Opinion ID: 509535
Heading Depth: 2
Heading Rank: 3

Heading: Countervailing Policies

Text: 43 Thus far, White has failed to demonstrate that enforcement of the IRS summonses would constitute an abuse of the court's process. However, that does not automatically entitle the IRS to enforcement of its summonses; other considerations may bear on their enforceability. See United States v. Arthur Young & Co., 677 F.2d 211, 219 (2d Cir.1982), rev'd on other grounds, 465 U.S. 805, 104 S.Ct. 1495, 79 L.Ed. 826 (1984). In appropriate circumstances, the broad latitude given the IRS in the use of its summons power may be restricted in light of substantial countervailing policies. Euge, 444 U.S. at 711, 100 S.Ct. at 878. The district court herein found that, in addition to the relevant statutory and regulatory provisions, principles of comity and federalism argued against allowing the IRS to second-guess the Surrogate's decisions. 650 F.Supp. at 909. As examples of the respect accorded state judgments by federal courts, the district court cited, inter alia, the eleventh amendment, the full faith and credit statute and federal common law rules of preclusion. 44 In establishing what it considered to be the proper balance between federal and state interests in this proceeding, the district court relied on Justice Harlan's dissent in Bosch. Id. at 910. In Bosch, Justice Harlan stated: 45 the federal interest requires only that the Commissioner be permitted to obtain from the federal courts a considered adjudication of the relevant state law issues in cases in which ... the state courts have not already provided such an adjudication. In turn, it may properly be assumed that the state court has had an opportunity to make, and has made, such an adjudication if, in a proceeding untainted by fraud, it has had the benefit of reasoned argument from parties holding genuinely inconsistent interests. 46 387 U.S. at 480-81, 87 S.Ct. at 1790-91. Relying on Justice Harlan's reasoning, the district court formulated a new standard for enforcement of a summons: in order to challenge a decision of the Surrogate when the Surrogate has passed on the facts upon which deductibility depends, the IRS must make a prima facie showing that the Surrogate's decision was motivated by factors other than those on which deductibility depends, such as fraud, overreaching, or excessiveness by the attorney or the Surrogate. 650 F.Supp. at 911. However, it is the reasoning of the majority in Bosch, and not that of the dissent, that is controlling. 47 On the facts presented, we are not persuaded that federalism and comity constitute a substantial countervailing policy that would justify imposing a requirement upon the IRS to make an advance showing of factors such as fraud, overreaching, or excessiveness by the attorney or the Surrogate before granting enforcement of its summonses. Unquestionably, in proper circumstances, federal courts are bound to respect the considered judgment of state courts. However, the facts of this case do not implicate the eleventh amendment, full faith and credit, principles of collateral estoppel, or other doctrines arising from principles of federalism and comity; consequently, federal authorities are not bound to give preclusive effect to the Surrogate's decree. 48 Instead of substantial countervailing policies, we find in I.R.C. Sec. 7602 a congressional policy choice in favor of disclosure of all information relevant to a legitimate IRS inquiry. Arthur Young, 465 U.S. at 816, 104 S.Ct. at 1502 (emphasis in original). The Supreme Court informs us that In light of this explicit statement by the Legislative Branch, courts should be chary of recognizing exceptions to the broad summons authority of the IRS.... If the broad latitude granted to the IRS by Sec. 7602 is to be circumscribed, that is a choice for Congress, and not this Court, to make. Id. at 816-17, 104 S.Ct. at 1502.