U.S. v. Harper, 80-7688

• Decision Date: 23 November 1981
• Docket Number: No. 80-7688,80-7688
• Citation: 662 F.2d 335
• Parties: 81-2 USTC P 9787 UNITED STATES of America and T. B. Schopfer, Revenue Officer, Internal Revenue Service, Plaintiffs-Appellees, v. C. H. HARPER, Defendant-Appellant. . Unit B *
• Court: U.S. Court of Appeals — Fifth Circuit

Page 335

662 F.2d 335

81-2 USTC P 9787

UNITED STATES of America and T. B. Schopfer, Revenue Officer, Internal Revenue Service, Plaintiffs-Appellees, v. C. H. HARPER, Defendant-Appellant.

No. 80-7688.

United States Court of Appeals,

Fifth Circuit.

Unit B ^*

Nov. 23, 1981.

W. J. Jacques, Jr., Greeley, Colo., for defendant-appellant.

Melissa S. Mundell, Asst. U. S. Atty., Savannah, Ga., John F. Murray, Acting Asst. Atty. Gen., Michael L. Paup, Atty., Carleton D. Powell, Tax Div., Dept. of Justice Washington, D. C., for plaintiffs-appellees.

Appeal from the United States District Court for the Southern District of Georgia.

Before VANCE, FRANK M. JOHNSON, Jr., and THOMAS A. CLARK, Circuit Judges.

PER CURIAM:

The taxpayer appeals from the district court's enforcement of an Internal Revenue Service summons directing him to appear before a revenue officer to testify and to produce certain documents and records relating to his financial status. ¹ The taxpayer had been assessed for certain penalties and interest relating to the years 1969 through 1971, and the summons had the legitimate purpose of aiding in determining the collectibility of the liability in question.

The taxpayer asserts that his tax liability for the years in question has been conclusively determined by a proceeding in the bankruptcy court and that the amount as so determined has been paid in full. He argues that because the matters now being investigated are barred by the bankruptcy proceeding the summons has no legitimate purpose. The government points out that the taxpayer's liability for penalties and interest was not before the bankruptcy court. The taxpayer counters that although the penalty and interest claims were not filed in bankruptcy court, principles of res judicata bar the assessment.

This appeal does not turn on these contentions, however, but rather turns on the fact that the validity of an assessment may not be challenged in a summons enforcement proceeding. The burden of the Commissioner in such a proceeding was stated in United States v. Powell, 379 U.S. 48, 55, 57, 85 S.Ct. 248, 253, 254, 13 L.Ed.2d 112 (1964):

He 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....

The district court found that each of these requirements has been met. The burden was then on the taxpayer to show that the investigation was for an improper purpose. Id. at 58, 85 S.Ct. at 255; United States v. Southeast First National Bank of Miami Springs, 655 F.2d 661, 663 (5th Cir. 1981). We recently observed that this burden "may, for all practical purposes, be insurmountable." United States v. Price, 655 F.2d 56, 58 (5th Cir. 1981). In any event it is clear that his desire to contest the underlying assessment will not suffice to meet that burden and defeat the IRS' prima facie showing.

Neither the district court's order nor this opinion should be construed as passing on the merits of the taxpayer's contention with respect to the assessment's validity. His rights to challenge it, including his rights to pay the tax, file claim for refund and bring suit under 26 U.S.C. § 7422 ² remain unimpaired by this proceeding.

Affirmed.

THOMAS A. CLARK, Circuit Judge, dissenting:

I dissent because I have a different view of appellant's contentions and a different view of how the law should be applied in this particular type of tax subpoena enforcement action. The district court erred, in my opinion, in ruling during the hearing that appellant-taxpayer was not entitled to an adversary hearing. Admittedly, the trial court permitted the taxpayer's attorney to make certain proffers of evidence, but the attorney was constantly faced with the court's statement that the taxpayer was not entitled to a hearing, and the various proffers did not provide the procedural due process to which the taxpayer was entitled.

The returns involved in this case were for the years 1969, 1970, and 1971. The alleged liability is for penalties for late filing of the returns and for interest on the penalties and interest on the taxes for those years. Assessment for these liabilities has been made. The summons was not issued to aid in a determination of tax liability, but rather for the purpose of determining the collectability of the alleged tax liability. The taxpayer claims, however, that he owes no taxes for the years 1969-71. At the enforcement hearing, he merely wanted to prove that he did not owe the money and that Agent Schopfer was harassing him.

The record indicates that the taxpayer, through the assistance of an accountant, had prepared the tax returns and written checks promptly each year, but the taxpayer's wife, who was supposed to sign each return and mail the check and return to IRS, retained and hid the tax returns and checks. The taxpayer's marital and tax problems resulted in a bankruptcy proceeding. One of the taxpayer's claims in this action is that the bankruptcy court made a final determination of all tax liability for the years 1969-71 and that this amount has been paid in full. The taxpayer also argues that any tax liability for the years in question was discharged in the bankruptcy proceedings. In support of the claim that no taxes are owed for the years 1969-71, the taxpayer included in his reply brief a copy of a Certificate of Release of Federal Tax Lien, issued on December 15, 1980, which seems to certify that all taxes, together with penalties and interest, for the years 1969, 1970, and 1971 either have been fully satisfied or have become legally unenforceable. ¹ In addition to urging that the alleged liability is not owed for the foregoing reasons, the taxpayer claims that he had received no notice that he owed any money to the government prior to the delivery of the summons by the IRS requiring him to appear with his books and records. If this latter contention is true, then the Commissioner failed to comply with the requirement that notice and demand for payment be given to the taxpayer within 60 days after the assessment is made. See 26 U.S.C. § 6303(a). Having raised these claims that no tax liability exists, the taxpayer was entitled to a hearing on these issues.

The majority opinion states that this appeal does not turn on the contention that the tax is not owed, "but rather turns on the fact that the validity of an assessment may not be challenged in a summons enforcement proceeding." No authority is cited in support of, nor can I agree with, this broad statement. The majority's analysis fails to distinguish between a summons to determine whether tax liability exists and a summons to determine the collectability of a tax liability that the IRS already has determined to exist. I agree that in the former case the taxpayer cannot raise the defense that the tax is not owed because that is the question that the IRS is seeking to resolve with the aid of the summons. In the latter case, however, a contention that the tax is not owed becomes an issue upon which the determination whether to enforce the summons should turn.

In a summons enforcement proceeding, the taxpayer is entitled to an adversary hearing in which the taxpayer " 'may challenge the summons on any appropriate ground.' " United States v. Powell, 379 U.S. 48, 58, 85 S.Ct. 248, 255, 13 L.Ed.2d 112 (1964) (quoting Reisman v....