U.S. Supreme Court Grants Certiorari in IRS Summons Case

us-supreme-courtOn January 10, 2014, the U.S. Supreme Court granted a writ of certiorari to hear arguments in a IRS Summons enforcement proceeding that originated in the 11th Circuit Court of Appeals. At issue is whether a taxpayer is entitled to an evidentiary hearing to determine whether an IRS Summons was issued for an improper purpose.

An IRS Summons is issued in good faith when it meets the four part test set forth in United States v. Powell, 379 U.S. 48, 57-58 (1964), to wit: (1) “the investigation will be conducted pursuant to a legitimate purpose”; (2) “the inquiry may be relevant to the purpose”; (3) “the information sought is not already within the Commissioner’s possession”; and (4) “the administrative steps required by the [Internal Revenue] Code have been followed.”

Respondents (taxpayers) argued that IRS issued the Summons for an improper purpose and requested discovery and an evidentiary hearing. The District Court found that respondents made no meaningful allegation of improper purpose and ordered enforcement. The taxpayers appealed.

In an unpublished, per curium opinion, the 11th Circuit reversed the trial court holding that it had abused its discretion when it declined to hold an evidentiary hearing. The appellate court relied on its prior decision in Nero Trading, LLC v. U.S. Dep’t of Treasury, 570 F.3d 1244, 1248 (11th Cir. 2009) quoting from that opinion: “in situations such as this, requiring the taxpayer to provide factual support for an allegation of an improper purpose, without giving the taxpayer a meaningful opportunity to obtain such facts, saddles the taxpayer with an unreasonable circular burden, creating an impermissible ‘Catch 22.’”

While the unpublished opinion which prompted the petition for certiorari was of no precedential value (only published opinions may be relied upon in the 11th Circuit), the government argued that the decision created a split in the Circuits. The high court may be in agreement because it granted the petition for certiorari.

Read the Government’s Petition for Certiorari: Government’s Petition for Writ of Certiorari

Read the Respondents’ Brief in Opposition: Respondent’s Brief in Opposition to Writ of Certiorari