Kimberly Gaetano v. United States

RECOMMENDED FOR PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 21a0082p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
┐
KIMBERLY BASEHART GAETANO; RICHARD GAETANO,
│
Petitioners-Appellants, │
> No. 20-1902
│
v. │
│
UNITED STATES OF AMERICA, │
Respondent-Appellee. │
┘
Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
No. 2:19-mc-51563—Marianne O. Battani, District Judge.
Decided and Filed: April 9, 2021
Before: GUY, DONALD, and MURPHY, Circuit Judges.
_________________
COUNSEL
ON BRIEF: Joseph Falcone, JOSEPH FALCONE, P.C., Southfield, Michigan, for Appellants.
Elissa Hart-Mahan, Joan I. Oppenheimer, DEPARTMENT OF JUSTICE, Washington, D.C., for
Appellee.
_________________
OPINION
_________________
RALPH B. GUY, JR., Circuit Judge. The Internal Revenue Service (IRS) issued a
summons to a point-of-sale systems provider, seeking records related to Richard and Kimberly
Gaetano and their cannabis businesses. Alleging the summons was issued in bad faith, the
Gaetanos brought this action to quash the summons under 26 U.S.C. § 7609. The district court
dismissed the action for lack of subject-matter jurisdiction because the Gaetanos lacked standing.
No. 20-1902 Gaetano, et al. v. United States Page 2
On appeal, the Government argues that § 7609 only waives the United States’ sovereign
immunity to allow taxpayers to bring an action to quash certain third-party IRS summonses. As
a matter of first impression, we conclude that the immunity waiver in § 7609 is subject to the
statute’s exceptions. One of those exceptions applies because the summons here was issued by
an IRS criminal investigator “in connection” with an IRS criminal investigation and the
summoned party is not a third-party recordkeeper. See 26 U.S.C. § 7609(c)(2)(E). Without a
statutory waiver of the United States’ sovereign immunity, subject-matter jurisdiction cannot
obtain. Accordingly, we affirm.
I.
A.
Kimberly and Richard Gaetano own several cannabis dispensary businesses located in
Michigan. The IRS at some point began a criminal investigation of the Gaetanos to determine
whether they owed federal taxes. On October 9, 2019, Special Agent Tyler Goodnight of the
IRS’s Criminal Investigation Division and another IRS agent interviewed the owners of Portal
42, LLC. Portal 42 is a software company that provides the cannabis industry with point-of-sale
systems, featuring the capacity for businesses to track customer sales data or delete the data
remotely with a “kill switch.” The owners of Portal 42 confirmed that the Gaetanos are clients.
At the conclusion of the interview, Agent Goodnight served Portal 42 with a summons.
The summons ordered Portal 42 (and its agent) to appear before Agent Goodnight to “give
testimony” and produce various records “and other data relating to the tax liability or the
collection of the tax liability or for the purpose of inquiring into any offense connected with the
administration or enforcement of the internal revenue laws concerning [the Gaetanos] for the
periods shown.” (Emphasis added). Above that statement, in the space labeled “Periods,” it
states “01/01/2015 to 09/01/2019.” The attachment to the summons directed Portal 42 to
produce “[a]ny and all” records related to the Gaetanos or one of their businesses (including
records of sales, deliveries, and the hours employees worked) for the same period noted on the
face of the summons—January 1, 2015 to September 1, 2019. The IRS did not notify the
Gaetanos about the summons.
No. 20-1902 Gaetano, et al. v. United States Page 3
A few weeks later, Portal 42 sent Agent Goodnight an email with a hyperlink to the
requested records. An IRS computer investigative specialist copied the documents to a disc, and
the disc was placed in a sealed envelope. Agent Goodnight has not viewed the records Portal 42
produced, nor have any other personnel in the IRS’s Criminal Investigation Division.
B.
On October 23, 2019, the Gaetanos filed a petition against the United States under
26 U.S.C. § 7609, seeking to quash the summons issued to Portal 42. In the petition, the
Gaetanos alleged that the IRS should have notified them about the summons and that it was
issued in bad faith. The district court referred the case to a magistrate judge.
The Government filed a motion to dismiss the petition and enforce the summons, arguing
that, because Portal 42 is not a “third-party recordkeeper,” the notice exception in
§ 7609(c)(2)(E) applies and, thus, the Gaetanos “lack standing to quash the summons.” The
Government attached a declaration from Agent Goodnight, stating that he was “conducting a
criminal investigation to determine whether [the Gaetanos] understated their tax liability in
violation of the Internal Revenue Code” and that the records summoned “are relevant and
necessary” to that investigation. In opposition, the Gaetanos conceded that Portal 42 is not a
third-party recordkeeper within the meaning of 26 U.S.C. § 7603(b)(2)(J), but asserted that there
could be no criminal investigation for 2019 because (at the time) a tax return for 2019 was not
yet due and because “Agent Goodnight’s affidavit does not mention the tax years he is
investigating.”
The Government then shifted theories in its reply. It argued that § 7609(c)(2)(E) is an
exception to the United States’ sovereign immunity waiver for petitions to quash, and that the
exception applied “because Agent Goodnight is a criminal investigator for the IRS” and Portal
42 is not a third-party recordkeeper. The Government also attached a supplemental declaration
from Agent Goodnight, clarifying that he was “conducting a criminal investigation into
[the Gaetanos for the] alleged filing of false income tax and employment tax returns for tax years
2015 through 2018, and quarterly filings for 2019.” The Gaetanos filed a supplemental brief to
reiterate their position. Relying on a different summons—which Agent Goodnight had issued to
No. 20-1902 Gaetano, et al. v. United States Page 4
JP Morgan Chase Bank on November 20, 2019, seeking the Gaetanos’ records related to the
“Periods” of “01/01/2015 to 11/01/2019”—the Gaetanos asserted that there are no tax periods
that end on November 1, 2019, and “the IRS is simply changing the tax periods under
investigation as time goes on.”1
After a hearing on the motion, the magistrate judge dismissed the Gaetanos’ petition to
quash for lack of subject-matter jurisdiction because the Gaetanos “don’t have standing” under
§ 7609. Nonetheless, the magistrate judge ordered that the summons be enforced because the
Gaetanos had failed to establish that the summons was issued in bad faith. The Gaetanos filed
objections.
The district court overruled most of the Gaetanos’ objections, concluding that the petition
to quash must be dismissed for lack of subject-matter jurisdiction because the facts fit within the
exception in § 7609(c)(2)(E). But the court set aside the portion of the magistrate judge’s order
that enforced the summons because, without subject-matter jurisdiction over the Gaetanos’ case,
the court concluded such relief could not be granted and, in any event, the court noted that the
Government had stated “Portal 42 ha[d] already complied.”2
The Gaetanos appeal.
1The summons to JP Morgan Chase Bank is not at issue here. That summons is part of a separate action
the Gaetanos brought to challenge the IRS summonses served on nine different financial institutions. See Gaetano
v. United States, No. 19-MC-51772, 2020 WL 6118488, at *1 (E.D. Mich. Oct. 16, 2020). In that case, the district
judge adopted the magistrate judge’s order granting the Government’s motion, dismissing the petition to quash,
enforcing the summons, and denying the Gaetanos’ motion for an evidentiary hearing and discovery. See id. at *4.
The Gaetanos’ appeal from that decision is pending in Case No. 20-2182, and briefing is not yet complete.
Jurisdiction is not in question in that case, so there does not appear to be any meaningful overlap with this case.
2That Portal 42 has already complied with the summons does not render this case moot. “Even though it is
now too late to prevent, or to provide a fully satisfactory remedy for, the [alleged] invasion of privacy that occurred
when the IRS obtained the [records from Portal 42], a court does have power to effectuate a partial remedy by
ordering the Government to destroy or return any and all copies it may have in its possession. The availability of
this possible remedy is sufficient to prevent this case from being moot.” Church of Scientology of Cal. v. United
States, 506 U.S. 9, 13 (1992); see also 26 U.S.C. § 7609(d)(2) (“No examination of any records required to be
produced under a summons as to which notice is required . . . may be made . . . where a [timely] proceeding [to
quash the summons]” was initiated, unless authorized by an order of a “court having jurisdiction of such
proceeding” or by the person that began the proceeding.).
No. 20-1902 Gaetano, et al. v. United States Page 5
II.
“[T]he party asserting federal jurisdiction when it is challenged has the burden of
establishing it.” DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 342 n.3 (2006). How the court
resolves a subject-matter jurisdiction challenge depends on whether the motion presents a “facial
attack or a factual attack.” Carrier Corp. v. Outokumpu Oyj, 673 F.3d 430, 440 (6th Cir. 2012)
(quoting Gentek Bldg. Prods., Inc. v. Sherwin-Williams Co., 491 F.3d 320, 330 (6th Cir. 2007)).
A “facial attack” is asserted when the movant accepts the alleged jurisdictional facts as true and
“questions merely the sufficiency of the pleading” to invoke federal jurisdiction. Gentek,
491 F.3d at 330. A “factual attack,” by contrast, is advanced when the movant contests the
alleged jurisdictional facts by introducing evidence outside the pleadings. See id.; Amburgey v.
United States, 733 F.3d 633, 636 (6th Cir. 2013). Here, the Government mounts a factual attack
by relying on Agent Goodnight’s affidavits.
In such a case, “the district court has wide discretion to allow affidavits, documents, and
even a limited evidentiary hearing to resolve jurisdictional facts,” Gentek, 491 F.3d at 330, and
“the court can actually weigh evidence to confirm the existence of the factual predicates for
subject-matter jurisdiction.” Carrier Corp., 673 F.3d at 440. Factual findings made by the
district court are reviewed for clear error. Id. But “review of the district court’s application of
the law to the facts is de novo.” Wayside Church v. Van Buren Cty., 847 F.3d 812, 817 (6th Cir.
2017) (quoting RMI Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1135 (6th Cir.
1996)).
III.
The Government asserts sovereign immunity as a jurisdictional bar to this action.
“Absent a waiver, sovereign immunity shields the Federal Government and its agencies from
suit.” FDIC v. Meyer, 510 U.S. 471, 475 (1994). “Sovereign immunity is jurisdictional in
nature.” Id. It implicates a court’s subject-matter jurisdiction because the “terms of [the United
States’] consent to be sued in any court define that court’s jurisdiction to entertain the suit.” See
id. (citation omitted); see also Brownback v. King, 141 S. Ct. 740, 749 (2021). An action to
quash a summons issued by the IRS is a suit against the United States requiring a waiver of its
No. 20-1902 Gaetano, et al. v. United States Page 6
sovereign immunity. See Clay v. United States, 199 F.3d 876, 879 (6th Cir. 1999); Barmes v.
United States, 199 F.3d 386, 388 (7th Cir. 1999); Taylor v. United States, 292 F. App’x 383, 385
(5th Cir. 2008). Any “waiver of sovereign immunity must be ‘unequivocally expressed’ in
statutory text,” Fed. Aviation Admin. v. Cooper, 566 U.S. 284, 290 (2012) (quoting Lane v.
Pena, 518 U.S. 187, 192 (1996)), and must be “strictly construed, in terms of its scope, in favor
of the sovereign.” Lane, 518 U.S. at 192; Orff v. United States, 545 U.S. 596, 601-02 (2005).
The Gaetanos claim jurisdiction obtains under 26 U.S.C. § 7609. We disagree. The
United States’ sovereign immunity waiver in § 7609 is limited by certain exceptions—one of
which applies to the facts of this case. See 26 U.S.C. § 7609(c)(2)(E).
1.
Congress directed the IRS to investigate persons “who may be liable to pay any internal
revenue tax.” 26 U.S.C. § 7601(a). In conducting its investigations, the IRS is authorized by
statute to summon not only the person under investigation, but also any third-party the IRS “may
deem proper” to obtain information “as may be relevant or material” to an IRS investigation.
See id. § 7602(a)(2). Recognizing that a summoned third-party who is not itself the target of an
IRS investigation would have “little incentive” to oppose the summons, Congress built in
safeguards in § 7609. See Tiffany Fine Arts, Inc. v. United States, 469 U.S. 310, 320-21 (1985).
But not every third-party IRS summons is covered. See 26 U.S.C. § 7609(c)(2). For taxpayers
whose information is identified in a qualifying third-party IRS summons, § 7609 establishes
notice procedures and a limited means of challenging the summons. See id. § 7609(a)-(b), (c)(2).
Section 7609(h)(1) confers federal-court jurisdiction in a confined category of cases. As
relevant here, this jurisdictional grant covers “any proceeding brought under subsection (b)(2).”
26 U.S.C. § 7609(h)(1).
In turn, § 7609(b)(2) waives the United States’ sovereign immunity for a narrow class of
taxpayers to initiate an action to quash a third-party IRS summons. See, e.g., Clay, 199 F.3d at
879; Haber v. United States, 823 F.3d 746, 750-51 (2d Cir. 2016); Upton v. IRS, 104 F.3d 543,
545-46 (2d Cir. 1997) (per curiam). The Government concedes as much. Section 7609(b)(2),
provides, in part: “Notwithstanding any other law or rule of law, any person who is entitled to
No. 20-1902 Gaetano, et al. v. United States Page 7
notice of a summons under subsection (a) shall have the right to begin a proceeding to quash
such summons[.]” 26 U.S.C. § 7609(b)(2)(A) (emphasis added). As a general rule,
§ 7609(a) requires the IRS to provide notice to the taxpayer(s) whose records are identified in a
third-party summons. See id. § 7609(a)(1).
Section 7609(c)(2), however, excludes certain categories of summonses (five in all) from
coverage under the statute. Id. § 7609(c)(2) (“[Section 7609] shall not apply to any
summons . . .”). The Government contends that if one of the exceptions applies—in particular,
§ 7609(c)(2)(E)—then the sovereign immunity waiver that authorizes an action to quash an IRS
summons does not apply, and the district court lacks subject-matter jurisdiction.
2.
There are two ways that courts have viewed the exceptions in § 7609(c)(2)(E):
limitations on statutory standing or (as the Government argues) exceptions to § 7609’s sovereign
immunity waiver. This presents an issue of first impression for the Sixth Circuit. We elect to
take the latter approach.
Although the district court did not specify which of these two grounds it relied upon in
dismissing the case for lack of subject-matter jurisdiction, the district court did not set aside the
magistrate judge’s conclusion that the Gaetanos “don’t have standing” under § 7609. Some
courts have taken this same approach. See, e.g., Viewtech, Inc. v. United States, 653 F.3d 1102,
1104, 1106 (9th Cir. 2011) (concluding that, because the exception in § 7609(c)(2)(D) for a
summons issued “in aid of the collection” applied, claimants were not entitled to notice of the
summons, and thus, claimants lacked standing to quash the summons); Stewart v. United States,
511 F.3d 1251, 1253 (9th Cir. 2008) (“[A]ny person entitled to notice of an IRS administrative
summons’s issuance to a third party has standing to challenge the validity of that summons.”);
see also Garrett v. United States, 124 F.3d 197, 1997 WL 468322, at *2 (6th Cir. 1997) (table)
(per curiam) (interpreting § 7609 before the 1998 amendments and holding that “only a
summons directed to a third-party recordkeeper, as defined by the statute, requires notice to the
person(s) identified in the summons, and only a person entitled to notice may institute a
proceeding to quash the summons”). That reasoning is consistent with so-called “‘statutory’
No. 20-1902 Gaetano, et al. v. United States Page 8
standing requirements.” Bank of Am. Corp. v. City of Miami, 137 S. Ct. 1296, 1302 (2017)
(quoting Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 128 n.4 (2014)).
Statutory standing is determined by the “zone-of-interests test.” See Lexmark, 572 U.S. at
129-30. Applied here, the question would be whether the Gaetanos fall “within the class of
plaintiffs whom Congress has authorized to sue under [§ 7609(b)(2), after considering any
applicable exceptions under subsection (c)(2)].” See id. at 128; see also POM Wonderful LLC v.
Coca-Cola Co., 573 U.S. 102, 107 (2014) (explaining that the Lanham Act’s “cause of action is
for competitors, not consumers”).
We decline to rely on the statutory standing rubric. There is no doubt that the exceptions
in § 7609(c)(2) limit the class of taxpayers entitled to notice and, thus, qualify which persons
have standing to sue under § 7609(b)(2). So then why does it matter? The problem is statutory
standing is not always jurisdictional because “the absence of a valid (as opposed to arguable)
cause of action does not implicate subject-matter jurisdiction, i.e., the court’s statutory or
constitutional power to adjudicate the case.” Lexmark, 572 U.S. at 128 n.4 (quoting Verizon Md.
Inc. v. Pub. Serv. Comm’n of Md., 535 U.S. 635, 642-43 (2002)). Sovereign immunity is not so
nebulous. See Brownback, 141 S. Ct. at 749; Cooper, 566 U.S. at 290-91; Meyer, 510 U.S. at
475. Moreover, it matters because a government official or attorney cannot waive the sovereign
immunity of the federal government, and the issue can be raised at any stage of the litigation,
even in a collateral attack on a judgment. See, e.g., United States v. U.S. Fid. & Guar. Co.,
309 U.S. 506, 513-14 (1940); Lapides v. Bd. of Regents of Univ. Sys. of Georgia, 535 U.S. 613,
623 (2002) (collecting cases and noting that the rule is different in the context of a State’s
sovereignty under the Eleventh Amendment); Dickerson ex rel. Dickerson v. United States,
280 F.3d 470, 478 (5th Cir. 2002); Hajro v. U.S. Citizenship & Immigr. Servs., 811 F.3d 1086,
1098-99 & n.6 (9th Cir. 2016). And courts have an obligation to address the issue sua sponte.
See, e.g., Perry Cap., LLC v. Mnuchin, 864 F.3d 591, 618-19 (D.C. Cir. 2017). As such, there is
good reason for us to address first and foremost whether the immunity waiver in § 7609 applies.
Other circuit courts have concluded that § 7609(c)(2) delineates exceptions
(or conditions) to the United States’ sovereign immunity waiver. See, e.g., Haber, 823 F.3d at
751 (holding that under the exception in § 7609(c)(2)(D), the United States has not waived its
No. 20-1902 Gaetano, et al. v. United States Page 9
sovereign immunity for challenges to any summons “issued in aid of the collection” of an
assessment); Maehr v. Comm’r, 641 F. App’x 813, 815 (10th Cir. 2016) (same); Taylor, 292 F.
App’x at 386-87 (concluding that § 7609(c)(2)(E) is an exception to the United States’ waiver of
sovereign immunity); see also Upton, 104 F.3d at 545, 547 (explaining that, before the 1998
amendments, the summoned party’s status as a “third-party recordkeeper” is a prerequisite to the
sovereign immunity waiver in § 7609).3
The Supreme Court, however, has cautioned that a statutory condition—even one
attached to a waiver of the United States’ sovereign immunity—is not accorded jurisdictional
status unless “Congress has ‘clearly state[d]’ as much.” United States v. Kwai Fun Wong,
575 U.S. 402, 409, 418-20 (2015) (citation omitted); see Irwin v. Dep’t of Veteran’s Affs.,
498 U.S. 89, 95-96 (1990). So if § 7609 “does not rank a statutory limitation on coverage as
jurisdictional, courts should treat the restriction as nonjurisdictional in character.” See Arbaugh
v. Y&H Corp., 546 U.S. 500, 515-16 (2006) (15-employee minimum requirement for coverage
under Title VII is “an element of a plaintiff’s claim for relief, not a jurisdictional issue”); Reed
Elsevier, Inc. v. Muchnick, 559 U.S. 154, 160-66 (2010) (copyright registration requirement in
17 U.S.C. § 411(a) is not jurisdictional).
Here, the text of the statute clearly dictates that the United States’ sovereign immunity
waiver in § 7609 is subject to the exceptions in § 7609(c)(2). The language preceding the
“exceptions” under § 7609(c)(2)—“[t]his section shall not apply to”—is almost identical to the
language preceding the “exceptions” under 28 U.S.C. § 2680 in the Federal Tort Claims Act
(FTCA)—“[t]he provisions of this chapter . . . shall not apply to[.]” The Supreme Court has
interpreted § 2680 as setting forth exceptions to the United States’ sovereign immunity waiver in
the FTCA. See, e.g., Kosak v. United States, 465 U.S. 848, 852 & n.6 (1984); Millbrook v.
United States, 569 U.S. 50, 52 (2013); Sosa v. Alvarez-Machain, 542 U.S. 692, 700 (2004). Just
as each of the “exceptions” in § 2680 suspends the FTCA (including the immunity waiver), the
“exceptions” in § 7609(c)(2) suspend the whole statute. Thus, we read “[t]his section shall not
3Although we held in Clay v. United States that compliance with § 7609(b)’s 20-day period to file a
petition to quash is a “condition of the United States’ waiver of sovereign immunity,” Clay is not on point here
because the filing deadline is not one of the exceptions listed in subsection (c)(2). 199 F.3d at 879-80.
No. 20-1902 Gaetano, et al. v. United States Page 10
apply to . . .” as it was written: The sovereign immunity waiver provision—one of the provisions
of § 7609—does not apply to suits arising from the categories of summonses listed as
“exceptions” in § 7609(c)(2).
We accordingly hold that if one of the exceptions applies, the bar of sovereign immunity
remains, and the court lacks subject-matter jurisdiction. But which party bears the burden of
proof on this issue? The plaintiff generally must establish a waiver of the United States’
sovereign immunity. See Ohio Nat’l Life Ins. Co. v. United States, 922 F.2d 320, 324 (6th Cir.
1990) (“The burden is on the plaintiff since the statute outlines the terms under which the United
States has waived sovereign immunity and thereby consented to suit.”); see also Taylor v.
Geithner, 703 F.3d 328, 335 (6th Cir. 2013).4 Where statutory exceptions to an immunity waiver
are at issue, however, we have said that “if the complaint is facially outside the exceptions” then
the “the burden fall[s] on the government to prove the applicability of a specific” exception to
the immunity waiver. Carlyle v. U.S., Dep’t of the Army, 674 F.2d 554, 556 (6th Cir. 1982);
accord Keller v. United States, 771 F.3d 1021, 1023 (7th Cir. 2014); S.R.P. ex rel. Abunabba v.
United States, 676 F.3d 329, 333 n.2 (3d Cir. 2012); Morales v. United States, 895 F.3d 708, 713
(9th Cir. 2018); Prescott v. United States, 973 F.2d 696, 702 (9th Cir. 1992). But see Blueport
Co., LLC v. United States, 533 F.3d 1374, 1381 (Fed. Cir. 2008). The basic rationale for treating
sovereign immunity exceptions as affirmative defenses is that a plaintiff should not be required
to prove a negative for each enumerated exception, and the government will generally possess
the relevant facts to prove that a particular exception does apply. See Abunabba, 676 F.3d at 333
n.2; Prescott, 973 F.2d at 702. That rationale is equally relevant in the context of § 7609(c)(2)’s
exceptions, and thus the rule in Carlyle applies.
In this case, the Gaetanos’ petition to quash is not facially within any of § 7609(c)(2)’s
exceptions. Therefore, the Government must prove the applicability of a specific exception.
4This differs from State sovereign immunity under the Eleventh Amendment. In such a case, the
government bears the burden of showing that it is entitled to immunity. Gragg v. Ky. Cabinet for Workforce Dev.,
289 F.3d 958, 963-64 (6th Cir. 2002).
No. 20-1902 Gaetano, et al. v. United States Page 11
3.
The relevant exception the Government invokes is § 7609(c)(2)(E). It states:
[Section 7609] shall not apply to any summons—
. . . .
(i) issued by a criminal investigator of the Internal Revenue
Service in connection with the investigation of an offense
connected with the administration or enforcement of the internal
revenue laws; and
(ii) served on any person who is not a third-party recordkeeper (as
defined in section 7603(b)).
26 U.S.C. § 7609(c)(2)(E). The Gaetanos concede that the second requirement is met because
Portal 42, the party summoned here, is not a “third-party recordkeeper.”5 (Appellants’ Br. at 10.)
And we conclude that the Government has established the first requirement.
First, the summons issued to Portal 42 was “issued by a criminal investigator of the
Internal Revenue Service,” Agent Goodnight. Id. § 7609(c)(2)(E)(i). Not only does the face of
5Under 26 U.S.C. § 7603(b)(2), the term “third-party recordkeeper” means:
(A) any mutual savings bank, cooperative bank, domestic building and loan association, or other
savings institution chartered and supervised as a savings and loan or similar association under
Federal or State law, any bank (as defined in section 581), or any credit union (within the meaning
of section 501(c)(14)(A)),
(B) any consumer reporting agency (as defined under section 603(f) of the Fair Credit Reporting
Act (15 U.S.C. 1681a(f))),
(C) any person extending credit through the use of credit cards or similar devices,
(D) any broker (as defined in section 3(a)(4) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(4))),
(E) any attorney,
(F) any accountant,
(G) any barter exchange (as defined in section 6045(c)(3)),
(H) any regulated investment company (as defined in section 851) and any agent of such regulated
investment company when acting as an agent thereof,
(I) any enrolled agent, and
(J) any owner or developer of a computer software source code (as defined in section 7612(d)(2)).
Subparagraph (J) shall apply only with respect to a summons requiring the production of the
source code referred to in subparagraph (J) or the program and data described in section
7612(b)(1)(A)(ii) to which such source code relates.
No. 20-1902 Gaetano, et al. v. United States Page 12
the summons attest to that fact—given that it was authorized by the IRS’s Criminal Investigation
Division and signed and served by Agent Goodnight—but Agent Goodnight also submitted a
declaration stating that he is employed in the IRS’s Criminal Investigation Division. Second, the
summons was issued “in connection with the investigation of an offense connected with the
administration or enforcement of the internal revenue laws.” Id. Indeed, Agent Goodnight’s
declaration states that he is “conducting a criminal investigation into [the Gaetanos for the]
alleged filing of false income tax and employment tax returns for tax years 2015 through 2018,
and quarterly filings for 2019,” and that he “issued the summons to Portal 42 to aid [his] criminal
investigation.” Therefore, the exception in § 7609(c)(2)(E) applies.
The Gaetanos attempt to duck this conclusion. Their sole argument is that the summons
was not issued “in connection with a criminal investigation” because the summons identifies the
“Periods” of January 1, 2015 to September 1, 2019. No annual or quarterly tax period ends on
September 1, 2019, so the Gaetanos surmise that the IRS cannot possibly investigate an offense
for the “non-existent tax period” of January 1, 2019, through September 1, 2019. Cf. Boulware
v. United States, 552 U.S. 421, 424 (2008) (“One element of tax evasion under § 7201 is ‘the
existence of a tax deficiency’” (citation omitted)). We are not persuaded.
The Gaetanos’ argument hinges on their contention that the entry field for “Periods,” on
the face of the summons, refers to the tax periods under investigation, not the time period of
records sought. In support, the Gaetanos rely on the IRS’s handbook, the Internal Revenue
Manual.6 Agent Goodnight may have contravened the instructions of that Manual. But that
hardly means the summons was not issued “in connection with” an IRS criminal investigation.
26 U.S.C. § 7609(c)(2)(E)(i). The fact remains that Agent Goodnight subsequently declared
under oath that he is conducting a criminal investigation for tax years 2015 through 2018, and
6In Exhibit 25.5.2-1(4), titled “General Instructions for Preparation of a Summons,” the Manual states:
Periods: Insert all of the calendar years, fiscal years, quarterly or monthly periods involved in the
examination or investigation. The periods should be specifically stated (e.g., quarterly periods
ended March 31, 2010 and June 30, 2010). Do not use abbreviations such as 201006 or 6/30/2010.
See INTERNAL REVENUE SERVICE, 2019 INTERNAL REVENUE MANUAL, Exhibit 25.5.2-1(4) (2015); see also id.§ 25.5.2(3).
No. 20-1902 Gaetano, et al. v. United States Page 13
quarterly filings for 2019. The Gaetanos have not cited any binding authority precluding an IRS
agent from submitting such an affidavit.
Nothing in § 7602 or § 7609 requires that a summons identify the tax period(s) the IRS is
investigating. Yet the Gaetanos insist that the IRS must state on a summons the specific tax
periods the IRS is investigating, otherwise the summons cannot be enforced because a court is
unable to determine one of the four required elements established in United States v. Powell,
379 U.S. 48 (1964)—that the records sought by the summons are “relevant to the [IRS’s
investigation].” Id. at 57-58. The Gaetanos ignore altogether that an IRS agent’s affidavit alone
is typically sufficient to satisfy Powell’s requirements. See, e.g., United States v. Stuart, 489
U.S. 353, 360-61 (1989); Byers v. United States, 963 F.3d 548, 556-57 (6th Cir. 2020)
(collecting cases). But more importantly, the argument goes to the merits of whether a summons
should be enforced or quashed. We cannot proceed to the Powell test when § 7609 does
not confer jurisdiction over this action. See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83,
94-95 (1998). As such, the Gaetanos have placed the cart before the horse.7
In sum, because the exception in § 7609(c)(2)(E) applies, the bar of sovereign immunity
remains, and subject-matter jurisdiction does not exist.
* * *
For the reasons stated, we AFFIRM.
7To be sure, jurisdiction under § 7609 is distinct from the substantive requirements to quash or enforce a
summons. Congress authorized the IRS to summon “any person” to obtain information “as may be relevant or
material” to an investigation, 26 U.S.C. § 7602(a)(2) (emphasis added), and the Supreme Court has clarified that
“even potential relevance” is sufficient, United States v. Arthur Young & Co., 465 U.S. 805, 814 (1984). The
jurisdictional exception in § 7609(c)(2)(E) is even broader: The first requirement is met if the summons is merely
issued “in connection with” a criminal investigation to enforce the internal revenue laws. 26 U.S.C.
§ 7609(c)(2)(E)(i). As a result, some taxpayers are not authorized to challenge a third-party IRS summons. But if a
taxpayer were permitted to fold the Powell analysis into the jurisdictional inquiry under § 7609(c)(2)(E)(i), the
United States’ sovereign immunity waiver would be “enlarged beyond what a fair reading of the text requires.” See
Cooper, 566 U.S. at 290.