On June 19, 2014, San Francisco tax attorney, James P. Kleier, entered into a plea agreement with the government for his failure to file tax returns and pay income taxes. Per the agreement, Mr. Kleier will be imprisoned at the Atwater Federal Corrections Institution for 12 months commencing September 18, 2014. Following release from prison, he will be subject to a 1-year supervised parole. In addition, Mr. Kleier is required to pay the IRS a total $650,993.
Mr. Kleier was a partner in the San Francisco law office of Preston Gates & Ellis LLP (now known as K&L Gates LLP) from 1999 to 2005. Thereafter, he practiced law in the San Francisco office of Reed Smith LLP. Both of these organizations are large prestigious international law firms. According to the complaint filed by the government in the U.S. District for the Northern District of California, tax attorney Kleier failed to report income of more than $1.3 million while practicing law at these firms. Specifically, he earned $624,923 in 2008; $476,088 in 2009; and $200,734 in 2010. Nevertheless, he failed to file tax returns for these years and pay the taxes due and owing.
Mr. Kleier is not a novice attorney. He is a seasoned tax practitioner and has handled several significant high-profile tax cases. For example, Mr. Kleier represented the City of San Francisco in its battle with Macy’s over a significant property tax matter, and he represented Microsoft in a hotly-contested California unitary tax case. Also, attorney Kleier has taught tax courses at both Golden Gate University and the Hastings College of Law. In addition, he is the author of several articles on tax matters.
For his bad deeds, attorney Kleier made the infamous list of the top 250 delinquent California taxpayers. According to California public records, he now joins the ranks of prominent taxpayers like singer Dionne Warwick and actor Burt Reynolds. Also, as stated above, he now owes the government over $650,000 in taxes, interest and penalties. In addition, he will be spending a year in the slammer.
IRS Special Agent-in-Charge José M. Martinez said, when interviewed about the case: “The prosecution of individuals who brazenly attempt to avoid their tax filing and payment obligations and prevent the IRS from performing its mission is necessary to maintaining public confidence in our tax system.” No doubt, the fact that the taxpayer in this case was a prominent tax attorney, played a role in the outcome.
The morale to the story is simple: Tax practitioners should know better! It is quite likely that a tax practitioner who finds himself or herself in this predicament will not be treated leniently. Mr. Kleier is proof of this hypothesis.
Larry J. Brant is a Shareholder in Garvey Schubert Barer, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; New York, New York; Washington, D.C.; and Beijing, China. Mr. Brant practices in the Portland office. His practice focuses on tax, tax controversy and transactions. Mr. Brant is a past Chair of the Oregon State Bar Taxation Section. He was the long term Chair of the Oregon Tax Institute, and is currently a member of the Board of Directors of the Portland Tax Forum. Mr. Brant has served as an adjunct professor, teaching corporate taxation, at Northwestern School of Law, Lewis and Clark College. He is an Expert Contributor to Thomson Reuters Checkpoint Catalyst. Mr. Brant is a Fellow in the American College of Tax Counsel. He publishes articles on numerous income tax issues, including Taxation of S Corporations, Reasonable Compensation, Circular 230, Worker Classification, IRC § 1031 Exchanges, Choice of Entity, Entity Tax Classification, and State and Local Taxation. Mr. Brant is a frequent lecturer at local, regional and national tax and business conferences for CPAs and attorneys. He was the 2015 Recipient of the Oregon State Bar Tax Section Award of Merit.
Upcoming Speaking Engagements
- "Developments in the World of IRC Section 1031 Exchanges Including the TCJA," Oregon Society of Certified Public Accountants (OSCPA) Forest Products ConferenceEugene, OR, 6.22.18
- "Evaluating the Built-in Gains Tax for C to S Conversions After TCJA," New York University Summer Institute in Taxation – Advanced Conference on Subchapter SNew York, NY, 7.26.18-7.27.18
- "S Corporation Distributions – The Ins and Outs," New York University 77th Institute on Federal TaxationNew York, NY, 10.21.18-10.26.18
- "The Tax Cuts and Jobs Act – What It May Mean to Your Clients," Estate Planning Council of Portland Mini-SeminarPortland, OR, 11.7.18
- "S Corporation Distributions – The Ins and Outs," New York University 77th Institute on Federal TaxationSan Diego, CA, 11.11.18-11.16.18