Tax Court Soundly Rejects Taxpayers' Motion to Compel Immunization of Third Party Witnesses (10/3/22)

In Oconee Landing Property, LLC v. Commissioner (T.C. No. 11814-19 Dkt. #229 Order 9/22/22), here (with Dkt entries here), a short order (3 pages), the Court (Judge Lauber) rejected the petitioner's Motion to Compel Immunization of Third-Party Witnesses. The gravamen of the holding is:

            It is well established that this Court lacks jurisdiction to grant criminal immunity to a witness who may be called to testify before the Tax Court. This power resides solely with the U.S. District Courts and only upon the request of the U.S. Attorney for the applicable district. 18 U.S.C. §§6001-6003; see, e.g., Coulter v. Commissioner, 82 T.C. 580, 583 (1984) (finding that “the Tax Court is not authorized to grant immunity” to a taxpayer); Hartman v. Commissioner, 65 T.C. 542, 547 (1975) (denying a taxpayer’s request for immunity “since jurisdiction to take such action is vested exclusively in the United States District Courts, and then only upon application of a United States Attorney”); Reynolds v. Commissioner, T.C. Memo. 1981-364, 42 T.C.M. (CCH) 395, 397 (holding that a taxpayer’s request that we grant him immunity “is spurious since jurisdiction to take such action is vested exclusively in the U.S. District Courts, and then only upon application of a U.S. Attorney”). It is equally well established that this Court lacks jurisdiction to compel the IRS to seek an order of immunity for a witness. See i, 65 T.C. at 547–48; Hershberger v. Commissioner, T.C. Memo. 1979-522 (finding that a taxpayer’s request that the Tax Court order the IRS to grant him transactional immunity was baseless). This Court has no “inherent authority” to confer immunity on a witness. Such discretionary power is statutorily reserved to the Executive Branch and is available to neither the Tax Court nor U.S. district courts (absent an application from a U.S. Attorney). See 18 U.S.C. §§ 6001-6005.

            In support of its position petitioner cites squibs from various cases taken out of context. Virtually all of these cases involve U.S. District Courts acting on the request of a U.S. Attorney. For example, petitioner errs in relying on United States v. [*3] Bahadar, 954 F.2d 821 (2d Cir. 1992). The question there was whether the U.S. District Court for the Eastern District of New York committed error by failing to order the government to immunize a witness and co-conspirator in a criminal drug trial. See id. at 825. Most cases cited by petitioner rely on Government of Virgin Islands v. Smith, 615 F.2d 964 (3d Cir. 1980). That precedent has been rejected by the Eleventh Circuit, to which this case is appealable. See United States v. DiBernardo, 880 F.2d 1216, 1220 (11th Cir. 1989) (ruling that the grant of immunity is strictly an Executive Branch function). Indeed, Government of the Virgin Islands has since been overturned by the Third Circuit, to the extent that it recognized any inherent authority of courts to confer immunity on a witness. United States v. Quinn, 728 F.3d 243, 252– 61 (3d Cir. 2013).

JAT Comments:

Are Kastigar Hearings Required Beyond Compelled Testimony Situations (7/30/12)

In Kastigar v. United States, 406 U.S. 441 (1972), the Supreme Court held that, where a witness who has invoked the Fifth Amendment is nevertheless compelled to testify by court order, the protection to insure that the prosecutors do not improperly benefit from the compelled testimony is a hearing in which the prosecutors must prove that its case will not be based on that evidence.  By way of background, in earlier cases, the Court had determined that the compelled testimony under 18 U.S.C. §§ 6002 and 6003 was use and derivative use immunity (as opposed to solely use immunity).  Use and derivative use immunity, the Court had opined, was coterminous with the Fifth Amendment Privilege, and thus fully protective of that Privilege even when the witness's assertion of the Privilege is overridden by the order to testify.  In Kastigar, the Court carved out a procedure, called the Kastigar hearing, where the prosecutors must prove that the Government's case is not based on tainted compelled testimony.  "This burden of proof . . . is not limited to a negation of taint; rather, it imposes on the prosecution the affirmative duty to prove that the evidence it proposes to use is derived from a legitimate source wholly independent of the compelled testimony." Kastigar, 406 U.S. at 460.  The requirement for a predicate Kastigar hearing is a substantial protection for a witness who may later become a defendant because the rigors of the burden imposed on the Government to prove lack of use in the case are substantial.  (For other blog entries on Kastigar, see here.)

One question that has lingered since Kastigar is whether there might be other areas, particularly in the context of privileged communications, where a Kastigar-like hearing is compelled in order to preserve the privilege.  Keep in mind that, if, at trial, the Government attempts improperly to use privileged communications (say attorney-client communications), the defense can object and the matter of the proper use of such communications can be resolved at that time.  Alternatively, the defense might obtain some form of advance hearing via a motion in limine by mounting a credible argument that the Government may improperly rely upon privileged documents.  These "corrective mechanisms" could be available even in compelled testimony over Fifth Amendment privileges, but the Supreme Court had granted in Kastigar the right to the hearing in which the burden is on the Government to disprove improper use.  So, one might think, why would this need for a Kastigar-like corrective mechanism not apply to other potential improper use of other privileged materials the Government posseses?