Action Recycling, Inc. v. United States

Previous possession of a record by the IRS does not prohibit a future summons of the same information necessary to a legitimate investigation, so long as the IRS no longer has possession of the record.

Action Recycling, Inc., moved to quash the IRS’s issuance of summonses to third parties requesting bank statements. It unpersuasively argued that the IRS already had possession of the summonsed information because the agency had previously reviewed those same statements. The district court found that the investigating agent’s declaration that she did not possess the information satisfied the government’s burden of demonstrating that the summonses were properly issued. The Ninth Circuit affirmed the district court’s decision to deny the motion, finding that the IRS’s prior review of the information did not automatically give the IRS continued possession of all the information in the records. Although the panel acknowledged Congress’s intent to prevent unnecessary investigations and annoyance in situations where the IRS already possessed summonsed records, it reasoned that that the Powell limitations were not intended to obstruct the “ability of the IRS to obtain relevant information necessary to a legitimate investigation,” where, as in this case, the IRS did not currently have possession of the bank statements. AFFIRMED.