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Tuka v. United States

March 9, 2009

THOMAS D. TUKA, PETITIONER,
v.
UNITED STATES OF AMERICA, INTERNAL REVENUE SERVICE, AND MATTHEW P. DAVEY, SPECIAL AGENT, IRS, RESPONDENTS.



The opinion of the court was delivered by: Ambrose, Chief District Judge

OPINION

I. Background

Pro Se Petitioner, Thomas D. Tuka, filed Petition to Quash Internal Revenue Service Third Party Summons pursuant to 26 U.S.C. §7609(b)(2) wherein he sought to quash a third party administrative summons dated July 2, 2008, issued by the Internal Revenue Service ("IRS") to Citizens Bank. (Docket No. 1). In response, Respondents filed a Motion to Dismiss or Summarily Deny Petition to Quash Third-Party Summons and for Enforcement of Summons arguing, inter alia, that the Petition should be dismissed for lack of jurisdiction. (Docket No. 2, pp. 11-12). I granted Respondents' Motion to Dismiss (Docket No. 2), without prejudice.*fn1 (Docket No. 6). Petitioner was ordered to obtain the proper summons and serve it in accordance with Rule 4, which, according to Respondents, he did. (Docket No. 7-2, p. 1).

On December 23, 2008, Respondents filed another Motion to Dismiss or Summarily Deny Petition to Quash Third-Party Summons and for Enforcement of Summons. (Docket No. 7). Pro Se Petitioner was ordered to respond to the Motion to Dismiss by January 23, 2009. Pro Se Petitioner did not file a response to the Motion as ordered.

However, on February 2, 2009, Pro Se Petitioner, without leave of court, filed an Amended Petition to Quash IRS Third Party Summonses adding to his Petition another third party administrative summons dated January 21, 2009, issued by the Internal Revenue Service (IRS) to Parkvale Savings Bank. (Docket No. 8). Thereafter, on February 5, 2009, Petitioner filed a Motion for Leave to Amend his original Petition to Quash. (Docket No. 9). He also filed, albeit late, a Motion for Extension of Time to file his response to the Motion to Dismiss. (Docket No. 10). I granted the Motion for Extension of Time and ordered that Petitioner respond to the Motion to Dismiss by February 27, 2008. (Docket No. 18).

To date, however, Petitioner has not filed a response to the Motion to Dismiss (Docket No. 7), nor has he requested a further extension. The arguments within the Motion to Dismiss (Docket No. 7) are virtually the same arguments contained within the initial Motion to Dismiss (Docket No. 2).*fn2 Petitioner responded to the initial Motion to Dismiss. (Docket No. 4-2). Therefore, I will consider Petitioner's Brief in Opposition to the initial Motion to Dismiss in ruling upon Respondents' Motion to Dismiss at Docket No. 7. As a result, the original Petition to Quash (Docket No. 1), the Motions to Dismiss the Petition to Quash (Docket Nos. 2 and 7), and the Motion for Leave to Amend Petition to Quash (Docket No. 9) are ripe for review.

II. Petition to Quash and Motions to Dismiss

The IRS has the authority to issue an administrative summons to banks and financial institutions to gather information related to a tax investigation. 26 U.S.C. §§7602(a)-(c), 7603(b). The taxpayer, in this case Petitioner, has the right to file a petition to quash the summons. 26 U.S.C. §7609(b)(2). "In any such proceeding, the Secretary may seek to compel compliance with the summons." Id. To succeed in having the summons enforced, the IRS must show good faith by demonstrating: 1) "the investigation will be conducted pursuant to a legitimate purpose;" 2) "the inquiry may be relevant to the purpose" of the investigation; 3) "the information sought is not already within the Commissioner's possession;" and 4) the proper administrative procedure has been followed. United States v. Powell, 379 U.S. 48, 57-58 (1962); Conner v. United States, 434 F.3d 676, 680 (4th Cir. 2006); Alphin v. United States, 809 F.2d 236, 238 (4th Cir. 1987). The IRS's burden at this juncture is "slight or minimal." Conner, 434 F.3d at 680. The IRS can meet this burden via "an affidavit of an agent involved in the investigation averring the Powell good faith elements." Id.; Alphin, 809 F.2d at 238. Then, the burden shifts back "to the party challenging the summons to show that enforcement would be an abuse of the court's process." Alphin, 809 F.2d at 238; Conner, 434 F.3d at 680. This is a "heavy burden." Alphin, 809 F.2d at 238.

A. Summon Issued for a Proper Purpose

The IRS may summon records and testimony "[f]or 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 the liability at law or in equity of any transferee or fiduciary of any person in respect of any internal revenue tax, or collecting any such liability..." 26 U.S.C. §7602(a). The IRS may also issue a summons for "the purpose of inquiring into any offense connected with the administration or enforcement of the internal revenue laws." 26 U.S.C. §7602(b). In this case, Special Agent Matthew Davey's ("Agent Davey") declaration establishes that the purposes of the investigation are "to determine Mr. Tuka's correct tax liabilities; to prepare federal income tax returns for Mr. Tuka, if the filings of such returns are required by law; and to ascertain whether Mr. Tuka has committed any offense connected with the administration or enforcement of the internal revenue laws." (Docket No. 7-3, ¶3). Contrary to Petitioner's assertion, this declaration is sufficient to satisfy the first element, that the summons was issued for a proper purpose. Conner, 434 F.3d at 680.

B. Relevancy of the Records

The second element of the Powell test is whether the summoned record and/or testimony is relevant to the investigation. Powell, 379 U.S. at 57. In this case, Agent Davey states that the records sought "may establish the source and amount of income received by Thomas D. Tuka during the years 2003-2006. These financial account records may also reveal control of the accounts and/or knowledge of financial activity by Thomas D. Tuka which may establish civil and/or criminal liability." (Docket No. 7-3, ¶5). This declaration is sufficient to satisfy the second element.

C. Possession of the Information

The third element of the Powell test is whether "the information sought is not already within the Commissioner's possession." Powell, 379 U.S. at 58. Agent Davey's declaration states that the IRS is not in the possession of "[t]he books, papers, records, or other data sought by the summons." (Docket No. 7-3, ΒΆ10). Specifically, with regard to the Form 1099, Agent Davey acknowledges that the IRS can electronically generate an "IRP Report" that shows information contained on the Form 1099; however, the IRS does not have the actual Form 1099s. Moreover, according to Agent Davey, the Form 1099 is "sufficiently different in format from the electronic information as ...


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