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United States v. Cunningham

September 15, 2010

UNITED STATES OF AMERICA, PETITIONER,
v.
NOEL S. CUNNINGHAM, RESPONDENT.



The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court

ORDER GRANTING PETITION TO ENFORCE INTERNAL REVENUE SUMMONS

The Government has petitioned the Court for an order enforcing the Internal Revenue Service ("IRS") Summons issued to Respondent Noel S. Cunningham ("Respondent"). On June 30, 2010, the Court issued an order to show cause why the IRS summons should not be judicially enforced. On July 6, 2010, the IRS personally served a copy of the order to show cause upon Respondent. On August 30, 2010, Respondent filed an answer in response to the order to show cause. On September 3, 2010, the Government filed a reply. On September 13, 2010, Respondent filed a reply to the Government's reply.

The hearing was held on the Government's petition on September 13, 2010, at 10:30 a.m. The Government was represented by Assistant United States Attorney Caroline J. Clark. Respondent appeared and represented himself. For the reasons explained herein, the Government's petition to enforce the summons is granted.

BACKGROUND

On February 19, 2010, John Black, a Revenue Officer employed by the IRS, issued an IRS summons to Respondent. [Declaration of Revenue Officer John Black in Support of Petition, ("Black Decl."), ¶ 3.] The IRS is conducting an investigation regarding an erroneous refund that was paid to Respondent and Respondent's personal tax liabilities. The summons relates to the collection of Respondent's unpaid assessed federal income tax liability for the tax year 2008 and information regarding an erroneous refund paid to him. [Id.] On February 22, 2010, the IRS personally served a copy of the summons on Respondent. [Id. at ¶ 4.]

The summons ordered Respondent to appear before the IRS on March 11, 2010. On March 10, 2010, Respondent provided a written request to Revenue Officer Black to make an audio recording of his appearance. [Id. at ¶ 5.] On March 11, 2010, Respondent appeared before Revenue Officer Black and to accommodate Respondent's request, the appearance was rescheduled until March 30, 2010. [Id.] On March 30, 2010, Respondent appeared before Revenue Officer Black but he did not produce any of the testimony, books, papers, records, and other data sought by the summons. [Id.] On April 29, 2010, Respondent appeared before Revenue Officer Black in response to a letter sent by the Office of Division Counsel of the IRS. [Id. at ¶ 6-7.] Respondent again failed to provide any of the information requested in the summons. [Id.] To date, Respondent has not provided the IRS with the testimony and documents requested by the summons. [Id. at ¶ 8.]

On June 30, 2010, the Government petitioned the Court to enforce the summons. On June 30, 2010, the Court set a hearing date for this matter and ordered Respondent to show cause why he should not be compelled to comply with the IRS summons. The IRS served this order to show cause on Respondent on July 6, 2010 and filed proof of service with the Court on July 12, 2010. On August 30, 2010, Respondent filed an answer in response to the order to show cause. On September 3, 2010, the Government filed a reply. On September 13, 2010, Respondent filed a reply to the Government's reply. On September 13, 2010, the Court held a hearing on the order to show cause.

DISCUSSION

Pursuant to 26 U.S.C. § 7602(a)(1), the Secretary of the Treasury may "examine any books, papers, records, or other data which may be relevant of material" in connection with "ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue . . . or collecting any such liability." Section 7602(a)(1) authorizes the Secretary to issue summonses to compel persons in possession of such books, papers, records, or other data to appear and produce the same and/or give testimony.

In order to obtain judicial enforcement of an IRS summons, the United States "must first establish it's '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 by the sworn declaration of the revenue agent who issued the summons that 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.

The Government's petition and Revenue Officer Black's supporting declaration satisfy all four elements of the Powell standard. First, the IRS is conducting an investigation with respect to the collection of Respondent's unpaid assessed federal tax liabilities for the tax year 2008 and information regarding an erroneous refund he was paid. [Black Decl., ¶ 2.] Such an investigation is expressly authorized by 26 U.S.C. § 7602(a). The Internal Revenue Code explicitly allows the issuance of a summons for the purpose of determining "the liability of any person for any internal revenue tax . . . or collecting any such liability . . ." 26 U.S.C. § 7602(a). The purpose for issuing a summons may include "inquiring into any offense connected with the administration or enforcement of the internal revenue laws." 26 U.S.C. § 7602(b). Thus, the summons was issued for a legitimate purpose. Second, Revenue Officer Black has declared in his affidavit that the information requested by the summons may be relevant to the IRS determination of the collectibility of Respondent's assessed income tax liability. [Id. at ¶ 11.] Third, the IRS does not already possess the testimony, papers, records, and other data sought by the summons issued to Respondent. [Id. ¶ 9.] Finally, the IRS has followed and exhausted all required administrative steps, but Respondent has not complied with the summons. [Id. at ¶ 10.] Thus, the Government has made prima facie showing that it is entitled to judicial enforcement of the summons.

In his answer, his reply brief filed on the date of the hearing, and during oral arguments, Mr. Cunningham argued the IRS lacks authority to issue and enforce summonses because the citation authority has not been published in the Federal Register. Mr. Cunningham also argued the summons violates the Paperwork Reduction Act because it does not display a valid OMB control number. Finally, Respondent argued he is not engaged in taxable activity. These arguments lack merit.

Notwithstanding Mr. Cunningham's arguments, Congress has imposed a tax on the taxable income of every individual, whether married or single. 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.*fn1 26 U.S.C. § 7601 et seq. As relevant to this action, the statute provides as follows:

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 ...


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