UNITED STATES of America, Plaintiff-Appellee, v. TITAN INTERNATIONAL, INC., Defendant-Appellant.
No. 14-3789.
United States Court of Appeals, Seventh Circuit.
Argued Sept. 21, 2015. Decided Feb. 1, 2016.
811 F.3d 950
tifiable expectations of privacy, neither does a simultaneous recording of the same conversations made by the agent....“); In re John Doe Trader Number One, 894 F.2d 240, 243-45 (7th Cir.1990). Thompson argues, though, that a video recording involves a greater intrusion on privacy because more information and detail is captured than with an audio recording. But this distinction, even if theoretically true, is irrelevant to the extent that an informant or undercover agent is using surveillance equipment that‘s no more sensitive than the human ear or eye. Cf. Kyllo, 533 U.S. at 33-34, 121 S.Ct. 2038 (“[O]btaining by sense-enhancing technology any information regarding the interior of the home that could not otherwise have been obtained without physical intrusion into a constitutionally protected area constitutes a search—at least where ... the technology in question is not in general public use.“) (citation and quotation marks omitted).
The video cameras in this case captured nothing more than what the informant could see with his naked eye. In fact, the videos are of such poor quality that many of the things the informant reportedly saw are not readily apparent on the recordings, including the existence and size of the bowl placed in the microwave, the contents of the large sandwich bag handed to Thompson through the bathroom door, and the box of baking soda next to the microwave. Perhaps Thompson anticipates that rapidly evolving technology soon will allow informants to see through opaque surfaces or into areas remote from their location or not visible to the eye.*
That concern is not for us to address today. And, as already discussed, Thompson retained no privacy interest in the areas captured by the camera. The informant would have been permitted to testify to the things he saw in Thompson‘s apartment, just as he would have been able to testify about the content of the conversations he had or heard. See Hoffa, 385 U.S. at 302-03, 87 S.Ct. 408; Brathwaite, 458 F.3d at 381; Davis, 326 F.3d at 367. Just because the informant made video recordings, Thompson cannot escape the longstanding principle that a person does not have a constitutional right “to rely on possible flaws in the agent‘s memory, or to challenge the agent‘s credibility without being beset by corroborating evidence that is not susceptible of impeachment.” Lopez, 373 U.S. at 439, 83 S.Ct. 1381; see Davis, 326 F.3d at 367.
Accordingly, the judgment
Hilary W. Frooman, Attorney, Office of the United States Attorney, Springfield, IL, for Plaintiff-Appellee.
David A. Rolf, Attorney, Sorling Northrup, Springfield, IL, for Defendant-Appellant.
Before POSNER, WILLIAMS, and SYKES, Circuit Judges.
SYKES, Circuit Judge.
In February of 2014, the Internal Revenue Service issued an administrative summons to Titan International, Inc., to inspect its 2009 books and records in connection with an audit of the company‘s 2010 tax return. Titan had taken an operating-loss carryforward in the 2010 tax year for a loss that occurred in 2009. Titan had claimed this same loss in 2009, and the IRS had already audited the company‘s return for that tax year.
Titan refused to comply with the 2014 summons because the IRS had inspected the same records during its audit of the company‘s 2009 return. Titan‘s refusal was based on
We affirm.
I. Background
Titan is an Illinois manufacturer of parts for off-road equipment. In 2010 the IRS audited Titan‘s 2009 tax return. During the course of that audit, the agency summoned Titan‘s 2009 general ledger, its 2009 airplane flight logs, and other 2009 business travel documents. Titan complied with that summons, and the audit concluded with a reduction of Titan‘s claimed net operating loss for that year.1
In 2014 the IRS opened an audit of Titan‘s 2010 tax return and again summoned Titan‘s 2009 general ledger, flight logs, and travel records. This inquiry related to an operating-loss carryforward Titan had claimed on its 2010 return. Citing
The United States, on behalf of the IRS, filed a petition in the district court to enforce the summons. The court rejected Titan‘s interpretation of
II. Discussion
Titan‘s appeal raises only a legal question about the meaning of
No taxpayer shall be subjected to unnecessary examination or investigations, and only one inspection of a taxpayer‘s books of account shall be made for each taxable year unless ... the Secretary ... notifies the taxpayer in writing that an additional inspection is necessary.
Titan argues that the statute limits the IRS to a single inspection of a “taxpayer‘s books of account” created for a particular taxable year, unless the Secretary finds a second inspection “necessary” and sends written notice to that effect. In other words, Titan reads “for each taxable year” as modifying “taxpayer‘s books of account.” On this interpretation, Titan‘s 2009 records—already inspected during the audit of its return for tax year 2009—cannot be inspected again in connection with the audit of its 2010 tax return (or any subsequent tax-year audit, for that matter) unless the Secretary first sends written notice of necessity.
Titan‘s interpretation is disjointed and curiously omits some of the language of the statute. The key statutory phrase is this: “[O]nly one inspection of a taxpayer‘s books of account shall be made for each taxable year.” The more natural reading of this language limits the IRS to one inspection of a taxpayer‘s books per audit of a given year‘s tax return (subject, of course, to notice and a finding by the Secretary that a second inspection is necessary). Read in this more natural way,
Two cases, one from this court and one from the tax court, confirm this interpretation of the statute. In Reineman v. United States, 301 F.2d 267, 268 (7th Cir.1962), the taxpayers purchased six horses in 1954 for their horse-breeding business. They then deducted the entire cost of the horses on their 1954 tax return. Id. In 1956 the IRS audited the 1954 tax return and adjusted that deduction. Id. at 269. Later the IRS audited the taxpayers’ 1955 tax return; in the process the agency reopened the 1954 audit (without written notice from the Secretary) and again adjusted the deduction for the six horses. Id. at 269-71. The 1954 records inspected by the IRS to adjust the deduction for the
The second relevant case is Digby v. Commissioner, 103 T.C. 441 (1994). There the IRS audited a married couple‘s 1987 tax return and allowed them to claim a pass-through loss for that year from their S corporation. Id. at 443. In the course of that audit, the IRS inspected records showing the couple‘s basis in its S corporation stock. See id. at 444. The IRS later audited their 1988 tax return, a year in which the couple claimed another pass-through loss from the same S corporation. Id. To complete this audit, the IRS necessarily summoned the same basis records it inspected for the 1987 audit; as the tax court explained, the agency was “in possession of the information necessary to make a [basis] determination for 1988 and/or 1987.” Id. at 448. Based on these summoned records, the IRS determined that the couple‘s basis was inadequate to support the pass-through loss for 1988 and 1987, despite its prior 1987 audit. Id. at 445-46. The IRS therefore disallowed the pass-through loss for both years. Id. at 446.
The tax court concluded that the second inspection of the records was not a violation of
This case is more like Digby than Reineman. The IRS first inspected Titan‘s 2009 records to verify its net operating loss in connection with an audit of its 2009 tax return. The IRS now seeks to inspect those same records for the purpose of auditing Titan‘s 2010 tax return in order to determine the validity of its 2010 net-operating-loss carryforward. Much like the pass-through loss at issue in Digby (and unlike the deduction at issue in Reineman), the net-operating-loss carryforward on the 2010 tax return cannot be verified unless the IRS inspects the 2009 records. Accordingly, the summons for inspection of Titan‘s 2009 books and records for the purpose of auditing its 2010 tax return does not require written notice and a finding of necessity by the Secretary under
AFFIRMED.