The lawsuit was in response to increasing scrutiny of high-income partnerships
International law firm Baker McKenzie has withdrawn its lawsuit aimed at compelling the Internal Revenue Service (IRS) to disclose more information about an expanded tax compliance crackdown on large partnerships.
The Chicago-founded firm announced its voluntary dismissal of the lawsuit in a filing made in the Washington, D.C. federal court. Initially filed in March, the lawsuit sought records under the federal Freedom of Information Act (FOIA).
The filing did not specify why Baker McKenzie decided to drop the lawsuit. George Clarke, the lawyer who filed the suit, declined to comment on whether the firm had received any records from the IRS.
The lawsuit was a response to the IRS's announcement of a new initiative aimed at increasing scrutiny on high-income earners, partnerships, large corporations, and promoters exploiting tax laws. This initiative includes examinations of 75 of the largest partnerships in the United States, which encompass hedge funds, real estate investment partnerships, and large law firms.
George Clarke, a partner at Baker McKenzie's D.C. office who leads the firm’s North America tax dispute group, was the plaintiff in the case. In a court filing, Clarke said he represents taxpayers who face IRS examinations. He emphasized the necessity of understanding the IRS’s plans to advise his clients effectively.
"I have a compelling need to understand how the IRS plans to impose on my clients so that I can effectively advise them and protect their rights,” Clarke said.
The IRS's new compliance effort represents a significant shift in focus toward entities and individuals with substantial income and complex tax structures.
Baker McKenzie's withdrawal of the lawsuit leaves unanswered questions about the IRS's strategies and the specifics of the compliance crackdown. According to Reuters, the firm’s decision to seek information through FOIA highlights the ongoing tensions and uncertainties that large partnerships and advisors face in navigating the evolving tax enforcement landscape.
