Overview
• A US Federal Court has ruled in favor of the IRS in their document seizure case against Coinbase.
• Plaintiff James Harper argued that the IRS’s action infringed upon his constitutional rights.
• The court ruling referred to a Supreme Court ruling from May, stating that Congress granted the IRS with sufficient authority for such actions.
Background
In August 2020, James Harper launched a legal challenge against the IRS and its agents over their demand for Coinbase user data via a ‘John Doe’ summons. Harper insisted on his innocence and argued that this infringed upon his Fourth and Fifth Amendment rights. Previously, he had filed an amicus brief opposing the IRS’s initial request for Coinbase records in 2016. Following an appeal last year, Harper was granted the right to sue the IRS for failing to declare his cryptocurrency trades accurately during 2013-14.
Court Ruling
The US District Court of New Hampshire dismissed claims of constitutional infringement by referring to a Supreme Court ruling from May 2021 which stated that existing checks on the IRS’ power were sufficient protection for plaintiffs like Harper. The court upheld the IRS’s authority to seize user data from Coinbase and other exchanges as part of their investigations into potential tax evasion cases.
Coinbase Response
Coinbase initially disregarded the demands made by the Internal Revenue Service but was eventually compelled to surrender some user information following a separate summons issued against them in 2017. This included details related to James Harper’s trading activities on their platform during 2013-14.
Conclusion
The US Federal Court has ruled in favor of Internal Revenue Service’s authority to obtain user data via ‚John Doe‘ summonses, such as those issued against Coinbase in this case. This decision reinforces existing checks on their powers while protecting taxpayers from any unconstitutional infringements resulting from such requests