PRAGOVICH v. IRS

Decision Date30 November 2009
Docket NumberCase No. 08-MC-50427.
Citation676 F. Supp.2d 557
PartiesGeorge K. PRAGOVICH, Petitioner, v. INTERNAL REVENUE SERVICE, Respondent.
CourtU.S. District Court — Eastern District of Michigan

George K. Pragovich, Clarksville, TN, pro se.

ORDER ACCEPTING NOVEMBER 9, 2009 REPORT AND RECOMMENDATION (# 9), DISMISSING PETITIONER'S MOTION TO QUASH (# 1), AND DENYING RESPONDENT'S MOTION TO DISMISS AS MOOT (# 5)

GEORGE CARAM STEEH, District Judge.

George Pragovich filed a petition to quash third party Internal Revenue Service ("IRS") summonses on May 7, 2008 with respect to an IRS summons served on Rhonda Gross of Brighton, Michigan on April 15, 2008.1 On June 26, 2008, respondent IRS filed a motion to dismiss the petition. The matters were referred to Magistrate Judge Paul J. Komives. Magistrate Judge Komives issued a 27-page Report and Recommendation on November 9, 2009, 2009 WL 5196000, recommending that: (1) Pragovich's petition to quash be denied; and (2) the IRS's motion to dismiss be construed as a response to Pragovich's petition to quash, and be denied as moot. Magistrate Judge Komives finds that the IRS has set forth a prima facie case for enforcing the summons pursuant to the four-part Powell test articulated in United States v. Will, 671 F.2d 963, 966 (6th Cir.1982) (citing United States v. Powell, 379 U.S. 48, 57-58, 85 S.Ct. 248, 13 L.Ed.2d 112 (1964)), that is: (1) the summoned materials are relevant to an IRS investigation; (2) the investigation has a legitimate purpose; (3) the information sought in the summons is not already in the IRS's possession; and (4) the IRS has complied with the procedural requirements of 26 U.S.C. § 7603. Noting that Pragovich did not file a response to the IRS's motion to dismiss, Magistrate Judge Komives finds that Pragovich's May 7, 2008 petition and brief, and accompanying affidavit, fail to displace the IRS's prima facie showing of an enforceable third party summons under Powell. The Magistrate Judge further finds that Pragovich's acts of selling tax avoidance advice and facilitating federal lawsuits by taxpayers against the IRS through the "National Justice Center" is commercial speech of the type not protected by the First Amendment, citing Pragovich v. United States, No. 08-5010, 2008 WL 3977578, *3 (W.D.Wash. Aug. 22, 2008) (denying petition to quash third party summons issued to one Puhn), Pragovich v. Internal Revenue Service, 2008 WL 2914514, *3 (M.D.Pa. July 24, 2008) (denying petition to quash third party summons issued to one Rhodes), Pragovich v. Internal Revenue Service, 2:08-MC-33, 2008 WL 5273576, *1 (N.D.Ind. Dec. 16, 2008) (denying petition to quash third party summons issued to one Gorman); and Pragovich v. Internal Revenue Service, 2008 WL 2692125, *2-3 (C.D.Ill. July 1, 2008) (denying petition to quash third party summons issued to one Brandts).

"A judge of the court shall make a de novo determination of those portions of a report or specified proposed findings or recommendations to which objection is made." 28 U.S.C. § 636(b) (1). Objections must be filed within 10 days after service of a Report and Recommendation. 28 U.S.C. § 636(b)(1)(C). "A judge of the court may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." Id. A party's failure to object waives further judicial review. Thomas v. Arn, 474 U.S. 140, 149-155, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985); Thomas v. Halter, 131 F.Supp.2d 942, 944 (E.D.Mich.2001); 28 U.S.C. § 636(b)(1). Neither petitioner Pragovich nor respondent IRS have filed objections. Accordingly, and having thoroughly reviewed the Report and Recommendation,

The court hereby ACCEPTS the well-reasoned November 9, 2009 Report and Recommendation as its own. Pragovich's petition to quash third party summonses is hereby DENIED, and the petition is hereby DISMISSED with prejudice. Respondent IRS's motion to dismiss is hereby construed as a response to the petition, and is hereby DENIED as MOOT.

SO ORDERED.

REPORT AND RECOMMENDATION REGARDING PETITION TO QUASH THIRD PARTY SUMMONSES (Doc. Ent. 1) and RESPONDENT'S MOTION TO DISMISS PETITION TO QUASH THIRD PARTY SUMMONS (Doc. Ent. 5)

PAUL J. KOMIVES, United States Magistrate Judge.

                Table of Contents
                I. RECOMMENDATION............................................................561
                II. REPORT...................................................................561
                   A. Pragovich's May 7, 2008 Petition to Quash Third Party Summonses............561
                    B. The IRS's June 26, 2008 Motion to Dismiss Construed as a Response
                        to the Petition......................................................562
                    C. The Court Should Deny the Petition to Quash Third Party
                        Summonses ...........................................................563
                       1. The summons served upon Gross was issued pursuant to 26 U.S.C
                          § 7602 .......................................................563
                       2. The IRS's June 26, 2008 filing (response) and Conroy's June 26
                          2008 declaration set forth a prima facie case under Powell.........564
                       3. Petitioner's May 7, 2008 petition and affidavit do not meet the
                          burden that has shifted to him.....................................566
                       4. The Court need not decide whether petitioner is collaterally
                           estopped from bringing the First Amendment claim set forth in
                           his petition......................................................573
                III. NOTICE TO PARTIES REGARDING OBJECTIONS .................................575
                
I. RECOMMENDATION:

The Court should deny Pragovich's petition to quash third party summonses (Doc. Ent. 1) and deem moot the IRS's motion to dismiss the petition to quash third party summons (Doc. Ent. 5).

II. REPORT:

A. Pragovich's May 7, 2008 Petition to Quash Third Party Summonses

On January 28, 2008, IRS Agent J. Conroy wrote to George Pragovich regarding his "participation in tax avoidance transactions." Doc. Ent. 1 at 13 (Letter 1844). An interview was scheduled for February 20, 2008. Pragovich was to bring certain documents with him. Doc. Ent. 1 at 9-12 Form 4564—Information Document Request, 13, 34. The Form 4564 contains three (3) definitions of "promotion." Doc. Ent. 1 at 9 ¶¶ C-E.

On February 14, 2008, Conroy again wrote to Pragovich regrading his "participation in tax avoidance transactions." Doc. Ent. 1 at 14 (Letter 1844). An interview was scheduled for March 19, 2008. Doc. Ent. 1 at 14-15. According to Pragovich, a Form 4564 was also attached to this letter. Doc. Ent. 1 at 4-5 ¶ D.

On February 29, 2008, the IRS issued a summons (Form 2039) for Pragovich to appear on March 19, 2008 before Revenue Agent Joseph Conroy or his designee. Revenue Agent Gary Ferguson issued the summons, and Group Manager Sam Anderson approved the summons. Doc. Ent. 1 at 16-19. Attachment A to this summons contains two (2) definitions of the term, "Promotion." Doc. Ent. 1 at 17 ¶¶ D-E.

Pragovich wrote to Conroy on or about March 11, 2008, declining Conroy's offer. Doc. Ent. 1 at 20-23. According to Pragovich, on or about April 1, 2008 and April 15, 2008, the IRS issued summonses "In the Matter of the liability of George K. Pragovich for penalties under IRC Sec. 6700." Doe. Ent. 1 at 2-3.

On April 15, 2008, the IRS served a summons upon Rhonda Gross of Brighton, Michigan requiring her to respond by mail on May 12, 2008. Doc. Ent. 6-2 at 1.1 The summons requested information related to George Pragovich and/or the National Justice Center. Doc. Ent. 6-2 at 3-4. Attachment A to this summons does not contain a definition of "promotion." Doc. Ent. 6-2 at 3-4. The "Service of Summons, Notice and Recordkeeper Certificates" was sent to Pragovich the same day. Doc. Ent. 6-2 at 2. He received the notice on or about April 21, 2008. Doc. Ent. 2 at 2 ¶ B.

Pragovich claims that Attachment A to the April 2008 third-party summonses (see, i.e., Doc. Ent. 6-2 at 3-4) contains language substantially similar to language contained in Attachment A to the February 29, 2008 summons (Doc. Ent. 1 at 17-19) sent to him. Doc. Ent. 2 at 2 ¶ D. Pragovich also claims that language in Attachment A to the February 29, 2008 summons sent to him is nearly the same as language in the January 28, 2008 and February 14, 2008 Information Document Requests (Doc. Ent. 1 at 9-12 Form 4564) sent to him. Doc. Ent. 2 at 3 ¶ F. Specifically, Pragovich refers to the inclusion or exclusion of a definition of "promotion." Doc. Ent. 2 at 3 ¶¶ E, F. Petitioner claims that, other than the omission of a "promotion" definition, the April 2008 third-party summonses are substantially identical to and, seek substantially related information as the February 29, 2008 firstparty summons issued to him, and the third-party summonses "facially appear to be following the path laid out by" Conroy's Forms 4564 and first-party summons. Doc. Ent. 1 at 6 ¶ VI; Doc. Ent. 1 at 29 ¶B.

Pragovich ("Petitioner") filed the instant petition to quash third party summonses on May 7, 2008 with respect to a summons issued to Gross. Doc. Ent. 1. Pragovich filed the petition, pursuant to 26 U.S.C. §§ 7609(b)(2), 7603, "to quash the third party `summonses' issued by Conroy, with the apparent approval of Anderson, on grounds that the third party `summonses' identified herein were issued for the improper purpose of chilling Petitioner's inseparable First Amendment rights of freedom in speech and press, peaceably to assemble and to petition for redress of grievances." Doc. Ent. 1 at 1 ¶ I.

Petitioner argues that Conroy and Anderson's third-party summonses do not meet the requirements set forth in United States v. Powell, 379 U.S. 48, 85 S.Ct. 248, 13 L.Ed.2d 112 (1964). Doc. Ent. 1 at 3 ¶ V. He also argues that Conroy and Anderson issued the third-party summonses for an improper purpose. Doc. Ent. 1 at 3-6 ¶¶ B-F. Finally, he argues that Conroy and Anderson's third-party summonses "demonstrate their awareness of...

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