Supreme Court sides with IRS

The Supreme Court ruled Thursday that taxpayers challenging an IRS summons must at least have a plausible case to get a court hearing.

Justice Elena Kagan wrote the opinion for the court, which unanimously overturned an Eleventh Circuit decision that said that taxpayers just needed to charge that the IRS had acted improperly to get a hearing.

Instead, Kagan said that taxpayers wanting a hearing must at least be able to point to “specific facts or circumstances plausibly raising an inference of bad faith.”

That test, the court said, would give the taxpayer the right to challenge the IRS without eating too much into the agency’s power to investigate.

The case, U.S. v. Clarke, revolved around Dynamo Holdings, a company the IRS was investigating for tax liabilities. Company officials said the IRS used its summons to get payback at Dynamo Holdings for not giving the agency more time to investigate.

The justices sent the case back to the Eleventh District, which had previously said that requiring taxpayers to provide proof to challenge the IRS saddled them “with an unreasonable circular burden.”