Adams v. State

Attorneys for Appellant

Robert W. Hammerle

Joseph M. Cleary

Hammerle Foster Allen & Long-Sharp

Indianapolis, IN

Attorneys for Appellee

Karen M. Freeman-Wilson

Attorney General of Indiana

Thomas D. Perkins

Deputy Attorney General

Indianapolis, IN

IN THE

INDIANA SUPREME COURT

DANTE ADAMS,

Appellant (Defendant below),

v.

STATE OF INDIANA,

Appellee (Plaintiff below).

)

) Supreme Court No.

) 49S04-0011-CR-627

)

) Court of Appeals No.

) 49A04-9903-CR-130

)

)

)

APPEAL FROM THE MARION SUPERIOR COURT

The Honorable Z. Mae Jimison, Judge

Cause No. 49G20-9804-CF-56875

ON PETITION TO TRANSFER

February 8, 2002

SULLIVAN, Justice.

This is the second of two cases we decide today involving Dante

Adams's difficulties with state revenue and criminal authorities after

cocaine was discovered first in his safety deposit box and later in his

home. This case presents the question of whether the cocaine found in a

search of the home by revenue authorities who were seeking property to

satisfy a tax assessment can be used by criminal authorities in a

subsequent drug prosecution. We conclude the search of the home was

unconstitutional and that the exclusionary rule bars the use of the cocaine

as evidence in criminal proceedings.

Background

Police officers found cocaine in a safe deposit box that Adams leased

from an Indianapolis bank, but a trial court later determined that the

search violated Adams's constitutional rights and suppressed the cocaine

for purposes of pending criminal charges against him.[1]

On March 23 – a day before the criminal charges were dropped – the

Indiana Department of Revenue (“the Department”) issued an assessment

pursuant to the Controlled Substance Excise Tax (“CSET”)[2] against

Defendant. The assessment included $79,548 in unpaid tax and a 100 percent

penalty, yielding a total assessment of $159,096. The drugs seized from

Defendant’s safe deposit box were the basis for the tax. Upon learning of

the assessment, Defendant filed a protest letter with the Department.

On March 31, 1998, the Department issued a tax warrant to collect on

the CSET assessment. Pursuant to the warrant, revenue officers entered

Defendant’s home on April 13. While looking for assets to satisfy the

assessment, the officers discovered cocaine hidden in a stove and in a

bedroom drawer. Marion County narcotics detectives waited outside the home

while the revenue officers searched it. When the Department’s officers

found the cocaine, the narcotics officers entered. Even though the

narcotics officers decided to seek a search warrant, the search of the home

continued unabated. In fact, the officers found more cocaine before a

search warrant was obtained.[3]

Defendant was arrested and charged with Dealing in Cocaine,[4] a Class

A felony, and Possession of Cocaine,[5] a Class C felony. Defendant filed

a motion to suppress the cocaine on the grounds that the assessment and the

tax warrant were based on the evidence illegally seized in the original

criminal case. The trial court denied the motion to suppress. Defendant

sought an interlocutory appeal, which both the trial court and the Court of

Appeals granted.

The Court of Appeals reversed the trial court, concluding that the

exclusionary rule applies to the CSET and as such the cocaine was the

“fruit of the poisonous tree” in the criminal trial. Adams v. State, 726

N.E.2d 390, 393 (Ind. Ct. App. 2000). We granted transfer. Adams v. State,

No. 49S04-0011-CR-627, 2000 Ind. LEXIS 1098 (Ind. Nov. 3, 2000). For the

reasons set forth below, we also reverse the trial court.

Discussion

Defendant contends that the revenue officers searched his residence

when they served the jeopardy tax warrant and that this search violated the

Fourth Amendment’s prohibition on unreasonable searches and seizures.[6]

The paramount concern of the Fourth Amendment[7] is the reasonableness of

the state’s intrusion into the privacy of its citizens. See Vernonia

School Dist. v. Acton, 515 U.S. 646, 652 (1995) (“As the text of the Fourth

Amendment indicates, the ultimate measure of the constitutionality of a

governmental search is ‘reasonableness.’”). Generally, a search of a home

is unreasonable unless it is conducted pursuant to a search warrant based

on probable cause. See Griffin v. Wisconsin, 438 U.S. 868, 873 (1987).

Therefore, we will first look at the Indiana CSET collection procedures to

determine whether the revenue officers entered Defendant’s home pursuant to

a warrant based on probable cause.

We begin this analysis by distinguishing between two different

chapters of the Indiana tax code. Chapter 3 of Article 7 of the tax code

imposes the CSET and sets forth procedures for its enforcement. Ind. Code

§6-7-3 (“CSET Chapter”). Chapter 5 of Article 8.1 of the tax code sets

forth the Department’s generic enforcement procedures applicable to all

taxes it collects. This includes CSET and such other taxes as the gross

income and retail sales taxes. Ind. Code §6-8.1-5 (“General Enforcement

Chapter”).

Under section 3 of the General Enforcement Chapter, the CSET’s status

as a “jeopardy assessment” allows the Department to expedite collection,

including the power to issue “jeopardy tax warrants” against the taxpayer.

Ind. Code §6-8.1-5-3. These warrants empower revenue officers to “levy on

and sell the [taxpayer’s] property” and to do so “either without or with

the assistance of the sheriffs of any counties in the state.” Id.[8]

Jeopardy tax warrants are issued by the Department unilaterally without

judicial review but typically can be issued only when the Department

concludes that the taxpayer intends to take some action that would

jeopardize the state’s ability to collect the tax. See id. However, the

CSET Chapter provides that “[a]n assessment for the tax due under [the

CSET] is considered a jeopardy assessment. The Department shall demand

immediate payment and take action to collect the tax due as provided by

Ind. Code §6-8.1-5-3.” Ind. Code §6-7-3-13. As such, the CSET Chapter

provides that assessments under the CSET are jeopardy assessments per se,

Ind. Code § 6-7-3-13, allowing the Department to skip the finding of

exigency required by section 3 of the General Enforcement Chapter, Ind.

Code § 6-8.1-5-3.

Under these statutes, then, jeopardy tax warrants under the CSET are

not issued pursuant to judicial review and are not necessarily based on

probable cause since there is no required finding of exigency. An entry of

a home pursuant to these warrants is therefore presumptively unreasonable

and the search of Defendant’s home was unconstitutional unless some

exception to the warrant rule applies.

The Supreme Court has recognized that the Fourth Amendment’s

requirement of reasonableness will allow the government to conduct some

searches in non-criminal or administrative contexts when the same search

would be invalid if conducted during a criminal investigation. For

example, the Court has carved both “administrative search”[9] and “special

needs”[10] exceptions to the warrant requirement on the basis that the

circumstances present in those contexts make a warrantless search

reasonable for Fourth Amendment purposes. Under this analysis, we must

determine whether the nature of the CSET makes an entry into a home to

collect the tax reasonable even if the revenue officers obtained only a non-

judicial jeopardy tax warrant.

The Supreme Court had the opportunity to analyze the reasonableness of

a warrantless search of a home pursuant to tax collection proceedings in

G.M. Leasing Corp. v. United States, 429 U.S. 338 (1977). The facts of

G.M. Leasing are worthy of close attention. The case involved the seizure

of several expensive automobiles to satisfy a tax assessment. Id. at 341-

43. Revenue officials found one such automobile inside a free-standing

garage near a cottage owned by the taxpayer. Id. at 344-45. Upon learning

that the taxpayer used the cottage for a business enterprise related to the

tax assessment,[11] the revenue agents seized the cottage in hopes of

finding records that would lead to more assets. Id. at 345-46. The agents

seized several sets of business records after conducting a search of the

cottage. Id. At no point in this process did the agents obtain a search

warrant, although they claimed authority to levy on the taxpayer’s property

pursuant to federal statutes.

The Supreme Court determined that the warrantless search of the

cottage was unreasonable. The Court recognized that the power to enforce

tax laws – including the power to seize assets to satisfy tax debts – was

critical to the functioning of government:

Indeed, one may readily acknowledge that the existence of the levy

power is an essential part of our self-assessment tax system and that

it enhances voluntary compliance in the collection of taxes that this

Court has described as “the lifeblood of government, and their prompt

and certain availability an imperious need.”

Id. at 350 (quoting Bull v. United States, 295 U.S. 247, 259 (1935)). But

the Court determined that general Fourth Amendment principles applied to

tax collection procedures, in part because the British abused general

warrants when collecting royal taxes during the colonial period. Id. at

355. Because the Fourth Amendment applied to tax collection, the Court

concluded that the warrant requirement should apply to levies under the

federal tax code:

The intrusion into petitioner’s office is therefore governed by the

normal Fourth Amendment rule that “except in certain carefully defined

classes of cases, a search of private property without proper consent

is ‘unreasonable’ unless it has been authorized by a valid search

warrant.”

Id. at 359 (quoting Camara v. Municipal Court, 387 U.S. 523, 528-529 (1967)

(emphasis added)).

Finding that the general warrant rule applied, the Court then rejected

the government’s contention that an exception to the rule should apply to

the IRS’s search. Specifically, the Court rejected the government’s claim

that provisions of the Internal Revenue Code authorized a warrantless entry

of a home for purposes of a tax levy and that these provisions made the

search of the cottage reasonable. The government claimed that 26 U.S.C. §

6331(b), as it then read,[12] authorized the Internal Revenue Service to

use “every means possible to deprive the taxpayer of use, enjoyment, or

title to property” including “warrantless intrusions into privacy.” G.M.

Leasing, 429 U.S. at 357. The government relied on language in the statute

that defined the IRS’s power to levy to include “the power of distraint and

seizure by any means.” The government argued that this language authorized

an administrative search of the type the Court first found permissible in

Camara v. Municipal Court, 387 U.S. 523, 531 (1967) and See v. Seattle, 387

U.S. 541 (1967).

The Court assumed for the sake of argument that the statute purported

to give the IRS power to make warrantless searches, but rejected on two

grounds the claim that such searches would be reasonable administrative

searches. First, the Court concluded that § 6331 gave the IRS excessive

discretion in determining what property to search:

The respondents recognize that one of the Court’s critical concerns in

Camara and See was the discretion of the seizing officers. Yet § 6331

clearly gives the Secretary or his delegate discretion as to what

property to seize. If more than one location is involved, the

Secretary will choose which dwelling will be invaded. If property is

to be found both in public places and in private areas, the Secretary

may choose which to seize. This hardly can be called a restraint on

discretion.

Id. at 357 (citation omitted).

Second, the Court rejected the government’s claim that a search under

the statute was reasonable because a warrant requirement would burden the

government’s ability to collect taxes in exigent circumstances:

The respondents assert that the burden on the Government of obtaining

a warrant is a relevant factor. They suggest that the burden is great

here because the Government is dealing with persons who may attempt to

put their property beyond reach. Yet the statute authorizes distraint

and seizure whenever a taxpayer neglects or refuses to pay his tax,

and regardless of any indication of risk of concealment. The statute

simply does not focus on situations involving a need for rapid action

Id. at 357 (citation omitted).[13]

After dispelling several other exceptions that the government

proposed, the Court concluded that the warrantless search of the cottage

was unreasonable and violated the Fourth Amendment.

At first blush, G.M. Leasing is distinguishable from the case before

us because the search of the cottage in that case was conducted without a

warrant. Here, the revenue officers searched Defendant’s home only after

they issued an administrative warrant under the jeopardy assessment rules

of section 3 of the General Enforcement Chapter. Ind. Code § 6-8.1-5-3.

Generally, an assessment qualifies as a jeopardy assessment under this

section if the Department determines that a taxpayer “intends to quickly

leave the state, remove his property from the state, conceal his property

in the state, or do any other act that would jeopardize the collection of

those taxes … .” This initial step addresses the concerns the G.M. Leasing

Court expressed about warrantless searches under 26 U.S.C. § 6331.

Indiana revenue officers do not enjoy the kind of unfettered

discretion present in G.M. Leasing because the Department may issue

jeopardy assessments only under statutorily prescribed circumstances.

These statutory standards relate directly to exigent circumstances and

ensure that a jeopardy assessment will be made only when the taxpayer

“intends to quickly leave the state, remove his property from the state,

conceal his property in the state, or do any other act that would

jeopardize the collection of those taxes … .” Ind. Code § 6-8.1-5-3.

Because the jeopardy warrant provisions of section 3 of the General

Enforcement Chapter, Ind. Code 6-8.1-5-3, address the concerns of the G.M.

Leasing Court, we hold that a search of a home pursuant to a jeopardy

warrant under section 3 provision will generally be reasonable for Fourth

Amendment purposes.

A close look at the CSET collection proceedings shows, however, that

the protections generally inherent in Indiana’s assessment scheme are not

present when revenue officers search a home under the CSET. As previously

mentioned, section 13 of the CSET Chapter, Ind. Code § 6-7-3-13, states

that all CSET assessments are jeopardy assessments, and as jeopardy

assessments the Department is empowered to issue jeopardy warrants to

collect them. Therefore, once the Department makes a CSET assessment,

revenue officers enjoy carte blanche to issue jeopardy warrants and levy on

private premises. Section 13 of the CSET Chapter essentially states that

CSET assessments create a per se exigent circumstance and grants revenue

officers complete discretion to enter the taxpayer’s home.

We therefore conclude that both of the factors that led the G.M.

Leasing Court to conclude that a search of a home under 26 U.S.C. § 6331

was unreasonable are present in searches of homes conducted pursuant to

jeopardy tax warrants issued to collect Indiana CSET assessments. First,

in both instances officers have boundless discretion to intrude upon the

privacy of the home. Because section 13 of the CSET Chapter states that

all CSET assessments are jeopardy assessments, Ind. Code § 6-7-3-13, the

only limit placed on revenue officers’ ability to search homes is the

requirement that they fill out their own warrant. See Ind. Code § 6-8.1-5-

3 (“the department may issue … a jeopardy tax warrant .. .”). Second, G.M.

Leasing determined that the exigency of the circumstances did not justify a

warrantless entry into the cottage. The search of Defendant’s home was

based on even less exigency. In G.M. Leasing, the taxpayer whose conduct

initiated the seizures was a fugitive. The IRS knew that his family

members were attempting to hide assets and were alone with documents inside

the cottage. There is nothing in the present record to suggest that

Defendant was about to abscond, hide assets, or destroy documents. In

fact, the record shows that Defendant was arrested when he returned to his

apartment during the search. This lack of evidence as to the exigency of

the circumstances is due at least in part to the fact that the Department

was not required to establish exigency under the CSET collection

procedures. Because of the similarities between this case and G.M.

Leasing, we conclude that the search of Defendant’s home under Indiana Code

§§ 6-7-3-13 and 6-8.1-5-3 was unreasonable for the same reasons that the

search of the taxpayer’s cottage under 26 U.S.C. § 6331 was unreasonable in

G.M. Leasing.

G.M. Leasing – which was a civil case – only addressed the

constitutionality of the search and did not determine whether the records

would have to be suppressed during a subsequent criminal prosecution. 429

U.S. at 359.[14] However, under normal Fourth Amendment principles,

evidence obtained in the course of an illegal search is not admissible in a

subsequent criminal proceeding. See, e.g., Mapp v. Ohio, 367 U.S. 643

(1961), Wong Sun v. United States, 371 U.S. 471 (1963). For example,

When applied, the [fruit of the poisonous tree] doctrine operates to

bar not only evidence directly obtained, but also evidence

derivatively gained as a result of information learned or leads

obtained during an unlawful search or seizure. To invoke the doctrine,

a defendant must show that challenged evidence was obtained by the

State in violation of the defendant’s Fourth Amendment rights.

State v. Farber, 677 N.E.2d 1111, 1114 (Ind. Ct. App. 1997) (Rucker, J.),

transfer denied. We believe that that the Supreme Court’s statements in

G.M. Leasing that “[t]he suppression issue, as to the books and records,

obviously is premature and may be considered if and when proceedings arise

in which the Government seeks to use the documents or information obtained

from them” is simply a statement of the Court’s limited jurisdiction given

the posture of that case, and was not intended to call into question the

elementary application of the principles of Mapp or Wong Sun. See State v.

Hinchey, 374 N.W.2d 14 (Neb. 1985) (relying on G.M. Leasing to exclude

evidence in a criminal case). We therefore hold that the trial court

should have suppressed evidence stemming from the search of Defendant’s

home under the jeopardy tax warrant.[15]

The Court of Appeals concluded that the fruit of poisonous tree

doctrine would preclude the State from introducing evidence obtained in the

CSET search. See Adams v. State, 726 N.E.2d 390, 393 (Ind. Ct. App. 2000).

It reached this conclusion because it determined that the exclusionary

rule applied to the CSET. See id.[16] However, the exclusionary rule’s

application to the CSET does not affect the suppression of evidence in

Defendant’s criminal trial. See Mapp v. Ohio, 367 U.S. 643 (1961). In a

criminal trial, evidence must be suppressed if it stems from an

unconstitutional search. Therefore, our analysis is focused on whether the

search of Defendant’s home was unconstitutional. Having found it so, we

conclude that the fruits of this search must be suppressed at Defendant’s

trial.

Our holding that the search of Defendant’s home was unreasonable is a

limited one. In this case, government officers intruded upon the privacy

of a home. Our conclusion that this intrusion was unreasonable does not

affect the Department’s ability to seize assets found in less private

contexts. In fact, G.M. Leasing endorsed the government’s power to

institute tax liens, seize assets found in public places, and take other

basic measures to collect taxes so long as they do not involve warrantless

intrusions into the home.[17] Moreover, our holding does not affect the

Department’s ability to collect taxes under the General Enforcement Chapter

using jeopardy assessments and jeopardy warrants in most circumstances.

The jeopardy warrant procedures both cabin revenue officers’ discretion and

provide that such warrants will not be issued except in exigent

circumstances. We conclude today that execution of jeopardy warrants based

only on a statutory declaration in the CSET Chapter that the CSET is a

jeopardy assessment is unreasonable. This conclusion does not impinge on

the general functioning of jeopardy warrants based on a finding of

exigency.

Conclusion

Having previously granted transfer, we now reverse the decision of

the trial court.

SHEPARD, C.J., and DICKSON, BOEHM, and RUCKER, JJ., concur.

-----------------------

[1] We set forth additional facts in the companion case issued today,

Dep’t. of Revenue v. Adams, No. 49S10-0011-TA-628 (Ind. Feb. 8, 2002).

[2] The CSET is a tax on the possession of certain narcotics. We discuss

the tax and the procedures for collecting it in greater detail infra.

[3] All of the cocaine at issue in this case was discovered prior to the

time the police served a valid search warrant.

[4] Ind. Code § 35-48-4-1 (1998).

[5] Id. § 35-48-4-6.

[6] United States Supreme Court precedent makes clear that the revenue

officers’ entry of Adam’s home to collect the CSET assessment was a search.

See G. M. Leasing Corp. v. United States, 429 U.S. 338 (1977) (holding

that revenue officers conducted a search when they entered a cottage and

seized records when levying on delinquent tax). Cf. Thomas v. Indiana

Dept. of State Revenue, 675 N.E.2d 362, 367 (Ind. Tax Ct. 1997).

[7] The Fourth Amendment to the federal constitution states that:

The right of the people to be secure in their persons, houses, papers,

and effects, against unreasonable searches and seizures, shall not be

violated, and no Warrants shall issue, but upon probable cause,

supported by Oath or affirmation, and particularly describing the

place to be searched, and the persons or things to be seized.

Adams does not raise any independent claims under the analogous provision

of the Indiana Constitution found in Article 1, § 11.

[8] We will assume for the sake of argument that this language purports to

give revenue officers the power to enter a home under a jeopardy tax

warrant.

[9] Administrative searches are reasonable because they are “carried out

pursuant to a regulation that itself satisfies the Fourth Amendment’s

reasonableness requirement.” Griffin v. Wisconsin, 483 U.S. 868, 873

(1987). These administrative searches may be conducted without a warrant

under three criteria: 1) “there must be a ‘substantial’ government interest

that informs the regulatory scheme pursuant to which the inspection is

made”; 2) “the warrantless inspections must be ‘necessary to further [the]

regulatory scheme’”; and 3) “‘the statute’s inspection program, in terms of

the certainty and regularity of its application, [must] provid[e] a

constitutionally adequate substitute for a warrant.’” New York v. Burger,

482 U.S. 691, 703 (1987) (quoting Donovan v. Dewey, 452 U.S. 594, 600-02

(1981)).

[10] The special needs of government may justify a warrantless,

suspicionless search “where the privacy interests implicated by the search

are minimal, and where an important governmental interest furthered by the

intrusion would be placed in jeopardy by a requirement of individualized

suspicion.” Skinner v. Railway Labor Executives’ Association, 489 U.S. 602,

624 (1989).

[11] The cottage was also used as a residence by the taxpayer’s son, who

became an intervenor in the tax collection suit. Id. at 347.

[12] At the time of the search, 26 U.S.C. § 6331 provided:

(a) Authority of Secretary.

If any person liable to pay any tax neglects or refuses to pay the

same within 10 days after notice and demand, it shall be lawful for

the Secretary to collect such tax (and such further sum as shall be

sufficient to cover the expenses of the levy) by levy upon all

property and rights to property (except such property as is exempt

under section 6334) belonging to such person or on which there is a

lien provided in this chapter for the payment of such tax. ... If the

Secretary makes a finding that the collection of such tax is in

jeopardy, notice and demand for immediate payment of such tax may be

made by the Secretary or his delegate and, upon failure or refusal to

pay such tax, collection thereof by levy shall be lawful without

regard to the 10-day period provided in this section.

(b) Seizure and sale of property.

The term ‘levy’ as used in this title includes the power of distraint

and seizure by any means. … A levy shall extend only to property

possessed and obligations existing at the time thereof. In any case in

which the Secretary or his delegate may levy upon property or rights

to property, he may seize and sell such property or rights to property

(whether real or personal, tangible or intangible).

[13] The government did not rely on a separate part of 26 U.S.C. § 6331

which authorized expedited jeopardy assessments much like those at issue

here. However, the Court later rejected the government’s argument that

exigent circumstances justified the warrantless search. Id. at 358-59.

[14] In refusing to address this issue, the Court cited two cases that held

that the issue of whether evidence seized in tax collections could be used

in a subsequent criminal prosecution was not ripe for adjudication in a

civil action concerning the tax. See id. (citing Meister v. United States,

397 F.2d 268 (3d Cir. 1968), and Hill v. United States, 346 F.2d 175 (9th

Cir. 1965), cert denied).

[15] The State argues that the cocaine could be introduced under good faith

exception to the exclusionary rule found in Indiana Code § 35-37-4-5 and

United States v. Leon, 468 U.S. 897 (1984). However, both the statute and

Leon require that the warrant on which the government relies to be reviewed

by a neutral and detached magistrate. As we discussed supra, the search

was conducted pursuant to a tax warrant that was never reviewed by a judge.

[16] We address this argument – and come to the opposite conclusion – in

the companion case, Dep’t. of Revenue v. Adams, 49S10-0011-TA-628.

[17] The G.M. Leasing Court was only concerned with the intrusion into the

privacy of the cottage, and not the actual levies on property. It

acknowledged that the government could seize property without obtaining a

warrant. Id. at 354. That is to say,

While the Government is indeed authorized to effect a seizure of

property without obtaining court authorization, it can not

constitutionally enter private premises to search for property subject

to such a seizure without a prior judicial determination that such an

intrusion is justified. The G.M. Leasing decision was grounded on the

need to protect the reasonable expectations of privacy of the

occupants of the premises. Thus, a tax seizure may still be effected

without judicial intervention if the property to be seized is found in

a public place. But, under G.M. Leasing, if it is necessary for the

Government to enter private premises to effect the seizure, it must

first obtain a court order authorizing such entry.

Matter of Campbell, 761 F.2d 1181 (6th Cir. 1985). See also United States

v. Shriver, 645 F.2d 221, 222 (4th Cir. 1981) (“The warrant requirement,

however, has to do with entry upon private property and nothing at all to

do with the reasonableness or possible unreasonableness of a contemplated

levy upon private property in aid of tax collection.”).