Opinion ID: 4544634
Heading Depth: 3
Heading Rank: 1

Heading: The IRS Authority to Issue Summonses

Text: Our self-reporting system of taxation relies on honesty at the front end and investigation at the back end. “There is legal compulsion, to be sure, but basically the Government depends upon the good faith and integrity of each potential taxpayer to disclose honestly all information relevant to tax liability.” United States v. Bisceglia, 420 U.S. 141, 145 (1975), partially superseded by statute on other grounds, Tax Reform Act of 1976, Pub. L. No. 94-455, § 1205, 90 Stat. 1520, 1699–1703 (1976). Mindful of the possibility that some citizens may be less-thanforthcoming with their financial records, Congress “endowed the IRS with expansive information-gathering authority” to monitor compliance with the internal revenue laws. United States v. Arthur Young & Co., 465 U.S. 805, 816 (1984). Section 7601 of the Internal Revenue Code permits the IRS to investigate “persons . . . who may be liable to pay any internal revenue tax,” and section 7602 gives it the authority “[t]o examine any books, papers, records, or other data which may be relevant or material to [an] inquiry” into whether an individual has violated the internal revenue laws. 26 U.S.C. §§ 7601(a), 7602(a)(1). “The purpose of the statutes is not to accuse, but to inquire.” Bisceglia, 420 U.S. at 146. The power granted in § 7602(a)(1) amounts, in practical terms, to the power to issue summonses to acquire tax-related information. What the IRS lacks is the power to compel compliance with these summonses, and for this it must turn to a federal district court. See 26 No. 19-1893 Byers v. IRS Page 5 U.S.C. §§ 7402(b), 7604(a). To obtain judicial enforcement of a summons, the IRS must make a prima-facie showing “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 [IRS] Commissioner’s possession, and that the administrative steps required by the Code have been followed.” United States v. Powell, 379 U.S. 48, 57–58 (1964). As the Seventh Circuit has aptly noted, this prima-facie burden “isn’t much of a hurdle.” 2121 Arlington Heights Corp. v. I.R.S., 109 F.3d 1221, 1224 (7th Cir. 1997). Most relevant for our purposes, it requires no explication of a factual basis for why the IRS has commenced an investigation in a particular case. See 13 Mertens Law of Fed. Income Tax’n § 47:121 (“Probable cause for the administrative inquiry is not required.”). The same standards apply when the IRS issues a summons not to the investigated taxpayer herself, but to a third party who may possess records related to the taxpayer. See Monumental Life, 440 F.3d at 730, 733. The only difference is that, in this scenario, the named taxpayer is entitled to notice that the summons has been issued, and has the right to intervene in the summons-enforcement proceeding. See 26 U.S.C. § 7609(a)–(b). It is in this statutory context that Byers’s appeal takes place.