United States v. Deang

Background

The United States petitioned to enforce an Internal Revenue Service summons against Joji Mae Y Deang. The summons required her to appear before an IRS revenue officer, give testimony, and provide records concerning assets, liabilities, and accounts. The court held a hearing on January 10, 2023, and Ms. Deang appeared with her husband, Louie Deang. She later provided some documents and information.

On February 13, 2023, the court granted the government’s petition to enforce the summons. The enforcement order directed Ms. Deang to appear in person before Revenue Officer Phillip Carrillo on March 1, 2023, and provide testimony and records within the summons’s scope, unless the parties agreed otherwise. Ms. Deang did not appear, did not provide the required testimony, and did not give an excuse. The government reported making repeated efforts to contact her. The court later issued an order directing her to explain why she should not be held in contempt and to attend a hearing, but she did not respond or appear.

Legal standard

A court may use civil contempt to enforce compliance with its orders. The party seeking contempt must prove by clear and convincing evidence that the person violated the order, that the violation was more than minor or technical, and that the violation was not based on a good-faith and reasonable interpretation of the order. After the government establishes an initial case for contempt, the taxpayer may avoid sanctions by showing a present inability to comply. A contempt order must also provide conditions that allow the person to end the contempt.

Court’s analysis

The court found that the United States met its burden. Ms. Deang did not appear on March 1, 2023, to give testimony as the February 13 enforcement order required. The court determined that the violation was more than minor because the IRS could not resolve its investigation into the collectability of the tax liability without the requested testimony and documents. The court also found no indication that Ms. Deang misunderstood the order or had a good-faith basis for not complying.

The contempt finding was limited to Ms. Deang’s failure to give testimony about the subject matter described in the summons, including testimony related to collection of the tax liability for the specified Form 1040 period. The court did not hold her in contempt for failing to produce records. The government sought information about accounts at a Philippine bank in connection with a large cash deposit and transfer in November 2022, but the summons requested bank statements for December 1, 2021, through February 28, 2022. The court concluded that the enforcement order did not clearly identify which of the requested documents were within the summons’s scope.

Order

The court found Ms. Deang in civil contempt of the February 13, 2023 enforcement order. She could purge, or end, the contempt by appearing before an IRS revenue officer and giving testimony responsive to the summons on or before October 10, 2023. The United States was required to give her at least five calendar days’ notice of the testimony’s date, time, and location and to personally serve her with the order and notice.

If Ms. Deang did not appear by October 10, the order provided for a $250-per-day fine beginning October 11 and continuing for 21 days. If she still had not appeared after that period, the court stated that it would issue a bench warrant. She could then be held until she testified or for five days, whichever came first. The court stated that the contempt decision did not prevent the United States from seeking another enforcement order for missing documents within the summons’s scope.