Harpole v. Calderone

Full title: JOHN THOMAS HARPOLE, Petitioner, vs. UNITED STATES, SPECIAL AGENT LAWRENCE…

Court: United States District Court, D. Alaska

Date published: Feb 13, 2001

No. A00-0228-CV (HRH) (D. Alaska Feb. 13, 2001)

Opinion

No. A00-0228-CV (HRH)

February 13, 2001

ORDER Motion for Summary Enforcement

H. Russel Holland, Judge Distrist of Alaska

Mr. Harpole has petitioned to quash¹ three Internal Revenue Service summonses directed against third-party record keepers. Respondents have moved for summary enforcement of the summonses.² The court scheduled and has heard oral argument on both of the foregoing matters. For reasons set forth below, petitioner's motion to quash the summonses is granted and respondents' motion for summary enforcement of those summonses is denied.

1 Clerk's Docket No. 1.

2 Clerk's Docket No. 8.

Facts

At oral argument, petitioner asserted for the first time that the summonses in question should be quashed because they do not comply with an IRS delegation order. In support of his argument, petitioner provided the court with a document which he represented to be an Internal Revenue Service (IRS) delegation order. The document states that summonses issued to third-party witnesses must be counter-signed by the revenue agent's supervisor, or bear a statement attesting to prior authorization, including the name and title of the authorizing official and the date of the authorization. The summonses in question solely bear the signature of the issuing special agent and contain no statement that the agent's action has been authorized by his superior. Petitioner's argument and supporting document gave the court pause, because, as the court reasoned, noncompliance with an IRS delegation order raises a material question of the Government's good faith in issuing the summonses.

Subsequent to oral argument, respondents submitted a short memorandum attaching a true and correct copy of IRS Delegation Order No. 4. The purpose of submitting this memorandum and attachment was to overcome petitioner's argument that the IRS had not complied with its own delegation order when issuing third-party summonses for petitioner's financial and credit information.

Discussion

In their memorandum, respondents argue that "contrary to petitioner's assertions, the delegation order does not require Special Agent Calderone to have a supervisor's signature to issue summonses."³ However, the delegation order, which is verbatim what petitioner gave to the court for consideration, does not support respondents' argument.

3 Clerk's Docket No. 15.

IRS Delegation No. 4 (Rev. 22) states the following:

(7) Authority: To issue summonses except "John Doe" summonses, and to perform other related functions as stated in Authority 1 of this Order except that on a summons to a third party witness, the issuing officer's manager, or any supervisory official above that level, has authorized the issuance of the summons in advance (evidenced by the supervisor's signature on the summons, or by a statement on the summons, signed by the issuing officer, that he/she had prior authorization to issue the summons and stating the name and title of the authorizing official and date of authorization)

(8) Delegated To: Internal Revenue Agents, Estate Tax Attorneys, Estate Tax Examiners, Revenue Service and Assistant Revenue Service Representatives, Tax Auditors, Revenue Officers, GS-9 and above, Tax Law Specialists, and Compliance Officers.

IR Manual § 1.2.2.2 (11-08-2000) (emphasis added) . This portion of the delegation order clearly states that a summons to a third-party witness must bear evidence that a manager or supervisor has authorized the issuance of the summons in advance. The issuing officer's manager or supervisory must sign the summons, or the issuing officer himself must sign a statement of prior authorization which includes the name and title of the authorizing official and the date of authorization. The quoted language directly contradicts respondents' assertion that the delegation order does not require Special Agent Calderone to have a supervisor's signature to issue summonses, while it supports the assertion made by petitioner at oral argument.

The summonses issued by respondents to petitioner' s third-party record keepers do not contain any authorization as required by IRS Delegation No. 4. The legal significance of this fact is that it prevents respondents from establishing that the IRS issued the summonses in good faith. Whenever a petitioner challenges a summons issued by the IRS, or when the IRS moves to enforce a summons, the IRS bears the burden of showing that it acted in good faith. United States v. Powell, 379 U.S. 48, 57-58 (1964) . To establish good faith, Powell requires, among other things, that the IRS show that it has complied with administrative steps required by the Internal Revenue Code. Id.; see also, United States v. LaSalle Nat'l Bank, 437 U.S. 298, 313-314 (1978) . A showing of non-compliance with the delegation order prevents respondents from establishing this necessary element of good faith.

Conclusion

In consideration of the foregoing, the court denies respondents' motion for summary enforcement and grants petitioner's motion to quash the three summonses.