United States District Court, W.D. Pennsylvania
December 2, 2005.
WILLIAM R. JOHNSON, Petitioner,
UNITED STATES OF AMERICA and INTERNAL REVENUE SERVICE, Respondents.
The opinion of the court was delivered by: SEAN McLAUGHLIN, District Judge
On September 30, 2005, Internal Revenue Service ("IRS") Agent
Donna Lavelle, issued an administrative summons to Northwest
Savings Bank, in Warren, Pennsylvania, for records of accounts in
the names of the William R. Johnson, Capital Consultants, Inc.,
Capital Consultants Company, Westland Equities and Pristine
Management Group. See Petition Ex. 1. On October 19, 2005,
Petitioner, William R. Johnson, filed a Petition pursuant to
26 U.S.C. § 7609(b) seeking to quash the summons. Respondents, the
United States of America and the IRS, move to dismiss the
Petition for failure to state a claim.
The IRS has been granted the authority to issue an IRS
administrative summons for the purpose of ascertaining the
correctness of any return, making a return where none has been
made, determining the liability of any person for any internal
revenue tax or collecting any such liability.
26 U.S.C. § 7602(a). In order to accomplish this purpose, the IRS may summon
third party record keepers to appear and produce documents as may
be relevant or material to such inquiry. 26 U.S.C. § 7602(a)(2).
Pursuant to § 7609(b), a taxpayer may bring an action in federal
court to quash an IRS summons issued to a third party record
Ordinarily, when a taxpayer moves to quash a third party
summons, the government moves simultaneously to enforce
compliance with the summons. 26 U.S.C. § 7609(b)(2)(A). In order
to establish a prima facie case for enforcement, the government
must show: (1) the summons was issued for a legitimate purpose;
(2) the inquiry may be relevant for that purpose; (3) the
information sought is not already within the government's
possession; and (4) the administrative steps required by the IRS
for issuance and service of the summons have been followed. See United States v. Powell, 379 U.S. 48, 57-58
(1964). Once the government establishes a prima facie case, the
petitioner must show sufficient facts to establish a defense to
the summons. Cosme v. Internal Revenue Service,
708 F. Supp. 45, 48 (E.D.N.Y. 1989).
However, the government is not required to move to enforce the
summons. Instead, the government may move to dismiss the petition
to quash and rely on third party compliance with the summons.
Hogan v. United States, 873 F. Supp. 80, 82 (S.D.Ohio 1994);
Cosme, 708 F. Supp. at 48; Jungles v. United States,
634 F. Supp. 585, 586 (N.D.Ill. 1986); Domestic Executive Leasing
Services, LLC. v. United States 2005 WL 1155161 at *1-2 (D.Nev.
2005). When the government moves to dismiss the petition, such a
motion "mirrors a 12(b)(6) motion to dismiss for failure to state
a claim." Cosme, 708 F. Supp. at 48. Therefore, the government
is not required to establish a prima facie case as set forth in
United States v. Powell, 379 U.S. 48, 57-58 (1964). Knauss v.
United States, 28 F. Supp. 2d 1252, 1254 (S.D.Fla. 1998).
Rather, "the burden shifts immediately to the petitioner to
establish a valid defense to the summons." Wilde v. United
States, 385 F. Supp. 2d 966, 968 (D.Az. 2005) (quoting Cosme,
708 F. Supp. at 48); Knauss, 28 F. Supp. 2d at 1254. We
therefore examine Petitioner's Petition pursuant to the standard
set forth in Rule 12(b)(6) of the Federal Rules of Civil
For the purposes of a motion to dismiss for failure to state a
claim upon which relief can be granted under Rule 12(b)(6), this
Court accepts as true all well-pleaded factual allegations in the
complaint, and construes the complaint in a light most favorable
to the plaintiff and determines whether "under any reasonable
reading of the pleadings, the plaintiff may be entitled to
relief." Colburn v. Upper Darby Township, 838 F. 2d 663, 665-66
(3rd Cir. 1988), cert. denied, 489 U.S. 1065 (1989)
(citations omitted). The court, however, need not accept as true
legal conclusions or unwarranted factual inferences. Conley v.
Gibson, 355 U.S. 41, 45-46 (1957). The proper inquiry is
"whether relief could be granted . . . `under any set of facts
that could be proved consistent with the allegations.'" Gasoline
Sales, Inc. v. Aero Oil Co., 39 F.3d 70, 71 (3rd Cir. 1994)
(quoting National Organization for Women, Inc. v. Scheidler,
510 U.S. 249, 256 (1994)). If no cause of action can be
identified, dismissal is proper.
Petitioner raises several arguments in support of his request
that the summons be quashed. He first contends that the summons
is overbroad and infringes upon his constitutional rights. We disagree. Section 7602(a) grants the IRS broad and
expansive authority to gather information when conducting tax
investigations. United States v. Bisceglia, 420 U.S. 141, 149
(1975). In light of this broad statutory authority to
investigate, we are of the opinion that the material being sought
is potentially relevant to Petitioner's tax liabilities.
Moreover, we reject Petitioner's suggestion that the agent be
required to "submit an affidavit to support a position of the
substantial existence of probable cause." See Petition p. 4.
The IRS's power to investigate is not limited to situations where
there is probable cause. Bisceglia, 420 U.S. at 145; Powell,
379 U.S. at 50 (the government need make no showing of probable
cause to suspect fraud).
Finally, the Supreme Court has rejected Fourth Amendment and/or
Fifth Amendment challenges to summons' issued to third parties.
In United States v. Miller, 425 U.S. 435 (1976), the respondent
argued that a subpoena served on his bank was the equivalent of a
search and seizure of his `private papers' and therefore violated
the Fourth Amendment. Id. at 442. The Court rejected this
position, finding that there was no legitimate expectation of
privacy concerning information kept in bank records. Id.
Consequently, no Fourth Amendment rights of the depositor were
implicated by the issuance of a summons to a third party to
obtain records of the depositor. Id. at 444. Likewise, in
Fisher v. United States, 425 U.S. 391, 408 (1976), the Court
held that a summons served on a third party record keeper to
produce papers prepared in connection with its business
transactions with a taxpayer under investigation did not rise to
the level of testimony within the protection of the Fifth
Petitioner next argues that the summons is defective since
neither the signature of the agent nor her manager "attests that
the document was made under penalties of perjury." See Petition
p. 4. He claims that pursuant to § 26 U.S.C. § 6065 such
attestation is required. This section, entitled "Verification of
returns", states, in relevant part: "any return, declaration,
statement or other document required to be made under any
provision of the internal revenue laws or regulations shall
contain or be verified by a written declaration that it is made
under the penalties of perjury." 26 U.S.C. § 6065. Petitioner
suggests that the term "other document" includes a summons issued
by the IRS.
The statute only requires taxpayers filing tax returns or other
documents to do so under penalty of perjury. Vaira v.
Commissioner of Internal Revenue, 444 F.2d 770, 777 (3rd
Cir. 1971). It does not apply to notices issued by the IRS. Kaetz v.
Internal Revenue Service, 2002 WL 1772623 at *2 (M.D.Pa. 2002);
Cermak v. United States, 116 F.3d 1482, 1997 WL 312261 at *2
(7th Cir. 1997) (unreported) ("The phrase `required to be
made' limits the applicability of § 6065 to documents that must
be filed with the IRS, and not documents issued by the IRS.");
Nordbrock v. United States, 173 F. Supp. 2d 959, 968 (D.Az.
2001) (§ 6065 applies to verifying tax returns); Morelli v.
Alexander, 920 F. Supp. 556, 558 (S.D.N.Y. 1996) (provision does
not apply to notices issued by IRS agents). We therefore find no
merit to this argument.
Finally, Petitioner claims that the summons did not comply with
the provisions of the Right to Financial Privacy Act,
12 U.S.C. §§ 3401-22. However, the terms of the Act (which Petitioner
concedes), states that "[n]othing in this chapter prohibits the
disclosure of financial records in accordance with procedures
authorized by Title 26." 26 U.S.C. § 3412(c). Petitioner contends
that because the IRS failed to comply with the verification
requirement set forth in 26 U.S.C. § 6065, the summons was not
made in accordance with the proper procedures. Since we have
rejected Petitioner's challenge with respect to the verification
requirement, this argument provides Petitioner no relief.
In summary, Petitioner has failed to establish a valid defense
to the summons. Accordingly, we shall grant the Respondent's
motion to dismiss, and deny Petitioner's Petition to Quash. An
appropriate Order follows. ORDER
AND NOW, this 2nd day of December, 2005, and for the
reasons set forth in the accompanying Memorandum Opinion,
IT IS HEREBY ORDERED that Respondents' Motion to Dismiss
Petition to Quash Summons [Doc. No. 4] is GRANTED. IT IS FURTHER
ORDERED that Petitioner's Petition to Quash Internal Revenue
Service Third Party Summons [Doc. No. 1] is DENIED, and the
action is DISMISSED with prejudice. The clerk is directed to mark
the case closed.
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