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30 Reply to Objection to Summons

The United States of America, through its undersigned counsel, hereby responds to the arguments contained in the opposition filed by the respondent in this matter and seeks an order directing him to fully obey the subject summons. Essentially, the respondent contends: (1) the United States is already in possession of the information and documents sought by the summons; (2) the United States has failed to demonstrate the relevance of the information and documents sought; and, (3) the taxpayer has no tax liability. The United States will address each of these arguments, infra.

Statement of Facts

On or about _______________________________, the United States initiated the current summons enforcement proceeding. In its petition, the United States set forth that the IRS is conducting an investigation to ascertain the correctness of the income tax return (Form _________) filed by ________________________________________________for the _________ year. At the same time it filed its petition, the government filed the declaration of ______________________________. In his declaration, _________________________________ explained the purpose of his investigation and stated that the requested documents and information were related to that purpose. In addition, Agent __________ stated that the documents and information requested were not in the possession of the IRS, that the administrative steps required by the Internal Revenue Code for the issuance of the summons had been complied with, and that no Justice Department referral was in effect with respect to ____________ for the __ ________ tax year.

The Court issued a show cause order and, on _____________________________ the respondent was served with copies of the order, the petition, and the declaration. The respondent has filed an opposition.

The Summons Should Be Enforced

In order to obtain enforcement of a summons, the United States must demonstrate that:

(1) the IRS investigation is being conducted for a legitimate purpose; (2) the information sought by the summons is relevant to that purpose; (3) the information sought is not already in the possession of the IRS; and, (4) the administrative steps required by the Internal Revenue Code have been followed. United States v. Powell, 379 U.S. 48, 57 (1964). It has repeatedly been held that the burden of satisfying the Powell requirements may be met by the introduction of the sworn affidavit of the IRS agent who issued the summons. United States v. Gilleran, 992 F.2d 232, 233 (9th Cir. 1993); United States v. Samuels, Kramer & Co., 712 F.2d 1342, 1344-1345 (9th Cir. 1983). The United States' burden is a slight one. Fortney v. United States, 59 F.3d 117, 118 (9th Cir. 1995). It need only demonstrate good faith in issuing the summons. United States v. Stuart, 489 U.S. 353, 359 (1989).

Once the government establishes a prima facie case for enforcement, as it has in the present case, the burden shifts to the party opposing enforcement to disprove the existence of the Powell elements or to demonstrate that judicial enforcement of the summons would constitute an abuse of the Court's process. Powell, 379 U.S. at 57-58; Gilleran, 992 F.2d at 233. "This burden is a heavy one...the opponent must demonstrate specific facts and evidence to support his allegations." Liberty Financial Services v. United States, 778 F.2d 1390, 1392 (9th Cir. 1985); United States v. Derr, 968 F.2d 943, 945 (9th Cir. 1992) ("Enforcement of a summons is generally a summary proceeding to which a taxpayer has few defenses").

In the current case, the declaration of _______________ Agent _________________, the IRS agent who issued the summons the government is seeking to enforce, establishes each of the Powell elements. Mr. __________________ is conducting an investigation to ascertain the correctness of the income tax return (Form _______) filed by _______________________________________ for the ________ tax year. This is, in accordance with Section 7602(a) of the Code, clearly a proper purpose. As will be further explained, infra, the documents and information he seeks are directly related to that purpose. And, finally, in his declaration Agent ________________ indicates the IRS is not in possession of the information sought by the summons, he has complied with all of the administrative steps required by the Internal Revenue Code, and there is no Justice Department referral in effect with respect to the respondent for __________. As a result, unless the respondent can demonstrate that it would be an abuse of this Court's process to do so, the summons should be enforced. We believe the respondent has failed to sustain this burden.

Relevance Of Documents & Information Summoned

Preliminarily, the respondent's contention that the taxpayer "has no tax liability," has no place in the current discussion. A summons enforcement proceeding is summary in nature and is not the proper forum for a determination whether a taxpayer has, or does not have, a tax liability. Additionally, "ascertaining the correctness of a return," by definition, suggests that a taxpayer may very well not have a tax liability different from that which appears on the return that is being investigated. Nonetheless, the IRS is well within its rights to investigate whether a taxpayer has accurately reported its tax liability and it need not simply accept a taxpayer's word that the taxpayer has no liability.

The respondent contends the government may not conduct a "fishing expedition" and cannot obtain an order enforcing a summons solely on the basis that "some chance of relevance exists or some possibility of relation remains..." This argument is specious in the current context, however, since Agent __________________ declaration and the information contained in the respondent's pleadings demonstrate a direct relationship between the respondent and the taxpayer. Agent ____________________ is not, consequently, harassing the respondent nor merely hoping against hope that the respondent might possibly have information and documents that are material to the investigation. Instead, it is entirely likely, even probable, that the respondent's testimony and the specific documents subject to this request are directly relevant to the investigation.

The definition of relevance in the summons context is extremely broad. United States v. Noall, 587 F.2d 123, 125 (2d Cir. 1978), cert. denied, 441 U.S. 923 (1979). This broad construction follows from the wording of Section 7602(a)(1) which authorizes the examination of books and records that "may be relevant or material to the inquiry." Such a construction is entirely logical since the overriding purpose of any investigation is to uncover or determine the facts. See, United States v. Arthur Young & Co., 465 U.S. 805, 813-814 (1984); La Mura v. United States, 765 F.2d 974, 979-983 (11th Cir. 1985).

Finally, in its Order to Show Cause, the Court specifically instructed the respondent to show cause why he should not be required to permit the copying of all documents responsive to the requests set forth in the subject summons. The respondent wholly fails to address this matter in his pleading so, based upon the Court's direction that only issues "brought into controversy by the responsive pleadings" will be considered, the government is entitled to an order directing the respondent to permit the copying of the documents identified in the summons. We note that throughout his papers the respondent is careful to assert that he permitted Agent _______________ to "review," "inspect," and/or "examine" the summoned documents. This seems a conscious effort to avoid a discussion of the "copying" issue and would call into question any future contention by the respondent that he merely "neglected" to address this matter.

Conclusion

As we have demonstrated, the documents and testimony requested in the subject summons are directly relevant to the investigation being conducted by ______________ Agent __________________. Further, the respondent has failed to set forth any evidence disputing Agent Beatty's testimony that he is conducting an investigation to ascertain the correctness of __________ income tax return (Form ________) for __________, that the IRS is not in possession of the documents or information requested in the summons, that the administrative steps required by the Internal Revenue Code have been followed, and that no Justice Department referral is in effect with respect to Mr. ________ for the year ________. The respondent has, likewise, failed to present evidence suggesting the IRS is pursuing this matter for an improper purpose. As a result, it is clear the IRS is not merely harassing the respondent nor is it on a fishing expedition with no basis for believing a nexus exists between _______ _ and the taxpayer. Rather, the United States has demonstrated the respondent is in possession or control of information and documents related to an ongoing investigation and, accordingly, has shown that it is entitled to an order directing the respondent to appear before Agent ___________ and fully obey the subject summons. Finally, the Court should direct the respondent that his compliance must include permitting the copying of all of the summoned documents.

Respectfully submitted this __________ day of February, 1997.

United States Attorney

_________________________________

Assistant United States Attorney

October 1997 Tax Resource Manual 30