In re U.S. for Taxpayer Return Info.

204 F.Supp.3d 933

In the MATTER OF APPLICATION OF the UNITED STATES for Taxpayer RETURN INFORMATION.

Case No. 6:16-cv-00138-GFVT

United States District Court, E.D. Kentucky, Southern Division at London.

Signed September 6, 2016

Kate K. Smith, AUSA, Kenneth Taylor, U.S. Attorney's Office, Lexington, KY, for Application of The United States for Taxpayer Return Information.

OPINION & ORDER

Gregory F. Van Tatenhove, United States District Judge

The United States of America, pursuant to 26 U.S.C. § 6103(i)(1), filed an application for an ex parte order directing the Internal Revenue Service to disclose certain tax return information in furtherance of a public corruption investigation. United States Magistrate Judge Hanly A. Ingram reviewed the Government's application and denied it, and the United States now appeals that decision to the undersigned. Importantly, the Government argues the "reasonable cause" standard of proof required under 26 U.S.C. § 6103(i)(1)(B)(i) presupposes a lesser burden than the "probable cause" standard which Judge Ingram applied when reviewing the application. For the reasons that follow, the Court agrees with the United States and finds that § 6103(i) requires the Government to satisfy a lower evidentiary threshold than "probable cause" to obtain a court order under the statute.

I

The Internal Revenue Code permits, under limited circumstances, federal law enforcement to obtain tax return information for use in non-tax related criminal investigations. Specifically, 26 U.S.C. § 6103(i) allows a federal district court or magistrate judge to grant an ex parte order allowing disclosure of tax return information to federal law enforcement when:

(i) there is reasonable cause to believe, based upon information believed to be reliable, that a specific criminal act has been committed,

(ii) there is reasonable cause to believe that the return or return information is or may be relevant to a matter relating to the commission of such act, and

(iii) the return or return information is sought exclusively for use in a Federal criminal investigation or proceeding concerning such act ..., and the information sought to be disclosed cannot reasonably be obtained, under the circumstances, from another source.

26 U.S.C. § 6103(i)(1)(B).

In the matter at hand, the Government submitted an application for tax return information to United States Magistrate Judge Hanly A. Ingram, in furtherance of a Federal Bureau of Investigation public corruption investigation. [See R. 3 at 1-3.] At Judge Ingram's request, the United States also submitted a memorandum addressing its position on the standard of proof required by 26 U.S.C. § 6103(i)(1)(B)(i) —namely, that "reasonable cause" as used in the statute requires a lower showing than the "probable cause" standard applicable to Fourth Amendment searches and seizures. [Id. at 3.] Judge Ingram considered the Government's memorandum but ultimately determined "reasonable cause" to equal the "probable cause" burden of proof. [See R. 2.] Applying a "probable cause" standard to the Government's application, Judge Ingram found the application deficient. [Id. at 8-11.]

Subsequently, the United States appealed to the undersigned, arguing that "reasonable cause" should not be equated with "probable cause." [R. 3.] The Court, desiring to consider the matter through the proven benefits of the adversarial process, appointed additional counsel to assist in a more thorough briefing of the issues [see R. 1; R. 4], and now sets forth its opinion on the appropriate meaning of "reasonable cause" as used in § 6103(i)(1)(B)(i).

II

This appeal presents a matter of statutory interpretation. When engaging in statutory interpretation in the Sixth Circuit, "the authoritative statement is the statutory text, not the legislative history or any other extrinsic material." City of Cookeville v. Upper Cumberland Elec. Membership Corp. , 484 F.3d 380, 390 n. 6 (6th Cir.2007) (quoting Exxon Mobil Corp. v. Allapattah Servs., Inc. , 545 U.S. 546, 568, 125 S.Ct. 2611, 162 L.Ed.2d 502 (2005) ). This requires a judge to first "determine whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case." Robinson v. Shell Oil Co. , 519 U.S. 337, 340, 117 S.Ct. 843, 136 L.Ed.2d 808 (1997) ; see also Brilliance Audio, Inc. v. Haights Cross Comm., Inc. , 474 F.3d 365, 371–72 (6th Cir.2007). Whether the language of a statute is plain and unambiguous depends upon not only the language itself, but also upon the "specific context in which that language is used, and the broader context of the statute as a whole." Robinson , 519 U.S. at 341, 117 S.Ct. 843 ; see also United States v. Meyers , 952 F.2d 914, 918 (6th Cir.1992).

Further, it has long been the rule that the Court's analysis does not resort to legislative history where the statutory language is unambiguous and the statutory scheme is coherent and consistent. See, e.g. , Barnhart v. Sigmon Coal Co., Inc. , 534 U.S. 438, 450, 122 S.Ct. 941, 151 L.Ed.2d 908 (2002) ; Harper v. AutoAlliance Intern., Inc. , 392 F.3d 195, 207 (6th Cir.2004). However, resort to legislative history may be appropriate where a statute's meaning is ambiguous. In that situation, the Sixth Circuit remains "mindful of the limited utility and reliability of legislative history," City of Cookeville , 484 F.3d at 390 n. 6, and still emphasizes that "Congress's intent is better derived from the words of the statute itself than from a patchwork record of statements inserted by individual legislators and proposals that may never have been adopted by a committee, much less an entire legislative body." Isle Royale Boaters Ass'n v. Norton , 330 F.3d 777, 784–85 (6th Cir.2003) (internal quotation marks and citations omitted). This view is informed by a long line of Supreme Court precedent. Justice Jackson, for example, cautioned that "[r]esort to legislative history is only justified where the face of the Act is inescapably ambiguous, and then ... should not go beyond Committee reports, which presumably are well considered and carefully prepared." Schwegmann Bros. v. Cal v ert Distillers Corp. , 341 U.S. 384, 395, 71 S.Ct. 745, 95 L.Ed. 1035 (1951) (Jackson, J., concurring).

Consistent with these principles, the Court turns to the language of the statute in question. In order to secure an ex parte order from the Court for access to tax return information, 26 U.S.C. § 6103(i)(1)(B)(i) requires the United States to show that "there is reasonable cause to believe, based upon information believed to be reliable, that a specific criminal act has been committed." Congress has not defined "reasonable cause" anywhere in the statute, and after careful consideration of the term, the Court concludes its meaning here is "inescapably ambiguous." See Schwegmann Bros. , 341 U.S. at 395, 71 S.Ct. 745.

Upon initial consideration of the statutory text, "reasonable cause" seems to plainly denote a lower standard of proof than the phrase "probable cause" would require. Standing alone, the words "reasonable" and "probable" are notably distinct. "Probable" is defined as "(1) supported by evidence strong enough to establish presumption but not proof; (2) establishing a probability; (3) likely to be or become true or real." See http://www.merriam-webster.com/ (last visited August 30, 2016). "Reasonable," however, simply means "being in accordance with reason." Id. Nevertheless, "[t]echnical words and phrases which have acquired a peculiar and appropriate meaning in the law cannot be presumed to have been used by the legislature in a loose popular sense." 73 AM. JUR. 2D Statutes § 143 (2016). The Court must also be mindful of any legal significance embodied in the statutory language in question.

Black's Law Dictionary equates "reasonable cause" with "probable cause." See BLACK'S LAW DICTIONARY (10th ed. 2014). No definition is given for "reasonable cause;" rather, "probable cause" is cross-referenced.¹ Id. And, as the Magistrate Judge's order points out, the 1976 Supreme Court decision United States v. Watson repeatedly uses the phrases "reasonable cause" and "probable cause" interchangeably. See 423 U.S. 411, 96 S.Ct. 820, 46 L.Ed.2d 598 (1976) ; [R. 2 at 3-4.] But while various lower courts have relied upon Watson and considered the two phrases synonymous, some ambiguity regarding an exact legal definition of "reasonable cause" still exists.

The year after Watson , the Supreme Court considered the phrase "reasonable cause to suspect" as used in 19 U.S.C. § 482 and articulated a different definition for the phrase than the "probable cause" standard. See United States v. Ramsey , 431 U.S. 606, 612–14, 97 S.Ct. 1972, 52 L.Ed.2d 617 (1977). Admittedly, the "reasonable cause to suspect " language at issue in Ramsey is distinct from the § 6103 phrase "reasonable cause to believe ." But the decision suggests the phrase "reasonable cause" itself may not automatically equate with "probable cause" in all situations. And more recently, the Sixth Circuit explained that the phrase "reasonable grounds to believe that [records] are relevant and material to an ongoing criminal investigation," as used in the Stored Communications Act, means something less than Fourth Amendment "probable cause" protection. See United States v. Carpenter , 819 F.3d 880, 889 (6th Cir.2016) (emphasis added). While the holdings of Ramsey and Carpenter may not be per se controlling over the present inquiry, the Court finds the decisions contribute to a finding of ambiguity. This situation is, indeed, the rare one where a statute's legislative history is appropriately considered. See, e.g. , Schwegmann Bros. , 341 U.S. at 395, 71 S.Ct. 745.

As noted above, the Court limits its consideration of legislative history to the House of Representatives and Senate committee reports, as those reports "presumably are well considered and carefully prepared." Id. ; see also United States v. Int'l Union UAW – CIO , 352 U.S. 567, 585, 77 S.Ct....