Conner v. U.S.

• Citation: 947 F.Supp. 1267
• Decision Date: 22 July 1996
• Docket Number: Civil No. 1:95cv254.
• Parties: Walter L. and Mary A. CONNER, Petitioners, v. UNITED STATES of America, Respondent.
• Court: U.S. District Court — Northern District of Indiana

947 F.Supp. 1267

Walter L. and Mary A. CONNER, Petitioners, v. UNITED STATES of America, Respondent.

Civil No. 1:95cv254.

United States District Court, N.D. Indiana, Fort Wayne Division.

July 22, 1996.

Walter L. Conner, Fort Wayne, IN, pro se.

Mary A. Conner, Fort Wayne, IN, pro se.

Kevin P. Jenkins, U.S. Department of Justice, Washington, DC, for U.S.

ORDER

WILLIAM C. LEE, District Judge.

This matter is before the court on a "Motion for Leave to File", and on a "Motion for Summary Denial of Petition to Quash and For Enforcement of Internal Revenue Service Summonses". Both motions were filed by the government on June 5, 1996, and the parties completed briefing the motions on July 3, 1996. For the following reasons, the governments' motions will be granted.

Discussion

On May 24, 1995, the petitioners filed a petition to quash Internal Revenue Service ("IRS") summonses. On July 27, 1995, the government filed a motion to dismiss for lack of jurisdiction. In an order dated December 21, 1995, this court granted in part and denied in part the government's motion to dismiss. This court held that jurisdiction was lacking over two financial institutions located in Buffalo, New York and one financial institution located in Des Moines, Iowa. However, this court further held that, with respect to three summonses directed to institutions and individuals located in Fort Wayne, Indiana, jurisdiction was proper in this court. Thus, the present order concerns only these three summonses.

In their petition to quash, the petitioners seek to quash summonses issued to Marcia Selking, Keeper of the Records of Norwest Legal Processing Department ("Norwest"), Garrett State Bank ("Garrett"), and Calvary Temple Church, Inc. ("Calvary"), relating to the tax liability of petitioners for the years 1991 through 1994, inclusive.

The government first asserts that this court lacks subject matter jurisdiction over the summons issued to Calvary because the church is not a "third-party recordkeeper" as that term is defined by statute. The government has taken the position that since Calvary is not a third-party recordkeeper, the government has not waived its sovereign immunity with respect to a claim against the Calvary summons.

In order to maintain a suit against the United States, it is necessary that there be a waiver of sovereign immunity to allow such suit, because the United States, as sovereign, may only be sued to the extent that it has consented by statute to be sued. United States v. Testan, 424 U.S. 392, 96 S.Ct. 948, 47 L.Ed.2d 114 (1976); United States v. Sherwood, 312 U.S. 584, 586, 61 S.Ct. 767, 769, 85 L.Ed. 1058 (1941). A waiver of sovereign immunity cannot be implied, but must be explicit. Soriano v. United States, 352 U.S. 270, 276, 77 S.Ct. 269, 273, 1 L.Ed.2d 306 (1957); Honda v. Clark, 386 U.S. 484, 501, 87 S.Ct. 1188, 1197, 18 L.Ed.2d 244 (1967). Additionally, a statutory waiver of sovereign immunity must be narrowly construed requiring the plaintiff to precisely meet the terms for waiver. Sherwood, supra, 312 U.S. at 587, 61 S.Ct. at 770. Where there is no statute expressly waiving the sovereign immunity of the United States, dismissal of the action is required. Stout v. United States, 229 F.2d 918 (2d Cir.1956).

Any potential waiver of immunity for the petition to quash the IRS summons to Calvary is found in 26 U.S.C. § 7609, which permits challenges to IRS summonses under certain limited circumstances. Specifically, § 7609(b) provides:

(b) Right to Intervene; Right to Proceeding to Quash —

* * * * * *

(2) Proceeding to Quash —

(A) In General — Notwithstanding any other law or rule of law, any person who is entitled to 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). In order to be considered a third-party recordkeeper, two conditions must be met: "(1) the person facially falls within one of the enumerated categories in Section 7609(a)(3); and (2) the summons requests records kept in the person's role as a third-party recordkeeper." Davenport v. Bell, 600 F.Supp. 568, 571 (N.D.Ill.1984); Menendez v. United States, 872 F.Supp. 567, 570 (S.D.Ind.1994).

The government argues that a church, such as Calvary, does not fall within any of the categories defined as third-party recordkeepers in § 7609(a)(3), and thus Calvary is not a third-party recordkeeper. A review of § 7609(a)(3) reveals that the term "third-party recordkeeper" only refers to entities such as banks, consumer reporting agencies, credit card issuers, brokers, attorneys, accountants, barter exchanges, and regulated investment companies. Clearly, a church is not a qualifying entity. Thus, the government argues that since Calvary is not a third-party recordkeeper, petitioners were not entitled to notice under the provisions of § 7609(a)(1). As § 7609(b)(2) only permits those entitled to notice to bring a suit to quash a summons, the government argues that the petitioners have not shown that they are entitled to bring such a suit. Thus, the government argues that since petitioners do not meet the statutory requirements for maintaining this action to the extent they seek to quash the summons to Calvary, the United States has not waived its sovereign immunity and this court lacks jurisdiction over that portion of the petition to quash. This court agrees with the government on this point and the petition to quash the summons to Calvary will be denied.

The government next argues that, with respect to the two remaining summonses, it has made a prima facie showing that the summonses are valid and enforceable. Section 7609 governs the enforceability of summonses issued to statutory third-party recordkeepers, such as Norwest and Garrett. Pursuant to § 7609, the summoned third-party recordkeeper must comply with the administrative IRS summons unless a person entitled to notice of the summons begins a proceeding to quash the summons not later than the 20th day after such notice is given. 26 U.S.C. § 7609(b)(2)(A). Further, in any proceeding to quash a summons, the government may seek to compel compliance with the summons. Id.

To compel compliance with a summons, the government need only present a prima facie case, as described by the Supreme Court in United States v. Powell, 379 U.S. 48, 57-58, 85 S.Ct. 248, 254-55, 13 L.Ed.2d 112 (1965). Once a prima facie case is established the burden shifts to the petitioners to demonstrate that the enforcement of the summons would be an abuse of the court's process or that a genuine issue exists as to any material defense to the enforcement of the summons. Powell, 379 U.S. at 58, 85 S.Ct. at 255; United States v. Kis, 658 F.2d 526, 535-37 (7th Cir.1981).

To present a prima facie case, the government need only show: (1) that the summonses were issued for a legitimate purpose, (2) that the summoned data may be relevant to that purpose, (3) that the information is not already in the government's possession, and (4) that the administrative steps required by the Internal Revenue Code for issuance and service have been followed. Powell, 379 U.S. at 57-58, 85 S.Ct. at 254-55; United States v. LaSalle National Bank, 437 U.S. 298, 313-14, 98 S.Ct. 2357, 2365-66, 57 L.Ed.2d 221 (1978); Kis, 658 F.2d at 536. The requisite showing is generally made by the declaration of the agent who is seeking enforcement of the summons. Kis, 658 F.2d at 536 ("The Government ordinarily proves these four elements by affidavits of the agents involved in the investigation. No more than that is necessary to make the prima facie case").

In the present case, the government argues that the declarations of Revenue Agents David T. Renninger and Stephen T. Orme establish each of the four elements of a prima facie case for the validity and enforceability of the summonses at issue. First, the government claims that the declarations of the Revenue Agents shows that the summonses were issued for a proper purpose. An IRS summons issued under § 7602 must be issued "in good-faith pursuit of the congressionally authorized purposes of § 7602." LaSalle National Bank, 437 U.S. at 318, 98 S.Ct. at 2368. Those purposes include "ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue tax," or "inquiring into any offense connected with the administration or enforcement of the internal revenue laws." 26 U.S.C. § 7602(a), (b). Here, the Declarations of Revenue Agents Renninger and Orme indicate that the summonses were issued precisely for the statutory purpose of determining the petitioners' correct income tax liabilities for the relevant years. It is clear in this case that the petitioners have not met their heavy burden of showing that the summonses were not issued for...