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Cephas v. United States

United States District Court, Fourth Circuit

October 11, 2013

JANAY CEPHAS, Petitioner,
v.
UNITED STATES OF AMERICA, et al. Respondents.

MEMORANDUM OPINION

WILLIAM B. QUARLES, Jr., District Judge.

Janay Cephas, pro se, brought this Petition against the Government to quash an IRS third-party summons. ECF No. 1. Pending is the Government's motion to dismiss or deny the petition. ECF No. 3. No hearing is necessary. Local Rule 105.6 (D. Md. 2012). For the following reasons, the motion will be granted.

I. Background[1]

IRS Revenue Agent Melanie Moreno is investigating Cephas's federal tax liability for the years 2010-2012. ECF No. 3 at 1. On June 20, 2013, Agent Moreno issued a third-party summons (the "Summons") to Bank of America seeking all documents about financial transactions involving Cephas. ECF Nos. 1-2, 3 at 1. The same day, Agent Moreno notified Cephas of the Summons. ECF No. 3 at 2. On July 2, 2013, Cephas filed a petition to quash the Summons. ECF No. 1. On July 11, 2013, the Court ordered the Government to respond to the petition. ECF No. 2. On August 1, 2013, the Government moved to dismiss or deny the petition.[2] ECF No. 3.

II. Enforcement of the Summons

When a person moves to quash an IRS summons, the IRS may seek enforcement of that summons. 26 U.S.C. § 7609(b)(2)(A). To obtain enforcement, the IRS must make a prima facie showing that: (1) an investigation for a legitimate purpose is being conducted; (2) the inquiry may be relevant; (3) it does not possess the information sought; and (4) the proper administrative procedure has been followed. United States v. Powell, 379 U.S. 48, 57-58, 85 S.Ct. 248, 13 L.Ed.2d 112 (1962); Conner v. United States, 434 F.3d 676, 680 (4th Cir. 2006); Alphin v. United States, 809 F.2d 236, 238 (4th Cir. 1987). The IRS may establish these requirements "by an affidavit of an agent involved in the investigation averring the Powell good faith elements." Conner, 434 F.3d at 680 (quoting Alphin, 809 F.2d at 238 (internal quotation marks omitted)). If the IRS makes such a showing, it is entitled to an enforcement of its summons, "unless the taxpayer can show that the IRS is attempting to abuse the court's process" or disproves any element of the prima facie case. See Conner, 434 F.3d at 680 ( quoting United States v. Stuart , 489 U.S. 353, 360, 109 S.Ct. 1183, 103 L.Ed.2d 388 (1989)); United States v. McHenry. 552 F.Supp.2d 571, 573 (E.D. Va. 2008). "The taxpayer's burden in rebutting the government's prima facie case is a heavy one." McHenry, 552 F.Supp.2d at 573;[3] Alphin, 809 F.2d at 238. The IRS's burden to show it issued a summons in good faith is "slight or minimal." Conner, 434 F.3d at 680 ( quoting Mazurek v. United States, 271 F.3d 226, 230 (5th Cir.2001) (internal quotation marks omitted)).

1. Proper Purpose

The IRS may summons records about an individual's tax liability for "the purpose of inquiring into any offense connected with the administration or enforcement of the internal revenue laws."[4] 26 U.S.C. § 7602(a), (b). In seeking judicial enforcement of a summons, the IRS may not abuse the court's process by, for example, issuing a summons for an improper purpose. See Powell, 379 U.S. at 58; Alphin, 809 F.2d at 238. Examples of improper purposes include "to harass the taxpayer or to put pressure on him to settle a collateral dispute." Powell, 379 U.S. at 58.

Agent Moreno declares that the Summons was issued "in furtherance of" her "investigation into the tax licibility of Janay Cephas" for the years 2010-2012. ECF No. 3-1 at 1. The documentation she has suggests that Cephas did not report all her income for those years. See id. Cephas asserts that the IRS's investigation is "frivolous" and constitutes "harassment and malicious prosecution." ECF No. 1 at 5. She also contends that the IRS is engaged in an "invasive... fishing" expedition that violates her constitutional and privacy rights. Id. The IRS has made a prima facie showing of a proper purpose for the Summons-its investigation into Cephas's tax liability. See McHenry, 552 F.Supp.2d at 573. Cephas's bare allegations of improper purpose, unsupported by facts, are insufficient to rebut this showing.[5] The Government has satisfied Powell 's first requirement.

2. Relevancy of the Records

The Government must show that the Summons is relevant to the purpose of the investigation. Powell, 379 U.S. at 57. The IRS has the authority to "examine any books, papers, records, or ther data which may be relevant" to determining tax liability. 26 U.S.C. § 7602(a)(1). This standard "allow[s] the IRS to obtain items of even potential relevance to an ongoing investigation." United States v. Arthur Young & Co., 465 U.S. 805, 814, 104 S.Ct. 1495, 79 L.Ed.2d 826 (1984) (emphasis in original). This is a low threshold that is crossed when the Government shows that the investigation might shed light on the correctness of the individual's tax returns. United States v. Richards, 631 F.2d 341, 345 (4th Cir. 1980).

Agent Moreno declares that the records she seeks will enable her to determine if Cephas did not report all of her "income in each of the tax years under examination." ECF No. 3-1 at 3. Although Cephas contends that the information Agent Moreno seeks is sensitive and private, she does not dispute its relevancy to the investigation. See ECF No. 1 at 5. Agent Moreno's declaration establishes that the Summons is relevant to the investigation. See Richards, 631 F.2d at 345.

3. The IRS Does Not Possess the Information

Agent Moreno declares that the information requested in the Summons is not "already in the possession of the [IRS]."[6] ECF No. 3-1 at 2. She asserts that she requested the bank records from Cephas, but that Cephas did not comply with the request. Id. at 3. Cephas does not dispute these assertions. Accordingly, the Government has satisfied Powell's third requirement.

4. Administrative Steps

Agent Moreno has declared that in furtherance of the investigation, and in accordance with 26 U.S.C. §§ 7602-7603, on June 20, 2013, she (1) issued the Summons to Bank of America, (2) served an attested copy of the Summons on Bank of America by certified mail, and (3) gave Cephas notice of the Summons. ECF No. 3-1 at 1-2. Agent Moreno also declared that all administrative steps have been followed. Id. at 2.

Cephas contends that Agent Moreno was required to give her notice of the Summons before she sent it to Bank of America.[7] See ECF No. 1 at 4. Section 7602 requires the IRS to give "reasonsible notice in advance to the taxpayer that contacts with persons other than the taxpayer may be made." § 7602 (c) (1). Agent Moreno avers that she provided this notice to Cephas in her initial letter to Cephas informing her of the audit. See ECF No. 3-1 at 2. Section 7609 requires the IRS to give the taxpayer notice "within 3 days of the day on which service is made" of a summons on the third party. § 7609(a)(1). Agent Moreno attests that she served this notice on Cephas on June 20, 2013, the same day she served Bank of America. ECF No. 3-1 at 1-2. Because Cephas's allegation is not supported by a declaration under oath, it is insufficient to rebut Agent Moreno's sworn affidavit. See Alphin, 809 F.2d at 238; Uhrig, 592 F.Supp. at 3 53; cf. McHenry, 552 F.Supp.2d at 573 (taxpayer has a "heavy burden" to rebut government's prima facie case). Finally, Cephas alleges that Agent Moreno was required to file the Summons with the U.S. Attorney General and District Attorney. ECF No. 1 at 6. However, § 7609(a)(1) only requires the IRS to give notice of the Summons to the taxpayer, and Cephas acknowledges that she received this notice, [8] see ECF No. 1 at 6. Thus, the Government has satisfied Powell 's fourth requirement and established a prima facie case for enforcement of the Summons.[9] See Powell, 379 U.S. at 57-58. Because Cephas has not established that enforcement of the Summons would abuse the Court's process, [10] the Court will grant the Government's motion to deny the petition to quash. See Conner, 434 F.3d at 680.

III. Conclusion

For the reasons stated above, the Government's motion to deny the petition to quash will be GRANTED.


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