*1 UNITED STATES LaSALLE NATIONAL et al. BANK al. et Argued
No. 77-365. March 1978 Decided June *2 J., opinion Court, delivered the of the in which Blackmun, Brennan, JJ., joined. J., and White, Powell, filed dissent- Marshall, Stewart, Rehnquist ing opinion, J., JJ., Burger, which C. Stevens, post, joined, p. 319. for the
Deputy argued Solicitor General Wallace the cause him on briefs were Solicitor United States et al. With McCree, Attorney Ferguson, General Assistant General Stuart Smith, Brookhart, A. E. Carle- Lindsay, Robert E. Charles ton D. Powell.
Matt P. Cushner argued respondents. the cause for With Gregory Perry. him on the brief was J. opinion delivered the of the Court.
Mr. Justice Blackmun supplement This case is a Donaldson to our decision in States, (1971). presents It the issue S. correctly whether the District refused to enforce Internal Court specifically Revenue Service summonses found that when special who his investi- agent conducting issued them “was gation of criminal solely evidence unearthing conduct.” AFTR 2d 76- p. 76-1 84,073, ¶ USTC ¶ p. (ND 1976). 76-1240 Ill.
I F. May 1975, special agent John Olivero, Division Intelligence Chicago District of Internal (hereinafter Revenue Service), Service IRS or received tuso for assignment investigate liability the tax John Gat years App. his taxable testi- 26-27, 1970-1972. 33. Olivero fied had requested assignment that he because of informa- tion he had received from a from confidential informant and Id., an unrelated investigation. at 35. The was case referred from but agency, IRS another law enforcement the nature Olivero assignment, testified, was “[t]o investigate possibility any criminal violations Id., Internal Revenue Code.” 33. Olivero pursued *3 the of own, agent.1 case on his without assistance a revenue He received information about from Gattuso the Federal Investigation previous Bureau of a result of investiga- as the Id., 36. tion. at He solicited and received data additional from Attorney the United States for Northern of the District Secret the Illinois, Service, Department the of Housing and Urban the IRS Collection Development, the Division, and Cosmopolitan Id., of Chicago. National Bank 37-40. at
Mr. tax returns for in question Gattuso’s the years disclosed rental income from real estate. in property That was held
1Frequently, agent a revenue of the IRS Audit Division will refer a case working Intelligence on which is he to the for Division possible referral, fraud. After such times, special agent a and other at the agent together. and the revenue work importance Because of the and sensitivity the aspects joint special of the investigation, the agent inquiry. See, assumes control of the Manual, Internal Revenue g., e. 4500, (CCH ch. 1978). 1976 and §§4563.431-4565.44 part planned
As of a reorganization, the has IRS announced its intention redesignate to the Audit Intelligence Division and the Division as the Examinations Division and Division, respec- the Criminal Enforcement tively. Release, IRS News 6, Feb. 1978. as by Bank, National respondent
Illinois land trusts2 LaSalle the by a files collected IRS trustee, revealed land trust by fact Id., the order to determine from 45. banks. proceeded Olivero accuracy reports, of Gattuso’s income authority the of 7602 summonses, § two issue 7602,3 to Code of S. C. Internal Revenue separate to a Each summons related trust respondent bank. trustee bank as among other requested, things, and and designated place time and Olivero appear before Trust No. “files No. produce relating [or 35396] its land trust follows: Respondents describe an Illinois as by with trust contract which a trustee vested “An Illinois land is a legal equitable property real interest both title to bene- beneficiary personal property. this trust Under is considered beneficiary has the ficiary any designated writing person or dealing title and power or control trustee exclusive direct selling of management, operation, renting and the exclusive control right earnings, avails together property the trust with the exclusive (1971).” Brief property. 8.31 proceeds of said Rev. Stat. ch. Ill. Respondents 1-2, 1. for n. 3Section reads: making any ascertaining return, purpose of the correctness of “For the made, liability any person determining the return where none has been any equity any liability or revenue tax or at law in internal any tax, fiduciary respect any person revenue transferee or internal delegate any Secretary his collecting liability, such or is authorized— records, be “(1) books, papers, or other which To examine data *4 inquiry; or to such relevant material required the “(2) person perform for To the liable tax or to summon having any person
act, any employee person, or of such or or officer relating custody, of entries possession, containing or of books account care act, required perform the person for tax to to the business of liable or may proper, to any Secretary delegate or deem person the his or other in delegate named appear Secretary place his a time and before the or at data, records, other produce papers, such or books, the summons and to to oath, material give testimony, may or to be relevant and such as inquiry; such and oath, person as “(3) testimony concerned, under To such take may inquiry.” such be relevant or material to 302 Agreement” period through for 1970
including the Trust closing also “all deeds, correspondence, and options, per- statements and and bills statements, escrows, sellers tax in taining property any during” to all held at time trust period. App. Respondent Joseph that 9-16. a vice Lang, W. president of the in bank, appeared response to the summonses on but, produce advice refused counsel, any to requested. materials for Respondents Brief 2.
The Olivero, pursuant (b) United States and to §§ (b) (a),4 (a) Code, §§ 26 U. S. C. and 7604 petitioned then the United States for the District Court Northern District of Illinois for enforcement of sum- App. monses. 5. This onwas November 1975. Olivero testified when petition was he had filed determined justified any whether criminal were charges and had not made report or recommendation about the case to his superiors. Id., It at 30. alleged petition was in the incorporated the requested exhibit materials for the necessary were determination the tax for liability years Gattuso question that the information contained in the documents was possession petitioners. Id., not in the 17-18. id., District Court entered an order cause, to show and respondents through repre- answered who counsel, also Id., sented Gattuso. at 20-22. (b) Section 7402 states:
“If person is appear, summoned under the internal revenue laws to testify, produce books, papers, or to data, or other court of district the United person States which district such or be resides jurisdiction by found have appropriate process shall compel such testimony, attendance, production or books, papers, or other data.” (a) Section 7604 reads: any person “If is under the appear, internal revenue summoned laws to testify, produce papers, or to books, records, or other data, the
States court district for the district in person which or such resides jurisdiction by found appropriate have process shall compel such attendance, testimony, production books, papers, records, or other data.” *5 post-hearing brief, respond- in a ensuing hearing
At the “purely was criminal” investigation argued ents that Olivero’s lawyer Id., specializing Perry, 82. J. a Gregory in nature. at firm that employed by in the same law federal taxation and him in told filed testified that June Olivero answer, strictly to criminal “was related investigation that the Gattuso Id., Re- Revenue at 52. violations of Internal Code.” that proving bore burden spondents they conceded that process, court’s summonses enforcement of the would abuse there did to show “that they they but contended not have that Id., Instead, purpose no to the 87. is civil Summons.” was to that the summonses they their burden show urged that good investigation in “the were not issued faith because a in evidence for use solely purpose gathering for the Id., 77. prosecution.” criminal contentions. respondents’ Court agreed The District recognize “that in the court seemed to Although hearing at the civil always probability there’s criminal on the id., at focused its attention liability,” tax it Special Agent Olivero: Olivero’s nothing Agent now I say “I’ll heard investiga- of a civil suggest thought that the testimony tion ever crossed his mind. inspec- I find in the camera
“Now, something unless support more to the gives tion the IRS case file] [of testimony did, position Agent’s than the Government times involved that he was at all conclusion my would be in his mind.” own at least investigation, Id., at 62. recognized the aware of and Government’s Court was District investigation was not agent’s in the that the individual motive
contention dispositive: theory any investigation would your
“The . . COURT: . [U]nder *6 District Court noted that In its written memorandum, in issued permitted Donaldson the use of an IRS summons prose- criminal good prior faith and to recommendation for a Caplin, 375 U. S. cution. on dictum in Reisman v. Relying said that it was (1964), however, the court purpose improper solely it for the use the summons “to serve 76-1 prosecution.” obtaining for use in a criminal evidence time of 76-1240. at the USTC, 2d, If, at 37 AFTR at 84,072, proscribed purpose, issuance, its the summons served this recommen- formal criminal court the absence of a concluded, good in issued summons was not irrelevant, dation was held: court precluded. was The then faith, Special Agent apparent “It is from the evidence that had focused F. in his activities investigative John Olivero Gattuso, upon possible criminal activities of John solely purpose for the conducting was his conduct Gattuso.” unearthing by evidence criminal Mr. Id., 84,073, 2d, 37 AFTR at 76-1240. for the Circuit Appeals
The United Seventh States Court Dis- F. It concluded (1977). affirmed. 554 2d 302 issue of criminal correctly trict Court had included the good-faith inquiry: within the solely for summons use of an administrative
“[T]he always possibility really they there was be one until closed it because liability. of a civil you’re trouble, Cushner law, Mr. [counsel
“If that’s the respondents]. I’m really that cases it’s the “I of law so think boils down an issue inspection in camera find in the plus further clues I
interested App. investigative file.” 61-62. after it camera file in investigative agreed inspect The court the IRS Id., 50-51, 61-62. respondents inspect file. permit refused bad example purposes quintessential . . faith. . factual its the district formulated
“We note that court purpose’ 'sole finding by expression use no find 'bad faith.’ We rather than a label such as verbal formulation. basis for reversible error *7 and of Donaldson district court the vital core grasped Id., therewith.” consistently its finding rendered factual at 309. Court
The further decided that the District Appeals Court it when rather conclusion factual, legal, had reached a than a solely for issued found the summonses to have been was Id., accordingly, prosecution. Appellate review, at 305. Id., clearly-erroneous standard. application limited to Olivero Although Appeals noted that at 306. the Court of for the the of a civil had testified about existence “the establishes the said that record investigation, court The Id., 309. at the district court did not believe him.” judgment, the court’s appellate court could not reverse trial convic- “not a firm definite said, because it was left with Id., 306. been made.” at tion that a mistake [had] importance of the issue Because among of conflict laws, of the internal revenue and because Appeals concerning scope of IRS summons Courts of 996 434 S. granted we certiorari. U. authority 7602,6 (1977). 6 Hodge Zweig, Compare United States & 1347, 2d 1350-1351 548 F. v. Zack, 1975); States United (CA9 (CA9 1977); 1366, 521 1368 v. F. 2d McCarthy, United States v. 368, (CA3 1975); 514 F. 2d 374-375 Weingarden, v. United States
States (CA6 1973); 454, 473 F. 2d 460 v. Corp., (1972); and Wall App. 309, 311, 893, D. C. 475 895 154 S. F. 2d U. Billingsley, United States v. (CA10 1972), 469 F. 2d Morgan Guaranty Co., Trust (CA2 United States v. 2d 41-42 572 F. Troupe, 1971), and United States v. 1978); (CA8 438 F. 2d
II States, In Donaldson United (1971), v. S. an IRS agent special taxpayer’s putative issued summonses to a former employer its production accountant employer’s taxpayer’s employment records com- pensation. When the records were the IRS forthcoming, petitioned for enforcement of the summonses. tax- payer appealed intervened and eventually the enforcement order. This Court addressed the contention that taxpayer’s the summonses were they unenforceable because were issued aid of an investigation that could have resulted a criminal charge against taxpayer. id., His argument see there, 532, was based on the following dictum in Reisman Caplin, S., 449: U. witness the summons on challenge
“[T]he appropriate ground. This would as the circuits include, have held, defenses sought for the that the material improper purpose of obtaining for use evidence in a *8 Tucker, prosecution, Boren 239 2d 767, v. F. 772-773 . . . .” light
In the of Boren,7 the citation to the Court in Donaldson concluded that the dictum referred and was “the applicable to situation of a pending criminal charge or, most, at of investigation solely for criminal purposes.” 400 atS.,U. 533. regarding the conflict about whether the recommendation for criminal prosecution dispositive is of the so-called criminal issue. Compare Hodge United States & Zweig, 2d, 1351; v. 548 F. at Billingsley, 2d, States 469 F. Lafko, with United States v. 520 2d 622, (CA3 1975), 625 F. regarding the conflict about whether the criminal recommendation from Department the IRS to the of or Justice the recommendation special agent superiors from the important to his inquiry. the enforcement 7 Tucker, In Boren v. 239 F. 2d (1956), 772-773 the Ninth Circuit distinguished United States v. O’Connor, Supp. (Mass. 1953), F. which involved an of taxpayer already under indictment. Discerning meaning dictum, brief Reisman how- did not ever, resolve for the the question posed Court by validity Donaldson. The depended the summonses ulti- mately on they whether were among those authorized Congress.8 Having reviewed the statutory scheme, S., IT. 523-525, Congress Court concluded that had authorized the use of summonses investigating potentially criminal statutory conduct. The history, particularly use of sum- monses under the Internal 1939,9supported Revenue Code this conclusion, practice as did consistent IRS and decisions concerning effective enforcement other comparable federal statutes.10 The Court saw no reason to force the Service to choose either to forgo the use of congressionally authorized summonses the option abandon of recommending criminal prosecutions to the Department of long Justice.11 As as the pursuit summonses were in good-faith issued of the congres- sionally purposes, prior authorized recommendation to the Department they were prosecution, enforceable. Id., at 536.
HI The present case requires us to examine limits good-faith use of an Internal Revenue summons issued § 7602. As the preceding demonstrates, discussion Donaldson does now taxpayer not control the facts before us. There, had argued prosecution that the mere potentiality precluded should have the summons. 400 U. S., at the other Here, 532. on the District Court hand, employer’s had earlier summoning Court that the concluded for an investigation taxpayer the accountant’s records did not *9 any rights violate the constitutional of S., of them. 400 U. 522. at 9 3614, 3615, 3616, 3654 438-440, See and of 1939 Code, the 53 Stat. §§ 446. 10 Kordel, States See United 1, (1970) (Federal Food, 397 U. 11 S. Sanitary Mfg. Standard enforcement), Drug, citing and Act v. Co. Cosmetic States, enforcement). (1912) (Sherman 226 51-52 U. S. Act 11 See Part III-B and n. infra. 308 investigating was Gattuso Agent Olivero Special
found that of criminal unearthing for of evidence “solely purpose the 76-1240. 37 AFTR at 84,073, 2d, USTC, conduct.” 76-1 necessarily finding whether this question then becomes The not were issued the summonses to the conclusion that leads purposes congressionally authorized good-faith pursuit 7602. §of
A of Treasury and the Commissioner Secretary The of responsibility of admin- are with charged Internal Revenue C. Code. 26 U. istering enforcing the Internal Revenue S. required has (a), § 7801 and 7802. Congress, §§ Secretary “inquire districts to after to canvass revenue pay any persons may all therein who be liable concerning suspected fraud, these regard internal revenue tax.” With of civil and criminal encompass duties both of a or fraudulent tax The willful submission false statutes. subject taxpayer penalties return to criminal only Code, well, under and 7207 of the as to a civil but, §§ 7206 underpayment. And of penalty, (b), § 50% penalty civil be considered (a) provides that shall § of part liability taxpayer. Hence, as the tax when permits the use of a summons “[f]or any determining . return, the correctness of . . ascertaining person any . liability any , internal revenue tax . . necessarily such it liability,” permits the use collecting the summons for tax suspected examination fraud Donaldson, penalty. for the calculation civil 50% we noted that drew distinc- S., clearly no aspects; between the civil and tion “contains restriction”; corresponding regulations no were and that there was no “for civil “positive”; significance, compared as purposes, point special at the then agent's appearance.” upheld Court the use of the though poten- summonses fraudulent conduct carried the even
309 emphasis liability. repeated of criminal The Court this tial States, (1973): Couch United 409 326 322, U. S. authorized, undisputed special agent “It is now is that a 26 to issue an Internal pursuant § to U. S. C. with civil investigation Revenue summons in aid of a tax possible consequences.” and criminal law Congress This result is inevitable because has created a are system in which criminal and civil elements investigation When an examines inherently intertwined. necessarily inquires of criminal it also possibility misconduct, tax appropriateness of civil assessing about the 50% penalty.12 investigative functions The interrelated nature of civil and by functioning IRS. organization and
is further demonstrated (1977), district has Pursuant CFR each revenue §601.107 Division, encourage and Intelligence “whose mission is to achieve possible highest degree voluntary internal revenue compliance of with the implemented possible laws.” This “the (when warranted) criminal violations such and the recommendation laws prosecution percent addition assertion of the 50 ad valorem and/or generally Organization tax.” Ibid. See Internal Revenue Service 1114.8, 1118.6, Reg. 11572, 11581, 1113.563, and and Functions Fed. §§ (1974). and 11607 jurisdiction employees, In its for instructs that Manual IRS penalties except related to Intelligence includes all civil those Division Manual, tax. the estimated income Internal Revenue ch.
(CCH 1976). The adds: Manual “Intelligence developing presenting are those activities features required prove and the ad admissible evidence criminal violations valorem delinquency fraud, (except those concern- penalties negligence civil investigated estimations) years jointly ing in cases tax for all involved completion.” Id., (4). 4565.31 for coordination between Manual also contains detailed instructions
The agents investigations tax fraud. special during agents and revenue id., 4565.32, g., (1978), §§4565.22, 4565.41-4565.44 E. §4563.431 (1976). Intelligence has year Division for the fiscal 1976 show that
Statistics substantially than greater with civil fraud involvement legislative history the conclusion supports the Code *11 system Congress design intended to a with interrelated assertedly criminal and civil elements. Section 7602 derives, change meaning,13 without from corresponding similar provisions in 3614, 3615, By §§ and 3654 of the 1939 Code. 3614 (a) authority the Commissioner received the summons purpose “for the the correctness of return ascertaining any or for return making a where none has been (b) made.” Section 3615 (3) authorized issuance of a summons any person required who is to deliver “[w]henever monthly objects other return of subject to tax any delivers return in the which, opinion of the collector, false, is erroneous, or fraudulent, or contains undervaluation or understate- ment.” Section 3654 (a) powers stated and duties collector:
“Every collector within his collection district shall see that all laws and regulations relating to the collection of internal revenue faithfully taxes are executed com- plied with, and shall aid in the prevention, detection, and punishment of any frauds in relation For thereto. such he purposes, power shall have to examine persons, all books, papers, premises . accounts, and . . and to summon any person produce papers books and . . . and to compel compliance with such summons same provided manner as in section 3615.” punishment Under 3616 for any fraud included both fine and imprisonment. The 1939 Code, contemplated therefore, use of the summons in an involving suspected 8,797 Of fraud. full-scale tax investigations fraud year, only 2,037 in that resulted in prosecution. 6,760 recommendations for cases not recom- approximately $11 mended involved million in penalties. deficiencies and Report See 1976 Annual of the Commissioner of Internal 33, 61, Revenue 152. Rep. See H. R. Sess., No. 83d Cong., 2d A436 (1954); Rep. S. Cong., Sess., 83d 2d (1954). No. criminal conduct well as as behavior that could have been disciplined penalty.14 a civil has not short, Congress categorized tax fraud investiga- into
tions civil on components. Any and criminal limitation good-faith use Internal Revenue must summons this statutory premise. reflect
B The preceding suggests why primary discussion limita- on the upon tion use of summons occurs the recommendation prosecution of criminal Department Only Justice. point aspects at that do of a the criminal and civil tax fraud *12 begin Zweig, to diverge. Hodge case United States v. & See (CA9 F. 2d 1347, 1977); Billingsley, 548 1351 United States v. F. 1208, (CA10 469 2d 1210 1972). course, recognize, We upon even that recommendation to Justice Department, civil separate completely. criminal elements do not The Government does not in unpaid sacrifice its interest taxes
14Internal authority Revenue officials received similar summons prior g., See, Revenue Acts the 1939 Code. e. 1918, to Revenue Act of 1305, 1142; 40 3, I, 178-179; Stat. Act II 1913, Tariff of Oct. 38 Stat. § ¶ § 30,1864, 14,13 ofAct June Stat. 226. § investigations apparent The nature fraud interrelated thus was as early permitted as 1864. Section 14 of the 1864 Act a the issuance of investigate suspected summons to prescribed a fraudulent return. It also a penalty increase in valuation as a civil for falsehood. Section 100% penalties years later, 15 established the criminal for such conduct. Four Congress position supervisor, when created the of district that official authority. July 20, 1868, 49, received similar summons Act of 15 Stat. § 144-145; Cong. Globe, Cong., (1868). 40th Sess., see 2d 3450 The federal they enforced good courts these summonses when issued in were faith and compliance with instructions from re the Commissioner. See In Meador, (No. 9,375) (ND 16 1294, 1869); F. Cas. 1296 Ga. v. Stanwood Green, (No. (SD (“it 22 13,301) 1870) being F. Cas. 1079 Miss. right upon part supervisor understood that only this extends papers banking books relate operations, such as to their and are States”). connected with the internal revenue of the United 312 Logically, then, begins. prosecution a criminal
just because 7602 to authority could use its summons the IRS by a fraud liability created about the tax uncover information rule But the criminal case. of the status regardless safeguard prophylactic intended forbidding such is policy interests. following permits Department
A to the referral Justice prosecu- its own proceed. try cannot litigation to IRS of Justice Department authority reserved to tions. Such is Attorneys. to the United States and, particularly, more history legislative in 7602 or its (1). Nothing 647§ U. S. C. authority to intended the summons Congress suggests litigation of criminal Department’s right broaden the Justice grand jury on the role of as discovery infringe Accord, States principal tool of criminal accusation. (CA2 1978); Guaranty Co., Trust 572 F. Morgan v. 2d (CA6 Weingarden, 473 F. 2d 458-459 United States v. O’Connor, 118 Supp. 248, United States v. F. 250- 1973); States, S., see Donaldson v. United (Mass. 1953); U. States, (1960). Abel United cf. S. 536; discovery be broadened or the The likelihood would jury infringed post-referral if grand role of substantial authority permitted. example, use of the summons were For upon compromise both IRS, referral, ability loses its *13 civil of fraud case. 26 aspects the criminal and the the (a). referral, authority U. S. C. 7122 After the to settle Department coopera- rests the of Interagency Justice. liability tion on the calculation of civil is then to be the expected encourages of probably efficient settlement But dispute. cooperation, the such combined with the when inherently nature criminal intertwined of the and civil ele- of the is case, suggests attempt ments that it unrealistic to to partial information barrier the build a between two branches executive. Effective use of the information to determine inevitably liability civil would result discovery. criminal prophylactic restraint on the use the summons effec- policy interests tively safeguards encouraging the while two cooperation.15 maximum interagency
C Prior to a for prosecution Depart recommendation to the ment Justice, authority the IRS must use its summons States, good faith. Donaldson United S., 400 U. at 536; Powell, United States v. (1964). U. S. 57-58 Powell, the good-faith Court elements of announced several exercise:
“ the investigation must show that will [The be Service] pursuant conducted that legitimate purpose, to a the may inquiry be relevant to that the purpose, the informa- sought tion already the within Commissioner’s suggested The Third Circuit has that our reference in Donaldson to (“We the recommendation for prosecution criminal hold that investigation an internal revenue summons be aid of an issued if prior in good is issued faith and a recommendation for prosecution,” S., 536) draw a line at the recommen intended special dation agent, Service’s district from office rather than at Department. the recommendation from the Service to the Justice Lafko, 2d, States v. 520 F. at 625. This misread our intent. Given the interrelated criminal/civil nature of tax fraud whenever it jurisdiction utility Service, given remains within the of the of the investigate impose civil tax liability, summons we decline to prophylactic authority any restraint on the summons earlier than at the Department deny recommendation to the of Justice. We cannot potential expanding discovery rights Justice Department usurping grand jury or for the role point exists at the special agent. possibilities the recommendation But we think the policies for abuse these are remote before recommendation to Justice place justify imposing takes and do not an absolute ban on the use of the point. imposition ban, given summons before Earlier policies interests, balance law unnecessarily civil would performance hamstring the of the tax determination and collection functions by the Service. *14 by steps required and that the administrative
possession, not may court have been followed the Code .... [A] an would process be abused. abuse permit its Such (cid:127) issued for an if the summons had been place take taxpayer or to as to harass the improper purpose, such on him settle a or put dispute, collateral pressure on faith of purpose reflecting good any other Ibid, omitted). investigation.” (footnote particular including A Courts Appeals, Seventh number 309, at said that case, 2d, in this 554 F. have another Circuit pursue improper good which Service purpose, for a gather solely is to evidence summons, faith with a The courts based their conclu- investigation.16 criminal have explanation of the Reisman part sions in on Donaldson’s Donaldson, however, dictum. must be read language recognition of interrelated light in the criminal/civil inquiry. nature of tax fraud For a fraud to be extraordinary would solely require nature departure normally inseparable examining from the goals whether the basis exists for criminal and for charges penalties. of civil assessment respondents departure submit did case, this that such a Special
indeed occur because was Agent Olivero interested only gathering prosecution. evidence for a We disagree. responsibility The institutional of the Service to penalties fraudulently calculate and to collect civil fraud reported unreported necessarily taxes is not overturned single attempts who to build agent a criminal case. The g., Hodge States Zweig, e. United & 16See, 2d, 1351; v. 548 F. at Zack, United States v. 2d, 1368; United States Lafko, F. at v. McCarthy, United States v. 625; United 2d, 2d, 374-375; F. at at F. Theodore, States v. (CA4 1973); 479 F. 2d United States Weingarden, Corp., 2d, 459; v. Wall 473 F. States 154 U. S. App. C., 2d, D. 475 F. at 895.
315 multilayered is his conclusions above over and process review his immediate the control from Apart thorough. and reviewed is final recommendation the supervisor, agent's 601.107 §§ 26 CFR Intelligence Division, district chief the 9600, ch. Manual, Revenue Internal (b) (c) (1977); Donaldson 1977); (CCH see 9623 9621.1, 9622.1, §§ also Counsel Regional Office of The States, 400 U. at 534. S., Office National before is forwarded the case reviews (c) 601.107 § 26 CFR Department. Justice or to the the Service Functions Organization Internal Revenue Service (1977); Internal Revenue (1974); 11602 Reg. Fed. 39 §1116(3), 1977). If the (C.CH 9631.4 9631.2, 9600, §§ ch. Manual, Commissioner Regional the Assistant Regional Counsel case, of a disposition about disagree Intelligence centered national level review occurs at complete another Counsel. of General of the Office Division in the Criminal Tax 1113.- § Functions Organization and Internal Revenue Service Manual, Revenue Internal (1974); Reg. 39 Fed. 11599 (11) 22, of at the officials 1977). Only after (CCH (1) § ch. 9600, conclusion in the concurred of review have layers two least of Justice Department referral to the does the special agent can stages, the Service At of the various place. take to assert decide can instead prosecution, the criminal abandon special While the pursue goals. both or can penalty, a civil his motivation process, actor important is an agent hardly dispositive. provide the review layers be noted that also
-It should hasty or protection against with substantial taxpayer taxpayer special agent. judgment zealous over Division Intelligence the district obtain conference of the Division chief or whenever the request upon officials interests best be conference would that a determines Internal (b)(2) 601.107 (1977); § CFR Government. 1977). If prosecu- (CCH 9356.1 § Manual, Revenue ch. taxpayer notifies the the chief recommended, has been tion (c) Regional CFR 601.107 the referral to the Counsel. (CCH (1977); Manual, Internal Revenue ch. 1977). Donaldson, line then,
As in we refused to draw the where permissible purposes and impermissible between civil special at the agent investigation, entrance into the *16 S., we cannot draw it on of agent’s the basis the personal so unnecessarily intent. To do would frustrate the by enforcement of the the tax laws of restricting the use according summons to motivation of single agent the a without regard the the policy to enforcement of as institu Service inquiry tion. the into Furthermore, the criminal enforce objectives agent ment of delay the would summons enforce ment proceedings parties over, grapple while clash and judges with, thought processes the of investigator.17 each See Morgan Guaranty Co., 1978). States v. Trust 572 F. (CA2 2d 36 obviously This unrewarding. result, undesirable and As a question the solely whether an pur has criminal poses only must be answered by an examination of institu the posture tional Contrary IRS. to the assertion of respondents, this opposing means that those of a summons do bear disprove the burden to the actual existence of a valid tax civil determination or purpose by collection the Service. After the of all, the good-faith inquiry is to determine whether agency the is honestly the pursuing goals by of 7602 issuing the summons. doubt,
Without heavy this burden is a one. Because crim inal and civil fraud liabilities are coterminous, the Service rarely will be found to have acted in bad faith pursuing former. On the other hand, we aspect cannot abandon this good-faith inquiry altogether.18 We shall not countenance recognize, We of course, agent may examination of be motive necessary good-faith to evaluate the Powell, factors example, for to consider whether summons was issued taxpayer. to harass a aspect good-faith The dissent would abandon this inquiry. It permit would the IRS to use the authority solely summons for criminal Depart to the Justice recommendation delay submitting to make the commitment is an institutional ment when there like to additional merely gather would referral and Service be would tanta delay Such a prosecution. for the evidence the recom authority after use of summons mount its expand permit would the Government mendation and standard good-faith discovery rights. Similarly, information-gathering to become an permit will not the IRS Department departments, including agency for other cases.19 regardless of the status Justice, says contains the Code investigation. because it It this conclusion reaches argument a fundamental prevent Its reveals such use. no limitation authority does misunderstanding The Service of the IRS. about papers private enjoy authority production of the inherent to summon by Congress. In only authority granted It citizens. exercise authority summon upon Congress the Service the has bestowed production only: “ascertaining purposes the correctness for four liability determining making made, has been return, a return where none *17 collecting any such any person any of revenue tax ... or for internal authority liability.” Congress be used summons therefore intended the purposes do to aid the of taxes. These determination and collection against Consequently, goal filing charges include the citizens. of criminal solely. investigations authority summons not exist to aid criminal does of a limit face the statute error of the dissent is that it seeks on the grant authority purely when seek for should an affirmative of summons investigations. made that search uncover We have and could nothing legislative history Congress suggest in the Code or its permit exclusively result, intended to criminal use of As a summonses. employs authority good the pursues IRS its in faith four when it purposes investigations aiding of which do not include solely. good To the extent that the limited institutional faith of the Service regard questioned to criminal be before recommen Department necessarily Justice, position dation to the of our on issue this rejects argument prerecommendation Government's only of good summonses must meet the Powell faith. have of We elements recognize concluded that the essence the Government’s contention fails to inquiry. good-faith as of The Powell not intended elements were examples good They exclusive statement about the of faith. were meaning D requirements emerge several summary, then, must IRS summons.20 the summons First, enforcement of an Department be recommends to the issued before the Service reasonably which would prosecution, Justice that a criminal be undertaken. subject summons, relate to the matter at all times must use the summons author- Second, the Service ity congressionally in good-faith pursuit authorized purposes prerequisite requires 7602. This second good to meet the Powell faith. It also Service standards requires that the Service not abandon an institutional sense, III-A as explained pursuit Parts and III-C above, civil tax or collection. determination
IV us, respondents On the record before demonstrated have not justification preclude sufficient enforcement of the IRS summonses. No recommendation to the Department Justice prosecution for criminal has been Powell made. Of the respondents only aspect criteria, challenge one of the Service's showing: They suggest already may possess that Olivero' requested evidence the summonses. for Respondents Brief Although 16-19. record shows that Olivero had uncovered the names and identities of the LaSalle National Bank land trusts, it does not show that Service knows the value the trusts or their income the allocation of interests therein. production Because complete the bank's records on the reasonably expected trusts could part be to reveal or all of this which information, computation would be material to the *18 agency good-faith pursuit congressionally in action not authorized purposes dispositive question case, then, of 7602. The in each is whether pursuing purposes good the Service is in authorized faith. requirements These are not intended be to exclusive. Future cases may prevent agency reveal the need to other well forms of abuse of authority judicial congressional process.
of Gattuso’s tax preclude the Powell criteria do not liability, enforcement. Finally, the District Court refused enforcement personal because it found that Olivero’s motivation was to gather solely evidence prosecution. court, a criminal The failed to consider in however, whether an the Service institu- tional sense had abandoned its pursuit Gattuso’s civil tax liability.21 The of Appeals require Court did not inquiry. that presently On the record we conclude that developed, cannot such an abandonment has occurred. judgment Appeals of the Court of is therefore reversed instructions that court to remand the case
District Court for further this proceedings consistent with opinion.
It is so ordered. Justice Stewart, Justice, with whom The Chief Mr. Justice Justice Rehnquist, join, Stevens Mr. Mr. dissenting.
This only judicial misreadings case is here because of of a passage States, in opinion the Court’s in Donaldson v. 533. passage S. That has been read federal courts, others, this case and to mean that a sum-
21Respondents argue finding the District Court made a factual solely gather when concluded that the summonses were issued evidence prosecution. They for a criminal submit then District Court’s only decision finding be overturned if this Court holds this be clearly Appeals erroneous. Several Courts have discussed the factual legal proceedings. Compare issues that lurk summons enforcement Zack, United States 2d, United States National 1367-1368; v. F. v. Bank, Tucker, (CA7 State Boren v. 1972); 2d 454 F. 239 F. Weingarden, with United States 2d, 2d, 473 F. at 460. Whether good generally poses question, the issue of the faith Service’s a factual legal one, legal question, necessarily presented and factual or a is not Court, in the case now before and we do not reach it. The lower employed legal courts incorrect standard to good measure faith when they limited their personal consideration to Special motivation of Agent case, then, legal compels Olivero. this error reversal. *19 7602 of mons the Internal Revenue Code, S. C. U. improper if in issued aid of investigation solely purposes.1 for criminal the statute itself Yet contains no such limitation, the Donaldson opinion clearly in fact stated that there but are two limits upon enforcement of such a summons: It must in good be “issued prior faith and to a recommendation prosecution.” for criminal S., I at 536. adhere to view.
The Court concedes that the task of establishing “pur- pose” of agent an individual is “undesirable unrewarding.” Ante, at 316. Yet burden it imposes today discover —to good “institutional faith” of the entire Internal Revenue my is, view, even less desirable and rewarding. less Service— The elusiveness of good “institutional faith” as described produce the Court can little but endless discovery proceedings and ultimate frustration of fair administration of the Internal Revenue Code. I short, fear that the Court’s new prove criteria will wholly unworkable. year
Earlier this
the Court of Appeals for the Second Circuit
had occasion to deal with the issue now
before us
the case
of United
Morgan
States v.
Guaranty
Co.,
Trust
2d 36.
F.
Judge Friendly’s perceptive opinion for his court in that case
opinion
read the Donaldson
correctly: This
there
Court was
“laying
objective
down an
'prior
test,
to a recommendation
for criminal prosecution,’ that would avoid a need for determin
ing
thought
processes
special
agents; and
'good
...
faith’ requirement of the holding related to such wholly dif
ferent matters as those
in”
mentioned
case
Powell,
States v.
I judgment, reverse the would order instructions District but with Court, of the summons. reflecting on the other dispute, or for
to settle a collateral S., at investigation.’ U. 58.] particular [379 good faith the Commissioner an intention “Nothing indicate that was said to good of the in- faith’ liability reflect 'on would criminal tax uncover contrary.” generis ejusdem dictate would quiry, and rule 2d, F. at 40.