The U.S. Supreme Court said Monday it will consider a law firm’s bid to shield client communications from grand jury subpoenas seeking documents on its tax advice in a case concerning the scope of attorney-client privilege over mixed-use legal advice.

In a statement, Evan J. Davis of Hochman Salkin Toscher Perez PC, one of the firm’s representatives in
the case, told Law360 that the privilege issue at the center of the case “is really important beyond merely
tax – it impacts pretty much every area of the practice of the law.”

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Evan Davis, a veteran tax litigator with Hochman Salkin Toscher Perez PC, predicted that existing businesses, particularly limited liability companies, will find adhering to the beneficial ownership regs to be “a herculean task and will result in far less than 100% compliance.” He said many clients already fail to take the basic steps to maintain their LLCs in good standing and that the new reporting rules would only add to that burden. “Getting the word out to clients who don’t use CPAs and lawyers will also be a challenge,” Davis told Checkpoint.

Click Here for full article.

We are pleased to announce that Steven Toscher, Sandra Brown and Jonathan Kalinski will be speaking at the upcoming Strafford webinar “Handling Cannabis Tax Examinations: Sec. 280E, Audits, IRS Guidance,” Tuesday, October 11, 2022, 10:00 a.m. – 11:30 a.m. (PST).

The sale and distribution of cannabis for recreational or medical use is a powerful economic engine generating billions in annual revenue, with over 40 states and the District of Columbia having some form of legalization of the substance. Despite state relaxation of marijuana prohibition laws, without careful planning, regulated cannabis businesses can be subject to hefty tax assessments and penalties.

Under Section 61, all gross income must be reported from whatever source it is derived. However, under Section 280E, cannabis businesses cannot deduct rent, wages, and other expenses unless it is for the cost of goods sold (COGS), resulting in a substantially higher tax rate than other companies on their income. The IRS issued guidance to its agents on conducting audits of cannabis businesses giving IRS agents the authority to change a cannabis business’ accounting method. Under Section 280E, COGS does not include certain costs. Thus, they remain non-deductible for income tax purposes.

As more states legalize cannabis and make available licenses to grow, manufacture, distribute, and sell cannabis, the IRS has increased cannabis tax audits, which could result in unbearable tax liabilities.

Listen as our panel discusses federal and select state tax law provisions impacting cannabis businesses, critical items of focus by the IRS when examining cannabis operations, and tactics for managing audits.

We are also pleased to announce that we will be able to offer a limited number of complimentary and reduced cost tickets for this program on a first come first serve basis. If you are interested in attending, please contact Sharon Tanaka at 

Click Here for more information.


to receive the


in recognition of His Outstanding Contributions in the Field of Tax Law

November 3, 2022

We are very pleased to announce that our friend and partner Robert Horwitz has been recognized for his outstanding contributions in the field of taxation by the California Lawyers Association 2022 Annual Meeting of the Tax Bar and Tax Policy Conference, November 2-4, 2022.

Robert has over 40 years of experience as a tax attorney specializing in the representation of clients in civil and criminal tax cases, including civil audits and appeals, tax collection matters, criminal investigations, administrative hearings and in civil and criminal trials and appeals in federal and state courts. He has served as a member of the Executive Committee of the Taxation Section of the State Bar of California and was Chair of the Taxation Section for 2015-2016 year. He was previously Chair of the Tax Procedure and Litigation Committee of the State Bar Taxation Section.

Sandra Brown, Evan Davis and Jonathan Kalinski will also be speaking on the following topics:

  • Criminal Tax Bootcamp – How to Represent Clients in Criminal Tax Matters
  • In re Grand Jury and the Impact on Dual-Purpose Attorney Client Privilege
  • Responsible Persons Liability

Click Here for more information.

We are pleased to announce that Steven Toscher, Sandra Brown and Evan Davis will be speaking at the upcoming Spidell webinar “New Corporate Transparency Act: The World is Changing,” Friday, October 7, 2022, 10:00 a.m. – 12:00 p.m. (PST).

On January 1, 2021, Congress enacted the National Defense Authorization Act for Fiscal Year 2021 (NDAA). Contained within the NDAA is the Anti-Money Laundering Act of 2020 (the AMLA), which introduces extensive reforms to U.S. anti-money laundering (AML) and counter-terrorism financing (CFT) laws. Within the AML, Congress passed the Corporate Transparency Act (CTA). The CTA requires certain corporations and limited liability companies (reporting companies) to disclose beneficial owner information to FinCEN and update ownership information within one year of any changes. This new regulatory reporting regime will impact over 25 million existing business entities and millions of new entities each year. Without an awareness of and compliance with these new reporting obligations, noncompliance can result in civil and criminal liability. 

Click Here for more information.

The following are additional Spidell topics we will be speaking on throughout the rest of this year.

Form 8300 Reporting/Cash Intensive Business Audits

Handling Estate and Gift Tax Audits, including Hot Topics in Enforcement and Valuation

Cryptocurrency Tax Compliance in the

Post $50,000 Bitcoin World

Posted by: pereztaxlitigatorcom | September 13, 2022

DENNIS PEREZ, SANDRA BROWN and CORY STIGILE to Speak at Upcoming Spidell Webinar

We are pleased to announce that Dennis Perez, Sandra Brown and Cory Stigile will be speaking at the upcoming Spidell webinar “Research and Development Tax Credits: IRS Scrutiny of Qualified Research Activity and Related Expenses,” Thursday, September 29, 2022, 10:00 a.m. – 12:00 p.m. (PST).

Research and development (R&D) is the lifeblood of a growing and prosperous economy, and many businesses perform some type of research and development. IRC §41 creates incentives for increased R&D activities in the form of tax credits for companies involved in qualified research activities. Businesses that consider R&D tax credits soon learn, however, that the potential benefits may come at a price. This program’s learning objectives include understanding how to navigate IRC § 41’s abundant and changing requirements and challenges, as well as the changes under the Inflation Reduction Act and the Internal Revenue Service’s increased focus on potential abuses of the R&D tax credit. Taxpayers and their tax advisors need to be prepared even when they are merely taking advantage of a tax benefit to which they are entitled. More easily identify key strategies to minimize exposure from IRS examinations of R&D credits

Click Here for more information.

The following are additional Spidell topics we will be speaking on throughout the rest of this year.

New Corporate Transparency Act:

The World is Changing

Form 8300 Reporting/Cash Intensive Business Audits

Handling Estate and Gift Tax Audits, including Hot Topics in Enforcement and Valuation

Cryptocurrency Tax Compliance in the

Post $50,000 Bitcoin World

Posted by: Steven Toscher | September 6, 2022

STEVEN TOSCHER to Speak at Upcoming CSTC Webinar

We are pleased to announce that Steven Toscher will be speaking at the upcoming CSTC 2022 Tax Forum Orange County South Chapter seminar at The Hills Hotel, Laguna Hills on “Cryptocurrency Tax Compliance: Tax Filing Requirements; Managing IRS Examinations,” Friday, September 16, 2022, 1:00 p.m. – 2:50 p.m. (PST).

This course will provide tax counsel, accountants, and other advisers with a critical first look at recent IRS enforcement actions on taxpayer compliance and reporting obligations for cryptocurrency transactions. The panel will discuss the IRS position on the tax treatment of cryptocurrency, analyze IRS monitoring to increase compliance, consider criminal investigations and prosecutions for failing to report crypto transactions accurately. The panel will define proper reporting and tax treatment for “mining” and exchanging cryptocurrency along with tactics in managing IRS examinations and audits.

Click Here for More Information.


It was a long-held belief that the Anti-Injunction Act barred Taxpayers from maintaining any lawsuit that had the effect of interfering with the assessment or collection of any tax. However, the recent Supreme Court decision in CIC Services created a crack in the Government’s use of the Anti-Injunction Act to dismiss cases for lack of subject matter jurisdiction. The First Circuit, relying on the holding in CIC Services, has now, in its ruling in Harper v. Rettig, further widened that crack.

Anti-Injunction Act – Background

The Anti-Injunction Act, 26 U.S.C. § 7421(a) (hereinafter “the AIA”) states that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person.”

The AIA’s history is quite informative. When the United States’ first income tax was adopted to finance the Civil War, some taxpayers, alleging the taxes illegal, sought to enjoin collection efforts – and some courts granted the requested relief. Congress, therefore, enacted the AIA in 1867 which protects the federal government’s ability to collect a consistent stream of revenue by barring litigation to enjoin or otherwise obstruct the collection of taxes.

While the AIA predates the Administrative Procedure Act’s (hereinafter “APA”), by some 70 years, courts have long interpreted the AIA as an exception to the APA’s waiver of sovereign immunity[i], and therefore, suits barred by the AIA can be dismissed for lack of subject matter jurisdiction.[ii]

Since its enactment in 1867, courts have consistently viewed the expanse of the AIA very broadly and thus, rejected almost any attempt to challenge IRS actions, no matter how remote from tax collection or assessment such actions may seem to be.  That changed with the Supreme Court’s ruling in CIC Services.

CIC Services and Harper

CIC Services, LLC v. Internal Revenue Service

The IRS has broad powers to require the submission of tax-related information that may be helpful in assessing and collecting taxes.[iii] These reporting rules may also apply to “material advisors” – individuals or entities that earn income from providing taxpayers with certain kinds of “aid, assistance, or advice.”[iv]

CIC Services, LLC v. Internal Revenue Service[v] began with the requirement that taxpayers and material advisors provide information about reportable transactions. The Internal Revenue Code (hereinafter “IRC”) describes these transactions as ones that “have a potential for tax avoidance or evasion.”[vi]

Micro-captive transactions are one category of reportable transactions that the IRS deems as having a potential for tax avoidance. Therefore, the IRS issued Notice 2016-66, which compels taxpayers and material advisors associated with micro-captive transactions to “describe the transaction in sufficient detail for the IRS to be able to understand [its] tax structure” of the transaction. Noncompliance with this notice subjects a taxpayer or material advisor to penalties of up to $50,000.[vii] Additionally, an advisor may incur a daily $10,000 penalty for failing to furnish, on request, a list of people it advised on a reportable transaction.[viii] These penalties are deemed to be taxes for purposes of the IRC and the AIA.

CIC Services is a material advisor to taxpayers participating in micro captive transactions. CIC Services asserted that the IRS violated the APA because it did not follow the notice-and-comment procedures.

The Government moved to dismiss the action based on the AIA, arguing that the requested relief would prevent the IRS from assessing a tax penalty against material advisors that disregarded the Notice’s reporting requirements, as the Notice’s reporting obligations are backed up by a statutory tax penalty. The District Court agreed, and the Court of Appeals for the Sixth Circuit affirmed the decision.

The Supreme Court had to decide whether the AIA barred CIC’s suit which claimed that the Notice’s reporting requirements violated the APA. If CIC’s suit was for the purpose of restraining the assessment or collection of tax, the AIA would bar CIC’s suit; if it wasn’t for that purpose, the suit could go forward.

CIC and the Government disagreed as to the characterization of CIC’s lawsuit. According to CIC, the suit was aimed at invalidating the Notice and eliminating the reporting requirements. The Government argued the suit’s purpose was to stop the collection of the tax itself.

The Court agreed that the complaint contested the legality of the Notice, not the penalty that served as an enforcement tool for the reporting requirements. CIC asked for injunctive relief from the Notice’s requirements, not from any impending or eventual tax obligation. The Court rejected the Government’s argument that an injunction against the Notice was the same as one against the tax penalty.

The Court stated that three aspects of the regulatory scheme refuted the idea that the lawsuit was a tax action in disguise. First, the Notice imposed affirmative reporting obligations, inflicting costs separate and apart from the statutory tax penalty. Second, the reporting requirements and the statutory tax penalty were several steps removed from each other – CIC has to withhold required information, the IRS must determine that a violation occurred, and then must make the entirely discretionary decision to impose a tax penalty. Third, violations of the Notice are punishable by a tax and a separate criminal penalty.

Ultimately, the Court found that CIC’s suit was not to restrain the assessment or collection of tax and therefore was not barred by the AIA.

Upon remand to the District Court initially granted CIC’s motion for a preliminary injunction and enjoined the IRS from enforcing Notice 2016-66 against CIC.[ix]  The District Court thereafter ruled the IRS had to return all documents and information produced pursuant to the Notice to taxpayers and material advisors.[x] Subsequently, upon the Government’s motion for reconsideration, enter an amended judgment removing its order requiring the IRS to return to non-parties the documents produced pursuant to the Notice.[xi]

Harper v. Rettig[xii]

In 2013, James Harper opened an account with Coinbase and deposited Bitcoin into that account. In 2015, he liquidated a portion of his Bitcoin and transferred the remaining Bitcoin to a hardware wallet.[xiii] Harper reported all income from his Coinbase transactions between 2013-2016. In 2016, Harper sold Bitcoin through other digital exchanges and paid tax on his holdings between 2016-2019.

In 2016, the IRS filed an ex parte “John Doe” administrative summons to Coinbase and thereafter, upon approval by the District Court, received information about Coinbase accounts “with at least the equivalent of $20,000 in any one transaction type… in any one year during the 2013-2015 period.”[xiv]

In August of 2019, the IRS notified Harper that it possessed information about his virtual currency accounts and transactions and warned him that he could face civil or criminal enforcement action for inaccurately reporting such transactions.

In July of 2020, Harper filed a complaint against the IRS which alleged that the IRS violated his Fourth and Fifth Amendment rights, as well as IRC § 7609(f) by acquiring his personal financial information from Coinbase through the third-party summons process. Harper’s action sought, among other remedies, relief requiring the IRS expunge his financial records from the IRS database. The IRS filed a motion to dismiss Harper’s claim arguing that the AIA represented an exception to the APA’s waiver of sovereign immunity and therefore, the District Court did not have subject matter jurisdiction to review the case. The District Court granted the Government’s motion and Harper appealed.

Harper challenged the IRS’s summons authority under IRC § 7602. Pursuant to IRC § 7602(a), the IRS, after notice to the taxpayer, may issue a summons: (1) to examine books and records; (2) to summon an individual with possession, custody, or care of books and records to produce such records to the IRS; and (3) to take testimony of the identified taxpayer concerned, under oath, as may be relevant or material to such inquiry. As such, the activities authorized by IRC § 7602 fall within the category of information gathering, rather than acts of assessment or collection.  However, a John Doe summons, unlike an individualized IRS summons, permits the IRS to obtain information from a large group of unidentified taxpayers.[xv]  Additionally, unlike an individualized summons, no individualized notice is required, nor arguably would such notice be practical as the taxpayers’ identities are unknown, for the issuance of a John Doe summons.

The Government must meet the following factors to obtain authority to issue a John Doe summons:

  1. The John Doe summons relates to the investigation of a particular person or ascertainable group or class of persons;
  2. There is a reasonable basis for believing that such person or group or class of persons may fail or may have failed to comply with any provision of any internal revenue law;
  3. The information sought to be obtained from the examination of the records or testimony (and identity of the person(s) with respect to whose liability the summons is issued) is not readily available from other sources; and
  4. The summons must be narrowly tailored to information that pertains to the failure or potential failure of the group or class of persons to comply with one or more provisions of the internal revenue laws which have been identified.[xvi] 

In response to Harper’s assertions that the IRS’s continuing retention of his financial information was illegal, the Government argued that the purpose of Harper’s suit was to restrain the assessment or collection of taxes, thereby bringing it within the scope of the AIA. The Government claimed that Harper’s suit was “a preemptive suit to foreclose tax liability” and thus, sought to enjoin a tax assessment or collection that could result from the information obtained about Harper under the John Doe summons to Coinbase.

The First Circuit found that Harper’s case was one seeking to set aside illegal information gathering and retention of such information by the IRS.  As such, following the holding in CIC Services, the Court held that Harper’s action fell outside the AIA because the injunction requested did not run against a tax at all. Rather, the suit contested, and sought relief from a separate legal wrong – the allegedly unlawful acquisition and retention of Harper’s financial records.

Ultimately, the Court held that because Harper’s claim was not a dispute about a tax rule, the AIA did not bar his suit, vacated the district court’s dismissal for lack of subject matter jurisdiction and remanded the case for further consideration, including whether Harper has stated a claim, as required by Federal Rule of Civil Procedure 12(b)(6), which was not previously addressed by the court.   


Harper is the latest iteration of the legal fissure that has opened in what, prior to the ruling in CIC Services LLC, has long been view by the Government as an almost impenetrable wall created by the Anti-Injunction Act. Time will only tell what other areas of IRS acts of gathering information, as opposed to acts of assessment and collection, might be the next to fall outside of the bar of the Anti-Injunction Act.

Sandra R. Brown is a Principal at Hochman Salkin Toscher Perez P.C., and former Acting United States Attorney, First Assistant United States Attorney, and the Chief of the Tax Division of the Office of the U.S. Attorney (C.D. Cal). Ms. Brown specializes in representing individuals and organizations who are involved in criminal tax investigations, including related grand jury matters, court litigation and appeals, as well as representing and advising taxpayers involved in complex and sophisticated civil tax controversies, including representing and advising taxpayers in sensitive-issue audits and administrative appeals, as well as civil litigation in federal, state and tax court.

Gary Markarian is an Associate Attorney at Hochman Salkin Toscher Perez P.C., and a graduate of the joint JD/LL.M. Taxation program at Loyola Law School, Los Angeles. While in law school, Mr. Markarian served as an intern at the Tax Division of the U.S. Attorney’s Office (C.D. Cal) and Internal Revenue Service Office of Chief Counsel’s Large Business and International Division.

[i] The principal of sovereign immunity, which states that the government cannot be sued without its consent, provides that the government is generally immune from suit. (Alden v. Maine, 527 U.S. 706, 713 (1999)).

[ii] Where sovereign immunity applies, a court is deprived of subject matter jurisdiction, thereby shielding the government from suit. (Robbins v. U.S. Bureau of Land Mgmt., 438 F.3d 1074, 1080 (10th Cir. 2006)).

[iii] IRC § 6011(a).

[iv] IRC § 6111(b)(1)(A); See IRC § 6111(a).

[v] CIC Services, LLC v. Internal Revenue Service, 141 S. Ct. 1582 (2021).

[vi] IRC § 6707A(c)(1).

[vii] IRC § 6707(b); IRC § 6707A(b).

[viii] See IRC § 6708(a); See § IRC 6112(a).

[ix] CIC Servs., LLC v. Internal Revenue Serv., Dep’t of Treasury, No. 3:17-CV-110, 2021 WL 4481008, at *6 (E.D. Tenn. Sept. 21, 2021), reconsideration denied sub nom. CIC Servs., LLC v. Internal Revenue Serv., No. 3:17-CV-110, 2022 WL 985619 (E.D. Tenn. Mar. 21, 2022), on reconsideration, No. 3:17-CV-110, 2022 WL 2078036 (E.D. Tenn. June 2, 2022).

[x] CIC Servs., LLC v. Internal Revenue Serv., No. 3:17-CV-110, 2022 WL 985619, at *8 (E.D. Tenn. Mar. 21, 2022), on reconsideration, No. 3:17-CV-110, 2022 WL 2078036 (E.D. Tenn. June 2, 2022).

[xi] CIC Servs., LLC v. Internal Revenue Serv., No. 3:17-CV-110, 2022 WL 2078036, at *3–4 (E.D. Tenn. June 2, 2022).

[xii] Harper v. Rettig et al., No. 21-1316, 2022 (1st Cir. Aug. 18, 2022).

[xiii] A hardware wallet is a “secure offline” version of a virtual currency wallet that “can be used securely and interactively.”

[xiv] See United States v. Coinbase, Inc., No. 17-cv-1432 JSC, 2017 WL 5890052, at *1 (N.D. Cal. Nov. 28, 2017).

[xv] See IRC § 7609(f).

[xvi] IRC § 7609(f) and Pub. L. No. 116-25, §1204(a), 133 Stat. 988 (2019) (Taxpayer First Act of 2019).

We are pleased to announce that Dennis Perez, Robert Horwitz and Lacey Strachan will be speaking at the upcoming CalCPA webinar on “Office of Tax Administration: Handling a Case Before California OTA,” Wednesday, August 31, 2022, 9:00 a.m. – 10:00 a.m. (PST).

The OTA (Office of Tax Appeals) has been in operation since January, 2018, but its rules are not well known to many tax practitioners. Learn how to guide a case through the procedural maze of the OTA regulations and avoid foot faults that can jeopardize your client’s case.

Learning Objectives

• Types of cases the OTA hears.

• How to file an appeal with the OTA

• Discovery in OTA cases

• Opportunities for settlement before the case is heard

• What to expect in an OTA hearing

Major Subjects

• OTA jurisdiction

• OTA procedures

• Settlement with the FTB or CDTFA while a case is pending before the OTA

Click Here for More Information.

Posted by: Steven Toscher | August 22, 2022

PHILIPP BEHRENDT to Speak at Upcoming Beverly Hills Webinar

We are pleased to announce that Philipp Behrendt, along with LaVonne Lawson, Richard Gano and Michele F.L. Weiss will be speaking at the upcoming webinar at the Beverly Hills Bar Association on “Tax Impacts of the Inflation Reduction Act,” Tuesday, August 30, 2022, 12:30 p.m. – 1:30 p.m. (PST).

President Biden recently signed The Inflation Reduction Act into law. The Act contains numerous tax provisions. Come listen to our expert panel discuss the provisions and how they may impact you and/or your clients.

Click Here for More Information.

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