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Supreme Court hears arguments on IRS summons, contaminated well water

[JURIST] The US Supreme Court [official website] heard oral arguments [day call, PDF] in two cases Wednesday. In United States v. Clarke [transcript, PDF; JURIST report] the court heard arguments on whether an unsupported allegation that the Internal Revenue Service (IRS) [official website] issued a summons for an improper purpose entitles an opponent to an evidentiary hearing to question IRS officials on their reasons for issuing the summons. The case involves the IRS issuance of five summonses during an investigation into the tax liabilities of Dynamo Holdings Ltd [corporate website]. Those summoned, including Dynamo's chief financial officer Michael Clarke, contend that they were entitled to discovery and an evidentiary hearing before the district court granted the IRS's petitions to enforce the summonses. Clarke and the others argue that the IRS sought to enforce the summonses for an improper purpose, including in retribution for Dynamo's refusal to extend a statutes of limitations deadline. Last April the US Court of Appeals for the Eleventh Circuit [official website] ruled [opinion, PDF] in favor of Clarke, stating that "in situations such as this, requiring the taxpayer to provide factual support for an allegation of an improper purpose, without giving the taxpayer a meaningful opportunity to obtain such facts, saddles the taxpayer with an unreasonable circular burden."

In CTS Corp. v. Waldburger the court heard arguments on whether the discovery rule set forth in the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) [text] preempts a state's law limiting the time to seek remedies. The case arose after North Carolina landowners filed a claim against CTS Corp. [corporate website] for allegedly contaminating their well water with concentrated levels of chemicals with carcinogenic effects. Because the corporation has not had any operations at the site since it was sold in 1987, CTS argued that the case should be dismissed under North Carolina's 10-year limitation on the accrual of real property actions. The US Court of Appeals for the Fourth Circuit [official website] held [opinion, PDF] that CERCLA does preempt state law, or else states could obliterate legitimate causes of action before they exist.

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