Opinion ID: 411336
Heading Depth: 2
Heading Rank: 1

Heading: The Legitimacy of the Summons Purpose

Text: 27 In challenging the legitimacy of the summons purpose, taxpayer in essence contends that the IRS, by not following the special summons procedures of section 7609(f) in this instance, did not issue the summons for a congressionally authorized purpose under section 7602. 9 We disagree. 10 28 In United States v. Euge, 444 U.S. 707, 100 S.Ct. 874, 63 L.Ed.2d 141 (1980), the Supreme Court described the deferential standard of review to be applied in construing the IRS' summons authority: 29 [T]his Court has consistently construed congressional intent to require that if the summons authority claimed is necessary for the effective performance of congressionally imposed responsibilities to enforce the tax code, that authority should be upheld absent express statutory prohibition or substantial countervailing policies. [Id. at 711, 100 S.Ct. at 878 (emphasis added).] 30 See, e.g., United States v. Bisceglia, supra, 420 U.S. at 150, 95 S.Ct. at 921 (avoiding narrow construction of summons authority absent unambiguous directions from Congress); Donaldson v. United States, 400 U.S. 517, 536, 91 S.Ct. 534, 545, 27 L.Ed.2d 580 (1971) (refusing to limit summons authority in a manner that would stultify enforcement of federal law); United States v. Powell, supra, 379 U.S. at 53-54, 85 S.Ct. at 252-253 (rejecting stringent interpretation of summons authority because it might seriously hamper the Commissioner in carrying out investigations he thinks warranted). 31 In applying this standard, 11 the district court had no difficulty in concluding that one of the purposes of the summons--to ascertain the correctness of BSI's returns--was squarely within the statutory language of Section 7602. However, the second purpose of the summons--to investigate unidentified members of the exchange--require[d] closer scrutiny. In examining the latter purpose, the district court concluded that [t]his appears to be the type of situation where ... the express statutory requirements of Section 7609(f) for a John Doe summons must be met. In so concluding, however, the district court read into section 7609(f) a statutory prohibition that Congress did not expressly intend, thus misinterpreting Euge and the deferential standard that it requires. Our review of section 7609(f) indicates no such express statutory prohibition. 12 32 Section 7609(f), by its express terms, applies in the case of a John Doe summons, requiring judicial approval only when the summons does not identify the person with respect to whose liability the summons is issued. 26 U.S.C. Sec. 7609(f) (1976). The statute, however, does not apply to the summons issued here, since the summons did identify the person with respect to whose liability the summons was issued, namely, BSI, and therefore was not a John Doe summons. Neither does the statute limit any fallout or ancillary benefit the IRS might receive in conducting an investigation of a named taxpayer that also discloses information relating to other third parties whom the IRS might wish to audit. Rather, the statute appears to be directed solely at controlling a particular type of summons, that of the John Doe. We conclude that section 7609(f) contains no express statutory prohibition against the enforcement of this summons under section 7602. We further conclude that section 7609(f), because of its limited scope in applying only to John Doe summonses when the taxpayer's identity is not known, does not express a substantial countervailing policy that would deny the enforcement of this summons. 33 Nothing in the legislative history suggests that Congress intended a broader interpretation. As indicated in the House and Senate Committee Reports, Congress recognized the importance of the John Doe summons as an administrative tool, but nonetheless sought to provide some check over its use. Section 7609(f) was enacted to ensure that the John Doe summons would not be indiscriminately used to conduct fishing expedition[s] through the records of third parties. S.Rep. No. 938, 94th Cong., 2d Sess. 373, reprinted in 1976 U.S.Code Cong. & Ad.News 2897, 3439, 3802; H.R.Rep. No. 658, 94th Cong., 2d Sess. 311, reprinted in 1976 U.S.Code Cong. & Ad.News 2897, 3207; see In re Tax Liabilities of John Does, Members of the Columbus Trade Exchange in the Years 1977 and 1978, 671 F.2d 977, 979 (6th Cir.1982) (per curiam) (in enacting section 7609(f) Congress did not intend to impose stringent restrictions on IRS' investigative function, but merely sought to prevent indiscriminate exercise of John Doe summons power). There is no indication, however, that Congress intended to impose similar limitations on summonses other than the John Doe even though they might have a dual purpose. 13 34 Our final inquiry under Euge is whether the summons is necessary for the effective performance of the IRS' statutory responsibilities to enforce the tax code. We conclude that it is. The district court found that the information sought under the summons was relevant and necessary for determining BSI's tax liabilities. Yet the district court's holding could leave the Government without the means to investigate those liabilities. As noted by appellants, a John Doe summons under subsection (f) cannot be issued to determine the tax liabilities of a known taxpayer. If, however, the summons is held unenforceable for failure to meet subsection (f) requirements, and a subsequently issued John Doe summons could not be served because it is issued to determine the tax liabilities of a known taxpayer, BSI's correct tax liabilities could become unverifiable. 35 Based on the foregoing, we conclude that the summons was issued for a legitimate purpose.