SAN FRANCISCO–A court here has authorized the Internal Revenue Service to serve what is known as a “John Doe” summons on Coinbase, requesting the identities of United States Coinbase customers who transferred convertible virtual currency from 2013 to 2015.
Coinbase helps to facilitate transactions of digital currencies such as Bitcoin and Ethereum.
The federal court in the Northern District of California handed down the ruling following a request from the Department of Justice on behalf of the IRS, since a “John Doe” summons can only be served with approval from a federal court. Such a summons does not specifically identify the person, but instead identifies a person or ascertainable group or class by their activities.
“Based upon a review of the Petition and supporting documents, the Court has determined that the ‘John Doe’ summons to Coinbase, Inc. relates to the investigation of an ascertainable group or class of persons, that there is a reasonable basis for believing that such group or class of persons has failed or may have failed to comply with any provision of any internal revenue laws, and that the information sought to be obtained from the examination of the records or testimony (and the identities of the persons with respect to whose liability the summons is issued) are not readily available from other sources,” wrote Judge Jacqueline Scott Corley in her ruling.
In a statement related to the case, Principal Deputy Assistant Attorney General Caroline D. Ciraolo, head of the Justice Department’s Tax Division, said, “As the use of virtual currencies has grown exponentially, some have raised questions about tax compliance. Tools like the John Doe summons authorized today send the clear message to U.S. taxpayers that whatever form of currency they use – Bitcoin or traditional dollars and cents – we will work to ensure that they are fully reporting their income and paying their fair share of taxes.”