The opinion of the court was delivered by: DAVID LARIMER, Chief Judge, District
Petitioners, Nick and Kathryn Muratore ("the Muratores") and
Executive Session, Inc. ("ESI"), filed a petition to quash several
summonses issued by the Internal Revenue Service ("IRS"), which seek
various information concerning petitioners' financial transactions, as
part of an investigation concerning Nick Muratore's*fn1 federal income
tax liability for the tax years 1999, 2000 and 2001. Respondents
Department of the Treasury, IRS and Special Agent Jarod Koopman*fn2
have filed a motion to enforce the summonses. DISCUSSION
"Because our system of federal taxation relies on self-reporting, it is
essential that the IRS have the power to issue administrative summonses
in order to have effective oversight." Upton v. I.R.S.,
104 F.3d 543, 545 (2d Cir. 1997) (citing United States v. Arthur Young &
Co., 465 U.S. 805, 816 (1984), and United States v.
Bisceglia, 420 U.S. 141, 145-46 (1975)). To that end, in
26 U.S.C. § 7601, "Congress gave the IRS a `broad mandate to investigate and
audit persons' to insure compliance with federal tax laws."
Upton, 104 F.3d at 545 (quoting Bisceglia, 420 U.S. at
145); see also Miller v. United States, 150 F.3d 770, 772 (7th
Cir. 1998) ("the IRS is entitled to broad latitude in issuing summonses
to enforce the tax laws").
"As a necessary incident to the investigatory power," Congress has
given the IRS "expansive authority" to:
summon the person liable for tax . . . or any
other person the Secretary may deem proper, to
appear before the Secretary at a time and place
named in the summons and to produce such books,
papers, records, or other data, and to give such
testimony, under oath, as may be relevant or
material to such inquiry.
Upton, 104 F.3d at 545-46; 26 U.S.C. § 7602(a)(2)). The
Second Circuit has described this as a "wholesale grant of summons
authority" that is "only `subject to the traditional privileges and
limitations.'" United States v. Euge, 444 U.S. 707
, 711, 714
(1980)). Pursuant to 26 U.S.C. § 7609, whenever a summons is served upon a
the IRS must give notice of the summons
to the person who is identified as the subject of the records sought
(ordinarily the taxpayer who is the subject of an IRS audit or
investigation). 26 U.S.C. § 7609(a)(1). That person then has the
right to initiate a proceeding in federal court to quash the summons.
26 U.S.C. § 7609(b), (h)(1).
Although a taxpayer cannot bring a proceeding to quash an IRS summons
served on him personally, see Pylar v. United States, 835 F. Supp. 1033,
1035 (W.D.Mich. 1993); Tabar v. United States,
142 F.R.D. 343, 344 (D.Utah 1992), the taxpayer can refuse to comply with the
summons, and, "if the IRS seeks enforcement of the summons in district
court, challenge the summons in district court." United States v.
Ritchie, 15 F.3d 592, 597 (6th Cir.), cert. denied,
513 U.S. 868 (1994).
To obtain enforcement of a tax summons, whether in opposition to a
petition to quash or on its own motion to enforce the summons, the IRS
must show that it has complied with four requirements established by the
Supreme Court in United States v. Powell, 379 U.S. 48, 57-58
(1964): that the investigation has a proper purpose; the information
sought may be relevant to that purpose; the IRS does not already have the
information; and the IRS has followed the statutory requirements for
issuing a summons. These "requirements impose only a minimal burden" on the IRS.
Miller, 150 F.3d at 772. Affidavits by the investigating agent
ordinarily are sufficient to make out the prima facie case for
enforcement. PAA Mgmt., Ltd. v. United States, 962 F.2d 212, 219
(2d Cir. 1992).
Once the government has met its prima facie burden, "the taxpayer faces
a `heavy burden' to either present facts to disprove one of the
Powell factors, or to show that the IRS issued the summons in
bad faith." Miller, 150 F.3d at 772 (quoting 2727 Arlington
Heights Corp. v. IRS, 109 F.3d 1221, 1224 (7th Cir. 1997)); see
also United States v. LaSalle Nat'l Bank, 437 U.S. 298, 316 (1978)
(taxpayer's burden is a "heavy" one, which he must meet by "disprov[ing]
the actual existence of a valid civil tax determination or collection
purpose by the Service"); United States v. Insurance Consultants of
Knox, Inc., 187 F.3d 755, 759 (7th Cir. 1999) ("The taxpayer can
rebut the government's prima facie case only by alleging `specific facts'
in rebuttal") (quoting Crystal v. United States, 172 F.3d 1141,
1144 (9th Cir. 1999)), cert. denied, 528 U.S. 1081 (2000);
United States v. Derr, 968 F.2d 943, 945 (9th Cir. 1992)
("Enforcement of a summons is generally a summary proceeding to which a
taxpayer has few defenses"); United States v. White,
853 F.2d 107, 111 (2d Cir. 1988) ("the taxpayer's burden of proof to establish
that enforcement would be improper is significantly greater than the
burden on the government to show a legitimate purpose"); United
States v. Kis, 658 F.2d 526, 535 (7th Cir. 1981) (noting taxpayer's
"extraordinarily heavy burden" to rebut IRS's prima facie case),
cert. denied, 455 U.S. 1018 (1982).
Because " [s]ummons enforcement proceedings are intended to be summary
in nature so that an investigation can advance to an ultimate
determination as to whether tax liability exists," White, 853
F.2d at 111, "the primary issue presented by a summons enforcement
proceeding is not whether the IRS has established, or is even likely to
establish guilt or liability on the taxpayer's part; rather, the issue is whether the IRS had a valid tax determination or
collection purpose in issuing its summons." In addition, "[u]nless a
taxpayer opposing enforcement of a summons makes a `substantial
preliminary showing' of an alleged abuse, neither an evidentiary hearing
nor limited discovery need be ordered by the district court." United
States v. Tiffany Fine Arts, Inc., 718 F.2d 7, 14 (2d Cir. 1983)
(quoting United States v. Morgan Guaranty Trust Co.,
572 F.2d 36, 42-43 n. 9 (2d Cir.), cert. denied, 439 U.S. 822 (1978)),
aff'd, 469 U.S. 310 (1985)*fn4; see also 2121 Arlington
Heights Corp., 109 F.3d at 1226 ("Summons enforcement proceedings
are intended to be summary in nature," and it is left to the district
court's discretion to determine whether a hearing is necessary)
Applying these standards to the case at bar, I find that the IRS has
made out a prima facie case, and that petitioners have failed to meet
their burden of disproving any of the Powell factors or of
showing bad faith on the IRS's part.
In general, petitioners' challenge to the summonses rests on their
assertion that the summonses are overly broad, and that the IRS has not
demonstrated the relevance of many of the documents sought. Under
26 U.S.C. § 7602, however, the IRS is entitled even to information that
has only "potential relevance" to its investigation, and it is not
"required to establish that the documents it seeks are actually relevant
in any technical, evidentiary sense." See Arthur Young, 465 U.S. at 814; see also United States v. Norwest Corp.,
116 F.3d 1227, 1233 (8th Cir. 1997) ("The IRS need not state with certainty
how useful, if at all, the summoned material will in fact turn out to
be") (citing Arthur Young, 465 U.S. at 813-14 & n. 11).
Here, the IRS has met its prima facie burden of showing that the
documents sought may be relevant to a proper purpose of its
investigation. As explained in the declaration of Special Agent Jarod J.
Koopman (Docket #6), he is conducting a criminal investigation to
determine Muratore's correct federal income tax liabilities for the tax
years 1999, 2000 and 2001, and to determine whether Muratore has
committed any tax offenses with respect to those tax years. Koopman Decl.
¶ 3. The summonses themselves relate to the Muratores' financial
transactions during the period under investigation,*fn5 as well as
transactions involving ESI, of which Muratore is president and sole
Petitioners' conclusory assertion that the requests are overbroad is
without merit. In effect, petitioners seek to turn the Powell
standard on its head, requiring the IRS to come forward with specific
evidence showing precisely how each document sought is expected to yield
information of evidentiary value. That is not what the law requires.
Although the IRS does have the initial burden of showing relevance, the
above-cited cases make clear that this burden is minimal, and that
relevance is not to be determined according to the standards that would
be applied at trial under the Federal Rules of Evidence. See Arthur
Young, 465 U.S. at 814 ("an IRS summons is not to be judged by the
relevance standards used in deciding whether to admit evidence in federal
court"); Norwest, 116 F.3d at 1233 ("`Relevance' under the
Powell test does not depend . . . on whether the information
sought would be relevant in an evidentiary sense, but merely whether that
information might shed some light on the tax return") (citingy4rt/mr
Young, 465U.S. at813-14 & ...