There is a very old and important legal concept that is known as due process of law.

For U.S. citizens, due process of law is guaranteed in the 5th Amendment of the Constitution, which states "no person shall be deprived of life, liberty, or property, without due process of law." What are fundamental to procedural due process are ample prior notice and an opportunity for an individual to be heard and defend those rights. That includes a clear definition of what is, and what is not, a crime.

Due process of law is being mentioned here as the trial of nine defendants in the KPMG tax shelter case draws near in New York. The former partners of KPMG
are charged with criminal conspiracy to evade taxes by selling what the IRS claims are "abusive tax shelters." Strangely enough, no court of law has ruled that the shelters in question are illegal. There is only the IRS' belief that they are.

In tax law, the way due process used to work was that the IRS issued a warning against a specific tax shelter, thereby putting taxpayers on notice. The taxpayer was then taken to court by the IRS on the shelter issue, where he had a chance to respond before a judge, who ruled on legality. But, in the case of KMPG, the IRS
called in the prosecutors first without first determining in a court of law whether these so-called "abusive" shelters are legal or not.

The Wall Street Journal believes that the IRS may have taken this backdoor prosecution route because the Service has lately lost a number of cases in Tax Court.
For example, last year the government froze $500 million in assets at Xelan, a charitable trust set up for doctors in California, alleging that the trust was used for tax fraud. A U.S. District Court threw the case out and ruled that the IRS failed to show that any court had ever held that Xelan's activities were illegal under the tax code.

There are some very serious concerns if federal prosecutors are permitted to accuse and prosecute citizens for a conspiracy to promote a tax arrangement that is legal until proven otherwise. Should government have the unregulated power to indict and try citizens for entering into agreements to do legal acts bureaucrats don't like, then no one is safe.

The IRS has been engaged in a deliberate attempt to blur the valid distinction between proper tax 'avoidance' and illegal tax "evasion." Since the U.S. tax code is a complex morass, it is no small wonder that resourceful experts such as those at KPMG, try to interpret the code to favor their taxpayer clients rather then surrender to the IRS.

The KPMG case is just another vicious role of the aggressive IRS campaign against anything it deems to be an "abusive tax shelter." This campaign is so aggressive that a leading Washington, DC tax law firm, Caplin & Drysdale, suggested that the objective of the IRS "is not to win in court, but rather to create an in terrorem effect." (The phrase "in terrorem" is Latin, meaning "so as to produce terror").

In other words, this highly respected law firm believes that the IRS is engaging in a form of tax terrorism by intimidating attorneys and tax accountants into failing to give even legitimate tax avoidance advice.

The problem is that the IRS sees any and every attempt to legally avoid taxes as tax evasion. What are really abused are the enormous IRS investigative powers backed by prosecutors of the U.S. Justice Department.

Congressional hearings that were held a few years ago on the IRS publicly exposed what most Americans already knew: the IRS often conducts its affairs like
a financial Gestapo by trampling the rights of citizens. The IRS still views taxpayers as adversaries, and assume them to be guilty until they can prove otherwise.

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