Bryan Choi, The Tax Loophole to Constitutional Privacy

Comment by: Derek Bambauer

PLSC 2013

Workshop draft abstract:

Even as the third party doctrine has come under sharp criticism in Fourth Amendment jurisprudence, an eerily similar workaround has been developing under the Fifth Amendment. The third party doctrine grew out of a tax enforcement case that held that a taxpayer has no reasonable expectation of privacy in financial records held by a third party such as a bank. That rule was later generalized to phone records and any other information held by a third party.

Likewise, a recent set of tax enforcement cases in the courts of appeals (5th, 7th, 9th) has held that taxpayers are not entitled to invoke the Fifth Amendment privilege against self-incrimination in order to withhold statutorily required records of offshore bank accounts. In essence, the reasoning adopted by those courts is that, if the records are required to be kept by the defendant, then the government already knows they exist and the compelled disclosure of those records is not incriminating — unless their very existence would indicate criminal activity. The fact that the contents of those records might be incriminating is irrelevant.

This case study provides an opportunity to reevaluate the controversial “required records” doctrine, as well as to revisit the long-running scholarly debate regarding the overlapping roles of the Fourth and Fifth Amendments in safeguarding individual privacy from governmental intrusion. In isolation, the tax enforcement cases seem innocuous enough. Yet, In future cases, the required records doctrine could easily be extended to phone records and other information of governmental interest, in the same manner as the third party doctrine. If we think the third party doctrine has gone too far, we should be wary of retracing its steps under a different guise.