United States of America v. Shawn Urbanski

Filing 11

ORDER Granting 1 Petition to Enforce IRS Summons. Signed by Judge Lucy H. Koh on July 20, 2017. (lhklc1, COURT STAFF) (Filed on 7/20/2017)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

United States District Court
Northern District of California

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UNITED STATES OF AMERICA,
Plaintiff,

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ORDER GRANTING PETITION TO
ENFORCE IRS SUMMONS

v.

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Case No. 17-CV-02424-LHK

Re: Dkt. No. 1
SHAWN URBANSKI,
Defendant.

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This matter is before the Court on an order to show cause why Respondent Shawn

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Urbanski (“Respondent”) should not be required to comply with an Internal Revenue Service

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(“IRS”) summons. Having considered Petitioner United States of America’s (“Petitioner’s”)

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verified Petition to Enforce IRS Summons, ECF No. 1 (“Pet.”), and the discussions at the hearing

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on July 20, 2017, the Court GRANTS Petitioner’s Petition to Enforce IRS Summons.

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I.

Background
According to the Petition, the IRS is investigating the collection of Eugenia Reyes’ tax

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liabilities for 2011–2015. Pet. at 5 & ¶ 3. The IRS “is informed and believes that [Respondent]

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has knowledge or information concerning records, paper and other data regarding income and

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other matters covered by [the IRS] inquiry and to which [the IRS] does not otherwise have access,

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Case No. 17-CV-02424-LHK
ORDER GRANTING PETITION TO ENFORCE IRS SUMMONS

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possession or control.” Id. ¶ 5. As part of its investigation, the IRS served a summons on

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Respondent on December 14, 2016 that required Respondent to appear on January 9, 2017. The

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record before the Court shows that service was properly made pursuant to 26 U.S.C. § 7603, which

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requires service “by an attested copy delivered in hand to the person to whom it is directed, or left

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at his last and usual place of abode.” The IRS left the summons at one of Respondent’s “last and

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usual places of abode.” Pet. ¶ 6.
However, Respondent did not appear on January 9, 2017 or produce testimony or records

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as requested by the summons. See id. ¶ 8. By letter dated January 19, 2017, Respondent was

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given another opportunity to comply with the summons by appearing for an appointment with
Revenue Agent Elisa Dang on February 16, 2017. Id. ¶ 9, Ex. C. According to the Petition,

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United States District Court
Northern District of California

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Respondent has still not complied. Id. ¶ 10.
On April 27, 2017, Petitioner filed the instant action to enforce the summons. See Pet. On

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May 26, 2017, the Court issued an order to show cause and set a briefing schedule and a hearing

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for July 20, 2017. ECF No. 8. The record shows that Respondent was served with the verified

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Petition and the order to show cause on June 1, 2017. ECF No. 9. However, the Court received no

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written response to the order to show cause, and Respondent did not appear at the show cause

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hearing.

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II.

Discussion

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Under 26 U.S.C. § 7602(a), the IRS is authorized to issue a summons relevant to the

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investigation of any taxpayer’s liability. Summons may be issued for the purposes of “ascertaining

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the correctness of any return, making a return where none has been made, determining the liability

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of any person for any internal revenue tax or . . . collecting any such liability . . . .” 26 U.S.C.

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§ 7602(a); see also Crystal v. United States, 172 F.3d 1141, 1143 (9th Cir. 1999) (quoting 26

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U.S.C. § 7602(a)). To enforce a summons, the IRS must first establish “good faith” by showing

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that the summons (1) is issued for a legitimate purpose; (2) seeks information relevant to that

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purpose; (3) seeks information that is not already in the IRS’s possession; and (4) satisfies all of

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the administrative steps set forth in the Internal Revenue Code. United States v. Powell, 379 U.S.

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Case No. 17-CV-02424-LHK
ORDER GRANTING PETITION TO ENFORCE IRS SUMMONS

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48, 57-58 (1964). “‘The government’s burden is a slight one, and may be satisfied by a declaration

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from the investigating agent that the Powell requirements have been met.’” Crystal, 172 F.3d at

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1144 (quoting United States v. Dynavac, Inc., 6 F.3d 1407, 1414 (9th Cir. 1993)). “The burden is

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minimal ‘because the statute must be read broadly in order to ensure that the enforcement powers

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of the IRS are not unduly restricted.’” Id. (quoting Liberty Fin. Servs. v. United States, 778 F.2d

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1390, 1392 (9th Cir. 1985)).

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Once the government has met its burden in establishing the Powell elements, if the

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taxpayer chooses to challenge the enforcement, he or she bears a “heavy” burden to show an abuse

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of process or lack of good faith on the part of the IRS. United States v. LaSalle Nat’l Bank, 437
U.S. 298, 316 (1978). “Enforcement of a summons is generally a summary proceeding to which a

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United States District Court
Northern District of California

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taxpayer has few defenses.’” Crystal, 172 F.3d at 1144 (quoting United States v. Derr, 968 F.2d

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943, 945 (9th Cir. 1992)). “‘The taxpayer must allege specific facts and evidence to support his

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allegations of bad faith or improper purpose.’” Id. (quoting United States v. Jose, 131 F.3d 1325,

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1328 (9th Cir. 1997)). As explained by the Ninth Circuit:

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The taxpayer may challenge the summons on any appropriate grounds, including
failure to satisfy the Powell requirements or abuse of the court’s process. Such an
abuse would take place if the summons had been issued for an improper purpose,
such as to harass the taxpayer or to put pressure on him to settle a collateral
dispute, or for any other purpose reflecting on the good faith of the particular
investigation. In addition, it has become clear since Powell that gathering
evidence after having decided to make a recommendation for prosecution would
be an improper purpose, and that the IRS would be acting in bad faith if it were to
pursue a summons enforcement under these circumstances. While neither the
Powell elements nor the LaSalle requirements is an exhaustive elaboration of
what good faith means, still the dispositive question in each case is whether the
Service is pursuing the authorized purposes in good faith.

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Id. at 1144–45 (internal quotes and citations omitted). Once a summons is challenged by a

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respondent, it must be “scrutinized by the court” to determine whether it seeks information

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relevant to a legitimate investigative purpose, and the court may choose either to refuse

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enforcement or narrow the scope of the summons. United States v. Goldman, 637 F.2d 664, 668

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(9th Cir. 1980).

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In the instant case, Petitioner has met its burden of showing that the Powell elements have
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Case No. 17-CV-02424-LHK
ORDER GRANTING PETITION TO ENFORCE IRS SUMMONS

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been satisfied, largely through the verification of the Petition by Revenue Agent Elisa Dang. See

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Crystal, 172 F.3d at 1144 (stating that it was undisputed that the special agent’s declaration

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satisfied the Powell requirements and that the government therefore “established a prima facie case

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to enforce the summonses”); Dynavac, Inc., 6 F.3d at 1414 (stating that the government’s burden

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“may be satisfied by a declaration from the investigating agent that the Powell requirements have

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been met.”); United States v. Bell, 57 F. Supp. 2d 898, 906 (N.D. Cal. 1999) (“The government

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usually makes the requisite prima facie showing by affidavit of the agent.”).

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As to the first Powell element, the verified Petition indicates that the IRS’s investigation is
being conducted for a legitimate purpose of ascertaining Eugenia Reyes’ assets and liabilities as
part of an effort to investigate federal tax liabilities for certain periods of time. Pet. ¶ 3; 26 U.S.C.

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United States District Court
Northern District of California

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§ 7602(a) (allowing issuance of summons for the purpose of “determining the [tax] liability of any

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person”). As to the second Powell element, the summons is relevant to the purpose of ascertaining

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Eugenia Reyes’ assets and liabilities. The summons asks Respondent to appear and bring “books,

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records, papers, and other data relating to the tax liability” of Eugenia Reyes. See id. Exs. A & B.

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As to the third Powell element, the Petition further indicates that the information is not already in

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the IRS’s possession. As to the fourth Powell element, the Petition certifies that all administrative

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steps required by the Internal Revenue Code for the issuance of the summons have been taken. Id.

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¶¶ 5, 7, 11–12.

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Because Petitioner has met its burden in establishing the Powell elements, the burden shifts

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to Respondent to show an abuse of process or lack of good faith. LaSalle, 437 U.S. at 316 (placing

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the “heavy” burden on the respondent). As discussed above, Respondent did not file any response

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to the order to show cause and did not appear at the show cause hearing held on July 20, 2017.

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This Court therefore finds that Respondent has not met Respondent’s burden of showing an abuse

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of process or lack of good faith on the part of the IRS.

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Based on the foregoing, the Court GRANTS Petitioner’s Petition to Enforce IRS

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Summons. Respondent is directed to obey the summons issued; to appear before Revenue Agent

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Elisa Dang, or any other proper officer of the IRS, on Friday, August 18, 2017, at 1:00 p.m. at 55

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Case No. 17-CV-02424-LHK
ORDER GRANTING PETITION TO ENFORCE IRS SUMMONS

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South Market Street, Suite 7000A, San Jose, California 95113, to give testimony as demanded in

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the summons.

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IT IS SO ORDERED.

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Dated: July 20, 2017
______________________________________
LUCY H. KOH
United States District Judge

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United States District Court
Northern District of California

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Case No. 17-CV-02424-LHK
ORDER GRANTING PETITION TO ENFORCE IRS SUMMONS