began investigating BDO Seidman, LLP (defendant) (BDO), a public accounting and consulting firm, for suspected violations of the Internal Revenue Code. The IRS believed BDO engaged in promoting potentially abusive tax shelters and failed to comply with tax-shelter registration and listing requirements. Organizers and sellers of tax shelters identified by statute as potentially abusive had to register them with the IRS and maintain records identifying each person who invested in them. The IRS issued summonses covering 20 types of tax-shelter transactions that demanded BDO produce information, including the identities of clients who participated in any of those tax shelters. BDO did not comply, and the IRS requested that the district court enforce the summons. BDO argued against enforcement, but the district court ruled that the summons was proper and instructed BDO to comply. After BDO told its clients it would produce the records, four anonymous clients (the Does) filed emergency motions to intervene in the proceedings. The Does argued that as BDO clients they sought confidential tax advice about potential tax implications of certain financial transactions. The Does claimed that disclosing the records revealing their identities would violate the tax-advice privilege under 26 U.S.C. § 7525. The Does made no claim of privilege outside of the assertion that disclosing the documents would identify the Does as BDO clients who invested in one or more of the 20 listed types of tax shelters in violation of § 7525. The district court denied the motions to intervene, and the Does appealed.