Supreme Court Rules Against IRS on Agency’s Summons Power – Los Angeles Income Tax Planning & Income Tax Litigation Attorney Bruce Givner

by Bruce Givner on July 3, 2014

In a victory for taxpayers and a blow to the Internal Revenue Service’s (IRS’s) summons powers, the Supreme Court of the United States ruled that the target of an IRS summons is entitled to an evidentiary hearing to argue that the summons was improperly issued.

The case at hand involves Michael Clarke, an investor from West Palm Beach, Florida, who argued that the IRS had improperly issued him a summons as a form of “retribution.” According to court filings, Clarke said that taxpayers should have the opportunity to hear the reasons behind an IRS summons at an evidentiary hearing before a judge can approve a court order.

As it stands, the IRS is entitled to issue a summons for information when a taxpayer refuses to provide it voluntarily. If the taxpayer ignores the summons, the IRS can ask the U.S. Department of Justice to seek a court order. These court orders are almost always approved, and never require first holding evidentiary hearings.

In Clarke’s case, the IRS began enforcing a summons against him in April 2011 in a Florida district court, which authorized the summons and denied Clarke’s request for an evidentiary hearing. Last year, the 11th Circuit Court of Appeals in Atlanta ruled in Clarke’s favor during an appeal, stating that taxpayers faced an “impermissible Catch-22” in proving that a summons was issued improperly without an evidentiary hearing.

The IRS then appealed this decision to the Supreme Court, which upheld the Circuit Court’s ruling. In a unanimous opinion, Justice Elena Kagan said that taxpayers have a right to conduct an examination of the reasons behind an IRS decision to issue a summons in cases where the taxpayer can point to specific facts or circumstances plausibly raising an inference of bad faith.

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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