In one corner, we have one of the largest law firms in the world, with 4,800 attorneys, the firm that puts the Big in Biglaw, taking down more than $3.3 billion in revenue: Baker McKenzie! In the other, we have a 161-year-old federal agency, with a $14.3 billion budget, and able to strike fear into the hearts of the likes of Al Capone: the IRS! Who will win this battle of the titans?
Earlier this week, Baker McKenzie sued the Internal Revenue Service in federal court under the Freedom of Information Act. The plaintiff is the head of the firm’s North America tax dispute group, George Clarke, and the suit alleges the agency failed to disclose memos, policy statements, and training materials related to their increased focus and audits on partnerships and other pass-through entities. One example of the materials sought is a paper discussed by an IRS employee at a November 2023 ABA Section of Taxation conference, which was described in a write-up on the event as “IRS Taking Partnership Audits to New Level.”
Hmmmm, I wonder why a Biglaw PARTNER would be interested in the IRS’s enforcement of PARTNERSHIP agreements…. Oh, and I guess Clarke also said in the complaint, he wants “to learn more about the Internal Revenue Service’s practices so that I can better represent my clients.” Which, you know, also sounds pretty necessary for his job.
The heat is already on for partnerships. The IRS has already reportedly opened up 75 examinations on large partnerships including hedge funds, real estate investment partnerships, and… law firms. The IRS also plans to send compliance letters to an additional 500 partnerships.
Kathryn Rubino is a Senior Editor at Above the Law, host of The Jabot podcast, and co-host of Thinking Like A Lawyer. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter @Kathryn1 or Mastodon @Kathryn1@mastodon.social.