A US Bitcoin trader who is currently attempting to fight the Internal Revenue Service over the seizure of his private data from Coinbase could be given the chance to challenge the tax body over the controversial move.
In a three-judge federal appeals court yesterday – the 1st United States Circuit Court of Appeals in Boston – experts sternly questioned the reason as to why the crypto owner, named Jim Harper, had been blocked from suing the IRS for privacy violations. This was originally reported by Reuters.
Harper originally tried to take the IRS to court in 2020 however he was unsuccessful. The Supreme Court ruled against the decision. The tax body had written to Harper claiming it had “obtained information” that appeared to show he may not have properly reported crypto transactions on tax return documents. For this reason, the IRS violated privacy and viewed confidential information.
The IRS’ legal team responded by warning that ruling in favour of Harper “could open the floodgate to other lawsuits” by crypto holders currently “under audit,” adding: “There is nothing to keep that from happening.”
Harper was not the only US crypto holder to be sent such a letter from the IRS. This occurred after the IRS won a key 2017 legal battle to enforce a summons against Coinbase, forcing it to hand over user transaction data. The IRS enforced a similar summons on Coinbase’s crypto exchange rival Kraken at the beginning of 2021.
However, Harper’s counsel Richard Swamp has reportedly told the judges:
“[The IRS] said: Let’s go on a fishing expedition. Let’s ask Coinbase for information on hundreds of thousands of taxpayers.”
A lawyer from the Department of Justice, arguing in favour of the IRS’ case, claimed that Harper’s attempt to sue had been rightly shut down under the Anti-Injunction Act. This is an act that bars lawsuits to restrain the “assessment or collection” of taxes.
However, Harper’s legal argument centres around the manner in which his data was obtained. The panel of judges were reportedly sympathetic to Harper’s argument.
One of the judges, Kermit Lipez, told the DoJ lawyer that the ruling’s “clear” language showed that “your position is not defensible.” Lipiz added:
“We are involved with perhaps a prelude to an act of assessment but not the act of assessment itself.”
