Court Opinion

ID: 9425994
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:16:24.70306+00
Date Added: 2024-06-11T17:22:58.467270
License: Public Domain

Mr. Justice Stewart,
with whom Mr. Justice Douglas joins,
dissenting.
The Court today says that it “recogniz[es] that the authority vested in tax collectors may be abused,” ante, *153at 146, but it is nonetheless unable to find any statutory limitation upon that authority. The only “protection” from abuse that Congress has provided, it says, is “placing the federal courts between the Government and the person summoned,” ante, at 151. But that, of course, is no protection at all, unless the federal courts are provided with a measurable standard when asked to enforce a summons. I agree with the Court of Appeals that Congress has provided such a standard, and that the standard was not met in this case. Accordingly, I respectfully dissent from the opinion and judgment of the Court.
Congress has carefully restricted the summons power to certain rather precisely delineated purposes:
“ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue tax or the liability at law or in equity of any transferee or fiduciary of any person in respect of any internal revenue tax, or collecting any such liability.” 26 U. S. C. § 7602.
This provision speaks in the singular — referring to “the correctness of any return” and to “the liability of any person.” The delineated purposes are jointly denominated an “inquiry” concerning “the person liable for tax or required to perform the act,” and the summons is designed to facilitate the “ [examination of books and witnesses” which “may be relevant or material to such inquiry.” 26 U. S. C. §§7602 (1), (2), and (3). This language indicates unmistakably that the summons power is a tool for the investigation of particular taxpayers.
By contrast, the general duties of the IRS are vastly broader than its summons authority. For instance, § 7601 mandates a “[cjanvass of districts for taxable persons and objects.” Unlike § 7602, the canvassing pro*154vision speaks broadly and in the plural, instructing Treasury Department officials
“to proceed, from time to time, through each internal revenue district and inquire after and concerning all persons therein who may be liable to pay any internal revenue tax, and all persons owning or having the care and management of any objects with respect to which any tax is imposed.” (Emphasis added.)
Virtually all “persons” or “objects” in this country “may,” of course, have federal tax problems. Every day the economy generates thousands of sales, loans, gifts, purchases, leases, deposits, mergers, wills, and the like which — because of their size or complexity — suggest the possibility of tax problems for somebody. Our economy is “tax relevant” in almost every detail. Accordingly, if a summons could issue for any material conceivably relevant to “taxation” — that is, relevant to the general duties of the IRS — the Service could use the summons power as a broad research device. The Service could use that power methodically to force disclosure of whole categories of transactions and closely monitor the operations of myriad segments of the economy on the theory that the information thereby accumulated might facilitate the assessment and collection of some kind of a federal tax from somebody. Cf. United States v. Humble Oil & Refining Co., 488 F. 2d 953. And the Court’s opinion today seems to authorize exactly that.
But Congress has provided otherwise. The Congress has recognized that information concerning certain classes of transactions is of peculiar importance to the sound administration of the tax system, but the legislative solution has not been the conferral of a limitless summons power. Instead, various special-purpose statutes have been written to require the reporting or disclosure of particular kinds of transactions. E. g., 26 IJ. S. C. §§ 6049, *1556051-6053, 31 U. S. C. §§ 1081-1083, 1101, and 1121— 1122, and 31 U. S. C. §§ 1141-1143 (1970 ed., Supp. III). Meanwhile, the scope of the summons power itself has been kept narrow. Congress has never made that power coextensive with the Service's broad and general canvassing duties set out in § 7601. Instead, the summons power has always been restricted to the particular purposes of individual investigation, delineated in § 7602.1
Thus, a financial or economic transaction is not subject to disclosure through summons merely because it is large or unusual or generally “tax relevant”- — but only when the summoned information is reasonably pertinent to an ongoing investigation of somebody's tax status. This restriction checks possible abuses of the summons power in two rather obvious ways. First, it guards against an *156overbroad summons by allowing the enforcing court to prune away those demands which are not relevant to the particular, ongoing investigation. See, e. g., First Nat. Bank of Mobile v. United States, 160 F. 2d 532, 533-535. Second, the restriction altogether prohibits a summons which is wholly unconnected with such an investigation.
The Court today completely obliterates the historic distinction between the general duties of the IRS, summarized in § 7601, and the limited purposes for which a summons may issue, specified in § 7602. Relying heavily on § 7601, and noting that the IRS “has a legitimate interest in large or unusual financial transactions, especially those involving cash,” ante, at 149, the Court approves enforcement of a summons having no investigative predicate. The sole premise for this summons was the Service’s theory that the deposit of old wornout $100 bills was a sufficiently unusual and interesting transaction to justify compulsory disclosure of the identities of all the large-amount depositors at the respondent’s bank over a one-month period.2 That the summons was not incident to an ongoing, particularized investigation, but was merely a shot in the dark to see if one might be warranted, was freely conceded by the IRS agent who served the summons.3
*157The Court’s opinion thus approves a breathtaking expansion of the summons power: There are obviously thousands of transactions occurring daily throughout the country which, on their face, suggest the possibility of tax complications for the unknown parties involved. These transactions will now be subject to forced disclosure at the whim of any IRS agent, so long only as he is acting in “good faith.” Ante, at 146.
This is a sharp and dangerous detour from the settled course of precedent. The decision of the Court of Appeals in this case has been explicitly accepted as sound by the Courts of Appeals of two other Circuits. See United States v. Berkowitz, 488 F. 2d 1235, 1236 (CA3), and United States v. Humble Oil & Refining Co., 488 F. 2d 953, 960 (CA5), cert. pending, No. 73-1827. No federal court has disagreed with it.
The federal courts have always scrutinized with particular care any IRS summons directed to a “third party,” i. e., to a party other than the taxpayer under investigation. See, e. g., United States v. Humble Oil & Refining Co., supra, at 963; Venn v. United States, 400 F. 2d 207, 211-212; United States v. Harrington, 388 F. 2d 520, 523. When, as here, the third-party summons does not identify the party under investigation, a presumption naturally arises that the summons is not genuinely investigative but merely exploratory- — -a device for general research or for the hit-or-miss monitoring of “unusual” transactions. Unless this presumption is rebutted by the Service, the courts have denied enforcement.
Thus, the IRS was not permitted to summon from a bank the names and addresses of all beneficiaries of cer*158tain types of trust arrangements merely on the theory that these arrangements were unusual in form or size. Mays v. Davis, 7 F. Supp. 596. Nor could the Service force a company to disclose the identity of whole classes of its oil land lessees merely on the theory that oil lessees commonly have tax problems. United States v. Humble Oil & Refining Co., supra. See also McDonough v. Lambert, 94 F. 2d 838; First Nat. Bank of Mobile v. United States, 160 F. 2d, at 533-535; Teamsters v. United States, 240 F. 2d 387, 390.
On the other hand, enforcement has been granted where the Service has been able to demonstrate that the John Doe summons was issued incident to an ongoing and particularized investigation. Thus, enforcement was granted of summonses seeking to identify the clients of those tax-return-preparation firms which prior investigation had shown to be less than honest or accurate in the preparation of sample returns. United States v. Theodore, 479 F. 2d 749; United States v. Turner, 480 F. 2d 272; United States v. Berkowitz, supra; United States v. Carter, 489 F. 2d 413. Similarly, enforcement was granted of summonses directed to an attorney, and his bank, seeking to identify the client for whom the attorney had mailed to the IRS a large, anonymous check, purporting to satisfy an outstanding tax deficiency of the client. Tillotson v. Boughner, 333 F. 2d 515; Schulze v. Rayunec, 350 F. 2d 666. Like the prior investigative work in the tax-return-preparer cases, the receipt of the mysterious check established the predicate of a particularized investigation which was necessary, under § 7602, to the enforcement of a summons. In each case, the Service had already proceeded to the point where the unknown individual’s tax liability had become a reasonable possibility, rather than a matter of sheer speculation.
Today’s decision shatters this long line of precedent. *159For this summons, there was absolutely no investigative predicate. The sole indication of this John Doe's tax liability was the unusual character of the deposit transaction itself. Any private economic transaction is now fair game for forced disclosure, if any IRS agent happens in good faith to want it disclosed. This new rule simply disregards the language of § 7602 and the body of established case law construing it.
The Court’s attempt to justify this extraordinary departure from established law is hardly persuasive. The Court first notes that a witness may not refuse testimony to a grand jury merely because the grand jury has not yet specified the “identity of the offender,” ante, at 147, quoting Blair v. United States, 250 U. S. 273, 282. This is true but irrelevant. The IRS is not a grand jury. It is a creature not of the Constitution but of legislation and is thus peculiarly subject to legislative constraints. See In re Groban, 352 U. S. 330, 346 (Black, J., dissenting). It is true that the Court drew an analogy between an IRS summons and a grand jury subpoena in United States v. Powell, 379 U. S. 48, 57, but this was merely to emphasize that an IRS summons does not require the support of “probable cause” to suspect tax fraud when the summons is issued incident to an ongoing, individualized investigation of an identified party. A major premise of Powell was that an extrastatutory “probable cause” requirement was unnecessary in view of the “legitimate purpose” requirements already specified in § 7602, 379 U. S., at 56-57.
The Court next suggests that this expansion of the summons power is innocuous, at least on the facts of this case, because the Bank Secrecy Act of 1970 4 itself com*160pels banks to disclose the identity of certain cash depositors. Ante, at 149-150. Aside from the fact that the summons at issue here forces disclosure of some deposits not covered by the Act and its attendant regulations,5 the argument has a more basic flaw. If the summons authority of § 7602 allows preinvestigative inquiry into any large or unusual bank deposit, the 1970 Act was largely redundant. The IRS could have saved Congress months of hearings and debates by simply directing § 7602 summonses on a regular basis to the Nation’s banks, demanding the identities of their large cash depositors. In California Bankers Assn. v. Shultz, 416 U. S. 21, we gave extended consideration to the complex constitutional issues raised by the 1970 Act; some of those issues — e. g., whether and to what extent bank depositors have Fourth Amendment and Fifth Amendment rights to the secrecy of their domestic deposits — were left unresolved by the Court’s opinion, 416 U. S., at 67-75. If the disclosure requirements in the 1970 Act were already encompassed within the Service’s summons power, one must wonder why the Court labored so long and carefully in Shultz.
Finally, the Court suggests that respect for the plain language of § 7602 would “undermine the efficacy of the federal tax system, which seeks to assure that taxpayers pay what Congress has mandated and prevents dishonest persons from escaping taxation and thus shifting heavier burdens to honest taxpayers.” Ante, at 146. But the federal courts have applied the strictures of § 7602, and its predecessors, for many decades without occasioning these *161dire effects. If such a danger exists, Congress can deal with it. But until Congress changes the provision of § 7602, it is our duty to apply the statute as it is written.
I would affirm the judgment of the Court of Appeals.

 The canvassing duties and the summons power have always been found in separate and distinct statutory provisions. The spatial proximity of the two contemporary provisions is utterly without legal significance. 26 U. S. C. § 7806 (b). The general mandate to canvass and inquire, now found in § 7601, is derived from § 3172 of the Revised Statutes of 1874. See Donaldson v. United States, 400 U. S. 517, 523-524. The summons power, however, has different historical roots. Section 7602, enacted in 1954, was meant to consolidate and carry forward several prior statutes, with “no material change from existing law.” H. R. Rep. No. 1337, 83d Cong., 2d Sess., A436; S. Rep. No. 1622, 83d Cong., 2d Sess., 617. The relevant prior statutes were §§ 3614 and 3615 (a)-(c) of the Internal Revenue Code of 1939. See Table II of the 1954 Code, 68A Stat. 969. Section 3614 granted the summons power to the Commissioner “for the purpose of ascertaining the correctness of any return or for the purpose of making a return where none has been made.” Sections 3615 (a)-(c) granted the summons power to “collectors” and provided that a “summons may be issued” whenever “any person” refuses to make a return or makes a false or fraudulent return. Thus, like the present § 7602, these earlier provisions clearly limited use of the summons power to the investigation of particular taxpayers.

 The summons here used a scattershot technique to learn the identity of the unknown depositor. Rather than merely asking bank officials who the depositor was, the IRS required production of all deposit slips exceeding specified amounts that had been filled out during the period when the suspect deposits were, presumably, made. Thus, enforcement of the summons, even as redrafted by the District Court, will doubtlessly apprise the IRS of the identities of many bank depositors other than the one who submitted the old and worn-out $100 bills.

 He testified at the enforcement hearing:
“Q. What possible tax effect could this have on the taxpayer if he is determined?
“A. Well, it could be anything from nothing at all, a simple ex*157planation, or it could be that this is money that has been secreted away for a period of time as a means of avoiding the tax.
“Q. Then you really have not reached first base yet, is that correct ?
“A. That’s correct.”

 Pub. L. 91-508, 84 Stat. 1114, 12 U. S. C. §§ 1730d, 1829b, 1951-1959, and 31 U. S. C. §§ 1051-1062, 1081-1083, 1101-1105, 1121-1122. See California Bankers Assn. v. Shultz, 416 U. S. 21.

 As limited by the District Court, the summons calls for production of deposit slips showing cash deposits in the amount of $20,000 and deposit slips showing cash deposits of $5,000 or more involving $100 bills, for deposits made between October 16 and November 16, 1970. Current regulations under the Bank Secrecy Act require reporting only with respect to cash transactions exceeding $10,000. 31 CFR § 103.22 (1974).