Legal Document

469 U.S. 310 105 S.Ct. 725 83 L.Ed.2d 678 TIFFANY FINE ARTS, INC., et al.v.UNITED STATES al. No. 83-1007. Argued Oct. 31, 1984. Decided Jan. 9, 1985. Syllabus Petitioners are a holding company and its tax-shelter-promoting subsidiaries. The Internal Revenue Service (IRS) issued summonses to petitioners pursuant § 7602(a) of the Code, which empowers IRS serve summons on any person, without prior judicial approval, if information sought is necessary ascertain that person's tax liability. requested petitioners' financial statements for certain fiscal years, as well names persons who had licenses from distribute medical device. When refused comply with summonses, Government brought an enforcement action in Federal District Court. opposed ground IRS's request licensees' indicated "primary purpose" was audit licensees, not petitioners. contended wanted names, it could proceed solely under but would have also "John Doe" procedures 7609(f), requires obtain approval seeking liability unnamed taxpayers. Court found made sufficient showing interest auditing returns enforced summonses. Appeals affirmed, 7609(f) applies only when issues identifiable party whom has no order investigate third parties' liabilities. Held: Where, 7602(a), serves known taxpayer dual purpose investigating both taxpayer's liabilities, need long all relevant legitimate investigation summoned taxpayer. Where itself being investigated, party's self-interest provides protection against evils Congress remedy enacted restraint exercise power context. Here, record, "may be relevant" petitioners, thus were properly enforced. Pp. 314-324. 718 F.2d 7 (2 Cir. 1983), affirmed. Michael D. Savage, Washington, D.C., Lawrence G. Wallace, respondents. Justice MARSHALL delivered opinion 1 question presented this case whether must Code 1954, 26 U.S.C. named liabilities other, parties. 2 * Petitioner Tiffany Fine Arts, Inc., various subsidiaries promote shelters.1 On October 6, 1981, Agent Joel Lewis four Tiffany, 7602(a). This provision liability.2 Tiffany's years ending 1979, 1980, list addresses, Social Security numbers, employer identification numbers acquired device "Pedi-Pulsor."3 then United States Southern New York, §§ 7402(b) 7604(a). 3 enforcement, principally licensees clearly Pedi-Pulsor itself. offered produce records redacted. It took position that, truly interested liability, redacted adequate investigation. 4 According go further 7602, requirements John Doe summonses.4 Under cannot taxpayers obtaining at ex parte proceeding. 5 rejected offer documents. In affidavit filed support Government's petition, asserted: 6 "I am conducting investigation, one correctness consolidated income by [Tiffany] 1980. One aspect my into corporate concerns possible underreporting received questionable business deductions claimed subsidiaries." App. 14a. supplemental affidavit, conceded "[i]t certainly once individual [Pedi-Pulsor] identified inquiry will they correctly reported their liabilities." Id., 24a. He reasserted, however, his Tiffany; particular, he failed report recourse nonrecourse notes provided licensees. Lewis, performed 8 Second Circuit (1983). held provisions apply "the issue[s] ha[s] potential parties." 13. Given Court's finding here "even assuming . partly customers." 13-14. 9 Courts divided scope 7609(f). Eighth Eleventh Circuits, like case, seeks parties carry out party. See v. Barter Systems, 694 163 (CA8 1982); Gottlieb, 712 1363 (CA11 1983). contrast, Sixth taken opposite position, whenever parties—even cases purposes recipient summons. Thompson, 701 1175 We granted certiorari resolve conflict. 466 925, 104 1705, 80 179 (1984). affirm. II 10 7609 response two decisions we gave broad construction general therefore useful review those before embarking analysis statutory provision. 11 Donaldson States, 400 517, 91 534, 27 580 (1971), 7602 prepared employees. employee obtained preliminary injunction restraining complying moved enforcement. response, stated complied " 'were for' injunction." 521, S.Ct., 537. employee, motions intervene proceedings, Rule Civil Procedure 24(a)(2), oppose outcome adequately represented employer. employee's legally protectible affirmed denial intervention. 12 Four later, decided Bisceglia, 420 141, 95 915, 43 88 (1975). bank identifying deposited large amount money severely deteriorated bills. bills appeared been stored period time abnormal conditions, suspected hidden avoid taxes. Although recognized danger might use "conduct 'fishing expeditions' private affairs depositors," id., 150-151, 921, concluded facts abused power. Thus, enforceable. 13 Section 7609, issue these decisions. Both Senate House Reports accompanying bill became focused exclusively problem "third-party summonses"—that is, served S.Rep. 94-938, p. 368 (1976); H.R.Rep. 94-658, 306 fact, Bisceglia cited texts Reports. 14 Referring Donaldson, Report noted then-existing law, "there legal requirement (or other party) whose or transactions relate informed third-party served." 306-307; see 368. stated: 15 "In cases, where [IRS] reason believe occurred may affect some taxpayer, unable determine specific involved, so-called 'John Doe' summons, means books relating requested, although name specified." 368; 306. 16 asserted standards enunciated "unreasonably infringe civil rights taxpayers, including right privacy." 307. stems concern. To deal knows identity 7609(a) (b); subsections require give notice "to proceeding respect such summons." provision, overturned result reached Donaldson. 17 does know advance course, possible. As substitute (b), provides: 18 "Any identify person after court Secretary establishes that— 19 "(1) relates particular ascertainable group class persons, 20 "(2) there reasonable basis believing fail internal revenue 21 "(3) examination (and issued) readily available sources" (emphasis added). 22 7609(h)(2) (providing determinations parte, petition supporting affidavits). our decision did provide restraints, context, re Tax Liabilities Does, 671 977, 979 (CA6 1982). With background mind, turn consider application case. III 23 starkly posed. matter fact—and affirmed—that pursuing liability.5 At same time, assumed, dispute, intended us, then, 24 "a formidable line precedent construing congressional intent uphold authority [this] effective laws undercut contrary legislative purposes." Euge, 444 707, 715-716, 100 874, 880-881, 63 141 (1980). Just last Term, reemphasized "restrictions upon IRSs should avoided 'absent unambiguous directions Congress.' Arthur Young & Co., 465 805, 816, 1495, 1502, 79 826 (1984) (quoting U.S., 150, 921). Thus examine statute history indicate expressly considered here, attempt discern enacting A. 25 find language little direct help determining how treat By terms, "which issued." argues term "person" read "persons." Tr. Oral Arg. 6. contends because literally applies. F.2d, 1178-1179. diametrically odds Tiffany's: "Section terms 'does [it] issued.' That simply here. district explicitly '[i]n Arts Inc. Subsidiaries.' Brief 28 168. 29 task ask us engage reference person" "every "at least person." reluctant, alone, reach even tentative conclusion about Neither strikes compelling. 30 Turning attention history, note different important respect: address situation 1976 provisions. contain mention They focus themselves investigation.6 conclude B 31 We, therefore, rise prompted enact discuss worry: receiving protecting privacy target 368-369; Such incentive vigorously. Then, real adversary, "fishing expeditions" unnecessarily trample privacy. 373; 311. determined uses conduct target, instead look around targets investigate, infringed unjustifiably. 32 concern, (b) interest—those actually investigated—the proceedings. Similarly, adopted (b). effect, takes place affected exerts influence IRS. However, opportunity assert "personal defenses," attorney-client Fifth Amendment privileges 309; 370. What guarantee through albeit unknown 33 When, interests stake very different. First, definition, engaged expedition" incidental effect justified enforcing laws. More importantly, circumstances, vigilance party—complemented resist assurance strike arbitrarily seek irrelevant materials. See, e.g., Powell, 379 48, 57-58, 85 248, 254-255, 112 (1964) ("[The IRS] show conducted purpose, already within [IRS's] possession, administrative steps required followed"). example, argued vigorously—albeit unsuccessfully 34 say, guaranteed adversary. party, recognize trampled upon. Congress, ensure adversary All investigation—or context standing challenge authority. up authority, trouble correct it. 35 reject argument below, can circumvent merely stating do persuasive reasons. still opposing way ascertaining fact addressed significantly attenuated. finds intend unless 36 Our met resort imply information, satisfy Therefore, next C 37 During perform never held, investigations intrusive Instead, standard relevance. supra, 57, 254-255. persuasively contact verify occurred. acknowledged relevance licensees: "They want check number them random, willing understand entitled [Tiffany's] books." 35. refused, think course "50 50 150 participants." Ibid. 38 record agree Tiffany. many, which, IRS—not Tiffany—to make. Having "unambiguous direction" needs failure serving undermine goals enforced.7 IV 39 hold where, parties, set judgment 40 so ordered. Throughout opinion, refer collectively "Tiffany." section "For return, making return none made, law equity transferee fiduciary tax, collecting delegate authorized— books, papers, records, data material inquiry; summon liable act, officer having custody, care account containing entries [or delegate] deem proper, appear data, testimony, oath, take testimony concerned, inquiry." president, Pedi-Pulsor, designed permit bed ridden patients prevent deep vein thrombosis leg movement assisted Pedi-Pulsor." Affidavit Opposition Order Show Cause, 16-17. Two production clients lithographs After market lithographs, dropped information. "A essence, direction surrender concerning currently IRS." 978 devotes considerable energy arguing clients." 11. primary secondary purpose; matters event, "this frequently reluctance disturb findings concurred lower courts." Rogers Lodge, 458 613, 623, 102 3272, 3278, 73 1012 (1982). Blau Lehman, 403, 408-409, 82 451, 454-455, 403 (1962). upset below. Amici First Western Securities Samuels, Kramer Co. argue referred example amici shareholders involved taxable reorganization characterized corporation (in letter shareholders) nontaxable transaction." 373 311 amici, indicate, Nor corporation, tell actual referred. Government, states case: Armour, 376 F.Supp. 318 (Conn.1974). officials learn shares. scarcity involved. Moreover, consistent amici's reading knowing referring rather than Armour. disinclined great weight advanced amici. discretion conclude, reviewing submissions oral argument, evidentiary hearing unnecessary. Morgan Guaranty Trust 572 36, 42-43, n. (CA2), cert. denied sub nom. Keech 439 822, 99 89, 58 114 (1978). 527, 540, burden abuse court's process taxpayer." Even factually true, central raised Court—that primary, sole, quashing

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