IRS Faces Suit for Excessive Summonses After Agent Issues Dozens

The IRS allegedly issued an “unprecedented number” of summonses when auditing a property holding company’s conservation easement and they should be quashed for lack of purpose, the company told a federal court.

Internal revenue agent Lijia Wu allegedly issued 37 total summonses as part of an IRS examination of Norcave Properties LLC’s perpetual conservation easement donation and corresponding charitable contribution deduction on the company’s 2018 tax return. However, most of the investigation’s 36 additional parties have minimal or no involvement in the donation, the company said Monday.

“The only explanation for the additional summonses can be harassment of Petitioner, by issuing unnecessary and burdensome document requests to third parties Petitioner has worked with or continues to work with,” Norcave said.

Among the summoned parties are the company’s manager, Webb Creek Management Group, and its counsel, St. Louis-based Armstrong Teasdale LLP. Webb Creek, a real estate consulting firm, was one of the companies named in a 2020 Senate Finance Committee report that identified syndicated conservation-easement transactions as “highly abusive tax shelters.”

‘Abused’ Process

Norcave told the US District Court for the Eastern District of Missouri that it has already produced more than 9,000 pages of documents for the IRS. Wu also “abused the summons process” in separate audits concerning the same tract of land from which Norcave’s parcel was cut, as shown by her issuing more than 20 summonses in each, the complaint said.

“The fact that Agent Wu has issued at least 86 summonses in three audits involving property from the same Parent Tract, when summonses are normally used sparingly in audits, evidences a pattern of lack of a legitimate purpose,” Norcave said. “Whether the goal is rooted in harassment or pure recklessness in ignoring the waste of resources caused by issuing so many summonses, the IRS cannot show a legitimate purpose.”

Additionally, the summonses should be quashed because, according to the complaint, the IRS has already made its determination regarding Norcave’s tax liability in connection with the charitable contribution deduction.

“It is no secret that the IRS is auditing all taxpayers who claimed deductions for conservation easements,” Norcave said. “The IRS is disallowing deductions and imposing penalties on every single taxpayer who claims a deduction for the donation of a conservation easement.”

Since its already made its decision to disallow the deduction and impose penalties, there is no need for additional documents from third parties, the complaint said. And, even if it hasn’t made that decision, the summonses should still be quashed because the requested materials either wouldn’t be relevant, are already in the IRS’s possession, or are subject to attorney-client privilege, Norcave said.

Norcave doesn’t question the IRS’s general authority to issue summonses, the complaint said.

The IRS didn’t immediately return an emailed request for comment.

Fox Rothschild LLP represents Norcave.

The case is Norcave Prop., LLC v. United States, E.D. Mo., No. 23-mc-23-SNLJ, complaint filed 11/6/23.