Supreme Court Gives Taxpayers Standard to Challenge IRS Summonses

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The U.S. Supreme Court held in a unanimous decision that a taxpayer has a right to a hearing to challenge an Internal Revenue Service summons if the taxpayer can identify specific facts or circumstances plausibly raising an inference of bad faith on the part of the government (United States v. Clarke, U.S., No. 13-301, 2014 BL 170106, 6/19/14).
The government technically won because the court vacated a decision by the U.S. Court of Appeals for the Eleventh Circuit, which held taxpayers are entitled to a hearing based on bare allegations of an improper purpose for the summons. Practitioners, though, see the opinion as a positive development for taxpayers, because the Supreme Court set a standard for taxpayers to challenge an IRS summons they believe was issued for an improper purpose.
Justice Elena Kagan authored the opinion, saying “the taxpayer is entitled to examine an IRS agent when he can point to specific facts or circumstances plausibly raising an inference of bad faith. Naked allegations of improper purpose are not enough: The taxpayer must offer some credible evidence supporting his charge.”