Supreme Court limits taxpayers' ability to fight IRS summons
[JURIST] The US Supreme Court [official website] ruled [opinion, PDF] unanimously Thursday in United States v. Clarke [SCOTUSblog backgrounder] that a taxpayer can only question Internal Revenue Service (IRS) [official website] officials about their reasons for issuing a summons when he can "point to specific facts or circumstances plausibly raising an inference of bad faith." The case involves the IRS issuance of five summonses during an investigation into the tax liabilities of Dynamo Holdings Ltd [corporate website]. Those summoned, including Dynamo's chief financial officer Michael Clarke, contend that they were entitled to discovery and an evidentiary hearing before the district court granted the IRS's petitions to enforce the summonses. Clarke and the others argued that the IRS sought to enforce the summonses for an improper purpose, including in retribution for Dynamo's refusal to extend a statutes of limitations deadline. In April 2013 the US Court of Appeals for the Eleventh Circuit [official website] ruled [opinion, PDF] in favor of Clarke, stating that "in situations such as this, requiring the taxpayer to provide factual support for an allegation of an improper purpose, without giving the taxpayer a meaningful opportunity to obtain such facts, saddles the taxpayer with an unreasonable circular burden." In a brief opinion by Justice Elena Kagan, the Supreme Court vacated the decision below and remanded the case for further proceedings: "We hold, contrary to the Court of Appeals below, that a bare allegation of improper purpose does not entitle a taxpayer to examine IRS officials."
The court heard arguments in the case in April. It granted certiorari [JURIST report] in January.
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