Mary McNulty Quoted in Bloomberg BNA Daily Tax Report on Coinbase

“Government Considers Enforcement Action in Coinbase Case”

The government is considering filing a petition to enforce an IRS summons on Coinbase Inc.,according to a court document seeking postponement of a hearing on the company’s efforts to seek relief and block the summons (United States v. John Doe, N.D. Cal., No. 3:16-cv-06658, motion for continuance filed 2/3/17).

When enforcement of a summons becomes an issue in a federal court, the IRS bears the initial burden to make a prima facie showing on four elements, known as the Powell factors because they derive from the U.S. Supreme Court case United States v. Powell, Mary A. McNulty, a tax litigation partner at Thompson & Knight LLP, told Bloomberg BNA. A prima facie showing means the agency must provide sufficient evidence to support enforcement of the summons.

The four factors include: that the investigation will be conducted pursuant to a legitimate purpose; that the inquiry may be relevant to the purpose; that the information sought is not already within the agency’s possession; and that the administrative steps required by the Internal Revenue Code have been followed.

“The taxpayer can succeed on a motion to quash either by disproving one of the four elements or by successfully challenging the summons on any appropriate ground, including showing that the summons was issued for an improper purpose or in bad faith,” McNulty told Bloomberg BNA in a Feb. 3 e-mail.