United States v. Powell

PETITIONER: United States
LOCATION: Heart of Atlanta Motel

DECIDED BY: Warren Court (1962-1965)
LOWER COURT: United States Court of Appeals for the Third Circuit

CITATION: 379 US 48 (1964)
ARGUED: Oct 14, 1964 / Oct 15, 1964
DECIDED: Nov 23, 1964

Facts of the case


Media for United States v. Powell

Audio Transcription for Oral Argument - October 15, 1964 in United States v. Powell

Audio Transcription for Oral Argument - October 14, 1964 in United States v. Powell

Earl Warren:

Number 54, United States et al, Petitioners, versus Max Powell et al.

Mr. Terris.

Bruce J. Terris:

Mr. Chief Justice, may it please the Court.

As has been indicated before, this case involves basically the same issues as are involved in the Ryan case.

The only real difference being that here there were second examinations of the taxpayer's records but notices under Section 7605 (b) had been sent.

I'll give the facts briefly.

Respondent Powell is the president of respondent William Penn Laundry Company which is the taxpayer, which is involved.

Mr. Powell received an Internal Revenue Service summons, give testimony, produced books and records of the company relating to its tax liability, the company's tax liability for the years 1958 and 1959.

The time the summons was issued, the statute of limitations, the three-year statute of limitations had elapsed although not the six-year.

As I've indicated since they're already been prior examination of the taxpayer's books, the statutory notice was sent by the Regional Commissioner.

At the administrative hearing, Mr. Powell refused to produce the books on the advice of counsel on the ground that the Government had made no showing of fraud.

In proceeding to enforce the summons in the District Court, the Government introduced the affidavit, not the testimony, the affidavit of an agent stating that on the basis of investigation, he had reason to suspect that the taxpayer has filed false and fraudulent returns for the years 1958 and 1959 with intent to evade its taxes and that the taxpayer had attempted to evade these taxes and I quote, “By overstating the amount of purchases made which in turn were used as expenses, so as to fraudulently understate the amount of taxable income.”

The District Court, while indicating doubt as to the legal rights of the respective parties, apparently compromised, and allowed the revenue agents one hour to examine the taxpayer's books.

The Third Circuit reversed.

It held that the summons was invalid on the ground that after the running of three-year statute of limitations a reexamination of the taxpayer's records is unnecessary under Section 7605 (b), unless the Commissioner shows that he has reasonable grounds to believe that the taxpayer has committed fraud.

Therefore, the issue in this case is the same as the issue in the Ryan case.

Whether the Government must show probable cause or reasonable grounds to believe which is the equivalent before it can obtain judicial enforcement of the summons which is as part of investigation after the three years statute of limitations has run.

Now, as I've indicated the basic arguments of the government are the same as in the Ryan case and I will not repeat them.

I would however, like to turn to the practical effect of the taxpayer's argument or the respondent's argument.

Arthur J. Goldberg:


Bruce J. Terris:

That's right.

The reason I say that this makes no difference is once you've satisfied that part assuming there are two parts to the statute of 7605 (b).

Once you've satisfied the second part and then your back under the first part again.

And so that is the issue, whether the first part of Section 7605 (b) can be read separately from the second part and if read separately, means that the Government must show probable cause after the three-year period has run.

Can I ask you a question on that point, assuming that you take this narrow construction, certainly the first sentence of Section 7604 (b) do I understand meaning unnecessary is the equivalent of irrelevant?

Bruce J. Terris:

Yes, Your Honor.

What's the source of the taxpayer's right under that kind of a reading where will inquire him of anything, of things that you inquire that you say it could be inquired in the good faith or not.

Bruce J. Terris:

Well, Your Honor, I think there are two possible sources.

One is the Fourth Amendment, Oklahoma Press -- the Oklahoma Press case indicates that when a subpoena is sufficiently burdensome, sufficiently broad, and I assume it doesn't say this, is issued in bad faith, it would be considered unreasonable.

It might be considered unreasonable under the Fourth Amendment.