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Click here for the full text of this decision FACTS:In 2001, the IRS investigated KPMG’s compliance with the registration requirements imposed by Notice 2000-44. As part of the inquiry, the IRS propounded summonses that demanded the names of clients to whom KMPG had sold certain tax shelters, as well as other documentation relating to the transactions. In all, KPMG received 25 summonses. In July 2002, the IRS brought an action in the U.S. District Court for the District of Columbia to enforce nine of the summonses sent to KPMG. In December 2002, the district court ordered KPMG to comply with the summonses and reveal the requested names and transactional information to a special master in charge of the case. The remainder of the case was held in abeyance pending the special master’s report. In August 2003, KPMG first informed the IRS and the taxpayers that the taxpayers’ 2000 SOS transaction was responsive to one of the summonses (a summons not involved in the D.C. litigation). According to the court of appeals, this revelation was contrary to KPMG’s previous representations to the IRS. KPMG then turned over information about the SOS transactions to the IRS but omitted the taxpayer names from the documents. The taxpayers notified KPMG that they wished to invoke the “tax-practitioner privilege” under I.R.C. (26 U.S.C.) �7525 and instructed KPMG not to take any action that would waive their privilege. KPMG promised the taxpayers that while it would not reveal any information before Sept. 8, 2003, the firm could not entirely refuse to comply with the summonses now that KPMG was aware that the SOS transaction was responsive. On Sept. 9, 2003, Doe I and Doe II filed the instant suit in federal court against KPMG, seeking declaratory and injunctive relief to prevent KPMG from disclosing their identities to the IRS in response to the summonses. KPMG promptly agreed to the taxpayers’ Stipulation and Agreed Order preventing KPMG from disclosing their identities or any relevant documents until the court should enter a final judgment on the merits. As of Sept. 8, the IRS learned that KPMG had not fully complied with the Notice 2000-44 summonses. Further, the instant litigation informed the IRS that taxpayers whose identities were not yet known had used these tax shelters. As the litigation continued, the IRS became concerned that the three-year statute of limitations to assess additional taxes would expire while the lawsuit was pending. On March 19, 2004, the IRS requested the taxpayers to sign a consent agreement extending the statute of limitations during litigation. The taxpayers refused. The IRS then filed an emergency motion to intervene under Federal Rule of Civil Procedure 24(a) to protect its interests and the public treasury. The district court granted the motion and ordered the parties to take all necessary steps to prevent the statute of limitations from expiring. When the taxpayers persisted in their refusal, the IRS sought an order to show cause why they should not be held in contempt. The taxpayers asserted, and the district court agreed, that consent to toll the statue of limitations must be voluntary. I.R.C. �6501(a)(4). Nevertheless, the court issued an order equitably tolling the statute of limitations based on I.R.C. � 6503(a)(1) and other equitable principles. That decision is the subject of the instant appeal. HOLDING:Reversed. Neither retroactive application of the new law nor equitable tolling in the government’s favor is available. The statute here at issue prohibits the imposition of equitable tolling to prevent expiration of the statute of limitations. The IRS is unable to rely on general equitable principles to protect its right to collect taxes from citizens where the statute does not allow equitable tolling. The IRS had three years to pursue the taxpayers using congressionally approved means. Congress can – and has – remedied the problems posed by the taxpayers’ tactics in this case. OPINION:Edith H. Jones, Garwood, Jones and Prado, JJ.

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