Brown v. United States of America, et al

Filing 7

ORDER denying 1 Plaintiff's "Petition" to Quash IRS Summons. Signed by US Magistrate Judge William A. Webb on 6/20/2011. A copy of the Order was mailed to the pro se plaintiff to her address of record. (Sawyer, D.)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
NO. 5:11-CV-143-D
MICHELE BROWN,
Plaintiff,
v.
UNITED STATES OF AMERICA, et al.
Defendant.

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ORDER

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This Cause comes before the Court upon pro se Plaintiff’s “Petition to Quash I.R.S.
Summons.” [DE-1]. Defendant has responded [DE-4], Plaintiff has replied [DE-5], and the
matter is accordingly ripe for adjudication. For the reasons stated herein, the petition to quash is
denied.
I.

Background

Janice Clark (“Agent Clark”), a revenue agent with the Internal Revenue Service (“IRS”), is
conducting a civil investigation into whether Plaintiff owes federal income taxes for the years
2006 through 2009. [DE-4-1]. In furtherance of her investigation, Agent Clark issued IRS
summonses to Bank of America, Equifax, Chex Systems, Inc., First Bank, Branch Banking &
Trust Co. (“BB&T”), and Atlantic Savings & Loan, directing these entities to produce
documents for examination and to designate witnesses to appear before the IRS on various dates
in April 2011 to provide certain testimony.

[DE-4-2-6].

None of the summoned entities

appeared on their designated dates to provide testimony. Equifax, Chex Systems, and First Bank
produced some documents in response. Bank of America, BB&T, and Atlantic Savings & Loan

have not produced any documents in response to the summonses. [DE-4-1]. On March 25,
2011, Plaintiff filed the instant petition to quash the summonses issued by the IRS.
II.

Legal Background

The IRS has broad authority to gather information in the course of conducting tax
investigations. United States v. Arthur Young & Co., 465 U.S. 805, 816 (1984). The IRS may
begin investigating a taxpayer on the mere suspicion that he is violating the revenue laws.
United States v. Powell, 379 U.S. 48, 53-56 (1964). Under 26 U.S.C. § 7602, the IRS may issue
administrative summonses to any person or for any document that may be relevant to a tax
investigation. The authority to issue administrative summonses includes the authority to issue
summonses to third-party record-keepers, such as banks and financial institutions. 26 U.S.C. §§
7602, 7603(b), 7609; Spell v. United States, 907 F.2d 36, 38 (4th Cir. 1990).
The taxpayer may file a petition to quash the summons. 1 26 U.S.C. § 7609(b)(2). When a
taxpayer or other interested party challenges enforcement of an IRS summons, the initial burden
rests with the government to establish a prima facie showing of good faith in issuing the
summons, requiring proof that the IRS has satisfied the following four elements:

(1) the

investigation is being conducted for a legitimate purpose; (2) the inquiry is relevant to that
purpose; (3) the information sought is not already in the possession of the IRS; and (4) the
administrative steps required by the Internal Revenue Code have been followed. See Conner v.
United States, 434 F.3d 676, 680 (4th Cir. 2006) (citing Powell, 379 U.S. at 57-58). “The burden
on the government to produce a prima facie showing of good faith in issuing the summons is
1

Congress has waived sovereign immunity and consented to petitions to quash summonses, but
the only proper respondent in such actions is the United States. Provenza v. Rinaudo, 586 F.
Supp. 1113, 1117 (D. Md. 1984). Therefore, the Court dismisses the petition as against the IRS
and Agent Clark and addresses the petition as against the United States only.

‘slight or minimal.’” Id. (quoting Mazurek v. United States, 271 F.3d 226, 230 (5th Cir. 2001).
To satisfy its burden, “the government need only present ‘an affidavit of an agent involved in the
investigation averring the Powell good faith elements’ in order to establish a prima facie case for
enforcement of a civil summons.” Id. (quoting Alphin v. United States, 809 F.2d 236, 238 (4th
Cir. 1987)).
“Once the IRS has made such a showing . . . it is entitled to an
enforcement order unless the taxpayer can show that the IRS is attempting to
abuse 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. The taxpayer carries the burden
of proving an abuse of the court’s process.”

Id. (quoting United States v. Stuart, 489 U.S. 353, 360 (1989)).
The IRS’s “‘summons power should . . . be liberally construed in light of the purposes it
serves.’” Uhrig v. United States, 592 F. Supp. 349, 352 (4th Cir. 1984) (quoting Godwin v.
United States, 564 F. Supp. 1209, 1212 (D. Del. 1983)). As noted above, the IRS possesses the
“power of inquisition” to investigate possible unpaid tax liabilities, and its inquisitory powers
need not be supported by probable cause that wrongdoing has occurred. Powell, 379 U.S. at 57;
see also United States v. Bisceglia, 420 U.S. 141, 146 (1975) (“The purpose of the [summons]
statutes is not to accuse, but to inquire.”). Although a court will not enforce a summons that
appears to be a groundless fishing expedition through taxpayer records, the IRS need only
convince the court that it “has a ‘realistic expectation rather than an idle hope that something
may be discovered.’” United States v. Richards, 631 F.2d 341, 345 (4th Cir. 1980) (quoting
United States v. Harrington, 388 F.2d 520, 524 (2d Cir. 1968)). “This standard generally will be
satisfied where the summons pertains to ‘a legitimate investigation of an ascertainable target.’”
United States v. O’Shea, 662 F. Supp. 2d 535, 541 (S.D. W. Va. 2009) (quoting Tiffany Fine

Arts, Inc. v. United States, 469 U.S. 310, 320 (1985)). “Provided that the four good faith
elements are satisfied, no greater justification is required.” Id.
In marked contrast to the burden placed on the government, the taxpayer bears a heavy
burden to prove an abuse of process. See Alphin, 809 F.2d at 238. The taxpayer can establish
that an abuse of process has occurred by disproving one or more of the four good faith elements
averred by the government. United States v. McHenry, 552 F. Supp. 2d 571, 574 (E.D. Va.
2008). Notwithstanding the government’s good faith, a taxpayer also may successfully resist an
IRS summons by raising and proving a valid affirmative defense. See Alphin, 809 F.2d at 238.
III.

Analysis

Here, Defendant has satisfied its burden of a prima facie showing of good faith in issuing the
summons by producing a declaration from Agent Clark that meets the requirements of the Powell
analysis. Under the first prong, the United States must demonstrate that the agent issued the
summonses for a proper purpose. Powell, 379 U.S. at 57-58. Proper purposes include verifying
the correctness of the taxpayer’s tax return, determining the taxpayer’s liabilities, preparing tax
returns if the taxpayer did not file them where he is required to by law, and locating assets to
satisfy an unpaid tax liability. Spell, 907 F.2d at 37-38. Agent Clark’s affidavit states that the
purpose of the instant investigation is to determine “whether [Plaintiff] was required to file
federal income tax returns for the years 2006, 2007, 2008, and 2009 and whether she owes
federal income taxes for these same periods.” [DE-4-1]. This is a proper purpose that meets the
first requirement of Powell.
Under the second prong of the Powell analysis, the United States must demonstrate that the
summoned records may be relevant to the investigation. Powell, 379 U.S. at 57-58. Here, the
requested records include bank statements, credit reports, and cancelled checks for the years

2006 through 2009. These records may show the sources and amount of income that Plaintiff
received during those years and may also show her knowledge of financial activity.
Accordingly, the summoned records are relevant to Agent Clark’s investigation.
Defendant has also satisfied the third step of the Powell analysis, because Agent Clark’s
declaration establishes that the IRS does not have the requested records. The affidavit of the
issuing agent is sufficient to establish that the IRS does not possess the requested documents.
Conner, 434 F.3d at 681.
Finally, Agent Clark’s declaration establishes that she followed the required administrative
steps. Powell, 379 U.S. at 57-58. The affidavit demonstrates that Agent Clark is authorized to
issue summonses and that she served an attested copy on each bank by certified mail pursuant to
26 U.S.C. §§ 7602, 7603(b), and 7609. Thus, Defendant has established a prima facie case for
enforcement of the summonses.

The burden therefore shifts to Plaintiff to show that

enforcement constitutes an abuse of process by disproving one or more of the four good faith
elements averred by the government. Conner, 434 F.3d at 680. Plaintiff may also raise and
prove a valid affirmative defense. Alphin, 809 F.2d at 238.
Plaintiff argues that the IRS summonses should be quashed because Agent Clark lacks
authority to issue the summonses under 26 U.S.C. § 7608. Section 7608 defines the authority of
internal revenue enforcement officers in criminal matters. The instant case is civil, however, and
26 U.S.C. § 7608 therefore has no bearing here.

Accordingly, Plaintiff’s argument is

unpersuasive. Plaintiff further maintains that Defendant “is conducting an unauthorized fishing
expedition.” [DE-5, p.6]. But as explained supra, Agent Clark’s affidavit establishes that the
summonses were issued for a proper purpose, and Plaintiff’s mere assertion of a fishing
expedition does not satisfy her “heavy burden” of refuting Defendant’s prima facie case. Alphin,

809 F.2d at 238. Plaintiff fails to demonstrate that enforcement of the summonses would be an
abuse of court process. Nor has she offered an affirmative defense. Her petition to quash the
IRS summonses is therefore without merit.
IV.

Conclusion

For the foregoing reasons, Plaintiff’s “Petition to Quash I.R.S. Summons” [DE-1] is
DENIED.

Further, Plaintiff’s petition as against defendants Janice Clark and the IRS is

DISMISSED, because they are improper parties to this action.
DONE AND ORDERED in Chambers at Raleigh, North Carolina this 20th of June, 2011.

_______________________________
WILLIAM A. WEBB
UNITED STATES MAGISTRATE JUDGE