Of Lenity, Chevron, and KPMG

I. INTRODUCTION Despite a mixed track record in challenging tax shelters in civil enforcement actions, the federal government has started prosecuting tax shelter cases criminally. (1) One of the top accounting firms, KPMG, and several of its partners and managers have come under scrutiny for developing and promoting certain tax shelters known colloquially as BLIPS, FLIP, OPIS, and SOS. (2) Under threat of criminal indictment, KPMG decided to save itself. KPMG admitted criminal culpability, paid a fine, and agreed to implement a compliance and ethics program and submit to several years of government monitoring in exchange for deferred prosecution. (3) Meanwhile, the government's criminal prosecution of several former KPMG tax professionals continues to work its way through the federal district courts. (4) Yet some believe that the tax shelters promoted by KPMG were not clearly abusive, or at least not criminally so. (5) One federal district court has decided that a key statutory element of the BLIPS structure was consistent with then-existing interpretations of the Internal Revenue Code (Code). (6) Many who are more skeptical of the KPMG shelters nevertheless are concerned about distinguishing the actions of the defendant tax professionals from those of ordinary tax planners under the specter of criminal enforcement. (7)