United States v. Guevarra

Background

The United States filed a verified petition asking the court to enforce an Internal Revenue Service summons directed to Aileen Guevarra, identified in the petition as the president of Fil-Am 2 Cuisine Restaurant. The IRS was investigating the restaurant’s tax liabilities for specified fiscal, calendar, and quarterly periods, including periods ending in 2017, 2018, 2019, 2020, and the quarter ending March 31, 2021.

The summons required Guevarra to appear before Revenue Officer Belden Granada, provide testimony, and produce records for January 1, 2021, through January 31, 2022. The requested materials included bank statements, checkbooks, canceled checks, savings-account passbooks, and certificates or records of deposit. The court found that the summons was properly served under 26 U.S.C. § 7603. Guevarra did not appear or produce the requested information.

The court previously ordered Guevarra to respond to the petition and appear at a hearing to show why the summons should not be enforced. She filed no response and did not attend the hearing. The United States later reported that Guevarra had indicated she might provide the information and appear for questioning, but she did not attend the April 7, 2023 meeting and still had not complied with the summons.

Legal standard

Under 26 U.S.C. § 7602(a), the IRS may issue a summons seeking information relevant to determining or collecting a taxpayer’s liability. Under the four-part test from United States v. Powell, the United States must show that the summons was issued for a legitimate purpose, seeks information relevant to that purpose, seeks information not already in the IRS’s possession, and followed the Internal Revenue Code’s required administrative steps.

The court explained that the government’s initial burden is limited and may be met through a verified petition or declaration from the investigating IRS officer. Once that showing is made, the person challenging the summons bears a heavy burden to provide specific facts and evidence showing an abuse of process or lack of good faith. A court may refuse to enforce or narrow a summons if the government has not shown that it seeks information relevant to a legitimate investigative purpose.

Court’s analysis

The court found that the United States met the Powell requirements through Revenue Officer Belden’s verification of the petition. The petition indicated that the investigation had a legitimate purpose: determining the restaurant’s assets and liabilities in connection with its federal tax liabilities. The court also found that the requested financial records were relevant to that investigation and that the information was not already in the IRS’s possession.

The petition further indicated that there had been no referral of the matter for criminal prosecution and that the IRS had completed the administrative steps required to issue the summons. Because the United States met its initial burden, the burden shifted to Guevarra to show that the IRS lacked a valid civil tax purpose or had acted improperly. The court found that she did not meet that burden because she neither responded to the order to show cause nor appeared at the hearing.

Disposition and reassignment

The court ordered the Clerk to reassign the matter to a district judge because all parties had not consented to the magistrate judge’s authority to hear and decide the case. The court recommended that the petition to enforce the IRS summons be granted and that an order require Guevarra to appear before the IRS within 21 days after the district judge’s order granting the petition, provide testimony, and produce the requested documents and records.

The opinion is a report and recommendation rather than a final district-judge decision on the petition. Any party may file objections with the district judge within 14 days after being served with the report and recommendation.