Caruso v. United States

Background

Cristian Caruso petitioned to quash, or cancel, an Internal Revenue Service summons issued to Apple, Inc. The summons sought subscriber and payment information related to Caruso, including his name, address, connection and internet-session records, service information, identifying numbers or internet protocol addresses, and payment details.

The summons followed a Swiss Federal Tax Administration request for information under the Convention between the United States and Switzerland for the Avoidance of Double Taxation with Respect to Taxes on Income. The request concerned a Swiss civil examination and criminal investigation involving alleged income-tax evasion. According to the IRS program manager’s declaration, Swiss authorities believed Caruso had used Apple’s services to exchange messages and documents, and the requested information could help authenticate documents and conduct a transfer-pricing analysis.

The United States moved for summary denial of the petition and enforcement of the summons. After oral argument on August 28, 2025, the court granted that motion.

Legal standard

Under 26 U.S.C. § 7602, the IRS may use a summons to examine records. A taxpayer may petition to quash a summons issued to a third-party recordkeeper, while the government may seek enforcement.

To enforce the summons, the IRS had to establish good faith under the four requirements identified in United States v. Powell: the summons had to serve a legitimate purpose, seek information that might be relevant to that purpose, seek information not already in the IRS’s possession, and follow the administrative procedures required by the Internal Revenue Code. Once the IRS met that initial burden, Caruso had the burden to provide specific facts and evidence showing bad faith or an improper purpose.

The court explained that the same test applies when the IRS issues a summons at the request of a treaty partner. The IRS did not have to establish that Switzerland itself acted in good faith; it had to show that the IRS acted in good faith and complied with applicable law.

Court’s analysis

The court found that the IRS met all four Powell requirements. First, the IRS issued the summons to fulfill the United States’ obligations under the United States-Switzerland treaty, which the court held was a legitimate purpose. Second, the requested information might be relevant to determining compliance with Swiss tax laws. Third, IRS officials stated that the IRS did not already possess the records. Fourth, an IRS tax-law specialist stated that the IRS gave Caruso notice and completed the required administrative steps.

The court rejected Caruso’s argument that the IRS acted improperly because the information would assist a Swiss criminal investigation. The court explained that the existence of a foreign criminal investigation did not establish bad faith. The statutory restriction in 26 U.S.C. § 7602(d) applies when the IRS has referred the summoned person’s case to the United States Department of Justice, and the court held that the Swiss investigation did not trigger that restriction.

The court also rejected Caruso’s arguments that the summons was irrelevant, overly broad, or a fishing expedition. The IRS program manager’s declaration explained why the requested subscriber records might assist Switzerland’s tax investigation, including its analysis of how revenues should have been accounted for. The court therefore found that Caruso had not provided facts or evidence showing bad faith or an improper purpose.

Evidentiary hearing and discovery

Caruso requested an evidentiary hearing and limited discovery to investigate the summons’s legality. The court denied that request. It explained that a taxpayer must offer credible evidence and specific facts that plausibly suggest bad faith; unsupported allegations are not enough.

Caruso questioned whether the Swiss information request accurately described certain matters and argued that the possible inaccuracies could show bad faith by the Swiss tax authority. The court held that these arguments did not justify a hearing or discovery because the IRS did not have to establish the requesting country’s good faith, and Caruso had not shown that the IRS itself acted in bad faith.

Caruso also argued that the United Kingdom’s Data Protection Act of 2018 might limit Apple’s disclosure of his data. The court held that he had not explained how that possibility suggested bad faith by the IRS and had not met his burden to show that the foreign law barred Apple’s response to the summons.

Disposition

The court granted the United States’ motion and ordered enforcement of the IRS summons. The court denied Caruso’s request for an evidentiary hearing and discovery. The order disposed of Docket No. 17.