DocketNumber： 92-1012
Filed Date： 7/14/1992
Status： Precedential
Modified Date： 9/21/2015
July 14, 1992 UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
--------
No. 92-1012
RAYMOND H. COPP, JR.,
Petitioner, Appellant,
v.
UNITED STATES OF AMERICA,
Respondent, Appellee.
-------
ERRATA SHEET
The opinion of this Court issued on July 14, 1992, is amended as
follows:
On page 2 remove the hyphen from the word "authorized."
On page 4 remove the hyphen from the words "interrelated",
"investigation", "potential."
On page 5 remove the hyphen from the words "overturned",
"disproving."
On page 7 remove the hyphen from the word "conditionally."
July 14, 1992 UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________________
No. 92-1012
RAYMOND H. COPP, JR.,
Petitioner, Appellant,
v.
UNITED STATES OF AMERICA,
Respondent, Appellee.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. A. David Mazzone, U.S. District Judge]
___________________
____________________
Before
Cyr, Circuit Judge,
_____________
Roney,* Senior Circuit Judge,
____________________
and Pieras,** District Judge.
______________
____________________
Alfred D. Ellis with whom Loren Rosenzweig and Cherwin & Glickman
_______________ _________________ __________________
were on brief for appellant.
Sally J. Schornstheimer, Attorney, Tax Division, Department of
________________________
Justice, with whom James A. Bruton, Acting Assistant Attorney General,
_______________
Gary R. Allen, Charles E. Brookhart, Attorneys, Tax Division,
_______________ _______________________
Department of Justice, and Wayne A. Budd, United States Attorney, were
_____________
on brief for appellee.
____________________
____________________
_____________________
* Of the Eleventh Circuit, sitting by designation.
** Of the District of Puerto Rico, sitting by designation.
PIERAS, District Judge. This appeal stems from
______________
the issuance of an administrative summons by the Internal
Revenue Service in the course of investigation into the
income tax liability of appellant Raymond H. Copp for the
years 1985 through 1989. The district court granted an IRS
motion for summary enforcement of the summons. We affirm.
The summons, which the IRS issued pursuant to 26
U.S.C. 7602, directed Goldman Sachs & Co., a third-party
recordholder, to appear, give testimony and produce
documents. Appellant filed a motion to quash the summons,
contending primarily that it was improperly served after the
IRS had referred the matter to the Justice Department for
criminal investigation. The district court rejected
appellant's contention and granted the Government's motion
for summary enforcement. Judge Mazzone found, based on an
affidavit filed by the IRS agent directing the
investigation, that no criminal referral had been made and
that the summons was issued in good faith to make a civil
determination of Copp's federal income tax liability.
Prior to its amendment in 1982, 26 U.S.C. 7602
authorized the IRS to issue summonses "[f]or the purpose of
ascertaining the correctness of any return, making a return
where none has been made, determining the liability of any
2
persons for any internal revenue tax . . . , or collecting
any such liability." In United States v. LaSalle National
_____________ ________________
Bank, 437 U.S. 298 (1978), the Supreme Court considered the
____
limits of this authorization. The Court noted that since
Congress created a tax enforcement system with interrelated
criminal and civil elements, in enacting Section 7602 it did
not intend that the IRS's subpoena power in a given
investigation be limited merely because of the presence of a
criminal purpose. Id. at 310-11. The Court held, however,
___
that the IRS's subpoena power did not extend to
investigations in which it had abandoned the good faith
pursuit of all of its congressionally authorized civil
___
purposes. 437 U.S. at 316-17.
As a result, after LaSalle a summonee could
_______
effectively block the enforcement of an IRS summons if he
could show that it was issued during an investigation in
which the IRS had abandoned the pursuit of a civil tax
determination or collection. In setting forth the reach of
its holding, the LaSalle Court found that an abandonment
_______
clearly occurs (and a summons may not be issued) after the
IRS refers an investigation to the Department of Justice for
criminal prosecution. Id. at 311. In addition, aware of a
___
potential for abuse where the IRS delays its referral to the
3
Justice Department in order to gather evidence for a
subsequent criminal prosecution, the Court found that an
abandonment also occurs where the IRS has "in an
institutional sense" abandoned its pursuit of a civil tax
liability determination and is instead conducting its
investigation for "solely criminal purposes." Id. at 316.
___
On this appeal, Copp seeks to invoke this "sole criminal
purpose" defense, which he contends the district court
incorrectly found was overturned by the 1982 amendments to
Section 7602.
The LaSalle Court stated that taxpayers seeking to
_______
avail themselves of the sole criminal purpose defense "bear
the burden to disprove the actual existence of a valid civil
tax determination or collection purpose by the Service."
Id. As a result, even if the defense has continuing
___
vitality, Copp has the burden of disproving that in this
case the IRS is not pursuing a valid civil tax
determination. The first hurdle which appellant must
therefore clear is the district court's finding that the IRS
has not abandoned the pursuit of Copp's civil tax liability.
___
Copp must show that this finding was clearly erroneous.
See, e.g., Hintze v. IRS, 879 F.2d 121, 125 (4th Cir. 1989),
___ ____ ______ ___
reh'd denied en banc, 1989 U.S. App. LEXIS 13075; United
_____________________ ______
4
States v. Claes, 747 F.2d 491, 495 (8th Cir. 1984). We find
______ _____
that this burden has not been met. In seeking enforcement
of an administrative summons, the IRS must meet the standard
of good faith set forth in United States v. Powell, 379 U.S.
_____________ ______
48 (1964). It "must show that the investigation will be
conducted pursuant to a legitimate purpose, that the inquiry
may be relevant to that purpose, that the information sought
is not already within the Commissioner's possession, and
that the administrative steps required by the Code have been
followed." Id. at 57-58. In this case, the IRS filed an
___
affidavit signed by Revenue Agent Ernest Van Loan which was
uncontroverted and established each of these elements. The
district court relied on this affidavit in finding that
"there is no criminal referral, the summons was issued in
good faith to make a correct determination of the
petitioner's federal income tax liabilities, if any, for the
taxable years under investigation, and all of the required
procedures of the Internal Revenue Code have been followed."
Implicit in the district court's ruling was a finding that
in issuing its summons to Goldman Sachs the IRS was not
seeking information solely for a criminal purpose. Even
under LaSalle, the IRS is entitled to enforcement of its
_______
5
summons where determination of civil tax liability is at
least one of its purposes. Accord 437 U.S. at 310-11.
______
Copp's effort to establish that the district
court's ruling was clearly erroneous is limited. He alleges
that several facts -- including the alleged expansion of the
audit to include tax years outside of 1988 and the refusal
of the IRS to conditionally accept a portion of requested
additional documents -- constitute evidence of an improper
purpose on the part of the IRS. He has not, however,
demonstrated how these facts, none of which are inconsistent
with a civil audit, suggest an improper purpose. Copp also
relies on the fact that in a related case before Judge Stahl
in the District of New Hampshire, based on similar
allegations made by Copp in response to summonses issued in
New Hampshire against other third-party recordkeepers, the
court concluded that sufficient showing had been made for
Copp to pursue a sole criminal purpose defense. Judge Stahl
directed the IRS agent to appear at an evidentiary hearing
at which Copp would be afforded the opportunity to examine
the agent regarding his purposes in issuing the summonses.
Judge Stahl's ruling is not before this Court on this
appeal, however. And the fact that Judge Stahl in a
6
separate proceeding has allowed Copp to proceed to an
evidentiary hearing on this claim does not establish that
Judge Mazzone's finding in this case was clearly
erroneous.1
The district court order of summary enforcement of
the summons is therefore affirmed.
________
So ordered.
____________________
1 Copp also contends that Judge Mazzone erred in enforcing
the IRS summons without conducting an evidentiary hearing.
In order to proceed to an evidentiary hearing to question
the propriety of an IRS summons, a taxpayer must make a
sufficient threshold showing that there was an improper
purpose behind an IRS summons. United States v. Salter, 432
_____________ ______
F.2d 697 (1st Cir. 1970). To make this show-ing, the
taxpayer must do more than allege an improper purpose; he
must introduce evidence to support his allegations. Id.
___
District court decisions to enforce a summons without a
hearing are review-able under the abuse of discretion
standard. Accord Tiffany Fine Arts, Inc. v. United States,
______ _______________________ _____________
469 U.S. 310, 324 n.7 (1985); Hintze, supra, 879 F.2d at
______ _____
126; United States v. Samuels, Kramer & Co., 712 F.2d 1342,
_____________ _____________________
1345 (9th Cir. 1983). Appellant again relies primarily on
Judge Stahl's conclusion that the allegations made by Copp
were sufficient to proceed to an evidentiary hearing. As
with his substantive claim, the fact that Judge Stahl
reached a contrary conclusion does not yield an abuse of
discretion on the part of Judge Mazzone.
7
8
United States v. LaSalle National Bank , 98 S. Ct. 2357 ( 1978 )
united-states-of-america-and-larry-j-donati-special-agent-of-the-internal , 747 F.2d 491 ( 1984 )
Fritz W. Hintze Ledagole R. Hintze v. Internal Revenue ... , 879 F.2d 121 ( 1989 )
Tiffany Fine Arts, Inc. v. United States , 105 S. Ct. 725 ( 1985 )