Opinion ID: 517676
Heading Depth: 1
Heading Rank: 1

Heading: purpose of summons

Text: 14 Dayton's principal argument appears to be that IRS is using the summons to gather data for a study and not for the purpose of carrying on an investigation of taxpayer liability. 15 Dayton relies on United States v. Humble Oil & Refining Company, 488 F.2d 953 (5th Cir.1974), vacated and remanded for further consideration in light of United States v. Bisceglia, 420 U.S. 141, 95 S.Ct. 915, 43 L.Ed.2d 88 (1975), United States v. Humble Oil & Refining Company, 421 U.S. 943, 95 S.Ct. 1670, 44 L.Ed.2d 97 (1975), opinion on remand 518 F.2d 747 (5th Cir.1975). In Humble, the Fifth Circuit considered a summons issued to an oil company seeking information concerning some 100 to 200 mineral rights lessors. The court characterized the project as research concerning noncompliance and noted that the lessors were not the object of any investigation for noncompliance with the tax laws. 488 F.2d at 954. On remand from the Supreme Court, the Fifth Circuit decided that Bisceglia did not require reversal and adhered to its distinction between a research project from which adjustment of tax liabilities would only incidentally result, and an ongoing investigation. Language in the earlier opinion seems to have acknowledged that the summons power could be used when IRS scrutiny of a taxpayer or a group thereof becomes particularized or focused. 488 F.2d at 960. 16 Dayton contends that the purpose of the present summons is to obtain data for a study. 4 The government concedes in its brief that [t]he Internal Revenue Service also intended to include the information derived from the investigation in a study about the underreporting of tip income. 17 The Fifth Circuit has given Humble a narrow interpretation. 18 The essence of the Humble holding, thus, was not that a summons could not be enforced where the investigation of a taxpayer's return was conducted primarily for research, but rather was that a particularized investigation (based on specific facts or specific taxpayers) was there non-existent.... 19 Thus, the IRS may issue summonses for research purposes as long as the summons is based in good faith upon a section 7602 purpose, even though motivated more generally by an investigative or research purpose within the contemplation of section 7601. 20 United States v. First Nat. Bank in Dallas, 635 F.2d 391, 395-96 (5th Cir.1981), cert. denied sub nom. Yeoham v. United States, 452 U.S. 916, 101 S.Ct. 3051, 69 L.Ed.2d 420 (1981). 21 This court has upheld the use of a Sec. 7602 summons for the purpose of ascertaining the correctness of a taxpayer's return, even if the primary purpose were to gain research data. U.S. v. Flagg, 634 F.2d 1087, 1091 (8th Cir.1980). 22 Accordingly, the district court was not called upon to decide which of two purposes was primary, but only whether one good faith purpose was to investigate taxpayer liability. 23 The decision in Humble preceded the enactment of 26 U.S.C. Sec. 7609(f). This court has decided 24 that the criteria for the service of a third-party, John Doe summons under section 7609(f) cannot be collaterally challenged during proceedings to enforce the summons.... Allowing reconsideration of the section 7609(f) determinations during a summons enforcement action would subject those determinations to adversarial attacks inconsistent with the ex parte nature of the proceedings expressly created by Congress. 25 United States v. John G. Mutschler & Assoc., Inc., 734 F.2d 363, 366 (8th Cir.1984). 26 Applying that holding to the present case, the district court's determination that the summons relates to the investigation of a particular ascertainable group of persons, 26 U.S.C. Sec. 7609(f)(1), 5 was not open to collateral attack, and places this inquiry on the investigation side of the investigation--research distinction drawn in Humble. In Mutschler, this court went on to say 27 Of course, nothing in our decision restricts the scope of review during summons enforcement proceedings established in Powell. The IRS must make out a prima facie case of good faith establishing that the investigation will be conducted pursuant to a legitimate purpose, that the inquiry may be relevant to the purpose that the information sought is not already within the Commissioner's possession, and that the administrative steps required by the Code have been followed. United States v. Powell, supra, 379 U.S. at 57-58, 85 S.Ct. at 254-255 [13 L.Ed.2d 112 (1964) ]. Besides these four specific prima facie elements, the Powell Court made clear that a court asked to enforce an IRS summons may inquire into the underlying reasons for the examination in order to prevent an abuse of the judicial process. Id. at 58, 85 S.Ct. at 255. Once the IRS makes out a prima facie case under the four express Powell standards, the burden shifts to the party summoned to disprove one of these elements or to demonstrate that judicial enforcement of the summons would otherwise constitute an abuse of the court's process. United States v. Lask, 703 F.2d 293, 297 (8th Cir.), cert. denied, 464 U.S. 829, 104 S.Ct. 104, 78 L.Ed.2d 107 (1983). 28 734 F.2d at 367. 29 Assuming, accordingly, that it was left open to Dayton to prove that the government's representation that the IRS was conducting an investigation to determine the correctness of the 1984 returns and the tax liability of the 50 Boundary Water employees was a sham and a false pretense, we do not deem the district court's finding of legitimate purpose clearly erroneous. 30 Dayton showed that in March, 1986, Mr. MacMillan had informed Dayton that Boundary Waters had been selected as a sample establishment for the study of tip income reporting compliance and had requested Dayton to produce much the same records as now at issue. Dayton had declined. 31 The district court did not comment on this earlier request. We note that the government's petition was signed February 9, 1987, more than ten months after the informal request. The study may well have proceeded in the interim. The examiner's declaration cited information of underreporting obtained in the study and other investigations as a reasonable basis for believing that Boundary Waters employees may have underreported. We conclude that under thse circumstances, the fact of the earlier request for material to be used in a study did not compel a finding that the claim of an investigation into tax liabilities was a sham.