Supreme Court Upholds IRS Authority To Issue Summons In Specific Collection Cases

Last week, the U.S. Supreme Court unanimously ruled in favor of the IRS, upholding the agency’s authority to issue summons without prior notice in some situations. Although this authority is limited to specific collection cases, it sets a precedent for IRS power in specific tax cases.

IRS Obligation To Provide Summons Notice

According to IRC §7609(a)(1) and IRC §7609(c)(2)(D), the IRS is obligated to provide advance notice to taxpayers who are identified in a summons, with exceptions for summonses that are issued in aid of collection. The Supreme Court indicated in their statement that “the IRS may issue summonses both to determine whether a taxpayer owes money and later to collect any outstanding liability. When the IRS conducts an investigation for the purpose of “determining the liability” of a taxpayer, §7602(a), it must provide notice, §7609(a)(1). But once the Service has reached the stage of “collecting any such liability,” §7602(a) — which is a distinct activity — notice may not be required, §7609(c)(2)(D).”

Polselli v IRS

Polselli v IRS was heard before the Supreme Court and examined whether the exception to the summons notice requirements applied when the delinquent taxpayers no longer possesses any legal interest in the accounts or records that were subject to summons, as was the case with Mr. Polselli.
Chief Justice Roberts noted that a “straightforward reading of the statutory text supplies a ready answer: The notice exception does not contain such a limitation.” The Court’s opinion further noted that Congress once had the opportunity to add a provision to the Tax Code in these types of circumstances, but chose not to.

Supreme Court Rules In Favor Of the IRS

The petitioner provided multiple arguments in favor of the Tax Code exceptions, including that the provision was designed to safeguard the privacy of the taxpayer. They also argued that an absence of summons notice raises privacy concerns. However, the Court interpreted a straightforward reading of the law and upheld the scope and authority of the IRS to issue summonses in accordance with Tax Code, concluding that Poliselli v IRS was not the right case to use to challenge the authority of the IRS in this area.

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