New TP Putting His Toe In the Water?

[The Observer]

UNITED STATES OF AMERICA AND ANGELA ARGUETA,
REVENUE OFFICER INTERNAL REVENUE SERVICE
Plaintiffs
v.
DEAN P. OLVANY
Defendant

Release Date: FEBRUARY 03, 2012

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF PENNSYLVANIA

Chief Judge Kane

Magistrate Judge Arbuckle

OPINION AND ORDER

PROCEDURAL HISTORY

This is a civil action to enforce an Internal Revenue Service (hereinafter IRS) Summons. A petition filed by the IRS (Document #1) resulted in an Order to Show Cause (Document #2). Defendant, Dean P. Olvany (hereinafter Olvany) filed a pro se response asserting substantive and procedural defenses (Document #4). The matter was referred by the District Judge to a Magistrate Judge for purposes of a hearing (Document #5). All parties appeared at the hearing held on January 27, 2012 in Williamsport.

During the hearing Counsel for the government suggested that the matter required the consent of the parties to proceed before a Magistrate Judge. Consent of the parties was not given and the hearing concluded with the announcement that a Report and Recommendation would be submitted to the District Judge for decision. However, after reviewing the applicable statues this Court concludes that consent to proceed before a Magistrate Judge is not required.

The statute authorizing judicial enforcement of an IRS Summons states in relevant part:

26 U.S.C. section 7604(b) Enforcement. -- Whenever
any person summoned under section . . . 7602 neglects
or refuses to obey such summons, or to produce books,
papers, records, or other data, or to give testimony,
as required, the Secretary may apply to the judge
of the district court or to a United States commissioner
for the district within which the person so summoned
resides or is found for an attachment against him
as for a contempt. It shall be the duty of the judge
or commissioner to hear the application, and, if
satisfactory proof is made, to issue an attachment,
directed to some proper officer, for the arrest of
such person, and upon his being brought before him
to proceed to a hearing of the case; and upon such
hearing the judge or the United States commissioner
shall have power to make such order as he shall deem
proper, not inconsistent with the law for the punishment
of contempts, to enforce obedience to the requirements
of the summons and to punish such person for his
default or disobedience. (emphasis added).

The office of United States Commissioner no longer exists, but the powers and duties of that office were transferred to the U.S. Magistrate Judges. The Federal Magistrates Act of 1968 established the Unites States magistrate judge system, building upon and superseding the 175 year old United States commissioners system. The authority of a Magistrate Judge is found in the Judiciary and Judicial Procedure Act at Section 636 which states:

28 U.S.C. section 636. Jurisdiction, powers, and
temporary assignment (a) Each United States magistrate
judge serving under this chapter shall have within
the district in which sessions are held by the court
that appointed the magistrate judge, at other places
where that court may function, and elsewhere as authorized
by law -- (1) all powers and duties conferred or
imposed upon United States commissioners by law
or by the Rules of Criminal Procedure for the United
States District Courts; (emphasis added). . . .

This matter was originally assigned to Chief Judge Kane in accordance with the Middle District Case Assignment Policy. Judge Kane referred the case to the Magistrate Judge for hearing (Document #5). This matter will therefore be decided by the Magistrate Judge.

APPLICABLE LAW

The IRS seeks judicial enforcement of a summons requiring the taxpayer to produce evidence of income for the period of January 1, 2011 to June 30, 2011. The IRS requests this information to aid in its determination of the collectability of an assessment of taxes owed for calendar years 2003 and 2004. The IRS relies upon 26 U.S.C. section 7602 and 7604(a) for its authority to request this information and to seek judicial enforcement of the subpoena.

26 U.S.C. section 7602 states in relevant part:

(a) Authority to summon, etc.: For the purpose
of . . . determining the liability of any person
for any internal revenue tax . . ., or collecting
any such liability, the Secretary is authorized:

(1) To examine any books, papers, records, or other
data which may be relevant or material to such inquiry;

(2) To summon the person liable for tax . . ., to
appear before the Secretary at a time and place named
in the summons and to produce such books, papers,
records, or other data, and to give such testimony,
under oath, as may be relevant or material to such
inquiry; and

(3) To take such testimony of the person concerned,
under oath, as may be relevant or material to such
inquiry.

. . .

(d) No administrative summons when there is Justice
Department referral.:

(1) Limitation of authority. -- No summons may be
issued under this title, and the Secretary may not
begin any action under section 7604 to enforce any
summons, with respect to any person if a Justice
Department referral is in effect with respect to
such person. 1

26 U.S.C. section 7604(a) states in relevant part:

section 7604. Enforcement of summons

(a) Jurisdiction of district court. -- If any person
is summoned under the internal revenue laws to appear,
to testify, or to produce books, papers, records,
or other data, the United States district court for
the district in which such person resides or is found
shall have jurisdiction by appropriate process to
compel such attendance, testimony, or production
of books, papers, records, or other data.

(b) Enforcement. -- Whenever any person summoned
under section . . . 7602 neglects or refuses to obey
such summons, or to produce books, papers, records,
or other data, or to give testimony, as required,
the Secretary may apply to the judge of the district
court or to a United States commissioner for the
district within which the person so summoned resides
or is found for an attachment against him as for
a contempt. It shall be the duty of the judge or
commissioner to hear the application, and, if satisfactory
proof is made, to issue an attachment, directed to
some proper officer, for the arrest of such person,
and upon his being brought before him to proceed
to a hearing of the case; and upon such hearing the
judge or the United States commissioner shall have
power to make such order as he shall deem proper,
not inconsistent with the law for the punishment
of contempts, to enforce obedience to the requirements
of the summons and to punish such person for his
default or disobedience.

REPORT OF HEARING

All parties were present for the hearing on January 27, 2012. The Defendant elected to proceed pro se.

The Defendant objected to the Summons on the grounds that certain of his property was seized to satisfy the 2003 & 2004 tax obligation and the Assessment of Tax that he received was incorrect.

Counsel for the IRS argued that the pleadings on their face satisfy the statutory requirements and meet the four point test established by U.S. v. Powell, 379 U.S. 48 (1964), entitling the IRS to enforcement of the subpoena by Court Order.

Testimony was not taken and no exhibits were offered or admitted. All argument was on the record.

DISCUSSION

The IRS seeks judicial enforcement of a summons requiring Olvany to produce:

"All documents and records you possess or control
regarding assets, liabilities or accounts held in
the taxpayer's name or for the taxpayer's benefit
which the taxpayer wholly or partially owns or in
which the taxpayer has a security interest. These
records and documents include but are not limited
to: all bank statements, checkbooks, canceled checks,
saving account passbooks, records, or certificates
of deposit for the period: from 01/01/2011 to 06/30/2011.
Also include all current vehicle registration certificates,
deeds or contracts regarding real property, stocks
and bonds, accounts, notes and judgments receivable,
and all life or health insurance policies." (Summons,
Document #1, Exhibit 1)

The authority for this request is 26 U.S.C. section 7602. Attached as Exhibits to the Complaint to Enforce IRS Summons (Document #1) is the Summons, a Certificate of Service, and the declaration of IRS Agent Angel Argueta.

By these documents the IRS has established that it is seeking information to be used to collect a tax liability; that the records sought are for a limited period and thus not burdensome; and that the proper procedure for service of the summons was followed. The requirements of the statute are met by the petition and declaration of Agent Argueta.

While the Petition and Declaration do not specifically state that a tax liability exists 2 or exactly what that liability is, Olvany stated at the hearing that he had received assessments for tax years 2003 and 2004 and that he disputed the amount owed. The question of the amount of tax owed is not before the court. This proceeding is limited to determining if the taxpayer can be required to respond to a summons for records and information to aid in the collection of taxes owed.

At the hearing, the IRS cited U.S. v. Powell, 379 U.S. 48 (1964), to support its request. In Powell, the Supreme Court held that the IRS need not establish probable cause to suspect fraud as a prerequisite to seeking enforcement of a summons unless the taxpayer raises a substantial question that judicial enforcement of the summons would be abusive use of the Court's process. There is no basis in the record to suggest that the enforcement of the summons would be an abuse of the court's process.

Olvany in his answer (Document #4) attempts to enter a "special appearance" to challenge the jurisdiction of the Court. His answer is rambling, does not contain numbered paragraphs, and does not respond directly to the allegations in the Complaint. In fact, he states "I have never seen the complaint." (Document #4, at page 2, line 13). He does however respond to "assertions" of the plaintiffs (Document #4, at page 2, line 12); and to the "notice pleading" (Document #4, at page 3, lines 6 & 18). The record also contains a "certificate of service" (Document #3) which establishes personal service on Olvany. Olvany's statement that he has "never seen the complaint" is contradicted by the record and his own pleading.

Jurisdiction to hear a petition to enforce a summons is vested in the District Court where the Defendant resides or may be found. 26 U.S.C. section 7604(a). In the instant case the IRS alleges, and Olvany admitted at the hearing, that he resides at 2073 Spruce Road, Sunbury, PA 17801. The Court takes judicial notice that this address is within the geographic jurisdiction of the Middle District of Pennsylvania (F.R.E. 201).

Olvany also objects to the jurisdiction of the Court because he has not received a "verified tax assessment or substitute for return (SFR) followed by a deficiency notice as mandated by Congress." (Document #4, at page 3, line 16). He cites no authority for this proposition, and as noted earlier, he admitted at the hearing that he has received an assessment of tax owed and disputes the amount. Based on the information before the court it appears that the IRS is attempting in good faith to collect taxes due. That is all that is required to invoke the jurisdiction of the court to enforce a summons. The amount of tax owed is not before the court at this time.

Olvany also demurs, claiming that the complaint is an attempt to form a contract, and he does not wish to contract with the IRS (Document 4, page 4, line 19 and page 3, line 6). Olvany cites no authority for this proposition and the court finds none.

Finally, Olvany does concede the jurisdiction of the Court to "remove all erroneous liens and furthermore order all property(s) and accounts seized in the matter returned." (Document #4, page 5, line 3). There is nothing in the record to indicate what the liens and seizures are or why they are improper. Olvany also cites no authority for this proposition and the court finds none.

ORDER

Accordingly, for the foregoing reasons, IT IS ORDERED that the IRS Complaint to Enforce Summons (Doc. #1) is GRANTED and the Defendant's Objections to Jurisdiction, Demur, and Request to Remove all Liens and Levies (Doc. # 4) are DENIED.

IT IS FURTHER ORDERED that the United States be permitted to recover its costs in maintaining this action.

IT IS FURTHER ORDERED that the Defendant appear before the undersigned Magistrate Judge in Williamsport, on Thursday, March 8, 2012 at 11:00 a.m. and produce the requested documents and testimony to comply fully with the IRS Summons (Document #1, Exhibit #1) issued August 1, 2011. Failure to appear and comply will constitute contempt. Olvany is once again strongly advised to seek competent legal advice.

NOTICE REGARDING APPELLATE RIGHTS

LR 72.2 Appeals from Non-Dispositive Orders of Magistrate
Judges.

Any party may appeal from a magistrate judge's order
determining a non-dispositive pretrial motion or
matter in any civil or criminal case in which the
magistrate judge is not the presiding judge of the
case, within fourteen (14) days after issuance of
the magistrate judge's order, unless a different
time is prescribed by the magistrate judge or a judge.
Such party shall file with the clerk of court, and
serve on the magistrate judge and all parties, a
written statement of appeal which shall specifically
designate the order, or part thereof, appealed from
and the basis for any objection thereto. At the time
the appeal is filed, the appellant shall also file
a brief addressed to the issue raised by the objection
to the order or part appealed from Any party opposing
the appeal shall file a responsive brief within fourteen
(14) days after service of the appellant's brief.
A brief in reply may be filed within seven (7) days
after service of the opposing party's brief. A judge
of the court shall consider the appeal and shall
set aside any portion of the magistrate judge's order
found to be clearly erroneous or contrary to law.
The judge may also reconsider sua sponte any matter
determined by a magistrate judge under this rule.

SO ORDERED this 3 day of February, 2012.

William I. Arbuckle, III
U.S. Magistrate Judge

FOOTNOTES:

/1/ What constitutes a "Justice Department referral" is defined by subsection (d)(2). The Assistant U.S. Attorney at the January 27, 2012 hearing and the IRS Agent in her declaration have each stated that a Justice Department referral has not been made. Olvany has not asserted that such a referral has been made.

/2/ The Complaint (Document #1) states at paragraph 4: "The Internal Revenue Service is presently conducting an investigation with respect to the collection of the outstanding Federal income tax liabilities (Forms 1040) of Olvany for the tax years ending in December 31, 2003 and December 31, 2004." The Argueta Declaration (Document #1, Exhibit 1) states at paragraph 2: "In my capacity as a Revenue Officer, I am conducting an investigation into the collection of the income tax liabilities (Forms 1040) of Dean P. Olvany for the calendar years ending December 31, 2003 and December 31, 2004." These statements presume that a tax liability exists.

[The Observer]

While there is nothing certain to indicate that our plucky contender is imbibing the kool-ade, the argument that he is not a "person" and not a "proven" taxpayer, for the purposes of a summons, certainly gives the impression that he is sticking a toe into the TP swimming hole.

UNITED STATES OF AMERICA,
Plaintiff,
v.
DEAN P. OLVANY,
Defendant.

Release Date: JUNE 20, 2012

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

(Chief Judge Kane)

(Magistrate Judge Arbuckle)

MEMORANDUM ORDER

Currently pending before the Court is Magistrate Judge Arbuckle's March 12, 2012 Report and Recommendation that Plaintiff's complaint to enforce summons be granted. (Doc. No. 20.) Upon a de novo review of the Report and Recommendation, Defendant's objections thereto, and the transcript of the January 26, 2012 hearing held before Magistrate Judge Arbuckle, 1 the Court will adopt Magistrate Judge Arbuckle's well-reasoned Report and Recommendation in full and grant the complaint to enforce summons.

Pursuant to 26 U.S.C. section 7602, the Internal Revenue Service has broad authority to issue a summons in order to conduct an investigation for the purpose of determining a taxpayer's liabilities. See United States v. Arthur Young & Co., 465 U.S. 805, 816 (1984) ("In order to encourage effective tax investigations, Congress has endowed the IRS with expansive information-gathering authority; [Section] 7602 is the centerpiece of that congressional design."). Section 7602(a) authorizes the Commissioner of the Internal Revenue Service to examine "any books, papers, records, or other data which may be relevant" to "the purpose of ascertaining the correctness of any return" or "determining the liability of any person for any internal revenue tax." 26 U.S.C. section 7602(a). The United States District Court for the district in which a person summoned resides or is found is empowered to compel compliance with such a summons from the Internal Revenue Service. 26 U.S.C. section 7604(a).

The Internal Revenue Service is not required to establish probable cause in order to obtain enforcement of an administrative summons issued pursuant to a tax investigation. United States v. Stuart, 489 U.S. 353, 359 (1989). Rather, the Internal Revenue Service need only make a prima facie showing that the investigation is conducted in good faith. Id. To meet this burden the Internal Revenue Service must show that: (1) the investigation will be conducted pursuant to a legitimate purpose; (2) the information sought is relevant to that purpose; (3) the information sought is not already within the Internal Revenue Service's possession; and (4) the administrative steps required by the Internal Revenue Service have been followed. United States v. Powell, 379 U.S. 48, 57-58 (1964). Once the Internal Revenue Service has made such a showing, enforcement of the summons is proper unless the taxpayer can prove that the Internal Revenue Service is attempting to abuse the court's process. Stuart, 489 U.S. at 360.

The Court agrees with Magistrate Judge Arbuckle, that Plaintiff has met its burden of making a prima facie showing of good faith. First, the declaration of Internal Revenue Officer Angela Argueta attests that she is conducting an investigation for a proper purpose, namely, the collection of Defendant's income tax liabilities for the calendar years ending December 31, 2003, and December 31, 2004. (Doc. No. 1-2 paragraph 2.) Second, the information sought is relevant. The summons directs Defendant to provide:

All documents and records you possess or control
regarding assets, liabilities, or accounts held in
the taxpayer's name or for the taxpayer's benefit
which the taxpayer wholly or partially owns, or in
which the taxpayer has a security interest. These
records and documents include but are not limited
to: all bank statements, checkbooks, cancelled checks,
savings account passbooks, records or certificates
of deposit for the period: from 01/01/2011 to 06/30/2011.
Also include all current vehicle registration certificates,
deeds or contracts regarding real property, stocks
and bonds, accounts, notes and judgments receivable,
and all life or health insurance policies.

(Doc. No. 1-1.) This information is precisely the type of information that would be necessary to determine whether the Internal Revenue Service is able to collect Defendant's tax liabilities. (See also Doc. No. 1-2 paragraph 9.) Third, Officer Argueta attested that the Internal Revenue Service does not have access to the information sought. (Id. paragraph 6.) Finally, the certificate of summons and declaration of Officer Argueta indicate that the Internal Revenue Service has complied with all administrative procedures. (Doc. No. 1-1; Doc. No. 1-2 paragraph 4.) Accordingly, Plaintiff has met its burden.

In his objections, Defendant makes a three primary arguments: (1) the Court lacks jurisdiction; (2) there has been no Department of Justice referral; and (3) Defendant has failed to prove that he has a tax liability and he is therefore, not a "person" under Section 7602(a). (Doc. No. 21.) Defendant's jurisdictional argument focuses on whether he resides in the Middle District of Pennsylvania. Plaintiff contends Defendant resides in Sunbury, Pennsylvania, which is located in the Middle District of Pennsylvania. (Doc. No. 1 paragraph 3.) When questioned by Magistrate Judge Arbuckle, Defendant affirmed that the address identified by Plaintiff was his mailing address. Defendant objects that he did not understand the significance of Magistrate Judge Arbuckle's question, and that he does not reside in the Middle District. Rather, he contends that he merely lives in the District in a house owned by a close relative. (Doc. No. 21 paragraph 6.) This is a distinction without a relevant difference. Plaintiff does not dispute that he is "domiciled in Pennsylvania" and lives in Sunbury, Pennsylvania. (Doc. No. 4; Doc. No. 21.) Accordingly, this Court's jurisdiction to issue a summons is not in question. Second, Defendant contends there has been no Department of Justice referral in this matter. Defendant is correct. (Doc. No. 1-2 paragraph 8.) However, he misapprehends the significance of this fact. Pursuant to 26 U.S.C. section 7602(d), a Department of Justice referral would bar the Internal Revenue Service from issuing a summons. 26 U.S.C. section 7602(d)(1) ("No summons may be issued under this title . . . with respect to any person if a Justice Department referral is in effect with respect to such person."). To that end, the summons is proper in this matter precisely because no Department of Justice referral is in effect. Finally, regarding the issue of whether Defendant is a "person," Defendant argues he is not a person because Plaintiff has not proven that he is a taxpayer. Contrary to Defendant's belief, Section 7602(a) does not apply solely to those individuals against whom taxes have been levied. Indeed, one of the express grounds for conducting an investigation is to determine whether an individual is liable for taxes or not. 26 U.S.C. section 7602(a); Tiffany Fine Arts, Inc. v. United States, 469 U.S. 310, 311 (1985). Therefore, the Court must find that Defendant is a person. Having reviewed all of Defendant's objections, the Court finds that they are without merit. Plaintiff has satisfied its burden of making a prima facie showing of good cause for the issuance of a summons. And Defendant has failed to rebut that showing.

ACCORDINGLY, on this 20 day of June 2012, IT IS HEREBY ORDERED THAT:

1. The Report and Recommendation (Doc. No. 20) is
ADOPTED;

2. Plaintiff's complaint to enforce summons (Doc.
No. 1) is GRANTED;

3. Plaintiff shall be permitted to recover its costs
in maintaining this action;

4. Defendant SHALL appear before Magistrate Judge
Arbuckle, at a date and time of Magistrate Judge
Arbuckle's choosing within sixty days of this order,
for the purpose of producing the requested documents
and testimony to comply fully with the Internal Revenue
Summons issued on August 1, 2011 (Doc. No. 1-1);
Defendant is cautioned that failure to appear and
comply with the summons will constitute contempt
of court;

5. This matter is referred to Magistrate Judge Arbuckle
for the purpose of scheduling a time for Defendant
to appear and comply with the summons.

Yvette Kane, Chief Judge
United States District Court
Middle District of Pennsylvania

FOOTNOTES:

/1/ The Magistrate Act, 28 U.S.C. section 636, and Federal Rule of Civil Procedure 72(b) provide that any party may file written objections to a magistrate's proposed findings and recommendations. In deciding whether to accept, reject, or modify the Report and Recommendation, the Court is to make a de novo determination of those portions of the Report and Recommendation to which objection is made. 28 U.S.C. section 636(b)(1).

[Dezcad]

His other case is here in Quatloos - viewtopic.php?f=8&t=8100

[The Observer]

Silly me. I forgot to check before posting. Merging this thread into the old one.

[Dr. Caligari]

Finally, regarding the issue of whether Defendant is a "person," Defendant argues he is not a person

if I were a judge and a defendant claimed not to be a "person," I would have the bailiff call Animal Control.

[Cathulhu]

Finally, regarding the issue of whether Defendant is a "person," Defendant argues he is not a person

if I were a judge and a defendant claimed not to be a "person," I would have the bailiff call Animal Control.

What he said! LMAO! Put 'em in a kennel and examine for rabies!

[jkeeb]

Eventually we will merge this thread with upcoming prison releases.

[Randall]

Finally, regarding the issue of whether Defendant is a "person," Defendant argues he is not a person

if I were a judge and a defendant claimed not to be a "person," I would have the bailiff call Animal Control.

What he said! LMAO! Put 'em in a kennel and examine for rabies!

Don't forget to have them spayed or neutered.