NCLA Files Appeal Against the IRS — Law Firm Claims Tax Agency Unlawfully Seizes Crypto Data of Thousands

On Friday, the public interest law firm New Civil Liberties Alliance (NCLA) filed an opening brief in the cryptocurrency case of James Harper v. Charles P. Rettig. The NCLA argues that Harper’s Fourth and Fifth Amendment constitutional rights were violated by the Internal Revenue Service (IRS). The U.S. tax agency is accused of obtaining Harper’s information from crypto asset exchanges without valid subpoenas or statutory limitations.

IRS Accused of Accessing American Citizens’ Private Information Without Following Statutory Limitations on Power to Issue Subpoenas

The NCLA has revealed it filed an opening brief in the case James Harper v. Charles P. Rettig in the U.S. Court of Appeals for the First Circuit. The NCLA is a nonpartisan nonprofit civil rights entity and public interest law firm that aims to protect constitutional freedoms from violations by the government.

The case involves a man named James Harper who has brought litigation against the IRS, the 49th commissioner of the U.S. tax agency Charles Rettig, and 10 “John Doe IRS agents.” The NCLA and Harper argue that the IRS took Harper’s financial information without “reasonable suspicion and without a judicial warrant.”

“Harper has plausibly pled that [the] IRS violated his constitutional and statutory rights,” the civil rights organization’s opening brief details.

It all started in 2019 when the IRS sent Harper a letter stating that he did not “properly report” his “transactions involving virtual currency.” The IRS also published a press release that summer that revealed 10,000 American cryptocurrency owners received a letter from the tax agency. The letters were sent to taxpayers who have “participated in virtual currency transactions or otherwise did not report past transactions properly,” the IRS noted.

“Taxpayers should take these letters very seriously,” IRS Commissioner Charles Rettig emphasized in the press release.

IRS Hides Behind Anti-Injunction Act, Supreme Court Says the Tax Agency ‘Cannot Block Lawsuits Challenging Constitutionality’

The NCLA and Harper are hoping the Appellant Court allows an oral argument of the case. The civil liberties law firm wholeheartedly believes this case affects the plaintiff’s constitutional rights. “This case presents important legal questions about whether the sovereign immunity of the United States bars suits challenging the government’s illegal information-gathering practices and whether injunctive or declaratory relief is available in such situations,” the NCLA’s opening brief stresses.

Caleb Kruckenberg, a litigation counsel member of the NCLA, said that he believes the First Circuit can fix this situation. “Earlier this year, the Supreme Court held that the IRS cannot block lawsuits challenging the constitutionality of its behavior by hiding behind the Anti-Injunction Act,” Kruckenberg said in a statement to Bitcoin.com News. “Unfortunately, that decision came out after the district court allowed the IRS to abuse the law in just that way. According to the Supreme Court, though, this case is a ‘cinch,’ and the First Circuit should swiftly reinstate this lawsuit.”

NCLA litigation counsel member, Adi Dynar, says the IRS does not have a sufficient reason to “claim that the information it possesses” can be obtained without due process. Dynar says that if the IRS took proper procedures then it could result in the assessment or collection of taxes. “But the Fourth and Fifth Amendments to the Constitution do not contain an IRS exception,” Dynar said in a statement. The NCLA’s opening brief describes how the IRS violated Harper’s rights and obtained his financial information from third parties.

“[The] IRS’s actions violated core constitutional protections under the Fourth and Fifth Amendments,” the NCLA opening brief details. “Assuming the IRS took his information from one or more exchanges, Mr. Harper’s contracts recognized that his data is his property, not that of the exchanges, and supplied him with a reasonable expectation of privacy in his personal information. The contracts made clear that he did not voluntarily surrender his Fourth Amendment rights by doing business with them. The IRS seized his information without due process.” The NCLA further added:

IRS did not provide Mr. Harper with any notice or opportunity to contest its lawless information gathering. That lack of process violates the Fifth Amendment’s due-process guarantee. IRS’s third-party collection of Mr. Harper’s information is also a Fourth Amendment trespass against Mr. Harper because it seized his personal papers without a warrant. The IRS also failed to protect Mr. Harper’s statutory rights when it obtained his personal papers from third parties.

The NCLA’s brief notes that the IRS should have its interest aligned with Harper’s rights and the tax agency should have obtained the records in compliance with the Fourth and Fifth Amendments. “The Court should conclude that the district court has subject-matter jurisdiction and that Mr. Harper has stated a claim upon which relief can be granted,” the NCLA’s opening brief concludes.