Opinion
Case No. 06cv657-IEG(NLS).
May 25, 2006
Order Denying Respondent's Motion to Dismiss for Lack of Jurisdiction [Doc. No. 6]; Granting Petition to Enforce IRS Summons [Doc. No. 1]
The IRS has filed a petition for enforcement of two summonses it issued to Respondent Michael N. Benoit. The IRS issued the summonses as part of its investigation of Mr. Benoit's ability to pay income tax liabilities assessed against him for the years 1994 through 1996. The IRS is also investigating Mr. Benoit's liability for income tax liabilities for the years 2000 through 2004, years for which Mr. Benoit has not filed income tax returns.
In response to the government's petition and the Court's order to show cause, Mr. Benoit filed a motion to dismiss for lack of jurisdiction, arguing that he is not a "taxpayer" and is not liable for any income tax under Title 26 of the United States Code. On May 8, 2006 the Court ordered that Mr. Benoit's motion to dismiss be heard on shortened time along with the order to show cause. The government filed an opposition. Mr. Benoit filed an "objection" to the order shortening time for the hearing on the motion to dismiss, and also filed an objection to the government's opposition and his own reply brief.
A hearing was held on Mr. Benoit's motion to dismiss and the government's petition to enforce the IRS summonses on May 22, 2006. Henry Darmstadter appeared on behalf of the IRS. Mr. Benoit appeared on his own behalf. Following arguments, for the reasons explained below, the Court DENIES Mr. Benoit's motion to dismiss and GRANTS the government's petition to enforce the IRS summonses.
Background
IRS Revenue Officer Angela Martinez is conducting an investigation of Mr. Benoit's ability to pay his previously assessed income tax liabilities for the years 1994, 1995, and 1996, as well as Mr. Benoit's liability for income taxes for the years 2000 through 2004. [Declaration of Revenue Officer Angela Martinez in Support of Petition, ¶ 2.] On June 2, 2005, Revenue Officer Martinez issued an administrative summons to Mr. Benoit with regard to the collection of his previously assessed income tax liabilities. [Martinez Decl., ¶ 3, Exhibit A.] On June 7, 2005, Revenue Officer Martinez issued a summons to Mr. Benoit with respect to the determination of his income tax liabilities for the years 2000 through 2004. [Martinez Decl., ¶ 4, Exhibit B.] Both summonses called for Mr. Benoit to appear on June 26, 2006 to give testimony and produce documents. On June 22, 2005, Revenue Officer Martinez personally served Mr. Benoit with a copy of the two summonses. [Martinez Decl., ¶ 5.] Mr. Benoit failed to appear in response to the summons.
On July 12, 2005, Mr. Benoit sent a letter to Revenue Officer Martinez regarding the summonses, objecting that he was not a "taxpayer" or a person who was liable for a tax. [Martinez Decl., ¶ 8, Exhibit D.] In response to a letter from Revenue Officer Martinez, on July 22, 2005 Mr. Benoit sent another letter objecting to the summonses. [Martinez Decl., ¶ 8, Exhibits E and F.]
The IRS filed this petition to enforce the IRS summonses on March 24, 2006. On April 10, 2006, Revenue Officer Martinez personally served Mr. Benoit with a copy of the petition and order to show cause why the summonses should not be enforced.
Discussion
I. Mr. Benoit's Motion to Dismiss for Lack of JurisdictionMr. Benoit argues that the Court lacks both subject matter jurisdiction over this case and personal jurisdiction over him. Mr. Benoit argues that before the IRS can issue a summons to him, and before it can bring this petition to enforce the IRS summons, it must first prove that he is a "taxpayer" or a person who may be required to pay income taxes.
Notwithstanding Mr. Benoit's arguments, Congress has imposed a tax on the taxable income of every individual, whether married or single, as well as upon estates and trusts. 26 U.S.C. § 1(a) — (e). Congress has also granted the Secretary of the Treasury broad authority to discover and enforce individual income tax assessments. 26 U.S.C. § 7601 et seq. As relevant to this action,
The IRS, as a delegate of the Secretary of Treasury, has the authority to issue summons to investigate a taxpayer's federal income tax liability. United States v. Derr, 968 F.2d 943, 945 (9th Cir. 1992).
For the purpose of 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 . . . the Secretary is authorized —
(1) To examine any books, papers, records, or other data which may be relevant or material to such inquiry;
* * *
(3) To take such testimony of the person concerned, under oath, as may be relevant or material to such inquiry.26 U.S.C. § 7602(a) (emphasis added).
Furthermore, Congress has given the district courts jurisdiction to hear petitions to enforce IRS summons. Pursuant to 26 U.S.C. § 7604(a), "[i]f any person is summoned under the internal revenue laws to appear, to testify, or to produce books, papers, records, or other data, the United States district court for the district in which such person resides or is found shall have jurisdiction by appropriate process to compel such attendance, testimony, or production of books, papers, records, or other data." (Emphasis added). Both § 7602(a) and § 7604(a) give the IRS authority to seek information from "any person," and there is no requirement that the IRS first demonstrate that the individual has taxable income or is liable to pay a tax.
The Ninth Circuit has found that the payment of federal income taxes is not voluntary. In re Becraft, 885 F.2d 547, 548 (9th Cir. 1989) (noting that the court "need comment on the patent absurdity and frivolity" of respondent's argument that the Constitution does not authorize Congress to implement an individual income tax); Wilcox v. Commissioner, 848 F.2d 1007, 1008 (9th Cir. 1988). The Ninth Circuit has also found respondents' similar arguments that they are not "taxpayers" or engaged in "taxable activity" to be patently frivolous. United States v. Studley, 783 F.2d 934, 937 (9th Cir. 1985). This Court has subject matter jurisdiction over the government's petition to enforce the IRS summons, and the government does not need to first establish that Mr. Benoit is a "taxpayer."
Finally, the Court has personal jurisdiction over Mr. Benoit. As in all civil actions, the district court acquires personal jurisdiction in an IRS summons enforcement action when the IRS serves the summoned person with the petition and show cause order in the manner provided for by Rule 4 of the Federal Rules of Civil Procedure. United States v. Gilleran, 992 F.2d 232, 233 (9th Cir. 1993). The Revenue Officer personally served Mr. Benoit with the petition and order to show cause in the manner provided by Fed.R.Civ.P. 4(e)(2). Therefore, Mr. Benoit's motion to dismiss for lack of jurisdiction is DENIED.
2. Petition to Enforce the IRS Summons
In order to obtain judicial enforcement of an IRS summons, the United States "must first establish its 'good faith' by showing that the summons: (1) is issued for a legitimate purpose; (2) seeks information relevant to that purpose; (3) seeks information that is not already within the IRS' possession; and (4) satisfies all administrative steps required by the United States Code."Fortney v. United States, 59 F.3d 117, 119 (9th Cir. 1995) (citing United States v. Powell, 379 U.S. 48, 57-58 (1964)). "The government's burden is 'a slight one' and typically is satisfied by the introduction of the sworn declaration of the revenue agent who issued the summons that the Powell requirements have been met." Id. at 120. Once the government has made a prima facie showing that enforcement of the summons is appropriate, the burden shifts to the respondent to show that enforcement of the summons would be an abuse of the court's process. Powell, 379 U.S. at 58. The Supreme Court has characterized respondent's burden as a heavy one. Id.
Here, the government's petition and Revenue Officer Martinez's's supporting declaration satisfies all four elements of the Powell standard. First, the IRS is conducting an investigation to determine whether David Benoit is able to pay assessed taxes for the years 1994 through 1996, and whether Mr. Benoit is liable for income taxes for the years 2000 through 2004. [Martinez Decl., ¶ 2.] These are both legitimate purposes which Congress has expressly authorized under 26 U.S.C. § 7602(a) (IRS may issue summons "[f]or the purpose of 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 collecting any such liability. . . ."). Second, Revenue Agent Martinez issued summonses designed to obtain relevant information which will allow the IRS to determine whether Mr. Benoit is able to pay the previously assessed taxes and whether he is liable for taxes for the years 2000 through 2004. [Id., ¶¶ 4, 5, and 11.] Third, the IRS does not already possess the papers, records, and other data it seeks from Mr. Benoit. [Id., ¶ 9.] Finally, the IRS has followed and exhausted all required administrative steps, but Mr. Benoit has not complied with the summons. [Id., ¶ 6.] Thus, the government has made a prima facie showing that it is entitled to judicial enforcement of the summonses. There is no Department of Justice referral in effect regarding Mr. Benoit as described in 26 U.S.C. § 7602(d). [Id., ¶ 12].
"Enforcement of a summons is generally a summary proceeding to which a taxpayer has few defenses." Derr, 968 F.2d at 945. Mr. Benoit argues that because he filed a motion to dismiss, the Court must give him an additional period of time to respond in writing to respond to the petition. The Court's March 30, 2006 order to show cause directed that any response to the petition must be filed within fourteen (14) days prior to the May 22, 2006 hearing date. In addition, the Court's May 8, 2006 order shortening time for hearing on Mr. Benoit's motion to dismiss made clear that it was being heard "along with the order to show cause why the IRS summons should not be enforced" and that Mr. Benoit "shall be prepared to respond to the government's petition to enforce the IRS summons." [Doc. No. 9.] Mr. Benoit was provided with an opportunity to respond, and no additional time is warranted.