Equity Investment Associates, LLC v. US, No. 21-2001 (4th Cir. 2022)
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The Internal Revenue Service is barred from issuing a summons “with respect to any person if a Justice Department [criminal] referral is in effect with respect to such person.” I.R.C. Section 7602(d)(1). The IRS issued a summons for information to Equity Investment Associates, LLC. (“Equity”). Equity sought to quash that summons, arguing that an existing criminal referral for its lone agent must be treated as a referral for Equity itself.
The Fourth Circuit rejected this argument and affirmed the district court’s judgment. The court held under Section 7602, a business entity is a distinct person from its agents. And because the court only look to whether the taxpayer itself has been referred to the Justice Department, Equity cannot quash the summons. Thus, the district court did not abuse its discretion when denying Equity’s motion for an evidentiary hearing. And because Equity cannot meet that lower burden, it cannot meet the “heavy burden of disproving the actual existence of a valid civil tax determination or collection purpose.”
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