Trick Or Treaty: Are Canadians Next As IRS Takes Historic First Step?

Canadians know that their proximity to the US presents both risk and opportunity. One risk that has always been hard to quantify is the risk that the IRS and CRA will cooperate to enforce each others' tax laws with respect to assets and information on both sides of the border.¹ Recently, the likelihood of this cooperation increased significantly. For the first time, the US government has used a powerful device in support of a treaty-partner government to obtain financial data. At the request of the Norwegian taxing authority, the IRS (and Department of Justice) applied to US federal district court (in multiple jurisdictions) for leave to file a "John Doe" summons. This is a specialized summons authorized by the US Internal Revenue Code when the IRS is seeking otherwise unavailable information regarding a particular individual or group that are believed to have failed to comply with tax laws. Although tax treaties generally require the signatory countries to assist each