First authorized by the Supreme Court in United States v. Bisceglia, 420 U.S. 141 (1975), and subsequently codified by Congress at §7609(f) of the Internal Revenue Code, John Doe summonses have long been a powerful tool in the IRS's arsenal to combat tax fraud schemes. These summonses enable the IRS to seek data on a class of otherwise unidentified persons (e.g., customers of a specific bank) where it can articulate a reasonable basis to believe that individuals within that class have failed to comply with their tax obligations.

As this column has recounted, in recent years the IRS has expanded its use of John Doe summonses to investigate tax evasion through cryptocurrency and even to help foreign governments identify individuals using credit cards issued in the United States to evade their tax obligations to their home countries. See Jeremy H. Temkin, Tax Enforcement, John Doe Summonses and Digital Currency, N.Y.L.J. (Jan. 19, 2017); Jeremy H. Temkin, Closed for Business: Shutting Down the U.S. as an Offshore Tax Haven, N.Y.L.J. (May 19, 2019). While practitioners should anticipate the IRS will continue to accelerate its use of John Doe summonses, a recent decision by the U.S. District Court for the Western District of Texas demonstrates some of the obstacles recipients of such summonses face in attempting to avoid compliance.

On the other hand, an opinion earlier this year by the U.S. Court of Appeals for the Sixth Circuit highlights how IRS agents can run afoul of the procedural requirements for obtaining a John Doe summons and, more recently, Congress imposed an additional factual element for the IRS to establish before district courts can authorize the issuance of such a summons.

Taylor Lohmeyer

In October 2018, the IRS sought and obtained leave to serve a John Doe summons on Dallas-based Taylor Lohmeyer Law Firm PLLC, seeking names and other information relating to the firm's clients between 1995 and 2017. The application was predicated on evidence, developed through an audit, that the firm had assisted one of its clients (Taxpayer-1) in establishing offshore accounts and structures used to evade tax obligations. Based on an ex parte affidavit submitted by an IRS agent, the district court authorized service of the summons, finding that (1) it related to an "ascertainable group or class of persons"; (2) there was "a reasonable basis for believing that … [the] group or class of persons … may have failed to comply with any provision of" the Internal Revenue Code; and (3) the information sought was "not readily available from other sources."