Opinion ID: 4544634
Heading Depth: 3
Heading Rank: 3

Heading: The Prima-Facie Showing

Text: Byers next argues that apart from whether the IRS was required to establish a “reasonable basis” for its investigation, it has failed to satisfy the four-part Powell test discussed supra Part III.A. We consider each part of the test below, and conclude that the government carried its burden.
The Supreme Court has cautioned that “those opposing enforcement of a summons do bear the burden to disprove the actual existence of a valid civil tax determination or collection purpose by the Service.” United States v. LaSalle Nat’l Bank, 437 U.S. 298, 316 (1978), superseded by statute on other grounds, Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. No. 97-248, § 333, 96 Stat 324, 622–23 (1982); see also United States v. Alpha Med. Mgmt., Inc., No. 96-5825, 1997 WL 359065, at  (6th Cir. June 26, 1997) (noting the “heavy burden” faced by an entity seeking to quash an IRS summons). The declared purpose of the IRS’s investigation in this case was as follows: “[T]o determine whether Andrea Byers, herself or in association with an entity, is liable for penalties under 26 U.S.C. §§ 6700 and/or 6701 in connection with the organization or promotion of abusive tax shelters and/or aiding and abetting the understatement of another person or entities’ tax liability.” R. 5-1 (Conroy Decl. ¶ 4) (Page ID #112–13). We have never established—and do not establish in this case—what precisely must be contained in an IRS agent’s declaration in order to satisfy the legitimate-purpose prong of the Powell test, nor whether an ipse dixit would suffice.6 At the enforcement hearing before the district court, Byers asked whether it would have been sufficient for Agent Conroy simply to 6Most of the cases relied upon in the parties’ briefs are either district-court cases, see, e.g., Nevius v. United States, 257 F. Supp. 3d 9, 12 (D.D.C. 2017), or circuit-court cases that are not binding on this court, see, e.g., United States v. AS Holdings Grp., LLC, 521 F. App’x 405, 409 (6th Cir. 2013) (summoned party forfeited argument on legitimate-purpose prong); United States v. Gertner, 65 F.3d 963, 968 (1st Cir. 1995) (out-of-circuit analysis of legitimate purpose). No. 19-1893 Byers v. IRS Page 12 aver, “I’m conducting an investigation to determine whether Ms. Byers violated the tax code.” See R. 16 (Hr’g Tr. at 10) (Page ID #247). We need not weigh in on this hypothetical. In light of the government’s minimal burden at this stage, the district court did not clearly err in concluding that the declared purpose here was legitimate. The declaration is sufficient to show that the summons will be properly used for a civil investigation, rather than for an improper purpose, such as an ongoing criminal investigation. See United States v. Ahee, 5 F. App’x 342, 353 (6th Cir. 2001) (“Given . . . the fact [that] the summonses were utilized to gather evidence, not justify a previous determination to prosecute, the trial court did not err in concluding the IRS had a legitimate purpose for the use of administrative summonses under 26 U.S.C. § 7206.”); Pragovich, 363 F. App’x at 314 (“We find no clear error here, however, as the summons could be used to determine whether Pragovich was subject to penalties under 26 U.S.C. §§ 6700-6701 for, among other things, advising others with respect to preparation of documents understating their tax liability.”).
Paragraph 14 of Agent Conroy’s declaration, which describes how the financial information sought by the summonses will assist the investigation, is sufficient to establish relevance. Congress has authorized the IRS “[t]o examine any books, papers, records, or other data which may be relevant or material” to an investigation, 26 U.S.C. § 7602(a)(1) (emphasis added), and the Supreme Court has clarified that “even potential relevance” is sufficient, Arthur Young & Co., 465 U.S. at 814. “[T]he Service therefore should not be required to establish that the documents it seeks are actually relevant in any technical, evidentiary sense.” Id. Even if four summonses were more than necessary to conduct the investigation in this case, the Supreme Court “ha[s] never held . . . that the IRS must conduct its investigations in the least intrusive way possible.” Tiffany Fine Arts, 469 U.S. at 323. Byers does not explain how this case represents an “exceptional circumstance where automatic reliance upon an agent’s affidavit is not adequate.” Monumental Life, 440 F.3d at 736. Unlike in Monumental Life, here the IRS does not seek a “voluminous amount of highly sensitive proprietary information,” the agency has not opposed a protective order, and the lower court had no concerns with the relevance of the summoned information. Id. No. 19-1893 Byers v. IRS Page 13
Agent Conroy’s declaration states that besides the information contained in Bank of America’s sealed response, the rest of the information sought in the summonses is “not already in the possession of the Internal Revenue Service.” R. 5-1 (Conroy Decl. ¶ 13) (Page ID #114). Byers suggests that the information sought in the summons served on Chase is already in the IRS’s possession, because the IRS acquired this information through the summons it served on Chase during its investigation into Byers’s ex-husband.7 Yet Byers does not explain what was contained in that summons. This omission, she says, exists “because Conroy never served her with a copy of [the summons] as required under section 7609(a)(1)-(2).” Appellant Br. at 21. In other words, Byers argues that she is hamstrung from contesting the already-in-possession prong of the Powell test because the IRS has improperly denied her the knowledge of what information it has. The relevant statutory section, however, requires notice of the issuance of a summons only to “any person . . . who is identified in the summons,” 26 U.S.C. § 7609(a)(1), and Byers does not claim that she was identified in the summons served in connection with her exhusband’s case. As Byers’s own exhibit demonstrates, the notification that Byers received in 2018 during this prior investigation states only that “[t]he requested information [by the IRS] includes information that relates to you.” See, e.g., R. 8-3 (Response to Mot. to Dismiss, Ex. B) (Page ID #151) (emphasis added). Because she was not apparently entitled to notice under the third-party summons statute, Byers thus fails to explain away her inability to identify what information is already in the IRS’s possession.
Byers’s first argument regarding the government’s alleged failure to comply with administrative procedures is that “unknown prospective investigation targets” other than Byers are the “sole” focus of the investigation, so the government should have followed the John-Doe procedures set forth in § 7609(f). Appellant Br. at 21. But she fails to rebut the declaration by 7Byers raises no argument related to Agent Conroy’s possession of information he sought from the other three entities (Bank of American, SunAmerica Trust Company, and Pershing, LLC). See Appellant Br. at 21. No. 19-1893 Byers v. IRS Page 14 Agent Conroy that Byers is, in fact, the focus of the investigation. R. 5-1 (Conroy Decl. ¶ 4) (Page ID #112–13). Even if the IRS were investigating both Byers and unnamed entities, Tiffany Fine Arts makes it clear that the government need not comply with § 7609(f) regarding named persons in order to enforce a dual-purpose third-party summons. See 469 U.S. at 324. Byers further argues that the various entities identified in the summonses were entitled to notice pursuant to § 7609(a)(1), but nowhere explains why she has standing to raise this argument on behalf of another entity, nor how she knows that “the government failed to notify any of these entities about the summonses at issue.” Appellant Br. at 23–24. Assuming that she does have standing as the registered agent or officer of each of the entities listed in the summonses, then as the government explains, this fact makes notice to her sufficient to provide notice to the entities. Appellee Br. at 31–32 (citing United States v. Held, 435 F.2d 1361, 1365 (6th Cir. 1970)). For the foregoing reasons, the district court’s determination that the government has satisfied the four Powell factors was not clearly erroneous.