In re: Internal Revenue Service

Filing 6

MEMORANDUM ORDER re (1 in 1:16-mc-00079-LPS) PETITION to Quash filed by Jerry V. Smith, (1 in 1:16-mc-00165-LPS) PETITION to Quash filed by Jerry V. Smith are DENIED. Signed by Judge Leonard P. Stark on 1/29/18. Associated Cases: 1:16-mc-00079-LPS, 1:16-mc-00165-LPS (ntl)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
JERRY V. SMITH,
Petitioner,
Misc. No. 16-79-LPS
Misc. No. 16-165-LPS

v.

INTERNAL REVENUE SERVICE,
Respondent.
MEMORANDUM ORDER
At Wilmington this 29th day of January, 2018, having reviewed the petitions filed by
Jerry V. Smith ("Petitioner") to quash third-party summons issued by the Internal Revenue
Service ("IRS"), as well as the papers filed in connection therewith, IT IS HEREBY
ORDERED that the petitions to quash (Misc. No. 16-79 D.I. 1; Misc. No. 16-165 D.I. 1) are
DENIED, for the reasons that follow.
1.

Petitioner did not file federal tax returns between at least 2009 and 2015. In order

to determine Petitioner's federal tax liability for tax years 2009 through 2014, on February 24,
2016, IRS agent Jeffrey Marino issued an IRS third-party summons to Bank of America for
· Petitioner's bank records. (Misc. No. 16-79 D.I. 2-1if10) OnMarch 11, 2016, Petitioner filed a
timely motion to quash. (Misc. No. 16-79 D.I. 1)
2.

On May 12, 2016, the IRS issued another third-party summons to Bank of

America, this time for Petitioner's bank records relating to tax year 2015. (Misc. No. 16-165 D.I.
3-2 if 10) On June 6, 2016, Petitioner filed a timely motion to quash. (Misc. No. 16-165 D.I. 1)
3.

Title 26 of the United States Code section 7601 gives the IRS a mandate to

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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 also Donaldson v. United

States, 400 U.S. 517, 523-524 (1971), abrogated on other grounds by 26 U.S.C. § 7609.
4.

Once the legality of a summons is questioned, the burden is on the IRS to

demonstrate: (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, 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 Department of
Justice 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).
5.

The record includes two declarations of Agent Marino, which are identical in all

material respects, other than that the first declaration relates to the first summons (see Misc. No.
16-79 D.I. 2-1) while the second declaration relates to the second summons (see Misc. No. 16165 D.I. 3-2) 1• The issues presented in the two motions are substantively identical, differing only

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The version ofthe second declaration contained in the record is unsigned. (See Misc.
· No.16-165 p.I. 3-2 at page 5of5) When it was submitted on July 15, 2016, the gov.emment
stated: "Counsel has not yet received the original signature page from Agent Marino, but will
forward same on receipt." (Misc. No. 16-165 D.I. 3 at 2 n.1) The docket does not indicate that
the Court ever received a signed version. This oversight does not prevent the Court from ruling
·

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in the tax years concerned. Therefore, the Court addresses both motions together. As explained
below, the two declarations satisfy each of the requirements set out above. See generally
Grandup v. United States, 2015 WL 3507966 (D. Del. June 2, 2015).

a.

Agent Marino issued the summonses for the legitimate purpose of

determining Petitioner's federal tax liability for the years 2009 through 2015. (See Misc. No. 1679 D.I. 2-1if11; Misc. No. 16-165 D.I. 3-2 if 11; see also 26 U.S.C. § 7602)
b.

The bank records sought from Bank of America may be relevant to

determining Petiti~ner's tax liability for tax years 2009 through 2015 by, e.g., revealing 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. (See Misc. No. 16-79 D.I. 2-1if11; Misc. No .
.16-165 D.I. 3-2 if 11; see also United States v. Rockwell Intern., 897 F.2d 1255, 1263 (3d Cir.
1990))
c.

According to Agent Marino's declarations, the requested bank records are

not already in the IRS's possession. (Misc. No. 16-79 D.I. 2-1if12; Misc. No. 16-165 D.I. 3-2

ir 12)
d.

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 Marino complied with the service requirement by sending a copy of the first summons via
certified-mail to Bank of America, N.A., Legal Order Processing, 800 Samoset Drive,

on the motion in the second action. The second declaration is substantively identical to the first
declaration, and the Court does have a signed version of the first declaration. (See Misc. No. 1679 D .I. 2-1 at page 4) Fundamentally, the record made by the parties leads to the conelusion that
the motion in the second action (like that in the first action) must be denied.
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DE5-024-02-08, Newark, Delaware, 19713. (See Misc. No. 16-79 D.I.

2-1~10)

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 Marino complied with this notice requirement by contemporaneously sending a

copy of the summons to Petitioner via certified mail at his last known address. (See Misc. No.
16-79 D .I. 2-1

~

10) Although Agent Marino's second declaration does not specifically indicate

how he complied with the service and notice requirements for the second summons, he does
declare: "All administrative steps required by the Internal Revenue Code for issuance of a
summons have been taken." (Misc. No. 16-165 D.I. 3-2 ~ 13) Petitioner does not argue to the
contrary and the record reveals no basis to doubt that all required administrative steps were taken.
In fact, in his motion Petitioner alleges that the second summons was issued to Bank of America

(Misc. No. 16-165 D.I.

1~2);

and it appears Petitioner received a copy on May 16, 2016 (Misc.

No. 16-165 D.I. 1-6 at page 1of6).
e.

No summons maybe 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 Marino declares
that there was no Justice Department referral in effect with respect to Petitioner at the time he
mailed the first or second summonses. (Misc. No. 16-79 D.I.
~

2-1~14;

Misc. No. 16-165 D.I. 3-2

14)
6.

Because the,IRS has met its burden to show that the requirements fora 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

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constitute an abuse of the Court's process. See Garden State, 607 F.2d at 71; Godwin v. United

States, 564 F. Supp. 1209, 1213 (D. Del. 1983). Petitioner has failed to meet his burden.
7.

Petitioner contends broadly that issuance of IRS summonses "is an act of

attempted extortion" and "nothing but an illegal fishing expedition,"·and further that "the IRS
has no authority to demand that my personal documents and records in the possession of Bank of
America be turned over to them for any purpose." (E.g., Misc. No. 16-165 D.I. 1if3) He further
argues that the federal tax system is one of "voluntary compliance," meaning that he is under no
obligation to file tax returns, and that if he were required to file tax returns this would violate his
right against self-incrimination, protected by the Fifth Amendment to the United States
Constitution. (E.g., Misc. No. 16-79 D.I. 3 if B; Misc. No. 16-165 D.I. 1ifif3, 5, 7) Petitioner
cites no authority to support his contentions. They are frivolous, as indicated by the statutory and
judicial authorities cited throughout this Memorandum Order. See also United States v. Evans,
356 F. App'x 580, 582 (3d Cir. 2009) ("Evans claimed that no legal authority required him to pay
income tax on his wages, [and] the filing of a tax return would violate his Fifth Amendment right
against self-incrimination .... [T]he District Court found in the Government's favor on
summary judgment. . . . Evans appealed, and we affirmed the District Court, noting the clear
precedent that explicitly rejects Evans' arguments.").

IT IS FURTHER ORDERED that the Clerk of Court is directed to CLOSE these cases.

HONO
LE LEONARD P. STARK
UNITED STATES DISTRICT COURT

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