Opinion
CV 01-951-BR
January 8, 2002
Rodney R. Cook, West Linn, OR, Pro se Petitioner.
Michael W. Mosman, United States Attorney, Portland, OR.
Jeremy N. Hendon, Trial Attorney, Tax Division, U.S. Department of Justice, Washington, D.C., Attorneys for Respondents.
OPINION AND ORDER
Petitioner, appearing pro se, seeks to quash eight summonses issued by the United States Internal Revenue Service (IRS) to various third-party recordkeepers pursuant to 26 U.S.C. § 7609. This matter comes before the Court on Respondent United States' Motion for Partial Dismissal of the First Amended Petition to Quash Third Party Summons and Motion for Summary Denial of the Remaining Portions of the First Amended Petition to Quash Third Party Summons (#16). This Court has jurisdiction pursuant to 26 U.S.C. § 7604(a) and 7609(h)(1).
For the reasons that follow, the Court GRANTS Defendant's Motions and DENIES Petitioner's First Amended Petition to Quash Third Party Summonses (#4).
BACKGROUND
On June 5, 2001, IRS Service Agent Susan Signor issued administrative summonses to the following entities:
1. Fish Construction NW, Inc., 1834 S.W. 58th Avenue, Suite 206, Portland, OR 97221;
2. Primevest Financial Services, Inc., 400 First Street South, St. Cloud, MN 56301;
3. Prudential Mutual Fund Services, LLC, P.O. Box 8098, Philadelphia, PA 19101;
4. U.S. Bank, 2nd and Columbia Branch, 1340 S.W. 2nd Avenue, Portland, OR 97201;
5. Wells Fargo Bank Northwest, N.A., 5639 Hood Street, West Linn, OR 97068;
6. Pershing Division of Donaldson, Lufkin, Jenrette Securities Corporation, One Pershing Plaza, 10th Floor, Jersey City, N.J. 07399;
7. Homeside Lending Inc., 9601 McAllister Freeway, San Antonio, TX 78216.
Agent Signor issued an additional administrative summons on July 11, 2001, to Wells Fargo Bank Nevada, N.A., P.O. Box 4063, Concord, CA 94524. Each summons directed a third party recordkeeper to produce certain financial records pertaining to Petitioner. The IRS seeks these records in furtherance of its investigation of Petitioner's federal tax liabilities for the years 1998 and 1999.
Petitioner asserts the Court should quash the eight administrative summonses. Petitioner makes various challenges to the sufficiency of the summonses and the IRS's authority to issue them.
Pursuant to Fed.R.Civ.P. 12(b)(1), the IRS moves to dismiss that part of the First Amended Petition that seeks to quash the summonses issued to the Pershing Division of Donaldson, Lufkin, Jenrette Securities Corporation and to Homeside Lending, Inc. The IRS asserts the Court lacks subject matter jurisdiction to adjudicate Petitioner's challenge to these summonses. The IRS also moves for "summary denial" of Petitioner's efforts to quash the remaining summonses.
I. Motion to Dismiss for Lack of Subject Matter Jurisdiction
A. Standards
Pursuant to 26 U.S.C. § 7609(h)(1), subject matter jurisdiction over a petition to quash a summons lies in the "United States district court for the district within which the person to be summoned resides or is found." Petitioner has the burden of establishing that this Court possesses the necessary subject matter jurisdiction. Association of American Medical Colleges v. United States, 217 F.3d 770 (9th Cir. 2000).
When deciding a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), the court may consider affidavits and other evidence supporting or attacking a petitioner's jurisdictional allegations. See St. Clair v. City of Chico, 880 F.2d 199, 201 (9th Cir. 1989).
B. Jurisdiction to Quash the Summonses Issued to Pershing Division of Donaldson, Lufkin, Jenrette Securities Corporation and to Homeside Lending, Inc.
This Court's subject matter jurisdiction over Petitioner's effort to quash summonses is governed by 26 U.S.C. § 7609(h)(1) of the Internal Revenue Code. The Fifth Circuit has interpreted 26 U.S.C. § 7609(h)(1) as limiting jurisdiction to the district where the summons is to be answered. Masat v. United States, 745 F.2d 985, 987 (5th Cir. 1984). This Court has found no other case analyzing the statutory language "resides or is found." Courts that have addressed the issue summarily conclude they lack jurisdiction if the recordkeeper is "located" or has its principal place of business outside the district. See, e.g., Manikranz v. United States, 612 F. Supp. 590, 592 (S.D.Ind. 1985) (no jurisdiction when recordkeeper's principal place of business is outside the district); Cosme v. United States, 708 F. Supp. 45, 47 (E.D.N.Y. 1989) (jurisdiction exists where the third party resides or does business); Bilodeau v. United States, 577 F. Supp. 234 (D.N.H. 1983) (New Hampshire court does not have jurisdiction to quash summons issued to Massachusetts bank).
Petitioner has not shown that Pershing Division or Homeside Lending has an office in Oregon or that the records the IRS seeks from them are located in Oregon. Petitioner argues, however, that Homeside Lending "is found" in Oregon because it is registered with the Oregon Corporation Division and does business in Oregon. Petitioner also contends Pershing Division "is found" in Oregon because the entity of which it is a division, Donaldson, Lufkin, Jenrette Securities, is licensed with the Oregon Division of Finance and Corporation Securities.
Petitioner, however, offers no affidavit or other evidence to support these assertions. In any event, Petitioner cites no authority to support his contention that such registry or licensing would satisfy the jurisdictional requirement of 26 U.S.C. § 7609(h)(1), and the Court has found none. The personal jurisdiction cases cited and discussed by Petitioner are inapposite to the Court's analysis of subject matter jurisdiction pursuant to 26 U.S.C. § 7609(h)(1).
In the absence of Ninth Circuit precedent on the subject, this Court adopts and applies the Fifth Circuit's analysis set forth in Masat. The Fifth Circuit observed the statutory jurisdictional requirement "is not intended to permit a summons directed to a third-party recordkeeper at that recordkeeper's residence to be challenged wherever else in the world the recordkeeper may be found." Masat, 745 F.2d at 987.
In this case, Petitioner has not shown that either Pershing Division or Homeside Lending reside in Oregon. Neither company has an office in Oregon and, more significantly, Petitioner has not shown the records the IRS seeks are located in Oregon. This Court concludes it lacks subject matter jurisdiction to quash the summonses issued to Pershing Division and Homeside Lending.
II. Motion for Summary Denial
A. Standards and Burden of Proof
The Internal Revenue Code allows the IRS to issue a summons for production of information relevant to "determining the liability of any person for internal revenue tax." 26 U.S.C. § 7602(a). The taxpayer has the right to attempt to quash any such summons. 26 U.S.C. § 7609(b). The government, however, is entitled to enforcement of an IRS summons when it has established a prima facie case for enforcement and the taxpayer fails to show sufficient facts that indicate the existence of a defense to enforcement. United States v. Powell, 379 U.S. 48, 58 (1964).
To obtain judicial enforcement of a summons issued pursuant to 26 U.S.C. § 7609, the IRS need only show 1) the summons was issued for a legitimate purpose, 2) the information sought is relevant to that purpose, 3) the information is not already in the government's possession, and 4) the administrative steps required by the Internal Revenue Code have been followed. Powell, 379 U.S. at 57-58. "The government's burden is `a slight one' and is typically satisfied by the introduction of the sworn declaration of the revenue agent who issued the summons that the Powell requirements have been met." Fortney v. United States, 59 F.3d 117, 120 (9th Cir. 1995) (quoting United States v. Dynavac, Inc., 6 F.3d 1407, 1414 (9th Cir. 1993)).
In an enforcement proceeding, after the government establishes a prima facie case, the burden shifts to the petitioner to show sufficient facts to establish a defense to the summons. See, e.g., Lidas, Inc. v. United States, 238 F.3d 1076, 1081-82 (9th Cir.), cert. denied, 121 S.Ct. 2245 (2001). In this case, however, the government has not moved to enforce the summonses, but only to dismiss the First Amended Petition. This Court, therefore, adopts the approach set forth by the court in Cosme v. Internal Revenue Service, 708 F. Supp. 45 (E.D.N.Y. 1989) for determining such a motion. In Cosme, the court explained:
[W]hen faced with a petition to quash an IRS third-party summons, the government need not move to enforce the summons. Instead the government can rely on the voluntary compliance of third parties to effectuate the summons. Thus, when a taxpayer petitions to quash a summons, the government can move to dismiss the petition. Such a motion mirrors a 12(b)(6) motion to dismiss for failure to state a claim. In a motion to dismiss the petition, the government does not have to establish a Powell prima facie case. Instead, the burden shifts immediately to the petitioner to establish a valid defense to the summons.
Id. at 48 (citations omitted, emphasis in original).
Accordingly, this Court treats Respondents' Motion as a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6).
B. Petitioner Has Failed to Establish a Valid Defense to the Summonses
Petitioner raises several arguments in support of his request that the summonses be quashed. Petitioner's primary argument appears to be that the IRS's authority to issue summonses pursuant to 26 U.S.C. § 7602 is limited to information related to liquor, tobacco products, and cigarette papers and tubes. Petitioner's argument is without merit. The IRS is authorized to summon any records relevant to "determining the liability of any person for internal revenue tax." 26 U.S.C. § 7602(a). The IRS's authority is not limited in the manner Petitioner suggests.
Petitioner also contends the IRS failed to provide him with "IRS Form 12180, Third Party Authorization Form." The IRS, however, issued the summonses pursuant to 26 U.S.C. § 7602 and 7609, which do not require such a form.
Petitioner next claims the summonses are not sufficiently specific to satisfy 26 U.S.C. § 7603(a), which requires a summons to describe the records sought "with reasonable certainty." This argument also is without merit. Each summons is accompanied by a "summons rider" that describes the records sought with sufficient particularity to satisfy the statute.
Petitioner also maintains the summonses are unenforceable because the IRS "fails to state with specificity which particular tax Respondents are basing their claim on." Petitioner does not identify any authority to support his assertion, and the Court finds no such requirement.
Petitioner further contends the summonses are invalid because IRS Revenue Agents are not authorized to issue them. In support of this argument, Petitioner cites a "Handbook for Special Agents." The page attached to Petitioner's affidavit appears to be a page from a handbook specifically designed for Special Agents with instructions on the proper use of IRS Form 2039. It does not purport to restrict the service of administrative summonses only to Special Agents nor does it prohibit IRS Revenue Agents from issuing summonses.
Petitioner additionally argues Respondents' Motion to Dismiss does not comply with the Federal Rules of Civil Procedure and various local rules. Petitioner contends Respondents' Motion should be denied because Respondents did not follow the rules applicable to a motion for summary judgment. As noted, the Court finds Respondents' Motion is in the nature of a motion to dismiss and satisfies the procedural requirements applicable to such a motion.
Finally, Petitioner contends the declaration of Agent Michele McGeachy is defective because she has no personal knowledge of the facts set forth therein. Petitioner does not object to any particular factual assertions in Agent McGeachy's 12-page declaration. To prevail in his argument, Petitioner must offer some evidence that specific factual assertions in the declaration are incorrect or that Agent McGeachy falsely attested to her knowledge of them. See Fortney, 59 F.3d at 121 (taxpayer is not entitled to an evidentiary hearing unless he or she factually opposes the government's allegations by affidavit). Petitioner has not presented any such evidence. Moreover, Respondents' argument that Agent McGeachy is offering evidence from IRS business records is well taken. There is no requirement that Agent McGeachy have personal knowledge of facts reflected in IRS records.
In summary, Petitioner has not established any defense to the summonses.
CONCLUSION
For the reasons set forth above, the Court GRANTS Respondents' Motion for Partial Dismissal of the First Amended Petition to Quash Third-Party Summonses and Motion for Summary Denial of the Remaining Portions of the First Amended Petition to Quash Third Party Summons (#16). Accordingly, Petitioner's First Amended Petition to Quash Third Party Summons (#4) is DENIED, and this case is DISMISSED.
IT IS SO ORDERED.