Legal Document

43 United States Supreme Court Reports Lawyer’s Edition 2d Series KF101.8 U54 88 95 Reporter 915 420 U.S. 141 UNITED STATES et al., Petitioners,v.Richard V. BISCEGLIA. Number 73—1245. Argued Nov. 11 and 12, 1974. Decided Feb. 19, 1975. Syllabus The Internal Revenue Service (IRS) held to have authority under §§ 7601 7602 of the Code 1954 issue a 'John Doe' summons bank or other depository discover identity person who has had transactions suggesting possibility liability for unpaid taxes, in this instance respondent officer during an investigation identify persons deposited 400 deteriorated $100 bills with within space few weeks. Pp. 148-151. (a) That was styled fictitious name is not sufficient ground denying enforcement. 148-149. (b) language § permitting IRS investigate inquire after 'all . may be liable pay any internal revenue tax .' authorizing summoning 'any person' taking testimony examination books witnesses that relevant 'ascertaining correctness return, determining collecting such .,' inconsistent interpretation would limit issuance summonses investigations which already focused upon particular named person, potential liability, moreover reading power ignores agency's legitimate interest large unusual financial transactions, especially those involving cash. 149-150. 6 Cir., 486 Federal Reporter, 2nd 706, reversed remanded. Stuart Atlantic Smith, Washington, D.C., petitioners. William Watson, respondent. Mr. Chief Justice BURGER delivered opinion Court. 1 We granted certiorari resolve question whether statutory taxes. 2 * On November 16, 1970, Commercial Bank Middlesboro, Ky., made two separate deposits Cincinnati Branch Reserve Cleveland, each included $20,000 bills. evidence undisputed were 'paper thin' showed signs severe disintegration could been caused by long period storage abnormal conditions. As result no longer suitable circulation they destroyed accord established procedures. Also regular procedures, reported these facts Service. 3 It disputed deposit amount high denomination currency out ordinary Middlesboro; example, months preceding bills, received only 218 from bank. This fact, together uniformly state deterioration $40,000 suspect relating purposes. An agent therefore assigned matter. 4 After interviewing some bank's employees, none whom provide him information regarding deposits, issued directed respondent, executive vice president Middlesboro. called production '(t)hose records will as person(s) firm(s) deposited, redeemed otherwise gave sent shipments (200) hundred Currency on about 6, 1970 1970.' This, course, simply initial step might lead nothing reveal there failure report money federal estate, gift, income taxes due.1 Respondent, however, refused comply even though he seriously argued compliance unduly burdensome. 5 In due proceedings commenced District Eastern Kentucky enforce summons. court narrowed its scope require slips showing cash $5,000 more involved restricted it between October 1970. Respondent ordered modified. Appeals reversed, holding 1954, 26 KF62 7602, pursuant issued, 'presupposes (Internal Service) identified interested taxpayer before proceeding.' 710. disagree, reverse judgment Appeals. II 7 framework case consists provide: 8 7601. Canvass districts taxable objects. 9 '(a) General rule. 10 'The Secretary his delegate shall, extent deems practicable, cause officers employees Treasury Department proceed, time time, through district concerning all therein tax, owning having care management objects respect imposed. 7602. Examination witnesses. 12 'For purpose ascertaining making return where made, authorized— 13 '(1) To examine books, papers, records, data material inquiry; 14 '(2) summon required perform act, employee possession, custody, account containing entries business deem proper, appear at place produce data, give testimony, oath, 15 '(3) take concerned, inquiry.' 16 begin sections against familiar background our structure based system self-reporting. There legal compulsion, sure, but basically Government depends good faith integrity disclose honestly liability. Nonetheless, naive ignore reality attempt outwit system, evaders are readily identifiable. Thus, gives broad mandate audit 'persons liable' provides 'examine (andto summon) possession Of necessity, investive so provided limited situations probable cause, traditional sense, believe violation laws exists. versus Powell, 379 48, 85 248, 112 (1964). statutes accuse, inquire. Although unquestionably involve invasion privacy, essential self-reporting alternatives well far less agreeable invasions house, business, records. 17 recognize vested collectors abused, subject abuse. However, solution restrict undermine efficacy seeks assure taxpayers what Congress mandated prevent dishonest escaping taxation thus shifting heavier burdens honest taxpayers. Substantial protection afforded provision can enforced courts. 7604(b); Reisman Caplin, 375 440, 84 508, 459 Once challenged must scrutinized determine investigative meant 'to harass put pressure settle collateral dispute, reflecting investigation.' U.S., 58, S.Ct., 255, 112. cases show courts taken their obligation apply standard fit situations, either refusing enforcement narrowing See, e.g., Matras, 487 1271 (CA8 1973); Theodore, 479 749, 755 (CA4 Pritchard, 438 969 (CA5 1971); Dauphin Deposit Trust Co., 385 129 (CA3 1967). Indeed, Judge viewed demands too carefully them. 18 Finally, we note instant one unprecedented. For brought grand jury identical circumstances little doubt testify contempt. Blair States, 250 273, 39 468, 63 L.Ed. 979 (1919), petitioners summoned jury. They exceeded jury, despite fact Their subsequent contempt convictions affirmed Court: 19 '(The witness) entitled set limits conduct. inquest, body powers inquisition, whose inquiries narrowly questions propriety forecasts investigation, doubts individual found properly accusation crime. said before, offender, precise nature offense, if one, normally developed conclusion jury's labors, beginning.' Id., 282, 471. 20 insignificant resolution case. supra, Harlan reviewed Court's dealing subpoena agencies, observed: 21 '(T)he Trade Commission 'has chooses call that, derived judicial function. analogous Grand Jury, does depend controversy get merely suspicion law being violated, just because wants assurance not.' While Commissioner derives different statutes, do think analogies agency without force when Commissioner's question.' 57, quoting Morton Salt 338 632, 642—644, 70 357, 363, 94 401 (1950). III 22 Against background, turn modified Court, authorized 1954.2 mere 'In matter John use names common indictments, see, Baker 115 533 1940), cert. denied, 312 692, 61 711, 1128 (1941), types compulsory process. Courts regularly did specific investigation. E.g., Carter, 489 413 Turner, 480 272, 279 (CA7 Tillotson Boughner, 333 515 (CA7), 913, 260, 184 undertakes distinguish known exist unidentified taxpayer. while serve suggest almost infinite variety factual necessary, follow define Service's 23 first words statute restrictive given them Section permits ..' aid function, authorizes Plainly, 24 Moreover, reasons numerous obvious catalog. recently determined foreign institutions amounts likely useful responsible enforcing banks. See generally California Bankers Assn. Shultz, 416 21, 40, 1494, 1500, 812 (1974). 25 seem elementary meaningful events conducted ascertained, always easy task. Fiduciaries agents understandably reluctant principals, criminal activity afoot used aliases measures cover tracks. unable persons, inquiry frustrated class cases. Settled principles avoid absent unambiguous directions Congress. NLRB Lion Oil 352 288, 77 330, 331 (1957); American Trucking Assns., 310 534, 542—544, 60 1059, 1063, 1345 (1940). No congressional discernible hold acting issuing identifying decrepit Middlesboro Further perfectly innocent explanation transactions. unknown hide odd places fear But record extraordinary, until complies 27 mean respondent's fears conduct 'fishing expeditions' into private affairs depositors trivial. observed similar context: 28 "That existence. power, should kept proper bounds; and, exceeded, jurisdictional presented cognizable courts." McGrain Daugherty, 273 135, 166, 47 319, 326, 71 580 (1927), People ex rel. McDonald Keeler, 99 N.Y. 463, 482, Northeastern KF135 N59 615, 626 (1885). 29 So here, arbitrary capricious action placing summoned. conscientiously discharged duty see broader than necessary achieve purpose. 30 remanded affirm order 31 ordered. 32 Judgment directions. 33 BLACKMUN, POWELL joins, concurring. 34 & N Dec. Immigration Nationality Decisions join judgment, add word emphasize narrowness stake here. decide today ascertain strongly Under overwhelming probability, certitude, entity deposits. condition amount, combined aspects, reason, indeed, investigate. possible plausible.* closely appropriately 35 summons, short, genuine engaged researching general problem; mission exploratory. distinction exploratory stressed courts, Humble Refining 488 953, 958 1974), pet. pending, 73—1827; Armour, 376 F.Supp. 318 (Conn.1974), important decision 36 need neither nor ascertainable group At most, taxpayer's obtain definitely so. enforceable lacking investigative. 37 Upon understanding, opinion. 38 STEWART, DOUGLAS dissenting. says 'recogniz(es) abused,' ante, 146, nonetheless find limitation authority. 'protection' abuse provided, says, 'placing summoned,' Page 151. all, unless measurable asked agree standard, met Accordingly, respectfully dissent 40 certain rather precisely delineated purposes: 41 equity transferee fiduciary liability.' 42 speaks singular—referring 'the return' person.' purposes jointly denominated 'inquiry' act,' designed facilitate '(e)xamination witnesses' 'may 7602(1), (2), (3). indicates unmistakably tool By contrast, duties vastly instance, mandates '(c)anvass objects.' Unlike canvassing broadly plural, instructing officials 44 imposed.' (Emphasis added.) 45 Virtually 'persons' 'objects' country 'may,' problems. Every day economy generates thousands sales, loans, gifts, purchases, leases, mergers, wills, like which—because size complexity—suggest problems somebody. Our 'tax relevant' every detail. conceivably 'taxation'—that is, IRS—the research device. methodically disclosure whole categories monitor operations myriad segments theory thereby accumulated assessment collection kind Cf. 953. And seems authorize exactly that. 46 otherwise. recognized classes peculiar importance sound administration legislative conferral limitless power. Instead, various special-purpose written reporting kinds 6049, 6051—6053, 1081—1083, 1101, 1121—1122, 1141—1143 (1970 ed., Supp. III). Meanwhile, itself narrow. never coextensive 7602.1 economic transaction relevant'—but reasonably pertinent ongoing somebody's status. restriction checks abuses ways. First, guards overbroad allowing prune away particular, First Nat. Mobile 160 532, 533—535. Second, altogether prohibits wholly unconnected 48 completely obliterates historic IRS, summarized 7601, issue, specified Relying heavily noting cash,' 149, approves predicate. sole premise old wornout sufficiently interesting justify identities large-amount over one-month period.2 incident ongoing, particularized shot dark warranted, freely conceded served summons.3 49 breathtaking expansion power: obviously occurring daily throughout which, face, complications parties involved. These now forced whim agent, 'good faith.' Ante, 146. 50 sharp dangerous detour settled course precedent. explicitly accepted Circuits. Berkowitz, 1235, 1236 (CA3), 960 (CA5), 73—1827. disagreed it. 51 'third party,' i.e., party 963; Venn 207, 211—212; Harrington, 388 520, 523. When, third-party presumption naturally arises genuinely exploratory—a device hit-or-miss monitoring 'unusual' Unless rebutted Service, denied 52 permitted addressed beneficiaries trust arrangements form size. Mays Davis, 596. Nor company oil land lessees commonly supra. also McDonough Lambert, 838; 533—535; Teamsters 240 387, 390. 53 hand, able demonstrate Doe seeking clients tax-return-preparation firms prior shown accurate preparation sample returns. 749; 272; supra; 413. Similarly, attorney, bank, client attorney mailed large, anonymous check, purporting satisfy outstanding deficiency client. 515; Schulze Rayunec, 350 666. Like work tax-return- preparer cases, receipt mysterious check predicate case, proceeded point individual's become reasonable possibility, sheer speculation. 54 Today's shatters line absolutely indication Doe's character itself. Any fair game disclosure, happens want disclosed. new rule disregards construing 55 extraordinary departure hardly persuasive. notes witness refuse yet 'identity offender,' 147, 471, 979. true irrelevant. creature Constitution legislation peculiarly constraints. re Groban, 346, 510, (Black, J., dissenting). drew analogy 254, 112, support 'probable cause' fraud individualized party. A major Powell extrastatutory requirement unnecessary view 'legitimate purpose' requirements 56—57, 254—255. 56 next suggests innocuous, least Secrecy Act 19704 compels banks depositors. Aside here forces covered attendant regulations,5 argument basic flaw. If allows preinvestigative deposit, largely redundant. saved hearings debates directing basis Nation's banks, demanding 812, extended consideration complex constitutional issues raised Act; issues—e.g., Fourth Amendment Fifth rights secrecy domestic deposits—were left unresolved opinion, 67—75, 1520—1524. encompassed wonder why labored Shultz. 57 plain 'undermine prevents taxpayers.' applied strictures predecessors, many decades occasioning dire effects. danger exists, deal changes written. 58 testified: 'Q. What effect determined? 'A. Well, anything simple explanation, secreted means avoiding tax. Then you really reached base yet, correct? That's correct.' argues statute, violates Amendment. contention passed event, upheld challenge 63—70, 1508, 'first base,' 143, n. 1, bat knew both ball park well. distinct provisions. spatial proximity contemporary provisions utterly significance. 7806(b). canvass inquire, 3172 Revised Statutes 1874. Donaldson 517, 523—524, 91 538, 580. historical roots. enacted consolidate carry forward several 'no change existing law.' H.R.Rep.No.1337, 83d Cong., Sess., A536; S.Rep.No.1622, 617, U.S.Code Cong. Admin.News, Pages 4584, 5268. 3614 3615(a)—(c) 1939. Table Code, 68A Statutes-at-Large 969. 'for made.' Sections 'collectors' 'summons issued' whenever refuses make makes false fraudulent return. present earlier clearly scattershot technique learn depositor. Rather asking depositor was, exceeding filled were, presumably, made. redrafted doubtlessly apprise submitted He testified hearing: Public Law 91—508, 1114, 1730d, 1829b, 1951—1959, 1051—1062, 1101—1105, 1121 1122. 812. calls Current regulations $10,000. Regulations 103.22

Classification Label: 11