Opinion
Civil Action No. 3:04-CV-0717-D.
January 27, 2005
FINDINGS, CONCLUSIONS, AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
Pursuant to the District Court's Order of Reference, entered June 10, 2004, United States' Motion to Dismiss Petition for Declaratory and Injunctive Relief and for Enforcement of Third-Party Summons ("Motion"), filed June 7, 2004, has been referred to the United States Magistrate Judge for hearing, if necessary, and for recommendation. This Court has considered the Motion, the supporting appendix, and the applicable law. Petitioner Kevin Haydel ("Petitioner") has not filed a response. For the reasons stated below, this Court recommends that the Motion be
GRANTED.
I. Background
This case involves an investigation into Petitioner's potential income tax liability. The Internal Revenue Service ("IRS") issued a third-party summons to Petitioner's employer, the Trammell Crow Company of Dallas ("Trammell"), for it to produce Petitioner's payroll records and copies of W-4 forms. Petitioner subsequently filed his petition seeking testimony from an IRS representative regarding the jurisdictional validity of the summons, and Trammell as a result, has refused to comply with the third-party summons. Respondent United States of America ("Respondent") then filed this motion to enforce the third-party summons served on Trammell, and to dismiss Petitioner's petition for declaratory and injunctive relief.
II. Analysis
The IRS is authorized to issue a third-party summons for the production of records that will help in determining an individual's tax liability. See 26 U.S.C. §§ 7602, 7609. The taxpayer identified in the summons may move to quash the summons under 26 U.S.C. § 7609(b)(2). Deal v. United States, 759 F.2d 442, 443 (5th Cir. 1985). The United States may then obtain a judicial enforcement of the summons by showing that: (1) the investigation of the taxpayer is being conducted for a legitimate purpose; (2) the information sought is relevant for that legitimate purpose; (3) the IRS does not already have the sought information; and (4) the required administrative steps set out in the Internal Revenue Code have been followed. 26 U.S.C. § 7609(b)(2)(A); United States v. Powell, 379 U.S. 48, 57-58 (1964). See also Mazurek v. United States, 271 F.3d 226, 229-30 (5th Cir. 2001) ("We then determine whether the government has demonstrated a prima facie case by fulfilling the four factors delineated in Powell. The burden on the government to produce a prima facie case is `slight' or `minimal.'") (citations omitted). The United States may satisfy these factors through an affidavit of the agent who issued the summons and is seeking to enforce it. United States v. Davis, 636 F.2d 1028, 1034 (5th Cir. 1981) (citations omitted). See also Mazurek, 271 F.3d at 230 ("The government's minimal burden at this stage can be fulfilled by a `simple affidavit' by the IRS agent issuing the summons. . . . With the Lyons affidavit, therefore, the IRS established a prima facie case under Powell.") (citing Davis, 636 F.2d at 1034; Lidas v. United States, 238 F.3d 1076, 1082 (9th Cir. 2001)).
Respondent has demonstrated a prima facie case for the judicial enforcement of the third-party summons served on Trammell through the declaration of Michael Boaz, the IRS Revenue Officer involved in the investigation of Petitioner. Respondent has shown that the investigation of Petitioner is being conducted for the legitimate purpose of determining Petitioner's income tax liability for the tax years 2001 and 2002. (App. at Ex. 1). Respondent has also shown that the requested records are relevant to the investigation of Petitioner's tax liability. Id. Further, Mr. Boaz's declaration states that the requested documents are not already in the IRS's possession. Id. Lastly, Respondent has also shown that the required administrative steps set out in the Internal Revenue Code for the service and issuance of a summons were followed. Id.
Even if the United States establishes a prima facie case for the enforcement of a summons, the taxpayer still `"may challenge the summons on any appropriate ground."' Powell, 379 U.S. at 58 (quoting Reisman v. Caplin, 375 U.S. 440, 449 (1964)). The taxpayer may rebut the prima facie case by either refuting one of the Powell factors established by the IRS or by showing that the enforcement of the summons would be an "abuse" of the judicial process. Mazurek, 271 F.3d at 230-31 (citing Powell, 379 U.S. at 58; Davis, 636 F.2d at 1034). "An abuse of the judicial process occurs when a summons is sought `for an improper purpose, such as to harass the taxpayer or to put pressure on him to settle a collateral dispute' or obtaining information solely for a criminal prosecution under the guise of a civil liability investigation." Id. at 231 (quoting Powell, 379 U.S. at 58; citing United States v. Southeast First Nat'l Bank, 655 F.2d 661, 665 (5th Cir. 1981)). However, "in contrast to the IRS's slight prima facie burden, the taxpayer's burden at the rebuttal stage is heavy." Id. at 231.
Petitioner has not shown that there are any applicable appropriate grounds to challenge the third-party summons. Petitioner asserts that the summons is not valid because Trammell is not located within the legislative and territorial jurisdiction of the United States. (Pet. at 4, 5, 7, 24). However, Petitioner has conceded that Trammell is located in Dallas, Texas. (Pet. at 24). The District Court has jurisdiction to enforce the third-party summons and also to consider Petitioner's motion to quash, because Trammell is located within the Northern District of Texas. See 26 U.S.C. § 7609(h)(1) ("The United States district court for the district within which the person to be summoned resides or is found shall have jurisdiction to hear and determine any proceeding brought under subsection (b)(2). . . ."); Deal, 759 F.2d at 444 (interpreting 26 U.S.C. § 7609(h)(1) to mean that "jurisdiction is exclusively in the district where the third-party record keepers reside") (citing Masat v. United States, 745 F.2d 985 (5th Cir. 1984)).
III. Conclusion
For the reasons stated above, this Court recommends that the Motion be GRANTED.