UNITED STATES of America, and Robert H. Cluberton, Internal Revenue Agent,
Internal Revenue Service, Petitioners-Appellees,
v.
CHURCH OF SCIENTOLOGY OF CALIFORNIA and Henning Heldt, Vice President,
Respondents-Appellants.
No. 74-1487.
United States Court of Appeals,
Ninth Circuit.
June 26, 1975.
Internal Revenue Service filed petition seeking enforcement of summons
requiring church officer to testify and to produce for examination certain
church records bearing on church's federal income tax liability. The United
States District Court for the Central District of California, Harry Pregerson,
J., entered order enforcing summons and denied church's request for
preenforcement discovery, and church appealed. The Court of Appeals, Duniway,
Circuit Judge, held that Service's litigative strategy in prior proceedings
involving the church did not sufficiently evince bad faith so as to require
denial of enforcement, that mere conclusory allegations of bad faith harassment
and bad purpose were not sufficient to warrant preenforcement discovery but
that church's allegations of bad faith harassment, though thin, raised
sufficient doubt about Service's purposes to require the district court to hold
a limited evidentiary hearing to determine whether further inquiry into the
Service's purposes by way of discovery was warranted.
Reversed and remanded.
[1] FEDERAL COURTS
Court of Appeals had jurisdiction of appeal from district court order enforcing
summons issued by internal revenue service agent and denying taxpayer's request
for pre-enforcement discovery. 26 U.S.C.A. (I.R.C.1954) s 7602; 28
U.S.C.A. s 1291.
[2] INTERNAL REVENUE
An internal revenue summons is administratively issued but its enforcement is
only by federal court authority in an adversary proceeding affording the
opportunity for challenge and complete protection of the witness. 26
U.S.C.A. (I.R.C.1954) s 7602.
[3] INTERNAL REVENUE
Federal Rules of Civil Procedure apply to a proceeding to enforce an internal
revenue service summons. 26 U.S.C.A. (I.R.C.1954) s 7602; Fed.Rules
Civ.Proc. rule 81(a)(3), 28 U.S.C.A.
[4] FEDERAL CIVIL PROCEDURE
Federal Rules of Civil Procedure, as applied in a summons proceeding, are not
inflexible; the district court may limit their application in a proceedings to
enforce a summons, which is intended to be a summary proceeding, so long as the
rights of the parties summoned are protected and adversary hearing, if
requested, is made available. Fed.Rules Civ.Proc. rule 81(a)(3), 28
U.S.C.A.
[5] INTERNAL REVENUE
Internal Revenue Service need not meet any standard of probable cause to obtain
enforcement of a summons; it must show only (1) that the investigation will be
conducted pursuant to a legitimate purpose, (2) that the inquiry may be
relevant to the purpose, (3) that the information sought is not already within
the Service's possession and (4) that the administrative steps required by the
internal revenue code have been followed. 26 U.S.C.A. (I.R.C.1954)
s 7602.
[5] INTERNAL REVENUE
Internal Revenue Service need not meet any standard of probable cause to obtain
enforcement of a summons; it must show only (1) that the investigation will be
conducted pursuant to a legitimate purpose, (2) that the inquiry may be
relevant to the purpose, (3) that the information sought is not already within
the Service's possession and (4) that the administrative steps required by the
internal revenue code have been followed. 26 U.S.C.A. (I.R.C.1954)
s 7602.
[6] INTERNAL REVENUE
Fact that proposed assessments for earlier years were pending at time of
internal revenue service summons for church records bearing on subsequent tax
years did not in itself indicate bad faith sufficient to deny enforcement of
summons; under code, determination of tax exempt status for a given year
depends upon the financial operations of the church for that year; in any
event, since gross receipts for subsequent tax years were markedly
higher than those for prior years it was not unreasonable for the service to
investigate the different periods separately but simultaneously. 26
U.S.C.A. (I.R.C.1954) ss 501(c)(3), 7602.
[7] INTERNAL REVENUE
Fact that in one instance the Internal Revenue Service tendered return of taxes
paid by church and in another case the government admitted error did not
sufficiently establish a bad faith "harass and moot" strategy on part of the
Service so as to warrant denial of enforcement of summons requiring production
of certain church records bearing on its federal income tax liability;
likewise, fact that Service may have capitulated in certain cases because small
amounts were in issue or because it had insufficient evidence to sustain its
case was no reason to bar it from gathering evidence it deemed necessary in
instant case. 26 U.S.C.A. (I.R.C.1954) ss 501(c)(3), 7602.
[8] INTERNAL REVENUE
Mere unsupported allegations of harassment and improper purpose are not alone
sufficient to require the court to deny enforcement of internal revenue service
summons. 26 U.S.C.A. (I.R.C.1954) s 7602.
[9] FEDERAL CIVIL PROCEDURE
In proceedings seeking enforcement of administrative summons, such as an
internal revenue service summons, the district court has considerable
discretion to restrict or deny discovery. 26 U.S.C.A. (I.R.C.1954)
s 7602; Fed.Rules Civ.Proc. rule 81(a)(3), 28 U.S.C.A.
[9] INTERNAL REVENUE
In proceedings seeking enforcement of administrative summons, such as an
internal revenue service summons, the district court has considerable
discretion to restrict or deny discovery. 26 U.S.C.A. (I.R.C.1954)
s 7602; Fed.Rules Civ.Proc. rule 81(a)(3), 28 U.S.C.A.
[10] FEDERAL CIVIL PROCEDURE
In contrast to the procedure in ordinary civil cases, discovery in a summary
summons enforcement proceeding is the exception rather than the rule.
Fed.Rules Civ.Proc. rule 81(a)(3), 28 U.S.C.A.
[11] FEDERAL CIVIL PROCEDURE
Party resisting enforcement of an administrative summons must do more than
allege an improper purpose to entitle him to pre-enforcement discovery.
Fed.Rules Civ.Proc. rule 81(a)(3), 28 U.S.C.A.
[12] INTERNAL REVENUE
Allegations that Internal Revenue Service issued administrative summons for
improper purpose or to harass taxpayers were not alone sufficient to warrant
preenforcement discovery; to allow taxpayer to depose examining agent and its
superiors and to inspect internal revenue service records and memoranda on
basis of such conclusory allegations would place undue burdens on the service
and impede what is supposed to be a summary enforcement procedure. 26
U.S.C.A. (I.R.C.1954) s 7602; Fed.Rules Civ.Proc. rule 81(a)(3), 28
U.S.C.A.
[13] INTERNAL REVENUE
A taxpayer resisting enforcement of internal revenue service summons bears
burden of proving bad faith harassment or other abuse. 26 U.S.C.A.
(I.R.C.1954) s 7602.
[14] INTERNAL REVENUE
A taxpayer resisting enforcement of internal revenue service summons on ground
of bad faith harassment or other abuse is entitled to some opportunity to
substantiate his allegations; holding of an evidentiary hearing would
accommodate the needs of efficient tax administration and at the same time
provide a reasonable opportunity for the summonee to carry the burden of
showing an abuse of process. 26 U.S.C.A. (I.R.C.1954) s 7602;
Fed.Rules Civ.Proc. rule 81(a)(3), 28 U.S.C.A.
[15] INTERNAL REVENUE
Purpose of an evidentiary hearing to determine whether to grant discovery in
proceeding seeking enforcement of internal revenue service summons is to sift
out those rare cases where bald allegations of harassment or improper purpose
can be substantiated and thereby avoid dilatory and burdensome discovery
procedures. 26 U.S.C.A. (I.R.C.1954) s 7602; Fed.Rules Civ.Proc.
rule 81(a)(3), 28 U.S.C.A.
[16] INTERNAL REVENUE
Since church's allegations of bad faith harassment by Internal Revenue Service,
though thin, raised doubt as to Service's purposes, district court should have
held a limited evidentiary hearing to determine whether further inquiry into
the Service's purposes by way of discovery was warranted; although such a
hearing would entail cross-examination of the summoning agent, permissible
scope of the hearing was for the district court's discretion. 26 U.S.C.A.
(I.R.C.1954) s 7602; Fed.Rules Civ.Proc. rule 81(a)(3), 28 U.S.C.A.
[17] INTERNAL REVENUE
Although summonee attempted discovery only by way of taking deposition and
request for internal revenue service documents, summonee did not waive its
right to evidentiary hearing to determine whether further inquiry into
Service's purposes by way of discovery was warranted where summonee twice
called district court's attention to case law providing for such a hearing in
an enforcement proceeding. 26 U.S.C.A. (I.R.C.1954) s 7602.
*820 James Q. Fisher (argued), Encino, Cal., for respondents-appellants.
Alfred S. Lombardi, Atty. (argued), Tax Div., U. S. Dept. of Justice,
Washington, D. C., for petitioners-appellees.
OPINION
Before DUNIWAY and ELY, Circuit Judges, and JAMESON,[FN*] District Judge.
FN* The Honorable William J. Jameson, Senior United States District Judge
for the District of Montana, sitting by designation.
DUNIWAY, Circuit Judge:
The Church of Scientology of California appeals from the district court's
order enforcing a summons issued by an Internal Revenue Service agent under
s 7602 of the Internal Revenue Code of 1954, 26 U.S.C. s 7602, and
denying the Church's request for pre-enforcement discovery. We reverse and
remand for further proceedings.
I. Facts.
On February 8, 1973, agent Cluberton of the Service's Audit Division issued a
summons to Henning Heldt, then vice president of the Church of Scientology of
California, requiring Heldt to appear on February 20, 1973, to testify and to
produce for examination certain records of the Church bearing on its federal
income tax liability for 1968 and 1969. Heldt appeared at the appointed time,
apparently willing to testify, but without the required records. Heldt said
that he was no longer an officer of the Church and that he had neither control
nor possession of the records because he had resigned as director and vice
president of the Church four days earlier, on February 16, 1973. The agent
noted Heldt's appearance but did not examine him. In the course of two years
of negotiations preceding the issuance of the summons, Heldt had consistently
held himself out to the agent as the representative of the Church in charge of
its books and records, and never stated that he was contemplating resigning.
On September 5, 1973, the Service petitioned the district court to enforce the
summons against Heldt and the Church under 26 U.S.C. ss 7402(b) and
7604(a), both of which somewhat redundantly gave the district courts
jurisdiction "by appropriate process" to compel compliance with such
summonses. The district court issued an order requiring Heldt and the Church
to show cause why they should not be required to comply with the summons.
Heldt and the Church then filed a notice of taking depositions of agent
Cluberton and two other Service officials and a demand for the production of
Service files relating to the Church. The Service moved to quash this
discovery. Then Heldt and the Church responded to the order to show cause by
alleging, inter alia, that the Service had issued the summons for the bad faith
purpose of harassing the Church. More specifically, the Church asserted that
the instant *821 summons was part of a concerted nationwide Service strategy
to harass various churches of Scientology, which are in the Church's words
"doctrinal cousins" but separate entities. According to the Church, the
Service has followed a pattern of initiating investigations and administrative
and judicial proceedings, but nonetheless resisting definitive determination of
the tax exempt status of those churches all, the Church alleges, for the
purpose of applying pressure to the churches to settle the issue of their
claimed tax exemptions and of eliminating Scientology organizations. The
Church sought to take the depositions of Service officials to attempt to
uncover evidence to support these allegations.
The district judge held a hearing on the order to show cause and on the
Service's motion to quash discovery, listening to oral argument by counsel, but
without the presentation of testimony or other evidence other than affidavits
already on file. Concluding that the "allegation of harassment is not
supported by the record," the judge entered orders (1) quashing the notice of
taking of depositions and (2) enforcing the summons against the Church. At the
request of the Church, the judge stayed enforcement of the summons pending
appeal, on the condition that the Church deposit with the court all of the
books and records sought by the summons. The Church did so, filling 23 trunks
with records, and brought this appeal.
[1] We have jurisdiction under 28 U.S.C. s 1291. Reisman v. Caplin,
1964, 375 U.S. 440, 449, 84 S.Ct. 508, 11 L.Ed.2d 459; D. I. Operating Co.
v. United States, 9 Cir., 1963, 321 F.2d 586.
II. Summons Enforcement Proceedings in General.
We begin with a review of a few basic, settled principles.
[2][3][4] An internal revenue summons is "administratively issued but its
enforcement is only by federal court authority in 'an adversary proceeding'
affording the opportunity for challenge and 'complete protection to the
witness.' " Donaldson v. United States, 1971, 400 U.S. 517, 525, 91 S.Ct.
534, 539, 27 L.Ed.2d 580; Reisman v. Caplin, 1964, 375 U.S. 440, 446, 84
S.Ct. 508, 11 L.Ed.2d 459. The Federal Rules of Civil Procedure apply to a
summons proceeding. Fed.R.Civ.P. 81(a)(3); United States v. Powell,
1964, 379 U.S. 48, 58, n. 18, 85 S.Ct. 248, 13 L.Ed.2d 112; Martin v.
Chandis Securities Co., 9 Cir., 1942, 128 F.2d 731, 734. But the Civil Rules
are not inflexible; a district court may limit their application in a
proceeding to enforce a summons which is intended to be a summary proceeding,
so long as the rights of the party summoned are protected and an adversary
hearing, if requested, is made available. Donaldson, supra, 400 U.S. at
528-29, 91 S.Ct. 534.
[5] The Internal Revenue Service need not meet any standard of probable
cause to obtain enforcement of its summons; it must show only (1) that the
investigation will be conducted pursuant to a legitimate purpose; (2) that the
inquiry may be relevant to the purpose; (3) that the information sought is not
already within the Service's possession; and (4) that the administrative steps
required by the Internal Revenue Code have been followed. United States v.
Powell, supra, 379 U.S. at 57-58, 85 S.Ct. 248.
However, as the Court explained in Powell, 379 U.S. at 58, 85 S.Ct. at 255
(footnotes omitted):
This does not make meaningless the adversary hearing to which the taxpayer is
entitled before enforcement is ordered. At the hearing he "may challenge the
summons on any appropriate ground," Reisman v. Caplin, 375 U.S. 440, at 449,
84 S.Ct. (508), at 513 (11 L.Ed.2d 459). Nor does our reading of the
statutes mean that under no circumstances may the court inquire into the
underlying reasons for the examination. It is the court's process which is
invoked to enforce the administrative summons and a court may not permit its
process to be abused. Such an abuse would take place if the summons had been
issued for an improper *822 purpose, such as to harass the taxpayer or to
put pressure on him to settle a collateral dispute, or for any other purpose
reflecting on the good faith of the particular investigation. The burden of
showing an abuse of the court's process is on the taxpayer, and it is not met
by a mere showing, as was made in this case, that the statute of limitations
for ordinary deficiencies has run or that the records in question have already
been once examined.
These principles were reaffirmed by the Court in Donaldson v. United
States, 1971, 400 U.S. 517, 526-27, 91 S.Ct. 534, 27 L.Ed.2d 580, and more
recently in United States v. Bisceglia, 1975, 420 U.S. 141, 146, 95 S.Ct.
915, 43 L.Ed.2d 88.
III. The Alleged Abuse of Process.
The four criteria for enforcement set out in Powell were satisfied in this
case. The principal question on appeal is whether the district court erred in
enforcing the summons without allowing discovery and without taking evidence on
the alleged abuse of the court's process. We conclude that the court should
have held a limited pre-enforcement evidentiary hearing.
A. The Allegation of Bad Faith IRS Harassment.
We first consider the Church's allegations and the support for them that
appears in the record.
Attached to the Church's memorandum in opposition to enforcement of the
summons is a "Summary of Administrative and Judicial Proceedings involving the
Church of Scientology and its Parishioners," which the Church says reveals a
pattern of bad faith IRS harassment. This summary lists eleven proceedings
involving various churches of Scientology. With respect to the California
Church, the summary states that the Service retroactively revoked the tax
exempt status of the California Church in 1968 and that questions of the
Church's tax liability for 1964 through 1967 were pending at the appellate
conference level when the summons was issued. Also appended to the memorandum
are the affidavit of Heldt and certain correspondence between the Church and
Service officials in which the Church asked the Service, and the Service
refused, to defer the examination for 1968 and 1969 while examinations for
earlier years were pending.
[6][7] The pendency of proposed assessments for the earlier years, however,
does not in itself indicate bad faith on the part of the Service. Under s
501(c)(3) of the Code, determination of tax exempt status for a given year
depends upon the financial operation of the Church for that year. See
Church of Scientology of Hawaii v. United States, 9 Cir., 1973, 485 F.2d
313, 319 (Koelsch, J., dissenting). Moreover, the gross receipts of the
California Church for 1968 and 1969 were markedly higher than those for 1964
through 1967. It was not unreasonable for the Service to investigate the
different periods separately but simultaneously.
The Church also cites our Church of Scientology of Hawaii case, supra, and
another case now pending on appeal to this court, Handeland v. Commissioner,
519 F.2d 327, as evidence of an alleged bad faith "harass and moot" strategy in
which the Service repeatedly imposes assessments on churches of Scientology but
stops short of litigating the merits of the churches' tax exempt status by
refunding the taxes paid or conceding non-liability. In the Church of
Hawaii case, we held that the taxpayer's suit for a refund was not mooted by
the Service's tender of the taxes paid. Handeland involves an action in the
Tax Court by ministers of the Church of Scientology of Minnesota in which the
government admitted error and the Tax Court entered a judgment without opinion
for the ministers. The propriety of this mooting tactic is not now before us.
If this mooting tactic is improper, the Church will have its remedy, as it did
in the Church of Hawaii case.
For present purposes, we conclude only that the Service's litigative strategy
in *823 those cases does not sufficiently evince bad faith to require us or
the district court to deny enforcement of the summons. It may be that the
Service has capitulated in certain cases because small amounts were in issue or
because it has insufficient evidence to sustain its case. We see no reason to
bar it from gathering the evidence it deems necessary in this case. We note in
passing that the Service has litigated to finality and won a case involving the
tax exempt status of a Scientology church in Founding Church of Scientology
v. United States, 1969, 412 F.2d 1197, 188 Ct.Cl. 490, cert. denied, 397
U.S. 1009, 90 S.Ct. 1237, 25 L.Ed.2d 422, where the court held that the Church
failed to prove that no part of the corporation's net earnings inured to the
benefit of private individuals. See 26 U.S.C. s 501(c)(3).
As evidence of purportedly improper Service motives, the Church also relies on
a Service "Manual Supplement" dated September 2, 1970. Its stated purpose, as
we observed in Church of Scientology of Hawaii, supra, 485 F.2d at 317, is
to identify "Church of Scientology type religious organizations" and to provide
guidelines for examining returns and processing applications. However, we see
no reflection of a nefarious purpose on the face of this document.
The manual supplement is based on the opinion of the Court of Claims in
Founding Church of Scientology v. United States, supra. The court discussed
both the tenets and the structure of Scientology organizations. After pointing
out that the Founding Church tithed 10 percent of its gross income to founder
L. Ron Hubbard, the court observed, 412 F.2d at 1199:
Other Scientology congregations, franchises, and organizations also paid
Hubbard a portion of their gross income, usually 10 percent.
The Court of Claims explained, 412 F.2d at 1201:
For purposes of deciding this case, we do not consider the income accruing to
Hubbard from the affiliated congregations and organizations as coming from
plaintiff. However, under the circumstances here, the fact that Hubbard had
income from such closely related sources indicates that Hubbard's compensation
from plaintiff was not for full-time service. During the years in issue these
other percentages, fees, and commissions, so far as the record shows, were
apparently received or receivable by Hubbard for his personal use. Such an
arrangement suggests a franchise network for private profit and, in turn, casts
doubt upon the propriety of the payments by plaintiff to Hubbard and the
members of his family. The fact that Hubbard was the recipient of income from
plaintiff in the form of royalties and commissions likewise occasions an
inference of personal gain.
Given the evidence in that case and the conclusions of the Court of Claims, it
was entirely reasonable for the Service, using the characteristics sketched by
that court, to identify Scientology organizations and to establish a uniform
policy and procedure for examining them. In fact, we might suspect an improper
external influence if, under the circumstances, the Service did not give such
organizations careful scrutiny.
[8] In short, we agree with the district court that the allegations of
harassment and improper purposes were not supported by the record and standing
alone did not require the court to deny enforcement. However, our inquiry does
not end here, for it may be that the Church's allegations have more substance
than meets the eye. See, e. g., Center on Corporate Responsibility, Inc. v.
Schultz, D.D.C., 1973, 368 F.Supp. 863 (evidence of White House use of IRS
administrative actions against certain "activist" organizations whose views
were offensive to the White House).
B. Denial of Discovery and Evidentiary Hearing.
The Church contends that it was entitled to discovery under Fed.R.Civ.P. 30
and 34 or, failing that, an evidentiary hearing to inquire into the motives
of the Service in issuing the summons.
*824 [9][10][11][12] Under Fed.R.Civ.P. 81(a)(3) the district court
has considerable discretion to restrict or deny discovery. See United
States v. Bell, 9 Cir., 1971, 448 F.2d 40, 42; United States v. Ruggeiro, 9
Cir., 1970, 425 F.2d 1069, 1071; United States v. Ahmanson, 9 Cir., 1969,
415 F.2d 785, 787. In contrast to the procedure in ordinary civil cases,
discovery in a summary summons enforcement proceeding is the exception rather
than the rule. The party resisting enforcement should be required to do more
than allege an improper purpose before discovery is granted. United States
v. National State Bank, 7 Cir., 1972, 454 F.2d 1249, 1252; United States v.
Salter, 1 Cir., 1970, 432 F.2d 697, 700. Conclusory allegations carefully
tailored to the language of Powell, supra, that the Service has issued a
summons for an improper purpose such as to harass the taxpayer or to put
pressure on him to settle a collateral dispute, are easily made. See
Garrett v. United States, 9 Cir., 1975, 511 F.2d 1037.
Allowing the Church to take depositions of the examining IRS agent and his
superiors and to inspect internal IRS records and memoranda on the basis of
such conclusory allegations would place undue burdens on the Service and impede
what is supposed to be a summary enforcement procedure. Accordingly, we reject
the Church's argument that it was entitled to pre-enforcement discovery.
[13][14][15][16] Nonetheless, because, as we have seen, the Church or any
other summonee bears the burden of proving bad faith harassment or other abuse,
we think that the summonee must be afforded at least some opportunity to
substantiate its allegations.
The Church argues that, failing to grant its request for discovery, the
district court should at least have held an evidentiary hearing to inquire
further into the motives of the Service in issuing the summons. As the Church
points out, that was the approach adopted by the First Circuit in United
States v. Salter, 1 Cir., 1970, 432 F.2d 697, where the summonee also alleged
an improper Service purpose in issuing a summons. There the court said (at
700):
We agree with the government, however, that respondent should be required to
do more than allege an improper purpose before discovery is ordered in a
proceeding of this type. Some evidence supporting respondent's allegations
should be introduced. We approve of the following suggestion, offered by the
government:
"The general solution would probably be for the district court to proceed
directly to a hearing at which, if desired, the summonee could examine the
agent who issued the summons, concerning his purpose. The court could then, by
observation and, where necessary, its own questioning of the agent, makes its
own determination of whether exploration, as by discovery, seemed to be in
order."
If, at the end of the hearing, there remains a substantial question in the
court's mind regarding the validity of the government's purpose, it may then
grant discovery.
The Third Circuit has recently adopted a similar procedure in United States
v. McCarthy, 3 Cir., 1975, 514 F.2d 368. We agree with the First and Third
Circuits that this solution would accommodate the needs of efficient tax
administration and at the same time provide a reasonable opportunity for the
summonee to carry the burden imposed by Powell, supra, of showing an abuse of
the court's process.
In approving the procedure suggested by the First Circuit, we also endorse
that court's limiting rationale that the purpose of the evidentiary hearing is
to sift out those rare cases where bald allegations of harassment or improper
purpose can be substantiated and thereby to avoid dilatory and burdensome
discovery procedures. As the First Circuit said in Salter, supra, 432 F.2d
at 700-01 (footnote omitted):
We believe that there are strong reasons of public policy for placing a
*825 burden of proof on respondent before allowing discovery in an
enforcement proceeding of this type. A broad discovery order puts the Internal
Revenue Service under a severe handicap in conducting a civil investigation.
Broad discovery can be expected to cause extensive delays and to jeopardize the
integrity and effectiveness of the entire investigation. Coupled with these
considerations is the fact that taxpayers have been almost uniformly
unsuccessful in proving an "improper purpose" defense. Requiring an
evidentiary hearing will not preclude a respondent from raising and proving a
(sic) "improper purpose," and we of course have no intention of precluding him
from doing so. But we feel that the hearing requirement will have the salutary
effect of eliminating discovery in cases in which it is clear that respondent
will not be able to prove his allegations.
Applying these principles to the case at hand, we conclude that the Church's
allegations of bad faith harassment by the Service, though thin, raised
sufficient doubt about the Service's purposes to require the district court to
hold a limited evidentiary hearing to determine whether further inquiry into
the Service's purposes by way of discovery is warranted. Although we
anticipate that such a hearing would entail, for example, cross-examination of
the summoning agent (Cf. Wild v. United States, 9 Cir., 1966, 362 F.2d 206,
208-09), we do not attempt to define precisely the permissible scope of the
evidentiary hearing. We leave that to the discretion of the district court.
[17] In the proceedings below, the Church attempted discovery only by way of
taking depositions and requests for IRS documents. Apparently counsel for the
Church mistakenly believed that it had a right to discovery before the
presentation of any evidence in the summons enforcement proceeding. Thus it is
arguable that the Church waived any argument that it was entitled to a pre-
discovery evidentiary hearing. However, we agree with the Third Circuit,
McCarthy, supra, 514 F.2d at 368 n. 11, that to hold under these
circumstances that the Church failed to ask the court for the proper sequence
of procedures would be unduly harsh. Moreover, in reviewing the record, we
note that the Church twice called the district court's attention to the
Salter case and the procedure there recommended. Accordingly, we conclude
that the Church did not waive its right to an evidentiary hearing.
IV. Conclusion.
In view of our conclusion that the district court should have granted the
Church a limited evidentiary hearing to inquire into the Service's purposes, we
do not reach the Church's other arguments for reversal.
Reversed and remanded for further proceedings.