On June 19, 2014, the United States Supreme Court issued its decision in United States v. Clarke, No. 13-301, reaffirming the right of a recipient of an IRS summons to challenge the summons by examining IRS officials in an adversarial proceeding. The U.S. Supreme Court ruled unanimously that taxpayers have a right to challenge an Internal Revenue Service summons enforcement action in court when they can show the tax agency might have issued the summons in bad faith. Justice Elena Kagan, the Supreme Court said:
"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."
But the nine justices sent the case back to the 11th U.S. Circuit Court of Appeals and said that court had wrongly decided that IRS agents could be examined at an evidentiary hearing based on a taxpayer's mere "conclusory allegations."
So for residents of Alabama, Florida, and Georgia, however, the Clarke victory for taxpayer rights, actually imposes a greater evidentiary burden on the recipient than the prior controlling precedent from the United States Court of Appeals for the Eleventh Circuit.
The impact of the Supreme Court’s decision in Clarke will be significant in light of a recent IRS directive (LB&I Control No: LB&I-04-0613-004), effective January 2014, which mandates that IRS examining officers issue a summons if a taxpayer fails to respond to an information document request (IDR) during the information gathering phase of an examination. (See our post: 2014 LB&I Information Document Request (IDR) Enforcement Process - Ready or Not?).
Do You Have An IRS Summon