Court Orders Enforcement Of A Summons Request From Abroad Allegedly To Harass Prominent Members Of Opposition Political Party

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Tax agencies face problems enforcing tax laws when their citizens have investments located abroad. One tool that countries use to address that problem is to include exchange of information provisions in tax treaties.  Another tool is a specific exchange of information treaty, or a tax information exchange agreement. The general effect of these treaties and agreements is that a requesting country can rely on the other country’s process to gather information that be relevant for ascertaining compliance with the requesting country’s tax obligations.

Recent appellate opinions address non US country requests that lead to the IRS issuing a third party summons to obtain information about US-sourced investments. I discuss the issue extensively in Saltzman and Book Chapter 13, but the upshot is that courts have essentially held that a challenge to the enforcement of the summons on the basis that the requesting nation is seeking the information for an improper purpose is not relevant to the inquiry.

What is relevant?

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The case law, essentially applying the well-known Supreme Court Powell standard, requires that the IRS must make a prima facie showing of its “good faith” in issuing the summons.  That is a minimal burden, and the IRS need only demonstrate its own good faith, not that of the requesting party.

Once that minimal hurdle is cleared the taxpayer then has the burden to challenge the government’s evidence or otherwise show that there are grounds to quash the summons.

This framework does not sit well with taxpayers who allege that the requesting country may have improper or nontax related motives in getting the US documents. For example, in Puri v US, a Ninth Circuit  nonprecedential case from earlier this year, the taxpayer alleged that the Indian tax authority sought investment information from Citibank to harass their family, who are prominent members of the Indian opposition political party.

Under the framework I discuss above, the court held that those allegations were not relevant, resulting in an order to enforce the summons.

One aspect of the Puri opinion that stood out is that it proceeded to analyze the merits of the allegations, stating that “in any event” Puri “does not present any plausible evidence suggesting that the Indian tax authorities acted in bad faith.” The opinion notes that Puri failed to connect how the requested bank statements could be used for harassment.

That discussion engendered a concurring opinion that joined in all but the “in any event” discussion:

Because courts are categorically forbidden from inquiring into the bad faith of a foreign government when deciding whether to quash an IRS summons, I see no need for us to reach the “in any event” argument in paragraph two

As the concurrence notes, an inquiry of any kind into a requesting state’s motives raises separation of powers concerns:

I have serious separation-of-powers concerns for even raising the prospect that courts can look through the Executive branch’s decision to comply with an international treaty and surmise the motives of a foreign government. That is clearly beyond our competence. 


We generally take for granted that US tax administration is a nonpartisan business, though recent events are starting to show that the norms are shifting.  Questions about the perhaps coincidental research audits of prominent opponents of the Trump Administration and allegations of pressure to audit from the former President’s Chief of Staff John Kelly have brought attention to that topic.  

There is a sense, perhaps more intuitive than empirical, that other tax administrators are less able to insulate their actions from political pressure. As Puri and other cases reflect, the norm is that US courts are to stay out of the messy inquiry of motive.

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Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law.


  1. Robert Kantowitz says

    There’s something obviously wrong here. It is offensive for courts to be enforcing information summonses at the behest of non-US agencies in circumstances where they would not enforce those same information requests if the requesting party were the Internal Revenue Service. The foreign agency should be required to demonstrate that it does not already have the information and should be required to demonstrate good faith, or at least the absence of bad faith, in that it has a legitimate civil, not criminal, purpose for requesting the information.

    The problem may be the breadth of information sharing provisions in treaties, which can be struck down only if they are unconstitutional, or the problem may be the interpretation that courts are giving to these provisions, different from tests developed for use in the US like Powell.

  2. Recent events are also starting to show that Supreme Court precedent is not as reliable as once thought. I am not familiar with the “well-known” Powell standard (does it involve a former Congressman from Harlem?) but I wonder if the 9th Circuit is warning the plaintiff that this is not the case to challenge it.

    • From the Justice Department Summons Enforcement Manual: The Supreme Court established the framework for judicial review of a summons in United States v. Powell, 379 U.S. 48 (1964). In that case the Court held that the IRS did not have to satisfy any standard of probable cause in order to issue a valid summons. All that the Government must show is that the summons (1) is issued for a legitimate purpose; (2) seeks information that may be relevant to that purpose; (3) seeks information that is not already within the IRS’s possession; and (4) satisfies all administrative steps required by the Internal Revenue Code. Powell, 379 U.S. at 57-58.

      • That 6-3 decision involved a US corporation, and I don’t see any foreign connection. And it does state, “Nor does our reading of the statutes mean that under no circumstances may the court inquire into the underlying reasons for the examination. It is the court’s process which is invoked to enforce the administrative summons, and a court may not permit its process to be abused. [Footnote 20] Such an abuse would take place if the summons had been issued for an improper purpose, such as to harass the taxpayer or to put pressure on him to settle a collateral dispute, or for any other purpose reflecting on the good faith of the particular investigation. The burden of showing an abuse of the court’s process is on the taxpayer, and it is not met by a mere showing, as was made in this case, that the statute of limitations for ordinary deficiencies has run or that the records in question have already been once examined.

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