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Part 25. Special Topics

Chapter 5. Summons Handbook

Section 6. Summonses on Third-Party Witnesses

25.5.6  Summonses on Third-Party Witnesses

25.5.6.1  (04-30-1999)
Overview

  1. This section contains the following topics:

    • General

    • Definitions

    • Statutory Requirements for Third-Party Summons

    • Exceptions to Notice Requirements

    • Procedures for Notice, Petition to Quash the Summons, and Compliance or Enforcement

    • Banks

    • Summonses for Foreign Records of Corporate Slush Funds

    • Records of Foreign Companies

    • Software Trade Secret Protection under IRC 7612

25.5.6.2  (10-04-2006)
General

  1. Prior to the changes enacted in the Restructuring and Reform Act of 1998 (RRA 98), IRC 7609 required the Service to follow certain notification and waiting period procedures for summonses served on third-party recordkeepers (i.e., banks, attorneys, accountants and specified others) which did not apply to summonses served on other third-party witnesses. Specifically, the Service was required to notify the taxpayer and any other person identified in the description of the records that the summons had been served. Thereafter, the Service was required to wait at least 23 full days before it could receive the summoned documents or initiate enforcement procedures. Significantly, the Service was not required to follow these procedures for any other summoned third party, i.e., it was not necessary to notify other persons of service, nor was it necessary to delay receipt of the summoned documents. (Although the Service could not require a summoned third party (not a third-party recordkeeper) to produce documents sooner than 10 days from the date of service, the Service could receive them if they were voluntarily provided.) RRA 98 significantly enlarged the group of third-party summonses for which the Service is required to notify other persons of service and to wait 23 full days before receiving documents or initiating enforcement procedures. Specifically, the Service must now follow the notice and waiting period requirements described below for all third-party summonses (except for five particular types described in IRC 7609(c)(2)(B)-(F) and discussed at subsection 6.5 of this handbook):

    1. The Service must give notice to the taxpayer identified in the heading of the summons and any other person identified in the description of summoned records.

    2. The date for compliance of the summoned party is no sooner than 23 full days after the date notice is given to the taxpayer and any other person entitled to notice.

    3. The summoned party cannot comply at an earlier time. The records cannot be accepted until the 24th day after the date of notice and only if no person entitled to notice brought a timely proceeding to quash.

  2. A third party need only produce a summoned document if it is in his or her possession, custody, or care and if the summons complies with all legal requirements. The witness may claim his or her individual right against self-incrimination. Persons summoned who conceal records and falsely state that they have been stolen may be prosecuted under 18 USC 1001 (false statements) and 18 USC 1503 (obstructing justice).

  3. If the summons was served on a third-party witness, the taxpayer and any other person entitled to notice can bring a proceeding to quash the summons (subject to the exceptions discussed in IRM 25.5.6.5). In that proceeding, the taxpayer (or other noticee) can attack the validity of the summons or assert privileges against disclosure.

  4. The 10 day waiting period provided by IRC 7605(a) still applies to those narrow categories of third-party summonses (described in IRM 25.5.6.5) that are excepted from the notice requirements and 23-day waiting period required by IRC 7609(a)(1). The 10 day waiting period is for the benefit of the person to whom the summons is directed. The taxpayer has no standing to object to a waiver of this provision.

25.5.6.3  (04-30-1999)
Definitions

  1. The following definitions pertain to summonses served on third-party witnesses.

25.5.6.3.1  (04-30-1999)
Summons Subject to IRC 7609 Third-Party Notice and Waiting Period Requirements

  1. Summons Subject to IRC 7609 third-party requirements:

    1. is an administrative summons issued under IRC 7602 or under 6420(e)(2), 6421(g)(2), 6427(j)(2), and 7612,

    2. that requires testimony on or relating to the taxpayer or other noticee, or

    3. the production of any portion of records made or kept on or relating to any person who is identified in the summons (other than the summoned third party), or

    4. the production of any computer software source code with respect to the taxpayer or other noticee (defined in IRC 7612(d)(2)).

25.5.6.3.1.1  (10-04-2006)
Identifying Third-Party Summonses

  1. With the enactment of RRA 98, the notice procedures now apply to almost all third-party summonses. Therefore, the Service must accurately distinguish third-party summonses from those served on a taxpayer. In most situations, this distinction is obvious. However, it is less obvious in at least two circumstances: those involving married couples who file joint returns and those involving employees or corporate officers who are summoned in that capacity (see below).

25.5.6.3.1.2  (10-04-2006)
Summons Served on a Married Person who Filed a Joint Return

  1. When the Service is investigating a married couple for periods for which they filed joint returns and the IRS employee must summon information from one of the married taxpayers, the Service must treat such a summons as a third-party summons and give notice to the other spouse.

  2. If only one spouse is summoned, the other spouse is entitled to notice under IRC 7609(a) as a person identified in the summons. Even when both spouses are summoned (by issuing and serving separate summonses), each spouse is entitled to notice of the other's summons. This procedure preserves each spouse's opportunity to move to quash the summons served on his or her spouse.

    Note:

    Summonses are treated and drafted differently when they are served to investigate the separate liabilities of married persons who failed to file a return for a year being investigated (i.e., a delinquent return investigation). They should not be captioned in the names of both the Taxpayer-Husband and Taxpayer-Wife because the married couple did not file a joint return. Instead, separate summonses should be issued for each person, and they should be captioned "In the matter of Taxpayer-Husband" and "In the matter of Taxpayer-Wife" , respectively

    Moreover, these summonses are not third-party summonses if they are directed to the taxpayer identified in the caption of the summons. Thus, a summons captioned "In the matter of Taxpayer-Wife " and directed to the Taxpayer-Wife is not a third-party summons, and no notice should be given to the Taxpayer-Husband , even if he is identified in the description of summoned records.

25.5.6.3.1.3  (10-04-2006)
Summons Served on an Officer or Employee of a Business

  1. When the Service is investigating a business (such as a corporation, partnership, or sole proprietorship) and summonses officers or employees of the taxpayer-business in their capacity as officers or employees, those summonses are excepted from the third-party summons procedures by IRC 7609(c)(2)(A). Therefore, the 23 day waiting period and the notice requirement of section 7609(a) do not apply to such summonses.

25.5.6.3.2  (04-30-1999)
Third-Party Recordkeeper

  1. Third-party recordkeeper The term means:

    1. any mutual savings bank, cooperative bank, domestic building and loan association, or other savings institution chartered and supervised as a savings and loan or similar association under Federal or State law, any bank (as defined in IRC 581), or any credit union (within the meaning of section 501(c)(14)(A));

    2. consumer reporting agency (as defined under section 603(f) of the Fair Credit Reporting Act (15 USC 1681a(F)));

    3. any person extending credit through the use of credit cards or similar devices;

    4. any broker (as defined in section 3(a)(4) of the Securities Exchange Act of 1934 (15 USC 78c(a)(4)));

    5. any accountant;

    6. any attorney;

    7. any barter exchange (as defined in IRC 6045(c)(3));

    8. regulated investment company (as defined in IRC 851) and any agent of such regulated investment company when acting as an agent thereof,

    9. any enrolled agent, and

    10. any owner or developer of a computer software source code (as defined in IRC 7612(d)(2)), but only if the summons requires the production of the source code or the program and data described in IRC 7612(b)(1)(A)(ii) to which the source code relates.

    Note:

    Prior to the changes enacted in RRA 98, the definition of a third-party recordkeeper signified a unique class of summonses for which the Service followed special notice and waiting period requirements. As stated throughout this chapter, RRA 98 requires the Service to follow these procedures with all third-party summonses, except for those enumerated in IRC 7609(c)(2). Now, the third-party recordkeeper definition signifies a unique class of summonses that may be served by certified or registered mail. It also identifies the only group of third-party summonses for which a Special Agent must observe the notice and waiting period requirements of IRC 7609(a).

25.5.6.3.2.1  (10-04-2006)
Service on a Third-Party Recordkeeper

  1. As stated above, third-party recordkeepers can now receive service of the summons by registered or certified mail pursuant to IRC 7603(b), as well as by delivery in hand and the other traditional methods of service permitted by IRC 7603(a) and discussed in IRM 25.5.3.

    Note:

    Do not use Summons Form 2039 with a revision date prior to 12-2001.

  2. If it is unclear as to whether a summoned party falls within the definition of third-party recordkeeper, seek the advice of Associate Area Counsel.

25.5.6.3.3  (04-30-1999)
Records

  1. Records - This term includes books, papers, or other data. The concept of records has been broadly construed to include an executable copy of a commercial tax software program used to prepare returns. However, a summons for a computer software source code cannot be issued unless certain conditions set forth in IRC 7612 are satisfied.

  2. Examples of third-party records are:

    1. employer records;

    2. corporate records;

    3. hospital records, excluding nature of illness;

    4. telegraph records;

    5. partnership records; and

    6. records of an unincorporated labor union concerning transactions of its officers.

    The dissolution of a corporation will not relieve its officers of the duty of producing its existing records within their control.

25.5.6.3.4  (10-04-2006)
John Doe Summons

  1. John Doe Summons - This is any summons that does not identify the taxpayer being investigated. For further information about John Doe summonses see IRM 25.5.7.

25.5.6.3.5  (04-30-1999)
Numbered Bank Account

  1. Numbered bank account - An account with a bank or similar financial institution through which a person may authorize transactions solely through the use of a number, symbol, code name or similar arrangement not involving disclosure of the account owner’s identity.

25.5.6.3.6  (10-04-2006)
Proceeding to Quash

  1. Proceeding to quash - A civil action begun in the appropriate U.S. District Court to prevent compliance by a summoned third-party witness.

25.5.6.3.7  (04-30-1999)
Intervention

  1. Intervention - The act of a person, who is not originally a party to a summons proceeding, becoming a party in order to protect his or her interests. Under IRC 7609(b)(1), any person who is entitled to notice of a third-party summons (i.e. a noticee) may intervene in any proceeding brought by the Government to enforce that summons. Also, under IRC 7609(b)(2)(C), the summoned third party has the right to intervene in any proceeding brought by a noticee to quash the summons.

25.5.6.3.8  (10-04-2006)
Noticee

  1. Noticee - The persons entitled to notice of a third-party summons are the taxpayer identified in the heading of the summons and every person identified in the description of summoned records. The taxpayer identified in the caption of the summons is always a noticee, even though his name may not appear in the description of summoned records. A noticee has the right to be given notice of the summons, to intervene in a summons enforcement proceeding, and to bring a proceeding to quash the summons.

    Note:

    Where a summons is served on a bank for account records and the IRS agent or officer knows before serving the summons that an account is styled in the names of more than one person, then each person should be named in the description of summoned records and should receive notice. For example, if the agent or officer knows that bank accounts are listed in the joint names of husband and wife, then both the husband and wife should be identified in the description of summoned records and both should be given separate notice, even if they reside at the same address. When records of a partnership are requested in the description of summoned records, notice to one general partner is sufficient.

25.5.6.3.9  (04-30-1999)
Date of Service of Notice

  1. Date of service of notice - The date on which the notice is placed in the mail or delivered personally.

25.5.6.4  (10-04-2006)
Statutory Requirements for Third-Party Summonses

  1. In general, IRC 7609 provides that:

    1. the taxpayer and every person identified in the description of summoned records must be notified if a summons has been served on a third party, unless the summons is subject to the exceptions listed in 7609(c)(2).

    2. any person who has the right to notice must file a timely petition to quash the summons in the appropriate U.S. District Court if he or she wishes to prevent the summoned third-party witness from complying with the summons (see IRM 25.5.6.6.2 for rules regarding timeliness);

    3. notice is not required when the Service first obtains a court order based on allegations that reasonable cause exists to believe notice may lead to material interference with the investigation or examination;

    4. the filing of a petition to quash the summons by the taxpayer or his or her agent suspends the running of the statute of limitations for assessment and criminal prosecution during the period when a court proceeding and appeals related thereto are pending;

    5. a dispute between a summoned third party and the IRS that is not resolved within 6 months after the service of a summons suspends the statutes of limitation on assessment and criminal prosecution until the final resolution of the summoned person's response; and

    6. a John Doe summons can only be served pursuant to a court order.

25.5.6.4.1  (10-04-2006)
Procedures for Summonses Issued to Investigate Liabilities for the Trust Fund Recover Penalty

  1. With the enactment of RRA 98, the notice procedures of IRC. 7609(a) now apply to third-party summonses issued to investigate persons who may be responsible for the trust fund recovery penalty (TFRP).

  2. When investigating the persons who may be responsible for the TFRP, the Service often summonses a bank (or other third party) to obtain records of the corporation's accounts. In many cases, the Service knows of several corporate officers or employees who may be responsible for the penalty. In such cases, the Service should issue a separate summons for each potentially responsible person and should follow the notice and waiting period requirements of IRC. 7609(a). (The bank need only provide one set of documents for multiple summonses with identical document requests. (See IRM 25.5.6.4.1(5).) Each such summons should only have one potentially responsible person's name typed in the heading.

    Note:

    The Service should not list the names of all of the potentially responsible persons in the heading of one summons. Doing so could raise disclosure problems because each potentially responsible person received the IRC. 7609(a) notice of the summons form showing all of their names. The potentially responsible persons may not have a sufficient transactional relationship with each other (concerning their TFRP liability) to overcome the IRC. 6103 prohibition against disclosure of return information. Redactions cannot cure this problem because the employee serving the summons must certify that the notice copies are true and correct copies of the original. A redacted copy will not satisfy this requirement. Therefore the Service must issue a separate summons for each potentially responsible person whom it investigates.

  3. The potentially responsible person should be identified in the heading of the summons by name and by his or her capacity as an employee or officer of the corporation. For example, where two potentially responsible persons (an officer and an employee) have been identified, two summonses would be issued. A summons investigating the liability of John Smith, president of Corporation XYZ, Inc. would be captioned as "In the matter of John Smith, President of Corporation XYZ, Inc." . A separate summons concerning the liability of an employee, John Smith, Jr., would be captioned"In the matter of John Smith , Jr., Employee of Corporation XYZ, Inc. " (Because the corporate name is identified in the heading of the summons, the corporation is a noticee as well as the individual named in the heading.)

  4. ) In many situations, the Service will know the identity of many potentially responsible persons but perhaps not all. For example, Corporation A has failed to pay its employment taxes for several past quarters and there are five potentially responsible persons. If the Service knows the identity of four of the five potentially responsible persons the Service will serve four summonses on the bank even though one of the summonses seeks the production of all of the documents the Service requires for all four investigations. As a matter of law, IRC. 7609 does not require the Service to serve all four summonses; however, the Service will serve all four as a matter of practice. To do otherwise would vitiate a taxpayer's opportunity to seek to quash a third-party summons that the Service issued to investigate his or her liability. Such a practice is inconsistent with Congressional intent (as expressed in RRA 98) to broaden the taxpayer's access to judicial review of third-party summonses. However, the Service need not later serve on the bank a summons that names the fifth person unless more records are required to determine that person's liability.

  5. When serving multiple, identical summonses on a bank (or other third party) to investigate the persons potentially liable for the TFRP, inform the summoned person that the Service need only receive one copy of the summoned information. See Exhibit 25.5.6-2 for sample language for a cover letter to accompany summonses in this situation.

25.5.6.5  (10-04-2006)
Exceptions to Notice Requirements

  1. There is no IRC 7609 notice requirement in the following instances:

    1. service of a"John Doe" summons;

    2. the summoned witness is the taxpayer, officer or employee of the taxpayer;

    3. each person entitled to notice gives up this right by executing a waiver;

    4. the summons is served to determine whether records of the business transactions or affairs of an identified person have been made or kept;

    5. the summons is issued in aid of the collection of an assessment made or judgment rendered against the person regarding whose liability the summons is issued, or the liability at law or in equity of any transferee or fiduciary of the taxpayer (see IRM 25.5.6.5.1 for more detailed information);

      Note:

      Notice under IRC 7609(a) is required for third-party summonses issued for Delinquent Return Investigations (DEL RET), for records to establish the liability for the trust fund recovery penalty, or for any other investigation where no liability has been assessed. Notification is not required for third-party summonses issued for Balance Due Accounts (BAL DUE) or any other investigation where an assessed liability exists against the taxpayer identified in the heading of the summons.

    6. summonses issued by a criminal investigator to a third party who is not a third-party recordkeeper.

    7. summonses issued solely to determine the identity of a person having a numbered bank account (see IRM 25.5.6.3.5)

  2. Summonses issued pursuant to a court order:

    1. Notice shall not be required if, upon petition by the Service, the district court determines reasonable cause exists to believe that giving notice may lead to attempts to conceal, destroy, or alter records relevant to the examination; to prevent the communication of information from other persons through intimidation, bribery, or collusion; or to flee to avoid prosecution, testifying, or production of records. The petition must be filed before issuing the summons, in the United States district court for the area within which the person summoned resides or is found.

    2. In the hearings required under (a) above, as well as those referred to in this Handbook regarding John Doe Summonses, the determination shall be made ex parte based solely upon the Government's petition and supporting affidavits. An order denying the petition is deemed a final order which may be appealed.

    3. Forward requests for court orders to the Associate Area Counsel for processing. Include in the memorandum a request that the person(s) to be summoned refrain from notifying the taxpayer, or other person to whom the records or testimony pertain, of the summons.

    4. Advise the summoned third party that, pursuant to a court order, the taxpayer and anyone else identified in the court order are not to be notified of the summons and, if appropriate, that notifying them could subject the person summoned to a contempt citation.

25.5.6.5.1  (10-04-2006)
Scope of the Exception For Summonses Issued in Aid of Collection

  1. IRC 7609(c)(2)(D)(i) and (ii) provide exceptions from the notice requirement of section 7609(a) for two different categories of collection summonses. The first category is codified in section 7609(c)(2)(D)(i), which provides an exception for summonses issued to aid in collecting an assessment made or a judgment rendered "against the person with respect to whose liability the summons is issued." That phrase refers to the taxpayer identified in the heading of the summons as the person being investigated. If the Service does not have an assessed liability against that taxpayer, then it cannot use the collection exception for any third-party summons it issues in that investigation. As a result of this rule, the Service must give notice under section 7609(a) when serving a summons on a third party to investigate the liability of those persons who are potentially responsible for the trust fund recovery penalty because those taxpayers' liabilities are not yet assessed. The Service cannot rely on the assessment against the corporation to satisfy the collection exception for these summonses, nor may it caption such summonses as issued "In the matter of the Corporation-Taxpayer." These summonses must be captioned as in the matter of the individuals being investigated as potentially responsible persons. See IRM 25.5.6.4.1 for detailed instructions for preparing a summons in a TFRP investigation.

    Note:

    A fraudulent conveyance investigation or a nominee lien investigation will not result in a new, separate assessment against a person other than the taxpayer whose liability the Service is trying to collect. Thus, summonses issued to pursue fraudulent conveyance or nominee lien investigations are excepted from the notice requirement by section 7609(c)(2)(D)(i) so long as the Service has assessed against the taxpayer the liabilities it seeks to collect.

  2. The second category of collection summonses is described in section 7609(c)(2)(D)(ii), which provides an exception for summonses issued to aid in collecting the liability at law or in equity of any transferee or fiduciary of a taxpayer against whom the Service has made an assessment or obtained a judgment. The scope of this exception is limited to summonses issued to collect a transferee (or fiduciary) liability that has been assessed pursuant to IRC. 6901 or otherwise finally determined by a judgment. It does not apply to summonses issued to determine whether a taxpayer is liable as a transferee.

25.5.6.5.2  (10-04-2006)
Sharing Information Obtained by a Collection Summons With IRS Personnel Conducting Examinations or Criminal Investigations

  1. At times, the Service may be pursuing a civil examination or a criminal investigation of a taxpayer's unassessed liabilities while it is also pursuing (or has finished pursuing) collection actions against the same taxpayer for assessed liabilities. In these circumstances, the Service's collection functions may have obtained information by a collection summons that was excepted by IRC 7609(c)(2)(D) from the notice requirement of section 7609(a). In general, the Service may share the information gathered pursuant to an excepted collection summons with examiners and criminal investigators, even though the examiners and criminal investigators would have had to give notice of the summons had they issued it. However, as explained in the scenarios discussed below, the Service must not engage in any subterfuge by having collection personnel summon information that is only needed for the examination or criminal investigation. The collection employee must act in good faith and must have a legitimate collection purpose for summoning the information.

  2. In the first scenario, a special agent is conducting a criminal investigation and is working with a cooperating revenue officer. Under these circumstances, the special agent should issue any third-party summons and give notice as required by IRC 7609(a) (unless the special agent's summons is not served on a third-party recordkeeper and is thus excepted from the notice requirement by IRC 7609(c)(2)(E)). To do otherwise would constitute an attempt to disguise the criminal nature of the investigation by having the collection employee issue the summons. See United States v. Tweel, 550 F.2d 297 (5th Cir. 1977) (revenue agent concealed involvement of special agent). Moreover, such a summons would be unlikely to meet the requirements of a collection summons under IRC 7609(c)(2)(D).

  3. In the second scenario, the collection employee issues a third-party summons to collect an assessed liability. After gathering the summoned information, the collection employee finds indications of criminal activity and refers the case to Criminal Investigation. The collection employee can share the summoned information with Criminal Investigation (and Criminal Investigation does not need to repeat the summons process and give notice). If the summoned information may be exculpatory then that information must be shared with Criminal Investigation. After the case is referred to Criminal Investigation, the collection employee must coordinate any further summons activity with Criminal Investigation and should follow all policies and procedures for parallel investigations. See Policy Statement P-4-84 and IRM 1.2.1.4.25.
    A third-party collection summons must not be solely used to pursue a criminal investigation. To do so would constitute a subterfuge and would jeopardize the criminal investigation. See United States v. Tweel550 F.2d 297 (5th Cir. 1977). Using a collection summons solely to further a criminal investigation would also circumvent the IRC. 7609(a) notice requirement if the summons were directed to a third-party recordkeeper. The collection employee's purpose for issuing the summons must be to collect the tax, not solely to develop a criminal case.

    Note:

    As noted above, after a case is referred to Criminal Investigation, the collection employee must coordinate any further summons activity with Criminal Investigation. In particular, the collection employee must ask whether the Service has referred the case to the Department of Justice for criminal prosecution or to begin a grand jury investigation. If such referral has been made, the Service is precluded by IRC 7602(d) from issuing a summons or seeking to enforce a summons against the same taxpayer for the same periods and the same tax liabilities that are the subject of the criminal referral. Seek the assistance of the local Criminal Tax Counsel and the Associate Area Counsel (SB) on issues involving IRC 7602(d).

  4. The third scenario occurs when the Service is examining and seeking to collect the same taxpayer's liabilities, and these efforts are separate, independent investigations. For example, the collection employee issues a third-party summons to collect taxes assessed for the years A and B, while the examiner is investigating the taxpayer's liabilities for years C and D. So long as the collection employee summonses information that " may be relevant," within the meaning of IRC 7602(a), to collecting the assessed taxes for years A and B, then the collection employee can share the summoned information with the examiner. This is appropriate because the collection employee is only summoning information that would otherwise be summoned if there were no ongoing, separate examination. However, if the examiner needs additional information, then he or she must obtain that information independently by issuing a separate third-party summons, if necessary, and by giving notice as required by section 7609(a).

  5. The fourth scenario is similar to the third, except both the collection employee and the examiner are pursuing separate and independent investigations of the same taxpayer for the same year. This may occur where the Service has assessed a trust fund recovery penalty for periods A, B, and C, and is also examining the taxpayer's income tax liabilities for those same years. The analysis and conclusions are the same as for the third scenario. So long as the collection employee only summonses information appropriate to his or her case, then he or she should be able to share that information with the examiner. The collection employee must avoid summoning information solely to assist with the examination; all of the summoned information must be of a nature that may be relevant to the collection activity.

25.5.6.6  (04-30-1999)
Procedures for Notice, Petition to Quash the Summons, and Compliance or Enforcement

  1. This section covers the following:

    1. Period in Which Service is Required to Give Notice

    2. Right to File Petition to Quash Summons

    3. Compliance or Enforcement of Summons

25.5.6.6.1  (10-04-2006)
Period in Which Service Is Required To Give Notice

  1. When summoning a third party for records or testimony, serve notice on the taxpayer and all other noticees within 3 days of serving the summons.

  2. No examination of the summoned records is allowed before the close of the 23rd full day after notice is given. Therefore, set the date for appearance:

    1. no sooner than the 24th day after giving notice to ensure sufficient time for the noticee to receive notice and, if desired, file a petition to quash, and

    2. on a workday.

25.5.6.6.2  (10-04-2006)
Right to File Petition to Quash Summons

  1. A noticee who wishes to prevent summons compliance by the third party must begin a civil action in U.S. district court to quash the summons not later than the 20th day after the day notice of the summons is given. When the last day to file a petition to quash falls on a Saturday, Sunday, or legal holiday, the petition to quash may be timely filed on the next business day.

  2. A noticee who brings a proceeding to quash the summons must mail (registered or certified) copies of the petition to the summoned third party and a copy to the IRS employee who issued the summons within the 20–day period.

  3. In instances where a summons is served on a third party for records or testimony and the description of summoned records identifies another person (other than the taxpayer), notice will be given to such person. This person has the right to file a petition to quash the summons.

  4. No examination of the summoned records is allowed before the 24th day after notice is given, or if a proceeding to quash is begun until the court so orders, or until every person that is entitled to notice consents. Pattern Letter 1728(P) may be used to document the noticee’s consent. (Exhibit 25.5.6–1)

25.5.6.6.3  (10-04-2006)
Compliance or Enforcement of Summons

  1. Service employees who receive a petition to quash will notify Associate Area Counsel by telephone on the same day. Within 6 workdays, the employee will forward to Associate Area Counsel a memorandum report or Form 4443, Summons Referral, to include the following:

    1. the name, full address, and taxpayer identification number of the taxpayer under investigation;

    2. a summary of the facts in the case, including whether it involves, or is related to, the Special Enforcement Program;

    3. an explanation of the relevance of the summoned information;

    4. all information supporting the validity or non-validity of each assertion in the petition to quash;

    5. a recommendation for or against defense of the petition to quash the summons; and

    6. the original summons and a copy of the petition to quash the summons.

    Note:

    Timely observance of this procedure is extremely important since the matter must be reviewed by IRS Counsel, DOJ, and the U.S. Attorney.

  2. Tolling of the periods of limitations on assessment and criminal prosecution when the taxpayer intervenes or brings a proceeding to quash, or when a third party fails to produce the summoned records within six months of being served:

    1. if the taxpayer (or the taxpayer’s agent, nominee, or other person acting under the taxpayer’s direction or control) intervenes in a summons enforcement suit or brings a proceeding to quash, then all periods of limitation under IRC 6501 (for assessing the taxpayer’s liability for the periods listed in the summons) and all periods of limitation under IRC 6531 (for criminally prosecuting the taxpayer for the periods listed in the summons) are tolled. The periods are tolled during the time the proceeding is pending or appealed; and

    2. if the taxpayer does not intervene in a summons enforcement suit or bring a proceeding to quash, and the summoned third party fails to comply with the summons for six months after being served, then the period of limitations under IRC 6501 and 6531 (pertaining to the taxpayer’s liability) shall be suspended beginning six months after the summons was served and ending when the dispute is resolved.

  3. Intervention by a person other than the taxpayer or his or her agent will not suspend the running of the statutes of limitation.

  4. The Service and the person summoned must be sent (by certified or registered mail) a copy of the noticee’s petition to quash not later than the close of the 20–day period. If a petition to quash is not mailed to the Service timely, the summoned person should immediately produce the summoned information. If he or she does not, the employee should immediately forward the summons for enforcement.

25.5.6.6.3.1  (10-04-2006)
Collection

  1. Collection personnel who receive a petition to quash will notify Technical Support by telephone on the day of receipt. Technical Support will notify Associate Area Counsel immediately.

  2. Within 6 workdays of receiving a petition to quash, prepare a memorandum and forward it to Technical Support, who will send the memorandum to Associate Area Counsel. Include in the memorandum the items listed above.

25.5.6.6.4  (10-04-2006)
Notice and Instructions to Noticee, Third-Party Summons

  1. Form 2039 includes a notice concerning the noticee’s right to contest the administrative summons (Form 2039 Part D). Serve on the noticee with a copy of the summons (Form 2039 Part C), by certified or registered mail to the noticee's last known address. Use registered mail when the notice is mailed to persons in foreign countries. The law also permits service of notice by delivering both documents in hand to the noticee, or by leaving them at the noticee’s residence, or in the absence of a last known address, leaving them with the person summoned.

  2. If the Service has been advised under IRC 6903 of the existence of a fiduciary relationship, mail notice of the summons to the last known address of the fiduciary of the person entitled to notice, even if such a person or fiduciary is now deceased, under a legal disability, or no longer exists. The filing of a power of attorney or tax information authorization does not qualify as the creation of a fiduciary relationship under this provision.

  3. Complete certification of serving the summons and of giving notice on the reverse side of the original summons.

    Note:

    Do not use Summons Form 2039 that bears a revision date earlier than 12-2001.

  4. A noticee who files a petition to quash the summons must mail (registered or certified) copies of the petition to the summoned third party and to the Service employee. If a summons enforcement action is instituted against the third party, the noticee has the right to intervene in the action. DOJ will serve the third party with process and will notify the noticee of the action via certified or registered mail.

  5. A copy of the back of the original summons, which certifies the service of the summons and notice, will be given to the summoned third party upon request for proof of notice.

  6. If the third party requests it, furnish a copy of the back of the original summons which certifies that the period for beginning a proceeding to quash the summons has expired and that no such proceeding was instituted within such period, or that the noticee consents to the examination.

25.5.6.6.5  (10-04-2006)
Waiver of Right to Notice and To Petition to Quash the Summons

  1. A person who is entitled to notice and to file a petition to quash when a summons is issued may waive such rights via a general waiver form. Letter 1728(P) is suggested for waiver purposes. All third parties involved in the waiver should be given a copy of the letter for their records. Prepare the waiver in triplicate. Retain the original; give one copy to the summoned party and one copy to the noticee.

  2. If all persons entitled to notice waive their rights, the time and place of examination must not be less than 10 days from the date of service. The witness may voluntarily comply at an earlier time.

  3. Payments for mileage, witness fees, and expenses may be made to the third party if a summons is issued.

25.5.6.6.6  (10-04-2006)
Duty and Rights of a Summoned Third Party

  1. The third party:

    1. has the right to intervene in the proceeding to quash the summons, and

    2. is bound by any decision in the proceeding, even if he or she does not intervene.

  2. The law provides that the third party will, upon receipt of the summons:

    1. proceed to assemble the summoned records (or such portion as the Service employee indicates), and

    2. be prepared to produce the records on the day on which the records are to be examined whether or not a noticee files a petition to quash the summons.

  3. A third party is not liable to any customer or other person for such disclosure if the disclosure of records was made in good faith reliance on the Service's certificate providing that:

    1. the period for beginning to quash a summons has expired and no such proceeding began within such period, or

    2. the taxpayer and every other person entitled to notice consented to the examination.

    A third party is also shielded from liability when disclosing records pursuant to a court order.

25.5.6.6.7  (10-04-2006)
Coordination of Summons Issuance and Enforcement Actions

  1. Attempt to coordinate the service of summonses pertaining to the same person at or near the same time, if possible. Likewise, make requests to the court for the exemption from the requirement of notice relative to the same person at the same time.

25.5.6.6.7.1  (10-04-2006)
Examination and TE/GE

  1. Use the following codes:

    1. Statute of Limitations alpha Code LL to update AIMS to identify these cases on the monthly AIMS tables 4.0 or 4.1.

    2. AIMS Data base should be updated by an examiner, to reflect the correct statute date.

    3. When closing the case, use Form 3198 (Special Handling Notice) and Form 895 (Notice of Statute Expiration) to indicate that the new statute date has been determined under IRC 7609 as a result of the third-party summons.

25.5.6.7  (04-30-1999)
Banks

  1. Frequent demands for information are made upon banks. A depositor at a bank has no proprietary interest in the bank’s books and records. The bank cannot refuse production of its records because some of the entries relate to transactions of persons other than the designated taxpayer. On the other hand, a bank will not be required to produce all of its records so that the Service can determine whether any of them contain information relating to the investigation.

  2. The Right to Financial Privacy Act (RFPA) provides account owners with the right to be given notice when banks release account information to government authorities. However, section 3413(c) of that Act allows the Service to obtain a taxpayer’s financial records without providing notice as long as the records are obtained pursuant a procedure authorized by the IRC. The Service interprets IRC 7602 as providing the procedure for its employees to request and receive taxpayer account information without issuing a summons. Consequently, the Service routinely requests and accepts a financial institution’s voluntary production of a taxpayer’s records of account, except in situations governed by the Tenth Circuit’s precedents. (Refer to IRM 25.5.1.4.1(3) for a list of these situations). The Tenth Circuit does not interpret IRC 7602 as providing the procedure required by section 3413(c) of the RFPA. Instead, the circuit court interpreted IRC 7609 as such a procedure. Therefore, that circuit court has ruled that a bank’s voluntary disclosure of a customer’s financial records to the Service, without prior notice to the customer, violates the RFPA. Accordingly, in situations governed by the Tenth Circuit’s precedents, the Service may only obtain account records from a bank by serving a summons and providing notice consistent with IRC 7609.

    Note:

    In RRA 1998, Congress enacted IRC 7609(j), which provides that nothing in IRC 7609 shall be construed to limit the Service’s ability to obtain information, other than by summons, through formal or informal procedures authorized by IRC 7601 and 7602. This section indicates that the Service’s ability to informally seek the voluntary exchange of records, i.e., without a summons, constitutes a procedure authorized by the Code. Nevertheless, the Service will follow the Tenth Circuit’s ruling in situations described in IRM 25.5.1.4.1(3).

25.5.6.7.1  (04-30-1999)
Foreign Branches of Domestic Banks

  1. A summons on a domestic bank to produce records of one of its foreign branches may be enforceable even if compliance would constitute a violation of the laws of the foreign country. The basis for compelling production of records is that a bank, like any other corporation, is presumed to be in possession and control of its own books and records. Courts have reasoned that any officer or agent of the corporation, who has power to cause the branch records to be sent from a branch to the home office for any corporate purpose, has sufficient control to cause them to be sent when summoned pursuant to IRC 7602.

  2. In determining whether to enforce a summons where the laws of the country in which the information is located bar such production, the courts balance the interests of the foreign country in blocking production of the records against the importance of the records to the United States. The courts have used the following 5–part test to determine whether a foreign blocking law should be