Court Opinion

ID: 8929213
Source: CourtListenerOpinion
Date Created: 2022-11-27 06:56:39.989371+00
Date Added: 2024-06-11T17:09:28.376258
License: Public Domain

KRUPANSKY, Circuit Judge,
concurring in part and dissenting in part.
I agree with the majority’s decision to remand the case as it relates to the defendant United States and the exceptions to the non-disclosure provisions of 26 U.S.C. § 6103. However, I believe that the actions of the individual defendants impinged upon plaintiff’s constitutional liberty interest to operate a business without arbitrary interference. Accordingly, I respectfully dissent.
The record in this case discloses that the issue as to whether Mid-South was in fact operating an abusive tax shelter had not been officially determined by the agency. Despite this critical omission, IRS personnel unilaterally concluded that Mid-South’s tax promotion was not legitimate, and arbitrarily notified all of Mid-South’s clients of this determination, thus virtually destroying Mid-South’s business. The defendant’s action in posting the pre-filing letters becomes all the more capricious when viewed in light of the facts that (1) Mid-South was neither notified of the IRS’ intent to mail the notices nor given the opportunity to defend its promotion, and (2) that no statutes or regulations enacted pursuant thereto authorized the IRS to implement such unilateral action. To the contrary, regulations enacted subsequent to the Mid-South incident mandate notification of the tax shelter promoter at the initial stages of the investigation, and provide numerous opportunities for the promoter to defend his activity. See Internal Revenue News Release IR-83-129 (October 19, 1983). In sum, it is clear that the arbitrary and capricious actions of the IRS’ agents in the instant case were in direct contravention of Mid-South’s liberty interest to operate its business free of such interference as recognized by this circuit in Sanderson v. Village of Greenhills, 726 F.2d 284, 287 (6th Cir.1984) (per curiam).
Thus, I would remand with instructions to the district court to analyze Mid-South’s fifth amendment due process claim against the individual defendants in light of plaintiff's constitutional liberty interest.