Anderson v. United States Internal Revenue Service et al
Filing
15
FINDINGS AND RECOMMENDATIONS: Respondents' 8 Motion to Dismiss be GRANTED and Petitioner's 1 MOTION to Quash be DISMISSED. Objections to F&R due by 5/10/2013 Signed by Magistrate Carolyn S Ostby on 4/23/2013. (Order mailed to Anderson.) (NOB) Modified on 4/23/2013 to convert to written opinion. (NOB).
UNITED STATES DISTRICT COURT
DISTRICT OF MONTANA
BILLINGS DIVISION
TANA ANDERSON,
MC 12-12-BLG-CSO
Petitioner,
v.
UNITED STATES INTERNAL
REVENUE SERVICE, and
CIANNE KALLUNKI, Revenue
Agent,
FINDINGS AND
RECOMMENDATIONS OF
UNITED STATES
MAGISTRATE JUDGE
Respondents.
Petitioner Tana Anderson (“Anderson”) is proceeding pro se. She
has filed with the Court a “Petition to Quash IRS Third Party
Summons” issued by Respondent United States Internal Revenue
Service (“IRS”) through its agent, Respondent Cianne Kallunki
(“Kallunki”). ECF 1.1 Anderson claims Respondent the United States
of America (“US”), the IRS, and Kallunki (collectively “Respondents”)
The ECF citation refers to the document as it is numbered in the
Court’s electronic filing system. Citations to page numbers refer to
those assigned by the ECF system.
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violated statutory provisions governing issuance of third-party
summonses when Kallunki issued a summons to First Interstate Bank
in Billings, Montana, seeking some of Anderson’s financial records. Id.
at 2-4.2 Anderson seeks a Court order quashing the summons as well
as other relief, including monetary damages. Id. at 4.
Respondents now move to dismiss Anderson’s petition under
Rules 12(b)(1) and (6).3 Mtn. to Dismiss Petition to Quash (ECF 8).
Having reviewed the record, the Court recommends that Respondents’
motion be granted for the reasons discussed below.
I.
BACKGROUND
The IRS, through Kallunki, is examining Anderson’s federal
income tax liability for tax years 2007 through 2011, for which
Anderson did not file federal income tax returns. Declaration of Cianne
Kallunki also issued a summons for Anderson’s bank records
from Prairie Mountain Bank in Great Falls, Montana. Anderson also
has filed a motion to quash that summons that is presently pending in
the Great Falls Division of this Court in Anderson v. U.S. Internal
Revenue Service, et al., MC 12-04-GF-RKS (D. Mont. 2012).
2
References to rules are to the Federal Rules of Civil Procedure
unless otherwise indicated.
3
2
Kallunki in Support of Motion to Dismiss the Petition to Quash (ECF
10) at ¶ 2. The IRS provided Anderson notice that it may contact third
parties for information during the examination as follows: (1) on
August 4, 2011, the IRS sent to Anderson’s last known address IRS
Publication 1 (“Your Rights as a Taxpayer”), which informs taxpayers
that the IRS may contact third parties regarding the examination; and
(2) on March 9, 2012, the IRS sent to Anderson’s current address an
additional copy of “Your Rights as a Taxpayer” and Notice 609
(“Privacy Act Notice”). ECF 10 at ¶ 3 and ECF 10-1 at 4-7.
On November 14, 2012, Kallunki served a copy of an IRS
administrative summons on First Interstate Bank by certified mail.
The summons directed the bank to produce books, records, papers, and
other data described in the summons relating to Anderson’s accounts
and the accounts for which Anderson has signature authority for the
relevant period. ECF 10 at ¶ 5. Also on November 14, 2012, Kallunki
sent notice of the summons to Anderson, who signed the certified mail
receipt acknowledging receipt of the notice on November 19, 2012. Id.;
ECF 10-1 at 14.
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On December 10, 2012, Anderson filed her Petition to Quash IRS
Third Party Summons. ECF 1 at 1. She sent copies of her petition, via
certified mail, to Kallunki and First Interstate Bank. ECF 1 at 5.
In seeking to quash the summons, Anderson claims that: (1) the
summons violates 26 U.S.C. § 7609(a)(1) because the IRS failed to
timely notify her of the summons thus depriving her of the opportunity
to timely file a petition to quash the summons under 26 U.S.C. §
7609(b)(1), id. at ¶ 8; (2) the IRS failed to give her advanced notice of
contact with any third party or to periodically provide her with a record
of persons contacted by the IRS about her as required by 26 U.S.C. §
7602(c)(1) & (2), id. at ¶ 9; (3) the IRS issued the summons while a
referral for criminal prosecution was pending with the Department of
Justice in violation of 26 U.S.C. § 7602(d)(2)(A), id. at ¶ 10; (4) the IRS
failed to meet the “good faith” requirement of United States v. Powell,
379 U.S. 48 (1964), because of the foregoing violations, id. at ¶ 11; and
(5) Respondents have caused or will cause violations of her federal and
state privacy rights by having her records turned over to the IRS, id. at
¶12.
4
On February 15, 2013, Respondents filed their motion to dismiss
the petition to quash. ECF 8.
II.
PARTIES’ ARGUMENTS
Respondents, who filed Kallunki’s declaration in support of their
motion, advance two principal arguments in seeking dismissal of
Anderson’s petition to quash the summons. Mem. in Support of
Respondents’ Mtn. to Dismiss Pet. to Quash (ECF 9) at 3-4. First, they
argue that this Court lacks subject matter jurisdiction because: (1) they
gave Anderson notice of the summons; (2) she verified receipt of notice
of the summons; and (3) she failed to file her petition within the
required 20-day limit. Id.
Second, Respondents argue that each of Anderson’s alleged
“causes of action” fails to state a claim upon which relief may be
granted, thus subjecting the petition to dismissal under Rule 12(b)(6).
Respondents argue that: (1) they provided Anderson the requisite
notice of the summons in accordance with 26 U.S.C. § 7609(a), id. at 45; (2) they provided Anderson the requisite notice of contact with third
parties in accordance with 26 U.S.C. § 7609(c), id. at 5-6; (3) there is no
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Justice Department referral, as defined by 26 U.S.C. § 7602(d)(2), in
effect for the period under examination at the time Kallunki issued the
summons, id. at 6; (4) they issued the summons in good faith under the
standards set forth in U.S. v. Powell, 379 U.S. 48, 57-58 (1964), id. at 68; and (5) Anderson has failed to properly identify or specify which
constitutional and privacy rights she claims have been violated or how
they have been violated and thus has failed to state a claim, id. at 8-9.
In addition to the foregoing, Respondents make two additional
arguments. First, they argue that the US is the only proper respondent
and that the IRS and Kallunki should, therefore, be dismissed. Id. at 9.
Second, they argue that Anderson has provided no basis for her claim
for damages for alleged violations of her privacy rights under federal
and state law. Id.
In response, Anderson states that “[t]he petition to quash the
summons argues various issues, all of which were addressed by the
respondents, saving one.” Petitioner’s Opposition to United States’ Mtn.
to Dismiss Petition to Quash (ECF 13) at 1. Anderson notes that the
issue that Respondents failed to address is her allegation that they
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violated 26 U.S.C. § 7602(c)(2) by failing to periodically provide her
with a record of persons that the IRS contacted about her. Id. at 2-3.
She argues that, although it could be argued that she could have
requested a list of third-party contacts, the statute requires the IRS to
“periodically provide” the taxpayer a record of persons contacted.
Respondents have presented no evidence, Anderson argues, that they
provided her with the list of third-party contacts. Id. at 3-4. Because of
Respondents’ failure, Anderson argues, they have failed to satisfy
Powell’s good faith standard and the Court should deny their motion to
dismiss. Id. at 5.
III. DISCUSSION
For the reasons that follow, the Court recommends that
Respondents’ motion be granted and that Anderson’s petition be
dismissed. As an initial matter, except for arguing that Respondents
failed to address her claim that they did not comply with 26 U.S.C. §
7602(c)(2), Anderson does not contest, nor has she even addressed, any
of Respondents’ factual or legal challenges to the “causes of action” she
raises in her petition to quash. In fact, Anderson goes so far as to
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expressly concede in her response brief that “it is not disputed that the
respondents’ [sic] complied with Section 7602(c)(1).” ECF 13 at 2. Her
failure to address any of Respondents’ other bases for dismissal
indicates to the Court that she concedes that all of Respondents’ other
arguments are well-taken. On this basis alone, her petition should be
dismissed to the extent that it presents claims other than her claim
that Respondents violated section § 7602(c)(2).
Even if Anderson had opposed Respondents’ other arguments
supporting the petition’s dismissal, however, the Court nevertheless
concludes that Respondents’ arguments are well-taken. Thus,
Respondents’ motion must be granted.
First, Anderson’s petition is untimely. Although a taxpayer has a
right to begin a proceeding to quash a summons, the taxpayer must file
it within 20 days after notice of the summons is given. 26 U.S.C. §
7609(b)(2). As Kallunki stated in her declaration, the IRS gave
Anderson notice of the summons by certified mail on November 14,
2012. ECF 10 at ¶ 5; 26 U.S.C. § 7609(a)(2) (notice by certified mail
complies with statute). Anderson verified receipt of the letter on
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November 19, 2012. ECF 10 at ¶ 5. A taxpayer must file a motion to
quash under section 7609 within 20 days of the mailing of the notice,
not within 20 days of receipt of the notice. Mollison v. U.S., 568 F.3d
1073, 1074, 1076 n.2 (9th Cir. 2009); Berman v. U.S., 264 F.3d 16, 19 (1st
Cir. 2001); Faber v. United States, 921 F.2d 1118, 1119 (10th Cir. 1990);
Stringer v. United States, 776 F.2d 274, 275 (11th Cir. 1985); 26 C.F.R. §
301.7609-4(b)(2) (2008) (proceeding to quash must be commenced “not
later than the 20th day following the day the notice of the summons
was ... mailed”).
Here, as noted, the IRS mailed notice of the summons on
November 14, 2012 – that is, more that 20 days before Anderson
initiated these proceedings on December 10, 2012. Thus, under the
foregoing authority, her petition is untimely and must be dismissed.
Second, even assuming Anderson had timely initiated these
proceedings, her petition must be dismissed for failure to state a claim
upon which relief can be granted. The Internal Revenue Code permits
the Commissioner of the IRS to make “inquiries, determinations, and
assessments of all taxes.” Stewart v. U.S., 511 F.3d 1251, 1254 (9th Cir.
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2008) (quoting 26 U.S.C. § 6201(a)). To that end, the Commissioner can
issue summonses “ordering that any person appear, produce
documents, or give testimony relevant to an IRS investigation.” Id.
(citing 26 U.S.C. § 7602(a)). “The Supreme Court has made clear that
this summons power must be construed broadly.” Id. (citing United
States v. Arthur Young & Co., 465 U.S. 805, 816–17 (1984)). The IRS
must comply, however, with the specific procedures outlined in 26
U.S.C. § 7609(a)(1)-(3) when it summons information relating to a
taxpayer’s records held by a third-party. Id.
As noted, a taxpayer may initiate proceedings to quash such a
summons. When the taxpayer does so,
the IRS must make a prima facie showing that the summons
was issued in good faith. Specifically, the IRS must
establish that the summons (1) was issued pursuant to a
‘legitimate purpose’; (2) seeks information ‘relevant’ to that
purpose; (3) seeks information that is ‘not already within the
Commissioner’s possession’; and (4) satisfies all
‘administrative steps required by the Code.’
Id. (quoting U.S. v. Powell, 379 U.S. at 57-58).4
Some courts note that the Powell requirements are triggered only
when the IRS moves or initiates an action to enforce the summons.
See, e.g., Peterson v. U.S., 2012 WL 682346, *2 (E.D. Pa. Mar. 2, 2012)
4
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The Ninth Circuit has emphasized that the government’s burden
under Powell “is ‘a slight one’ and typically is satisfied by the
introduction of a sworn declaration of the revenue agent who issued the
summons that the Powell requirements have been met.” Id. (quoting
Fortney v. U.S., 59 F.3d 117, 120 (9th Cir. 1995)).
When the government has established its prima facie case to
enforce the summons, “those opposing enforcement of a summons ...
bear the burden to disprove the actual existence of a valid civil tax
determination or collection purpose by the Service.... Without a doubt,
this burden is a heavy one.” Crystal v. U.S., 172 F.3d 1141, 1144 (9th
(“When the Government opposes a petition to quash but does not seek
to enforce compliance with the summons, the [G]overnment is not
required to establish a prima facie case. Rather, the burden shifts
immediately to the petitioner to establish a valid defense to the
summons.”) (internal quotation marks and citations omitted); Kahler v.
U.S., 1995 WL 776924, at *1 (D. Mont. Oct. 30, 1995) (citing DeLeeuw
v. IRS, 681 F.Supp. 402, 404 (E.D. Mich. 1987)). Otherwise, the burden
is upon the petitioner to establish a valid defense to the summons.
Peterson, 2012 WL 682346, *2 (citing cases). Here, although
Respondents have not moved to enforce the summons, the Court deems
it appropriate to address the Powell requirements below and, for the
reasons stated, concludes both that Anderson has failed to establish a
valid defense and that Respondents are entitled to dismissal of
Anderson’s motion to quash the summons.
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Cir. 1999) (quoting United States v. Jose, 131 F.3d 1325, 1328 (9th Cir.
1997)). Thus, “[t]he burden then shifts to the taxpayer to show an
abuse of process, e.g., that the summons was issued in bad faith for an
improper purpose,” Liberty Fin. Serv. v. United States, 778 F.2d 1390,
1392 (9th Cir. 1985), mindful that “[e]nforcement of a summons is
generally a summary proceeding to which a taxpayer has few defenses.”
United States v. Derr, 968 F.2d 943, 945 (9th Cir. 1992).
In the case at hand, Kallunki has introduced a declaration stating
that the IRS began the examination for a legitimate purpose: “[T]o
determine the correct federal income tax liabilities of Tana Anderson
for the tax years 2007, 2008, 2009, 2010, and 2011, for which Ms.
Anderson has failed to file federal income tax returns.” ECF 10 at ¶ 2.
Second, Kallunki declares that the material being sought is relevant to
that purpose: “The summoned bank account records may be relevant to
determine the taxpayer’s income during the years at issue, which are
under audit examination.” Id. at ¶ 6. Third, Kallunki declares that:
“None of the information requested is in the possession of the IRS.” Id.
Finally, Kallunki declares that in issuing the summons, the IRS
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complied with all administrative requirements. Id. at ¶¶ 3, 5, and 7
(stating that “[a]ll administrative steps required by the Internal
Revenue Code for issuance and service of the summons have been
followed.”). The Court concludes that Respondents have established a
prima facie case that the summons was issued in good faith based on
Kallunki’s declaration.
The Court further concludes for the reasons that follow that
Anderson has failed to meet her “heavy” burden of demonstrating that
Respondents did not issue the summons in good faith or in accordance
with the requisite administrative procedures. Thus, her petition must
be dismissed.
Respecting Anderson’s “first cause of action,” Kallunki’s
declaration makes clear that the IRS provided notice of the summons to
Anderson by sending her a copy by certified mail on November 14,
2012. ECF 10 at ¶ 5. Anderson acknowledged receipt of the notice on
November 19, 2012. Id. First Interstate Bank was required to comply
with the summons by December 14, 2012. ECF 10-1 at 9. Thus,
Anderson received notice more than 23 days before the date set in the
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summons for record production. Anderson’s claim of lack of timely
notice fails.
Respecting Anderson’s “second cause of action,” as noted above
Anderson concedes that Respondents complied with 26 U.S.C. §
7609(c)(1), which requires the IRS to provide the taxpayer with
reasonable notice that contacts with third-parties may be made. ECF
13 at 2. Also, to the extent Anderson claims that the IRS failed to
comply with 26 U.S.C. § 7609(c)(2) by not providing her with a list of all
third parties that the IRS contacted pursuant to its examination, the
Court is not persuaded. Respondents were under no obligation to notify
Anderson under 26 U.S.C. § 7609(c)(2) of its issuance of the First
Interstate Bank summons because Anderson already had such notice
under § 7609(a)(1) when Kallunki sent her a copy of the summons on
November 14, 2012. Williams v. U.S., 2013 WL 594898, at *3 (D. Or.
Jan. 23, 2013), adopted in full 2013 WL 594897 (D. Or. Feb. 14, 2013)
(citing Peterson v. U.S., 2012 WL 682346, at *4 (E.D. Pa. Mar. 2, 2012)
(quoting 26 C.F.R. § 301.7602–2(e)(3) (“A post-contact record under this
section need not be made, or provided to a taxpayer, for third-party
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contacts of which the taxpayer has already been given a similar record
pursuant to another statute, regulation, or administrative
procedure.”)). Anderson has failed to provide any evidence that the IRS
contacted any parties other than First Interstate Bank and Prairie
Mountain Bank, the third party involved in Anderson v. U.S. Internal
Revenue Service, et al., MC 12-04-GF-RKS (D. Mont. 2012). Anderson’s
claim of lack of notice of third party contact fails.
Respecting Anderson’s “third cause of action,” Kallunki declares
that there was no Justice Department referral, as defined by 26 U.S.C.
§ 7602(d)(2), respecting Anderson during the periods under
examination. ECF 10 at ¶ 8. Anderson has presented no evidence to
rebut this. Thus, Anderson’s claim that the IRS issued the summons
while a referral for criminal prosecution was pending with the Justice
Department fails.
Respecting Anderson’s “fourth cause of action,” her argument that
Respondents failed to meet the “good faith” requirement set forth in
Powell is unavailing. Her argument in this “cause of action” depends
on findings in her favor respecting the causes of action discussed above.
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As noted, her other “causes of action” fail and she has presented no
evidence that would give rise to an inference that Respondents failed to
meet Powell’s “good faith” requirement respecting the summons at
issue here. Thus, Anderson’s claim fails.
Respecting Anderson’s “fifth cause of action” – that Respondents
have caused or will cause the violation of her federal and state privacy
rights by having her records turned over to the IRS – the Court is not
persuaded. Anderson has not specified the “Privacy Laws” on which
she bases this claim. If she intended to assert a violation of the Right
to Financial Privacy Act, 12 U.S.C. §§ 3401 et seq., it expressly states
that “[n]othing in this chapter prohibits the disclosure of financial
records in accordance with procedures authorized by [the Internal
Revenue Code].” 12 U.S.C. § 3413(c). Also, the notice requirements in
26 U.S.C. § 7609(a), discussed herein, diminish any privacy concerns in
cases such as this one in which the IRS knows the individual being
investigated. See Tiffany Fine Arts, Inc. v. United States, 469 U.S. 310,
320 (1985). Thus, Anderson’s claim fails.
Finally, the Court concludes that Respondents’ remaining two
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arguments have merit. First, the US is the only proper respondent to a
petition to quash an IRS summons. Peterson, 2012 WL 682346, at *1,
n.1 (citing DeLeeuw v. I.R.S., 681 F.Supp. 402, 403-04 (E.D. Mich.
1987)); Oldham v. U.S., 2002 WL 1077311, at *1, n.1 (D. Or. Mar. 21,
2002) (citations omitted). Second, Anderson has provided no basis for
claiming damages under this case’s circumstances. Thus, any claim for
damages on the current record fails.
IV.
CONCLUSION
For the foregoing reasons, IT IS RECOMMENDED that
Respondents’ motion to dismiss (ECF 8) be GRANTED and that
Anderson’s petition to quash IRS third-party summons (ECF 1) be
DISMISSED.
NOW, THEREFORE, IT IS ORDERED that the Clerk shall
serve a copy of the Findings and Recommendations of United States
Magistrate Judge upon the parties. The parties are advised that
pursuant to 28 U.S.C. § 636, any objections to the findings and
recommendation must be filed with the Clerk of Court and copies
served on opposing counsel within fourteen (14) days after service
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hereof, or objection is waived.
DATED this 23rd day of April, 2013.
/s/ Carolyn S. Ostby
United States Magistrate Judge
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