The tale of the 1980 U.S. Olympic hockey team is one that will be recounted for generations: a team of fresh-faced college students with a losing track record took on the Soviets, the greatest hockey dynasty in Olympic history, and won. The 4-3 victory under Coach Herb Brooks was unprecedented, unexpected, and, frankly, unbelievable, showcasing the power of great leadership, a strong work ethic, and a whole lot of heart. Even now, 38 years after the team’s triumphant victory against insurmountable odds and the pervasiveness of Communism, the final goal, the miracle on ice that inspired the 2004 Disney film Miracle, stands strong as evidence of the infallibility of the American spirit.

The case of Presley v. U.S. featured a similar uphill climb and a battle of wills. But, when it comes to the power of the IRS, miracles are hard to come by.

The Challenges in IRS Opposition

Presley v. U.S. started, as many cases do, with potential boundary-stepping by the IRS. The Plaintiffs in this case include Michael Presley, Cynthia Presley, BMP Family Limited Partnership, and Presley Law and Associates, the subjects of a 2014 IRS investigation. As a part of their sleuthing, the IRS sent three summonses to Bank of America in 2016 in search of bank statements, transaction records, loan proceeds, and other related information for the accounts held by BLP and Presley Law. Micheal and Cynthia were informed of these summonses, but their clients were not as, according to the IRS, the Presleys were the sole subjects of the investigation.

As lawyers with a presumably sound understanding of the law, the Presleys had a problem with this. Due to the nature of their business accounts, the Presleys believed that allowing the IRS access would violate confidentiality by disclosing private financial information about their clients. In an effort to halt what they considered to be overstepping by the IRS, the Presleys filed a motion to quash the summonses. This, of course, was abjectly dismissed by the district court. The court determined that the summonses were narrowly drawn and in the scope of the IRS’ investigation, and that the Presleys‘ clients had no reasonable expectation of privacy in the records held by the bank.

The Presleys‘ Fight for Gold

Predictably, the Presleys appealed the decision, but they faced a tough climb from the start. According to the ruling outlined in United States v. Morse, summonses by the IRS are generally uniformly enforced unless they are determined to be “clearly erroneous.” In the eyes of the law, these current summonses didn’t appear to be blatantly wrong, so the court was by default on the side of the IRS. This is particularly true when United States v. Clarke is taken into account, which states that the IRS has “broad statutory authority to summon a taxpayer to produce documents or give testimony relevant to determining tax liability.”

The framework that gives the government the right to issue summonses for taxpayer information was outlined in United States v. Powell, and requires that the IRS:

• Has a legitimate reason for the investigation
• Issues summons for information relevant to the purpose of the investigation
• Is not already in possession of the information requested
• Has followed all procedural steps as outlined in the tax code

Assuming this process is followed correctly, the responsibility then shifts to the taxpayer to disprove any of the above criteria – a sufficiently large burden to contend with for the average person.

In an unusual twist, the Presleys did not attempt to argue that the IRS didn’t comply with United States v. Powell but rather that the Fourth Amendment precludes the government’s right to search or seize the requested bank records.

The Right to Privacy (or Lack Thereof)

Privacy is a right under the Fourth Amendment of the U.S. Constitution, which prohibits unreasonable searches and seizures by the government for any reason. However, were these IRS summonses really a matter of Fourth Amendment magnitude when the Plaintiffs were attempting to make a case on behalf of their clients and not themselves?

In order to support their case, the Presleys argued two things: first, that the Fourth Amendment requires the government to demonstrate probable cause because their legal clients have a reasonable expectation to privacy, and second, that the IRS was obligated to proceed under 26 U.S.C. § 7609(f), which entails issuing John Doe summonses to all affected clients and petitioning the court for an ex parte hearing to move forward with obtaining records.

Despite their best efforts, the court soundly rejected both of these contentions, citing that:

• The Plaintiff’s clients had no reasonable expectation of privacy under the Fourth Amendment as the financial information at the center of this case was already relayed to a third party (the Presleys). By law, information revealed to a third party no longer maintains a Constitutional right to privacy, even if “revealed on the assumption that it will be used only for a limited purpose and the confidence placed in the third party will not be betrayed.” Further, these records do not belong to the taxpayers in question – they belong to the bank – and are also not records of confidential communications. The Plaintiffs attempted to argue that the previous rulings used to make these determinations, namely United States v. Miller, which also included the IRS and a bank, did not apply here as the law firm acted as an intermediary, but the courts found this equally irrelevant.
• There is no need for an ex parte hearing due to compliance with United States v. Powell, which the Plaintiffs did not contest. Further, the use of John Doe summonses under 26 U.S.C. § 7609(f) is also irrelevant, as the clients in this case are not the “person[s] with respect to whose liability the summons is issued” as is specified in this particular code section.

For good measure, the court brought to light an additional Supreme Court ruling: Tiffany v. United States. This particular case, which ruled that the IRS has the right to issue dual purpose summonses that could include information about unnamed third parties, was the court’s ace in the hole, effectively scoring the winning goal against the thoroughly trounced Presleys.

No Final Scoring Point

And so, despite the best efforts of the Presleys, the court ruled in favor of the IRS, which presumably went on to finally collect all of the information requested two years ago from Bank of America as a part of the investigation into the Presleys.

While the 1980 Olympic hockey final was an inspiring story of perseverance and faith against all odds, the story in this case ended quite differently. The mighty government prevailed; in 2018, there was no miracle in the courtroom – or on the ice, for that matter, as the Olympic Athletes from Russia prevailed once again in Pyeongchang.