Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-02043/USCOURTS-cand-3_05-cv-02043-1/pdf.json

Parties Involved:
Douglas M. Kelly
Petitioner
United States of America
Petitioner
David L. Wessel
Respondent

Document Text:

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 Because Mr. Wessel has not consented to proceed before a magistrate judge, the undersigned

has prepared a report and recommendation only and hereby directs the Clerk of the Court to reassign this

case to a district judge.

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

UNITED STATES OF AMERICA, et al.,

Petitioners,

v.

DAVID L. WESSEL,

Respondent.

___________________________________/

No. C-05-2043 EMC

REPORT AND RECOMMENDATION

RE PETITIONERS’ VERIFIED

PETITION TO ENFORCE IRS

SUMMONS

(Docket No. 1)

On May 19, 2005, Petitioners filed a verified petition to enforce an IRS summons with

respect to Respondent David L. Wessel. The Court held a hearing on the petition on August 31,

2005. Mr. Wessel failed to appear at the hearing. He also failed to provide any written response to

the petition or this Court’s order to show cause (as discussed below). Having considered Petitioners’

papers and all other evidence of record, the Court hereby recommends that the petition be

GRANTED.1

I. FACTUAL & PROCEDURAL BACKGROUND

According to the petition, Petitioners tried “to determine certain income tax liabilities of

DAVID L. WESSEL for the taxable years ending December 31, 1992; December 31, 1993;

December 31, 1994; December 31, 1995; December 31, 1996; December 31, 1997; December 31,

1998; December 31, 1999; December 31, 2000; December 31, 2001[,] and December 31, 2003.” 

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Pet. ¶ 3. Petitioners believed that Mr. Wessel had in his possession and control documents relevant

to the IRS’s inquiry. See id. ¶ 6. Accordingly, on February 24, 2005, an IRS employee served a

summons on Mr. Wessel by hand, requesting an appearance as well as the production of certain

documents. See id. ¶ 7 & Ex. A. While Mr. Wessel appeared as requested in the summons, he did

not provide any testimony nor did he produce any of the documents sought. See id. ¶ 9. Petitioners

thus filed their verified petition.

On June 27, 2005, the Court issued an order to show cause, giving Mr. Wessel an opportunity

to explain why the IRS summons should not be enforced. Petitioners were instructed to serve the

order to show cause, along with the verified petition, in accordance with Federal Rule of Civil

Procedure 4. See Docket No. 6 (order, filed on 6/27/05). Petitioners have submitted evidence

showing that these documents were properly served on Mr. Wessel in compliance with Rule 4. See

Docket No. 8 (Low declaration, confirming personal service on Mr. Wessel). However, Mr. Wessel

never filed a written response to the order to show cause or the verified petition; nor did he appear

for the hearing on this matter on August 31, 2005.

II. DISCUSSION

“The IRS may issue a summons only for the purposes set out in 26 U.S.C. § 7602(a). Those

purposes are ‘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.’” Crystal v. United States, 172 F.3d 1141, 1143 (9th Cir. 1999) (quoting § 7602(a)). To

enforce a summons, the government must satisfy the factors set forth in United States v. Powell, 379

U.S. 48 (1964). That is, 

the government must establish that (1) the investigation will be

conducted for a legitimate purpose; (2) the material being sought is

relevant to that purpose; (3) the information sought is not already in

the IRS’s possession; and (4) the IRS complied with all the

administrative steps required by the Internal Revenue Code. “The

government’s burden is a slight one, and may be satisfied by a

declaration from the investigating agent that the [above] requirements

[known as the Powell requirements] have been met. The burden is

minimal “because the statute must be read broadly in order to ensure

that the enforcement powers of the IRS are not unduly restricted.”

Crystal, 172 F.3d at 1143-44. 

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That being said, the government’s “mere assertion of relevance may not satisfy [its] burden. 

‘Once a summons is challenged, it must be scrutinized by a court to determine whether it seeks

information relevant to a legitimate investigative purpose. . . . The cases show that the federal courts

have taken seriously their obligation to apply this standard to fit particular situations, either by

refusing enforcement or by narrowing the scope of the summons.’” United States v. Bell, 57 F.

Supp. 2d 898, 906 (N.D. Cal. 1999).

Once the government has established the Powell elements,

“‘those opposing enforcement of a summons . . . bear the burden to

disprove the actual existence of a valid civil tax determination or

collection purpose by the Service. . . . Without a doubt, this burden is a

heavy one.’” As we observed in Derr, “enforcement of a summons is

generally a summary proceeding to which a taxpayer has few

defenses.” “‘The taxpayer must allege specific facts and evidence to

support his allegations’ of bad faith or improper purpose.”

“The taxpayer ‘may challenge the summons on any appropriate

grounds,’ including failure to satisfy the Powell requirements or abuse

of 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.” In addition, it has become clear since Powell that

gathering evidence after having decided to make a recommendation for

a prosecution would be an improper purpose, and that the IRS would

be acting in bad faith if it were to pursue a summons enforcement

under these circumstances. . . . [T]he ‘dispositive question in each

case’ is ‘whether the Service is pursuing the authorized purposes in

good faith.’”

Crystal, 172 F.3d at 1144-45.

In the instant case, Petitioners have met their burden of meeting the Powell requirements,

largely through the verification of the petition by Douglas M. Kelly, an IRS employee. See id. at

1144 (stating that it was not disputed that special agent’s declaration satisfied the Powell

requirements and that therefore the government had “established a prima facie case to enforce the

summonses”); see also United States v. Dixon, No. 02-CV-183 H, 2002 U.S. Dist. LEXIS 10594, at

*3 (S.D. Cal. Apr. 8, 2002) (“Assertions in a declaration by an investigating officer can satisfy the

IRS’s burden.”); Bell, 57 F. Supp. 2d at 906 (“The government usually makes the requisite prima

facie showing by affidavit of the agent.”).

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The verified petition indicates that the IRS’s investigation is being conducted for a legitimate

purpose, namely, to determine the federal tax liabilities of Mr. Wessel for certain periods of time. 

See Pet. ¶¶ 3, 8. The summons is relevant to that purpose, asking Respondent to appear and bring

with him documents related to his taxable income (e.g., statements of wages, statements regarding

interest or dividend income, bank records), see id.., Ex. A; and the information sought is not already

in the IRS’s possession. See id. ¶ 6 (stating that government does not have “access, possession, or

control” of information sought). Finally, as stated in the verified petition, the IRS complied with all

the administrative steps required by the Internal Revenue Code -- “in particular, that ‘the Secretary or

his delegate,’ after investigation, has determined the further examination to be necessary and has

notified the taxpayer in writing to that effect.” Powell, 379 U.S. at 58. See Pet. ¶ 11 (“All

administrative steps required by the Internal Revenue Code for issuance of the summons have been

taken.”); id. ¶ 7 & Ex. A (confirming service of summons on Mr. Wessel by hand as required by 26

U.S.C. § 7603).

Because Petitioners have established the Powell elements, the burden shifts to Mr. Wessel to

disprove the actual existence of a valid civil tax determination or collection purpose. As noted

above, here, Mr. Wessel has failed to provide any response to the order to show cause and/or verified

petition. Nor did he appear at the hearing before this Court on August 31, 2005. Accordingly, Mr.

Wessel has not met his burden and the Court therefore recommends that Petitioners’ verified petition

to enforce IRS summons be granted.

III. RECOMMENDATION

For the foregoing reasons, the Court recommends that the petition be granted and that an

order be issued enforcing the IRS summons -- i.e., instructing Mr. Wessel to appear before the IRS

on a date certain to provide testimony and produce documents in compliance with the summons. 

Petitioners have submitted a proposed order, which is attached to this report and recommendation.

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Any party may file objections to this report and recommendation with the district judge

within ten days after being served with a copy. See 28 U.S.C. § 636(b)(1)(B); Fed. R. Civ. P. 72(b);

Civil L.R. 72-3. Petitioners are instructed to serve a copy of this report and recommendation

on Mr. Wessel within three days of the filing date of this report and recommendation.

IT IS SO ORDERED.

Dated: September 2, 2005

_________________________

 EDWARD M. CHEN

United States Magistrate Judge

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