United States v. Clarke
573 U.S. ___ (2014)

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Justia Opinion Summary

The Internal Revenue Service (IRS) issued summonses to four individuals, seeking information and records relevant to the tax obligations of Dynamo, 26 U.S.C.7602. When they failed to comply, the IRS brought an enforcement action. The individuals challenged the IRS’s motives in issuing the summonses and sought to question the responsible agents. The district court denied the request and ordered the summonses enforced. The Eleventh Circuit reversed, holding that refusal to allow questioning of the agents was an abuse of discretion. A unanimous Supreme Court vacated and remanded. A taxpayer has a right to examine IRS officials regarding reasons for issuing a summons when the taxpayer points to specific facts or circumstances plausibly raising an inference of bad faith. The proceedings at issue are “summary in nature,” and the only relevant question is whether the summons was issued in good faith. Prior cases support a requirement that a summons objector offer not just naked allegations, but some credible evidence to support a claim of improper motive. Circumstantial evidence can suffice; a fleshed out case is not required. The objector need only present a plausible basis for the charge. The Eleventh Circuit erroneously applied a categorical rule demanding the examination of IRS agents without assessing the plausibility of the claims.

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued.The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader.See United States v. Detroit Timber & Lumber Co., 200 U. S. 321 .

SUPREME COURT OF THE UNITED STATES

Syllabus

UNITED STATES v. CLARKE et al.

certiorari to the united states court of appeals for the eleventh circuit

No. 13–301. Argued April 23, 2014—Decided June 19, 2014

The Internal Revenue Service (IRS) issued summonses to respondents for information and records relevant to the tax obligations of Dynamo Holdings L. P. See 26 U. S. C. §7602(a). When respondents failed to comply, the IRS brought an enforcement action in District Court. Respondents challenged the IRS’s motives in issuing the summonses, seeking to question the responsible agents. The District Court denied the request and ordered the summonses enforced, characterizing respondents’ arguments as conjecture and incorrect as a matter of law. The Eleventh Circuit reversed, holding that the District Court’s refusal to allow respondents to examine the agents constituted an abuse of discretion, and that Circuit precedent entitled them to conduct such questioning regardless of whether they had presented any factual support for their claims.

Held: A taxpayer has a right to conduct an examination of IRS officials regarding their reasons for issuing a summons when he points to specific facts or circumstances plausibly raising an inference of bad faith. Pp. 5–9.

     (a) A person receiving a summons is entitled to contest it in an adversarial enforcement proceeding. Donaldson v. United States, 400 U. S. 517 . But these proceedings are “summary in nature,” United States v. Stuart, 489 U. S. 353 , and the only relevant question is whether the summons was issued in good faith, United States v. Powell, 379 U. S. 48 . The balance struck in this Court’s prior cases supports a requirement that a summons objector offer not just naked allegations, but some credible evidence to support his claim of improper motive. Circumstantial evidence can suffice to meet that burden, and a fleshed out case is not demanded: The taxpayer need only present a plausible basis for his charge. Pp. 5–7.

     (b) Here, however, the Eleventh Circuit applied a categorical rule demanding the examination of IRS agents without assessing the plausibility of the respondents’ submissions. On remand, the Court of Appeals must consider those submissions in light of the standard set forth here, giving appropriate deference to the District Court’s ruling on whether respondents have shown enough to entitle them to examine the agents. However, that ruling is entitled to deference only if it was based on the correct legal standard. See Fox v. Vice, 563 U. S. ___, ___. And the District Court’s latitude does not extend to legal issues about what counts as an illicit motive. Cf. Koon v. United States, 518 U. S. 81 . Pp. 7–9.

517 Fed. Appx. 689, vacated and remanded.

     Kagan, J., delivered the opinion for a unanimous Court.

Primary Holding
A taxpayer has a right to examine IRS officials regarding their reasons for issuing a summons if the taxpayer can identify specific facts or circumstances that plausibly create an inference of bad faith.

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