A question of IRS summonses.
They are valid and must stand.
Dennis brings this action under the Internal Revenue Code,
26 U.S.C. § 7609(b)(2)(A), to quash six Internal Revenue Service
("IRS" or "Service") summonses issued during an investigation of his
federal income tax liabilities for the calendar years 1981, 1982, and
After the Government moved to dismiss, Dennis demanded discovery by way
of interrogatories and requests to produce. Following his motion to
compel responses, the Government sought a protective order. Dennis
— who appears pro se — then filed a memorandum setting forth
his positions both on discovery and the merits. Argument ensued before
U.S. Magistrate Charles H. Evans, who ruled in favor of the Government on
the discovery matters.
The Magistrate also recommended that the district court allow the
motion to dismiss. His able recommendations are hereby adopted and the
Government's motion to dismiss is consequently allowed. Before launching
into our analysis, a short review of the facts is in order.
Bernard Coleman is a duly commissioned special agent of the Service's
Criminal Investigation Division, with a post of duty in Springfield,
Illinois. In his capacity as a special agent, Coleman investigated
Dennis' federal tax liabilities for the taxable years 1981, 1982, and
Pursuant to the investigation, and in accordance with
26 U.S.C. § 7602, between the dates of April 9 and July 30, 1985,
inclusive, the IRS issued a summons to Millikin National Bank, Decatur,
Illinois; First Federal Savings and Loan Association, Tuscola, Illinois;
Credit Bureau of Decatur, Inc.; Monroe Savings Bank of Rochester, New
York; Illinois Bell Telephone Company, Chicago, Illinois; and
Teleconnect, Cedar Rapids, Iowa. Each summons directed the named to
appear before him (or another designated officer of the Service) on a
specified date to testify and produce for examination the books, papers,
records and other data set forth in the document. Dennis timely filed an
amended petition seeking to quash the summonses.
In that petition, Dennis contends the Internal Revenue Service is
guilty of "institutional bad faith" by identifying him as a tax protestor
and by conducting an investigation to determine his correct federal tax
liabilities and ascertain whether he committed any evasive acts in
violation of the Code. Moreover, he asserts the summonses issued to the
banks and credit bureau are unreasonable in that they are "overly broad
and vague and constitute a "fishing expedition'." Dennis also maintains
the summonses to Illinois Bell and Teleconnect are neither relevant nor
necessary and infringe upon his First Amendment rights under the Privacy
Act. Continuing into
Part VII of his petition, Dennis alleges that "he is being deprived of
the right to an impartial grand jury." Part VIII states that he is not a
person subject to the authority of § 7602 of the Internal Revenue
Code. Finally, in Part IX he insists that the use of the summons is a
"form of fraud and deceptive practices of falsely labeling and calling a
subpoena duces tecum a "summons.'" These contentions lead him to the
erroneous conclusion that the Court should not enforce the summonses.
The Government moves to dismiss the action for failure to state a claim
upon which the Court may grant relief. Fed.R. Civ.P. 12(b)(6).
Additionally, the Government maintains the district court is without
jursidiction to quash three out-of-district summonses since the United
States has not waived its sovereign immunity with respect to an action
seeking to quash summonses issued to out-of-district entities.*fn1
Agent Coleman derives his power from § 7601(a) of Title 26. That
provision directs the Secretary of the Treasury (or his delegate) to make
inquiries into the tax liability of every person who may be liable to pay
any Internal Revenue tax. To aid in an investigation, § 7602(a) and
(b) authorize the examination of records, issuance of summonses, and
taking of testimony for the purposes of: (1) "ascertaining the
correctness of any return," (2) "making a return where none has been
made," (3) "determining the liability of any person for any internal
revenue tax," and/or (4) "inquiring into any offense connected with the
administration or enforcement of the internal revenue laws." United
States v. Euge, 444 U.S. 707, 710-11, 100 S.Ct. 874, 877-78, 63 L.Ed.2d
141 (1979); United States v. LaSalle Nat'l Bank, 437 U.S. 298, 308, 98
S.Ct. 2357, 2363, 57 L.Ed.2d 221 (1978); United States v. Particle Data,
lnc., 634 F. Supp. 272, 276-77 (N.D.Ill. 1986).
In seeking to quash the summonses in question, Dennis attempts to take
advantage of § 7609(b)(2)(A), a provision which expressly waives the
sovereign immunity of the United States. It permits the taxpayer (or
other person entitled under § 7609(a)(1) to notice of a summons),
upon complying with the conditions of the waiver, to commence a proceeding
against the United States to quash an IRS summons:
Notwithstanding any other law or rule of law, any
person who is entitled to notice of a summons under
subsection (a) shall have the right to begin a
proceeding to quash such summons not later than the
20th day after the day such notice is given in the
manner provided in subsection (a)(2). . . .
See Stringer v. United States, 776 F.2d 274, 275 (11th Cir. 1985);
Abraham v. United States, 582 F. Supp. 257 (S.D.N.Y.), aff'd per curiam,
740 F.2d 2 (2d Cir. 1984); Riggs v. United States, 575 F. Supp. 738, 741
Nevertheless, Dennis' cause must fail. We initially conclude that this
Court is without subject-matter jurisdiction to render an adjudication
concerning the summonses issued to Monroe Savings Bank, Illinois Bell,
and Teleconnect. Section 7609(h)(1) limits our exercise of jurisdiction:
"The United States district court for the district within which the
person to be summoned resides or is found shall have jurisdiction to hear
and determine any proceeding brought under subsection (b)(2), (f), or
(g)." 26 U.S.C. § 7609 (h)(1). See, e.g., Deal v. United States,
759 F.2d 442 (5th Cir. 1985); Masat v. United States, 745 F.2d 985 (5th
Cir. 1984); Jungles v. United States, 634 F. Supp. 585, 586 (N.D.Ill.
1986). Because the aforementioned businesses neither reside in nor are
found in the Central District of Illinois, this Court is without power to
quash the summons issued to those businesses.
Aside from the jurisdictional issue, Dennis' substantive claims are
without merit. Initially, his "criminal purpose" defense is frivolous.
Although no summons may issue requesting information about a person that
has been referred to the Justice Department for criminal investigation,
Dennis has not proved, or even alleged, the existence of such a referral
as described in § 7602(c) of the Code with respect to any of the
subject taxable years. United States v. Kis, 658 F.2d 526, 537-37 (7th
Cir. 1981); Kerr v. United States, 801 F.2d 1162, 1164 (9th Cir. 1986);
Pickel v. United States, 746 F.2d 176, 183-84 (3d Cir. 1984).
Moreover, Dennis' claim that production of the summoned documents would
violate his Fourth and Fifth Amendments rights does not withstand
scrutiny. First, the Fifth Amendment privilege against compelled
self-incriminating testimony normally may only be asserted by the
taxpayer himself. It is therefore inapplicable with regard to materials
in the possession of third-party recordkeepers as defined by §
7609(a)(3). Fisher v. United States, 425 U.S. 391, 96 S.Ct. 1569, 48
L.Ed.2d 39 (1976); Couch v. United States, 409 U.S. 322, 93 S.Ct. 611, 34
L.Ed.2d 548 (1973); United States v. Weingarden, 473 F.2d 454, 458, n. 4
(6th Cir. 1973). Compare, United States v. Schlansky, 709 F.2d 1079, 1082
(6th Cir. 1983), cert. denied 465 U.S. 1099, 104 S.Ct. 1591, 80 L.Ed.2d
123 (1984). Furthermore, even if a third-party recordkeeper could assert
a taxpayer's Fifth Amendment rights, the "taxpayer cannot avoid
compliance with the subpoena merely by asserting that the item of
evidence which he is required to produce contains incriminatory writing
. . ." Fisher, 425 U.S. at 410, n. 11, 96 S.Ct. at 1580, n. 11. See also
United State& v. Porter, 711 F.2d 1397, 1400 (7th Cir. 1983). Likewise,
Dennis' rights under the Fourth Amendment are not implicated by the
compelled production since he has no legitimate expectation of privacy in
the contents of documents he knows must be disclosed in his tax returns.
United States v. Miller, 425 U.S. 435, 96 S.Ct. 1619, 48 L.Ed.2d 71
(1976); Couch, 409 U.S. at 322, 93 S.Ct. at 611, 34 L.Ed.2d at 548;
Weingarden, 473 F.2d at 458, n. 4.
Dennis has next failed to demonstrate specifically how his
associational and expression rights claimed under the First Amendment are
chilled by the IRS investigation of his income tax liabilities or by the
disclosure of the summoned information. Similarly, he has not submitted
— by affidavit or otherwise — any evidence of his harassment
by the Government, although such showings are the minimum necessary in
order to establish a prima facie case of infringement of First Amendment
rights. United States v. Freedom Church, 613 F.2d 316, 320 (1st Cir.
1979); O'Neal v. United States, 601 F. Supp. 874, 879-80 (N.D.Ind.
1985); Holderbaum v. United States, 589 F. Supp. 107, 112 (D.Colo.
1984); Voss v. United States, 573 F. Supp. 957, 960-61 (D.Colo. 1983).
His First Amendment defense therefore falls short of the mark.
Moving to Dennis' assertion that the summonses are overbroad and seek
irrelevant data, it is clear that this contention simply cannot be
sustained. The summonses call for the production of data relating to
Petitioner's in-state and out-of-state transactions. Such data is
potentially relevant to the determination of his correct tax liabilities:
Moreover, the Service is not required to make a particularized showing of
relevance, and the district court may not substitute its or the
taxpayer's judgment for that of the Service in determining what may be
relevant. United States v. Arthur Young & Co., 465 U.S. 805, 814, 104
S.Ct. 1495, 1501, 79 L.Ed.2d 826 (1984); Tiffany Fine Arts, lnc. v.
United States, 469 U.S. 310, 323, 105 S.Ct. 725, 733, 83 L.Ed.2d 678
(1985). Nor does the summons power given to the IRS pursuant to §
7602 infringe upon the role of the grand jury or deprive the Petitioner
of his Fifth Amendment right to indictment by a grand jury. United States
v. DeGrosa, 405 F.2d 926, 929 (3d Cir.), cert. denied sub nom Zudick v.
United States, 394 U.S. 973, 89 S.Ct. 1465, 22 L.Ed.2d 753 (1969);
Mauroni v. United States, 84-2 U.S.T.C., ¶ 9705 (N.D.Cal. 1984)
[Available on WESTLAW — DCT database]. Dennis' challenge to the
summonses' breadth is without merit.
Yet another argument is Dennis' incredible (but not unique) theory that
he is not a taxpayer; and therefore, the IRS has no "jurisdiction" to
issue the summonses which he seeks to quash. This specious assertion,
though denominated as a "jurisdictional" argument, is truly a challenge
to the statutory authority of the IRS and has been consistently
rejected. The reasoning upon which it depends is circular, and the
conclusion fallacious.*fn2 Ponsford v. United States, 771 F.2d 1305,
1307 (9th Cir. 1985); United States v. McAnlis, 721 F.2d 334, 336 (11th
Cir. 1983), cert. denied, 467 U.S. 1227, 104 S.Ct. 2681, 81 L.Ed.2d 877
(1984); Uhrig v. United States, 592 F. Supp. 349, 353 (D.Md. 1984);
Reed, v. United States, 592 F. Supp. 200 at 203; Cienkus v. United
States, 57 AFTR 2d 86-882 (N.D.Ill. 1985) [Available on WESTLAW —
Finally, the Privacy Act, 5 U.S.C. § 552a, does not require
compliance with its terms as a prerequisite to the valid issuance,
service, or subsequent judicial enforcement of an IRS summons. Contrary
to Dennis' assertions, that law does not contain any provision which
allows either the quashing or denial of enforcement of a summons as a
remedy for any alleged failure to maintain secrecy. McAnlis, 721 F.2d at
337; Uhrig, 592 F. Supp. at 353; McTaggert v. United States,
570 F. Supp. 547, 550 (E.D.Mich. 1983); United States v. Will,
475 F. Supp. 492, 494 (M.D.Fla. 1979).
In sum, the petition in this case utterly fails to state a claim upon
which the district court may grant relief. It raises absolutely no valid
claim or defense to support quashing the summonses. Under such
circumstances, a proceeding to quash, like any other civil action, should
be dismissed. Fed.R.Civ.P. 12 (bX6); Jungles, 634 F. Supp. at 586;
O'Neal, 601 F. Supp. at 877 n. 1; Sloan v. United States,
621 F. Supp. 1072, 1073-74 (N.D.Ind. 1985), aff'd in part, dismissed in
part, 812 F.2d 1410 (1987); Maikranz v. United States, 612 F. Supp. 590,
592 (S.D.Ind. 1985).
And this one is!
IT IS SO ORDERED.