The Internal Revenue Service has broad powers to collect unpaid taxes. In order to locate a delinquent taxpayer's assets, the IRS can issue summonses seeking records relating to the delinquent taxpayer's financial accounts, as well as accounts held by third parties with whom the delinquent taxpayer has done business. Over the years, courts have split over whether such third parties are entitled to notice that the IRS has summoned their financial records.

In Polselli v. Internal Revenue Service, 143 S. Ct. 1231 (May 18, 2023), the U.S. Supreme Court unanimously refused to limit the IRS's ability to issue summonses without notice to situations in which it seeks records of accounts in which a delinquent taxpayer has an interest. While the IRS prevailed on the narrow question presented in Polselli, both the unanimous opinion drafted by Chief Justice Roberts and a concurring opinion drafted by Justice Ketanji Brown Jackson make clear that the IRS's authority to summon records of financial accounts belonging to individuals other than a delinquent taxpayer without notice to the affected account holder is not unconstrained. This column discusses the court's decision in Polselli, Justice Jackson's concurring opinion, and the potential for future challenges to the IRS's issuance of summonses without notice.

Background

Title 26 U.S. Code Section 7609(a) sets forth the general rule that "any person" identified in an IRS summons issued to a third-party recordkeeper must receive notice and an opportunity to challenge the summons. Section 7609(c)(2) provides exceptions to the notice requirement and specifies that notice is not required where a summons is "(D) issued in aid of the collection of" either "(i) an assessment made or judgment rendered against the person with respect to whose liability the summons is issued" or "(ii) the liability … of any transferee or fiduciary" of such person.