## Facts

- The IRS received information from French authorities indicating that certain HSBC accounts were held by Pelsa Business Inc. and that Eli Chabot was Pelsa’s beneficial owner for tax years 2005–2007.
- In June 2012, the IRS issued summonses to Eli and Renee Chabot seeking testimony and documents concerning foreign bank accounts for 2006–2009.
- The Chabots refused to appear or produce documents, asserting the Fifth Amendment privilege against self-incrimination and claiming the act of production would be testimonial and incriminating (including as to possible FBAR noncompliance).
- In November 2012, the IRS amended the summonses to seek only records required to be maintained under 31 C.F.R. § 1010.420, which obligates U.S. persons with qualifying foreign accounts to retain for five years basic account information (account name, account identifier, financial institution information, account type, and maximum value).
- The IRS petitioned in federal district court to enforce the amended summonses; the district court enforced them under the required-records exception.
- The Chabots appealed, challenging the application of the required-records exception; the court of appeals reviewed the legal question de novo.

## Issues

1. Whether the Fifth Amendment act-of-production privilege shields taxpayers from producing foreign account records demanded by an IRS summons when production would implicitly admit existence, control, and authenticity of the records.
2. Whether records required to be maintained under 31 C.F.R. § 1010.420 fall within the required-records exception to the Fifth Amendment, permitting compelled production.

## Decision

- The Third Circuit affirmed the enforcement order.
- The court assumed, without deciding, that producing the records could be testimonial under act-of-production doctrine.
- The court held that the required-records exception applied to the § 1010.420 records, defeating the Fifth Amendment objection.
- Applying the three-part required-records test, the court concluded:
  - The foreign account recordkeeping regime is essentially regulatory and not aimed at a selective group inherently suspect of criminal activity.
  - The required information is basic account information customarily kept by account holders.
  - The required records have sufficient public aspects because they are maintained pursuant to a regulatory obligation and in anticipation of governmental inspection.
- The court rejected arguments that potential criminal exposure (including FBAR-related liability) negates the exception, and aligned its holding with other circuits that had enforced similar summonses.

## Legal Principles

- The Fifth Amendment may protect a compelled act of production when the act is testimonial (e.g., it admits existence, possession/control, or authenticity), even if the contents are not privileged.
- Under the required-records exception, the Fifth Amendment does not bar compelled production of records that a valid regulatory scheme requires a person to keep, when:
  - the scheme is essentially regulatory rather than targeted at inherently suspect criminal groups,
  - the records are of a type customarily kept, and
  - the records have public aspects consistent with regulatory oversight.
- Foreign bank account records required by 31 C.F.R. § 1010.420 satisfy the required-records criteria and may be compelled by IRS summons notwithstanding act-of-production concerns.

## Conclusion

The Third Circuit held that records U.S. persons must maintain under 31 C.F.R. § 1010.420 fall within the required-records exception, so the Chabots could not invoke the Fifth Amendment act-of-production privilege to resist the IRS summonses for those specific documents.


United States v. Chabot, 793 F.3d 338 (3d Cir. 2015)