United States v. Lasalle Nat’l Bank, 437 U.S. 298 (1978)

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Syllabus

Petitioner special agent of the Internal Revenue Service (IRS), in the process of investigating a taxpayer’s tax liability, issued summonses to respondent bank under authority of § 7602 of the Internal Revenue Code of 1954 (which permits use of a summons "[f]or the purpose of ascertaining the correctness of any return, . . . determining the Liability of any person for any internal revenue tax . . or collecting any such liability") to appear before the agent and produce files of certain land trusts, created for the benefit of the taxpayer. When respondent bank official appeared in response to the summonses but refused to produce the files, the United States and the agent petitioned the District Court for enforcement of the summonses. That court denied enforcement, finding that the summonses were not issued in good faith because they were issued "solely for the purpose of unearthing evidence of criminal conduct" by the taxpayer. The Court of Appeals affirmed.

Held: The District Court erred in refusing to enforce the summonses, since its finding that the agent was investigating the taxpayer "solely for the purpose of unearthing evidence of criminal conduct" does not necessarily lead to the conclusion that the summonses were not issued in good faith pursuit of the congressionally authorized purposes of § 7602. Pp. 307-319.

(a) Congress has not categorized tax fraud investigation into civil and criminal components, but has created a tax enforcement system in which criminal and civil elements are inherently intertwined, and any limitation on the good faith use of an IRS summons must reflect this statutory premise. Pp. 308-311.

(b) To enforce a summons under § 7602, the primary requirement is that it be issued before the IRS recommends to the Department of Justice the initiation of a criminal prosecution relating to the subject matter of the summons. This is a prophylactic rule designed to protect the standards of criminal litigation discovery and the role of the grand jury as a principal tool of criminal accusation. Pp. 311-313.

(c) Enforcement of a summons is also conditioned upon the good faith use of the summons authority by the IRS, which must not abandon its institutional responsibility to determine and to collect taxes and civil fraud penalties. That a single special agent intends only to gather evidence for a criminal investigation is not dispositive of the good faith of the IRS as an institution. Those resisting enforcement of a summons must disprove the actual existence of a valid civil tax determination or collection purpose by the IRS. Pp. 313-317.

(d) On the record here, respondents have not shown sufficient justification to preclude enforcement of the summonses in question, absent any recommendation to the Justice Department for criminal prosecution and absent any showing that the special agent already possessed all of the evidence sought in the summonses or that the IRS, in an institutional sense, had abandoned pursuit of the taxpayer’s civil tax liability. Pp. 318-319.

554 F.2d 302, reversed with directions to remand.

BLACKMUN, J., delivered the opinion of the Court, in which BRENNAN, WHITE, MARSHALL, and POWELL, JJ., joined. STEWART, J., filed a dissenting opinion, in which BURGER, C.J., and REHNQUIST and STEVENS, JJ., joined, post, p. 319.