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In the Matter of the Tax

December 15, 2011

IN THE MATTER OF THE TAX
LIABILITIES OF: JOHN DOES, UNITED STATES TAXPAYERS, WHO DURING ANY
PART OF THE PERIOD JANUARY 1, 2005, THROUGH DECEMBER 31, PROPERTY IN THE STATE OF CALIFORNIA FOR LITTLE OR NO CONSIDERATION SUBJECT TO CALIFORNIA PROPOSITIONS 58 OR 193, WHICH INFORMATION IS IN THE POSSESSION OF THE STATE OF CALIFORNIA BOARD OF EQUALIZATION, SENT TO BOE BY THE 58 CALIFORNIA COUNTIES PURSUANT TO PROPOSITIONS 58 AND 193.



The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge

MEMORANDUM AND ORDER

Presently before the Court is the United States' Ex Parte Petition for Leave to Serve "John Doe" Summons ("Petition"). By way of its Petition, the United States seeks leave to serve, pursuant to 26 U.S.C. § 7609(f), an Internal Revenue Service ("IRS") "John Doe" Summons (hereafter "Summons") on California's Board of Equalization ("BOE"). For the following reasons, the United States' Petition is GRANTED.

BACKGROUND*fn1

In its previous Order, ECF No. 3, the Court denied the United States' Petition on the grounds that it did not meet one of the three elements necessary to grant a Summons. Because failing to meet one of the three elements is dispositive, the Court did not address the other two elements. In its Order, the Court also advised the United States that if it chose to resubmit the Petition, it would have to address four additional inquiries regarding the constitutionality of issuing a Summons to a state.

The United States has now resubmitted the Petition. The revised Petition expands on the discussion of the three required elements and also addresses each of the four inquires raised by the Court.

This Order first addresses each of the three elements necessary for the issuance of a Summons and then turns to a consideration of each of the United States' responses to the Court's four additional inquiries.

"For the purpose of ascertaining the correctness of any return, making a return where none has been made, [or] determining the liability of any person for any internal revenue tax...," the Internal Revenue Code ("IRC") empowers the Secretary of the Treasury, or its delegate to:

[S]ummon the person liable for tax or required to perfor m the act...or any person having possession, custody, or care of books of account containing entries relating to the business of the person liable for tax or required to perform the act, or any other person the Secretary may deem proper ... to produce such books, papers, records, or other data, and to give such testimony ... as may be relevant or material to such inquiry.

26 U.S.C. §§ 7602(a), 7701(11).

The IRS power to summon extends even to those situations in

which the identity of the taxpayer is unknown. 26 U.S.C. § 7609(f). This power is somewhat limited, however, because where, as here, the IRS seeks to summon information that pertains to an unknown taxpayer, and the information is in the custody of a third party, the United States must make a showing to the court that:

1) its investigation relates to an ascertainable class of persons;

2) a reasonable basis exists for the belief that these unknown taxpayers may have failed to comply with Internal Revenue Laws; and

3) the United States cannot obtain the information sought from another readily available source.

Id. The Court will address each of these elements in order. In its prior order, the Court determined that the IRS failed to satisfy the third element.

ANALYSIS

A. An ...


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