1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 SAN JOSE DIVISION 7 8 UNITED STATES OF AMERICA, Case No. 23-cv-00184-VKD

9 Petitioner, ORDER FOR REASSIGNMENT TO A

DISTRICT JUDGE

10 v.

REPORT AND RECOMMENDATION

11 RE PETITION TO ENFORCE IRS

AILEEN GUEVARRA, PRESIDENT, FIL- SUMMONS

12 AM 2 CUISINE RESTAURANT, INC., Re: Dkt. No. 1 13 Respondent. 14 This matter is before the Court upon the United States’ Verified Petition to Enforce 15 Internal Revenue Service (“IRS”) Summons. Dkt. No. 1. On January 23, 2023, the Court issued 16 an order requiring respondent Aileen Guevarra to file a written response to the United States’ 17 petition by March 7, 2023, and to appear before the Court on March 28, 2023 at 10:00 a.m. and 18 show cause why the subject IRS summons should not be enforced. Dkt. No. 4. Ms. Guevarra did 19 not file any response. Nor did she appear at the March 28, 2023 hearing. 20 At the hearing, the United States advised that just prior to the hearing, Ms. Guevarra 21 indicated that she was willing to provide the requested information and to appear for questioning 22 at the IRS on April 7, 2023. See Dkt. No. 10. The United States noted a possibility that this 23 matter might be resolved by that date. Accordingly, the Court deferred issuing a report and 24 recommendation, pending receipt of a status report by April 10, 2023. Id. 25 The United States has submitted a status report advising that its counsel emailed Ms. 26 Guevarra on March 28, 2023 and April 5, 2023, requesting confirmation for a meeting with the 27 IRS on her requested date, April 7, 2023. According to the status report, the United States 1 counsel to advise that she would not attend the scheduled meeting due to illness. See Dkt. No. 11. 2 The United States reports that Ms. Guevarra did not appear for the April 7 meeting and still has 3 not complied with the summons. Id. 4 All named parties must consent to magistrate judge jurisdiction before a magistrate judge 5 may hear and decide a case. 28 U.S.C. § 636(c)(1); Williams v. King, 875 F.3d 500 (9th Cir. 6 2017). Because this Court does not have the consent of all parties to proceed before a magistrate 7 judge, this matter shall be reassigned to a district judge for all further proceedings. Upon 8 consideration of the record presented, as well as the discussion at the March 28, 2023 hearing, this 9 Court recommends that the United States’ Petition to Enforce IRS Summons be granted. 10 REPORT AND RECOMMENDATION 11 According to the petition, Ms. Guevarra is the president of Fil-Am 2 Cuisine Restaurant 12 (“Restaurant”), and the IRS is investigating the collection of the Restaurant’s tax liabilities for the 13 fiscal period ending December 31, 2017; the calendar periods ending December 31, 2019 and 14 December 31, 2020; and the quarterly periods ending March 31, 2018, June 30, 2018, September 15 30, 2018, December 31, 2018, March 31, 2019, June 30, 2019, September 30, 2019, March 31, 16 2020, June 30, 2020, September 30, 2020, December 31, 2020, and March 31, 2021. Dkt. No. 1 17 ¶ 4 & Ex. A. The United States believes that Ms. Guevarra has possession and control of records, 18 documents, and other information concerning the IRS’s inquiry, as to which the IRS has no 19 access, possession, or control. Id. ¶ 7. As part of its investigation, the IRS served a summons on 20 Ms. Guevarra, requiring her to appear before Revenue Officer Belden Granada on March 28, 2022 21 and to give testimony and produce records for the period January 1, 2021 to January 31, 2022. 22 The requested records “include but are not limited to: all bank statements, checkbooks, canceled 23 checks, saving account passbooks, [and] records or certificates of deposit.” Id., Ex. A. The record 24 shows that the summons properly was served pursuant to 26 U.S.C. § 7603.1 Id. ¶ 8 & Ex. A. Ms. 25 Guevarra did not appear or produce testimony or records as requested by the summons. Id. ¶ 10. 26 1 Service of summons shall be made “by an attested copy delivered in hand to the person to whom 27 it is directed, or left at his last and usual place of abode.” 26 U.S.C. § 7603(a). “[T]he certificate 1 In a letter dated May 6, 2022, Ms. Guevarra was given another opportunity to comply with the 2 summons by appearing for an appointment with Officer Belden on May 18, 2022. Id. ¶ 11 & Ex. 3 B. According to the petition, Ms. Guevarra still has not complied. Id. ¶ 12. 4 On January 13, 2023, the United States filed the instant action to enforce the summons. 5 This Court issued an order to show cause, setting a briefing schedule and a hearing for March 28, 6 2023. Dkt. No. 4. The record shows that Ms. Guevarra was personally served with the United 7 States’ petition and the Court’s order to show cause on February 1, 2023. Dkt. No. 6. As noted 8 above, the Court received no written response from Ms. Guevarra, and she did not appear at the 9 hearing. 10 The IRS is authorized under 26 U.S.C. § 7602(a) to issue a summons relevant to the 11 investigation of any taxpayer’s liability. A summons may be issued for the purposes of 12 “ascertaining the correctness of any return, making a return where none has been made, 13 determining the liability of any person for any internal revenue tax or . . . collecting any such 14 liability . . ..” 26 U.S.C. § 7602(a); see also Crystal v. United States, 172 F.3d 1141, 1143 (9th 15 Cir. 1999) (quoting 26 U.S.C. § 7602(a)). To enforce a summons, the IRS must first establish 16 “good faith” by showing that the summons (1) is issued for a legitimate purpose; (2) seeks 17 information relevant to that purpose; (3) seeks information that is not already in the IRS’s 18 possession; and (4) satisfies all of the administrative steps set forth in the Internal Revenue Code, 19 namely that the IRS has determined that the examination is necessary and has notified the taxpayer 20 in writing to that effect. United States v. Powell, 379 U.S. 48, 57-58 (1964). “‘The government’s 21 burden is a slight one, and may be satisfied by a declaration from the investigating agent that the 22 Powell requirements have been met.’” Crystal, 172 F.3d at 1144 (quoting United States v. 23 Dynavac, Inc., 6 F.3d 1407, 1414 (9th Cir. 1993)). The relevance standard “that the IRS must 24 meet is clearly less than probable cause” and has been defined “as whether the inspection sought 25 might have thrown light on the correctness of the taxpayer’s return.” United States v. Goldman, 26 637 F.2d 664, 667 (9th Cir. 1980). “The burden is minimal ‘because the statute must be read 27 broadly in order to ensure that the enforcement powers of the IRS are not unduly restricted.’” 1 Once the United States has met its burden in establishing the Powell elements, if the 2 taxpayer chooses to challenge the enforcement, she bears a heavy burden to show an abuse of 3 process or lack of good faith on the part of the IRS. Indeed, “‘[e]nforcement of a summons is 4 generally a summary proceeding to which a taxpayer has few defenses.’” Crystal, 172 F.3d at 5 1144 (quoting United States v. Derr, 968 F.2d 943, 945 (9th Cir. 1992)). “‘The taxpayer must 6 allege specific facts and evidence to support his allegations of bad faith or improper purpose.’” Id. 7 (quoting United States v. Jose, 131 F.3d 1325, 1328 (9th Cir. 1997)). As explained by the Ninth 8 Circuit:

9 The taxpayer may challenge the summons on any appropriate grounds,’ including failure to satisfy the Powell requirements or abuse of 10 the court’s process. 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 11 pressure on him to settle a collateral dispute, or for any other purpose reflecting on the good faith of the particular investigation. In addition, it 12 has become clear since Powell that gathering evidence after having decided to make a recommendation for prosecution would be an improper purpose, 13 and that the IRS would be acting in bad faith if it were to pursue a summons enforcement under these circumstances. While neither the Powell elements 14 nor the LaSalle requirements is an exhaustive elaboration of what good faith means, still the dispositive question in each case is whether the Service is 15 pursuing the authorized purposes in good faith. 16 Id. at 1144-45 (internal quotations and citations omitted). 17 While the United States’ burden is not great, it is not necessarily satisfied by an agent’s 18 mere assertion of relevance. Goldman, 637 F.2d at 667. Once a summons is challenged, a court 19 must scrutinize it to determine whether it seeks information relevant to a legitimate investigative 20 purpose, and the court may choose either to refuse enforcement or narrow the scope of the 21 summons. Id. at 668. 22 In the present case, the United States has met its burden of showing that the Powell 23 elements have been satisfied, through the verification of the petition by Revenue Officer Belden. 24 See Crystal 172 F.3d at 1144 (stating that it was undisputed that the special agent’s declaration 25 satisfied the Powell requirements and that the government therefore “established a prima facie 26 case to enforce the summonses”); Dynavac, Inc., 6 F.3d at 1414 (stating that the government’s 27 burden “may be satisfied by a declaration from the investigating agent that the Powell 1 (“The government usually makes the requisite prima facie showing by affidavit of the agent.”). 2 The United States’ verified petition indicates that the IRS’s investigation is being conducted for a 3 legitimate purpose of ascertaining the Restaurant’s assets and liabilities as part of an effort to 4 investigate federal tax liabilities for the fiscal period ending December 31, 2017; the calendar 5 periods ending December 31, 2019 and December 31, 2020; and quarterly periods in 2018, 2019, 6 and 2020, as well as the quarter ending March 31, 2021. Dkt. No. 1 ¶ 4 & Ex. A. The summons 7 at issue is relevant to that purpose and asks Ms. Guevarra to appear and bring with her documents 8 pertaining to assets and liabilities (e.g., bank statements, checkbooks, canceled checks, saving 9 account passbooks, and records or certificates of deposit) for the period January 1, 2021 to January 10 31, 2022. Id. ¶¶ 4, 9 & Ex. A. The petition further indicates that the information is not already in 11 the IRS’s possession, that there has been no referral for criminal prosecution of this matter, and 12 that all administrative steps required by the internal Revenue Code for the issuance of the 13 summons have been taken. Id. ¶¶ 7, 13, 14. 14 Because the United States has met its burden in establishing the Powell elements, the 15 burden shifts to Ms. Guevarra to disprove the actual existence of a valid civil tax determination or 16 collection purpose. As discussed above, she did not file any response to the order to show cause 17 and did not appear at the show cause hearing. This Court therefore finds that she has not met her 18 burden of showing an abuse of process or lack of good faith on the part of the IRS. 19 Accordingly, this Court orders the Clerk of the Court to reassign this case to a district 20 judge, with the recommendation that (1) the petition to enforce the IRS summons be granted and 21 (2) an order issue enforcing the IRS summons and directing Ms. Guevarra to appear before the 22 IRS within 21 days of the district judge’s order granting the petition to provide testimony and 23 produce the requested documents and records. 24 Any party may file objections to this report and recommendation with the district judge 25 within 14 days after being served with a copy. See 28 U.S.C. § 636(b)(1)(B), (C); Fed. R. Civ. P. 26 72. The United States is requested to promptly serve a copy of this Report and Recommendation

27 1 on Ms. Guevarra and to file a proof of service with the Court. 2 IT IS SO ORDERED. 3 || Dated: April 10, 2023 4 5

VIRGINIA K. DEMARCHI

6 United States Magistrate Judge 7 8 9 10 11 12

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