Gandrup v. United State of America, Internal Revenue Service et al

Filing 10

MEMORANDUM. Signed by Judge Sue L. Robinson on 6/2/2015. (fms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

)

JIM GANDRUP,

)
Petitioner,

)
)
) Misc. No. 15-38-SLR

v.
UNITED STATES OF AMERICA,
INTERNAL REVENUE SERVICE, and
JULIETA JOHNSON,
Respondents.

)
)
)
)
)

)

MEMORANDUM
At Wilmington this ;tr>day of June, 2015, having reviewed the petition filed by
Jim Gandrup ("the petitioner") to quash a third-party summons issued by the Internal
Revenue Service ("IRS"), as well as the papers filed in connection therewith, the petition
to quash (D.I. 1) will be denied for the reasons that follow:
1. Background. Petitioner has not filed a federal tax return since 1996. In
order to determine petitioner's federal tax liability for tax year 2010, defendant Julieta
Johnson, a California-based Revenue Agent with the IRS ("Agent Johnson"), issued an
IRS third-party summons to Bank of America for the bank records of Silver Bullet
Paving, Inc. (a business believed to be owned by petitioner (D.I. 5,
December 1, 2009 to January 31, 2011. (D.I. 5,

1f 2, ex.

1f1f 7, 8)) from

8) Petitioner timely filed his

petition to quash. (D.I. 1)

I
l

I

2. Legal standard. Title 26 of the United States Code section 7601 gives the
IRS a mandate to investigate "persons ... who may be liable" for taxes. To enforce this
mandate, the IRS has been given the power to examine records, to issue summonses
(to the taxpayer or to a third party), and to take testimony for purposes of (1)
ascertaining the correctness of any tax return, (b) making a tax return where none has
been made, (c) determining the tax liability of any person, (d) collecting a tax liability, or
(e) inquiring into any offense connected with the administration or enforcement of the
internal revenue laws. 26 U.S.C. § 7602. See Donaldson v. United States, 400 U.S.
517, 523-524 (1971 ), abrogated on other grounds by 26 U.S.C. § 7609.
3. Once the legality of a summons is questioned, it is the burden of the IRS to
demonstrate the following: (a) the summons was issued for a legitimate purpose; (b) the
summons sought information that may be relevant to that purpose; (c) the information
sought was not already within the possession of the IRS; and (d) all administrative
requirements were met. See United States v. Clarke,_ U.S._, 134 S. Ct. 2361,
2365 (2014) (citing United States v. Powell, 379 U.S. 48, 57-58 (1964)). In addition,
there must not have been any criminal referrals to the Justice Department regarding the
taxpayer. See 26 U.S.C. § 7602(d); United States v. Garden State Nat'/ Bank, 607 F.2d
61, 68-69 (3d Cir. 1979); Godwin v. United States, 564 F. Supp. 1209, 1213-14 (D. Del.
1983).
4. Analysis. The declaration of Agent Johnson satisfies each of the above
requirements:

2

a. Legitimate purpose. Agent Johnson issued the summons for the
legitimate purpose of determining petitioner's federal tax liability for the year 2010. (D.I.
5,

1f1f 2,

10) See 26 U.S.C. § 7602.
b. Relevant information. The bank records sought from Bank of

America may be relevant to determining petitioner's tax liability for tax year 2010 by,
e.g., revealing 2010 income, the existence of other income-producing assets, or the
existence of other bank accounts owned by petitioner that are currently unknown to the
IRS. (D.I. 5,

1f 10)

See United States v. Rockwell Intern., 897 F.2d 1255, 1263 (3d Cir.

1990).
c. Information not in possession of IRS. According to Agent Johnson's
declaration, the requested bank records were not already in the IRS's possession. (D.I.
5,

1f 11)
d. Administrative requirements met. A third-party summons issued by

the IRS may be served by certified or registered mail to the last known address of the
summoned party. See 26 U.S.C. § 7603(b). Agent Johnson complied with the service
requirement by sending a copy of the summons via certified mail to Bank of America,
N.A., Legal Order Processing, 800 Samoset Drive, DE5-024-02-08, Newark, Delaware,
19713. (D.I. 5,

1f 8) The IRS is also required to

provide notice of such a third-party

summons to the taxpayer. See 26 U.S.C. § 7609(a). Agent Johnson complied with this
notice requirement by contemporaneously sending a copy of the summons to petitioner
via certified mail at his last known address, after having attempted via prior notice to
contact petitioner about his unpaid taxes. (D.I. 4 at 2-3; D.I. 5,

1f1f 3-6, 8-9, exs.

1-4, 8-

9)
f

3

e. No referral. No summons may be issued or enforced if (i) the IRS has
recommended to the Attorney General either a grand jury investigation or the criminal
prosecution of a taxpayer, or (ii) the Department of Justice has requested an individual's
tax return information from the IRS pursuant to 26 U.S.C. § 6103(h)(3)(B). See 26
U.S.C. § 7602(d)(2). Agent Johnson averred that there was no Justice Department
referral in effect with respect to petitioner at the time she mailed the summons and
signed the declaration. (D.I. 5, 1113)
5. Because the IRS has met its burden to show that the requirements for a valid
summons have been met, the burden shifts to petitioner to show, through particularized
factual averments, that the IRS is not acting in good faith or that enforcement of the
summons would constitute an abuse of the court's process. See Garden State, 607
F.2d at 71; Godwin, 564 F. Supp. at 1213. Petitioner has failed to meet his burden
through his allegations.
a. Notice. 1 Contrary to petitioner's allegation that the IRS failed to
provide him with advance notice that contact would be made with third parties, Agent
Johnson provided general notice when she mailed petitioner IRS Publication 1 on
November 4, 2013 and January 6, 2014, and provided notice of specific contact when
she sent him notice of the Bank of America summons. See 26 U.S.C. § 7602(c)(1) &
(2). (D.I. 5, 11114-6, 9, exs. 1-4, 9)
b. Referral. 2 There is no evidence that a referral to the Justice
Department was pending at any relevant time. (D.I. 5, 1113)

1

2

See D.I. 1, 118; D.I. 9.
See D. I. 1, ~ 9.

4

I

I

c. Good faith. 3 Because petitioner has not demonstrated his first two
allegations, his allegation that the IRS lacked good faith based on such must also fail.
d. Violation of privacy laws.

4

Again, because Agent Johnson met the

statutory requirements for issuing a third-party summons, and especially in light of the
fact that petitioner failed to identify the privacy laws to which he was generally referring,
this final allegation lacks merit.
e. Legitimate purpose. 5 Given the fact that petitioner has not filed a tax
return since 1996, there is no question but that the summons was issued in aid of the
collection of a tax assessment.
6. Conclusion. For the reasons stated, the petition to quash is denied. An
order shall issue.

3

See D.I. 1, 1110.
See D. I. 1 , 1111 .
5
The court notes that a third-party summons to a bank for records does not violate a
taxpayer's Fourth Amendment rights. See United States v. Miller, 425 U.S. 435, 444
(1976).
4

5