The purpose of this section is to acquaint revenue officers with the basic legal concepts governing the use and enforcement of administrative summonses. For more detailed guidance, refer to the Summons Handbook at IRM 25.5.

In general, the Service should issue summonses only when the taxpayer (or other witness) will not produce the desired records or other information voluntarily. When a taxpayer or third person is willing to testify and produce documents voluntarily, a summons may not be required. In such cases, revenue officers may only need to produce their credentials. Before issuing any summons, the Service should consider:

The summons should not require the witness to do anything other than appear on a given date to give testimony or produce existing books, papers and records or both. A summons cannot require a witness to prepare or create documents, including tax returns, that do not currently exist.

IRC § 7602 provides the Service with summons authority. See IRM 5.17.6.2.1, below. Additionally, case law provides standards that the Service must meet to have its summons enforced. See IRM 5.17.6.2.2, below.

IRC § 7602 authorizes the Service to issue a summons to any person to produce for examination books, papers, records or other data, and to require such person to give such testimony, under oath, as may be relevant or material to the determination or collection of any internal revenue tax.

The question of what "may be relevant or material" depends on the facts and circumstances of each case. In general, courts reject the use of a summons as a "fishing expedition" and have held that there must be a "realistic expectation" rather than an "idle hope" that something may be discovered to satisfy the relevance and materiality requirements of IRC § 7602, particularly where third-party documents are sought. United States v. Arthur Young & Co., 465 U.S. 805, 814, n. 11 (1984), citing United States v. Harrington, 388 F.2d 520, 524 (1968).

Courts recognize that not all documents summoned will prove relevant or material, emphasizing the test is whether the summoned documents "might throw light upon subjects under legitimate inquiry." Arthur Young, 465 U.S. at 813–814.

When documents or information are sought from the taxpayer, all records of financial transactions, all books and records showing the receipt or expenditure of money by the taxpayer, all financial transactions of the taxpayer with other persons and the names of such other persons to verify such transactions satisfy the relevance test of IRC § 7602.

Where documents or information are requested from third persons, all records or information of the taxpayer’s financial transactions with such third persons or other persons satisfy the relevance test of IRC § 7602.

Delegation Order No. 4 (as revised) provides detailed instructions concerning the levels of authority delegated to various Service officials to approve and perform activities concerning summonses. See IRM 1.2.52.7. Revenue officers should refer directly to the most current revision of Delegation Order No. 4 whenever an issue arises about their authority to take any of these actions:

IRC § 7603 provides that books and records sought must be described with reasonable certainty and particularity, including the periods for which the records are sought. In general, the meaning of the phrase " reasonable particularity" is a factual matter that will depend on all the circumstances involved.

A demand for documents required to be produced for examination cannot be so general and vague that it would be unreasonable to expect the summoned party to comply. The rule established by the courts is that the Service employee or officer issuing the summons need not describe in minute detail every document and paper to be produced, but must describe them with "such reasonable particularity" that the person summoned will have sufficient information to enable him to produce such documents. Doe v. United States (In re Grand Jury Subpoena), 383 F.3d 905, 910 (9th Cir. 2004).

In United States v. Calhoun County Hospital, Inc., 35 AFTR2d 75-1097 (N.D. Miss. 1974), the typed-in body of the summons did not specify for what years the records were sought. The court rejected the taxpayer's argument that the summons was facially invalid by looking at the "four corners" of the summons, thereby incorporating into the body of the summons the years listed in the caption. Accord United States v. Duke, 379 F. Supp. 545 (N.D. Ill. 1974).

If it is not known what records are in the summoned party's possession, a summons can be served identifying only the taxpayer, the tax period under investigation, and the type of tax involved.

IRC § 7609 contains notice and waiting period requirements which apply to all third-party summonses, except for certain limited categories discussed herein. See IRM 5.17.6.6.2, below, for a discussion of these notice and waiting periods.

IRC § 7609 applies to all summonses except:

The procedural rules applicable to third-party recordkeeper summonses issued under IRC § 7609(a) do not apply to collection summonses that pertain to an assessed liability, transferee liability, or a liability reduced to judgment. IRC § 7609(c)(2)(D); Ginsburg v. United States, 90 AFTR 2d 2002-6555 (D. Conn. 2002).

Third-party summonses issued as part of tax delinquency investigations for trust fund recovery penalties (i.e., pre-assessment investigations) or any other investigation where no liability has been assessed are not considered collection summonses under IRC § 7609(c)(2). Accordingly, the Service must follow the notice and waiting period requirements of IRC § 7609(a) for these summonses.

The Service should not issue a summons that lists the names of all potentially responsible persons in the heading of one summons and provide redacted notice copies to noticees. Thus, using an example where two potentially responsible persons, an officer and an employee, have been identified, two summonses would be issued. A summons concerning the liability of John Smith, President of Corporation XYZ, Inc., would be issued for records that may be relevant to the liability of "John Smith, as President of Corporation XYZ, " and that may be relevant to the time periods at issue. A separate summons concerning the liability of employee, Mary Smith, would be issued for records that may be relevant to the liability of "Mary Smith, Employee of Corporation XYZ, Inc.," and that may be relevant to the time periods at issue. (The bank or other summoned party need only produce each summoned document once.)

Notification is not required for third-party summonses issued for taxpayer delinquency accounts (TDAs) or any other investigation where an assessed liability exists.

Notice is required for taxpayer delinquency investigations (TDI) where no liability has been assessed.

A petition to quash brought by the taxpayer suspends the period of limitations for assessment under IRC § 6501. IRC § 7609(e)(1) only tolls the statute of limitation for a taxpayer who petitions to quash the summons. If only one of the potentially responsible persons (regarding whose liabilities the Service issued separate summonses) files a petition to quash the summons, only that petitioner’s assessment statute is suspended. The statute is suspended for the period in which the proceeding and any appeals are pending.

IRC § 7602(c), Notice of Contact of Third Parties, requires that before Service employees initiate contact with third parties for the determination or collection of a taxpayer’s tax liability, the taxpayer must be given reasonable notice in advance that third parties may be contacted. IRC § 7602(c) also requires the Service to make a record of persons contacted and provide that record to the taxpayer upon the taxpayer’s request.

The third party contact notice letter advises taxpayers that contacts may be made with other persons. In most cases, third-party notice is now accomplished by sending Pub. 1 to the taxpayer and directing the taxpayer’s attention upon initial contact that third parties may be contacted, which is well in advance of the revenue officer receiving the account for collection.

Refer to IRM 5.1.17, Third Party Contacts, for detailed guidance on third party contacts.

IRC § 7605(b) prohibits unnecessary examinations or investigations of a taxpayer and limits the Service to one inspection of a taxpayer’s books of account for each taxable year unless the taxpayer requests otherwise or unless the Secretary or his delegate after investigation, determines that further inspection is necessary and notifies the taxpayer in writing of this determination.

An examination of the taxpayer’s books for the purpose of collecting the tax after an examination to determine the liability is considered to be an original examination not subject to the restrictions of IRC § 7605(b).

Banks and other financial institutions have argued that producing records of a taxpayer’s financial transactions pursuant to a summons would violate the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq. (1970). To protect consumers’ interests, the FCRA restricts the circumstances under which a "consumer reporting agency" may furnish a "consumer report" to third parties including the Service.

A "consumer reporting agency" is defined as ". . . any person which for monetary fees or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility or interstate commerce for the purpose of preparing or furnishing consumer reports." 15 USC § 1681a. A bank may be considered a "consumer reporting agency" if it meets the above definition.

The FCRA specifically excludes from its definition of a " consumer report" any report containing information solely as to transactions or experiences between the consumer and the person making the report. 15 USC § 1681a. Thus, information relating only to the bank and its customer (which is generally what the Service seeks) is not covered by the Act, and the bank can produce this summoned information without violating the FCRA. United States v. Lake County National Bank, 35 AFTR2d 75-1428 (N.D. Ohio 1975); United States v. Bremicker, 365 F. Supp. 701 (D. Minn. 1973).

In general, the consumer reporting agency may only provide a consumer report to the Service if one of the permissible purposes listed in 15 USC § 1681b(a) is satisfied. That section provides that a consumer reporting agency may furnish a consumer report under certain limited circumstances, which include:

In most cases involving collection of an assessed tax, the Service’s requests for full credit reports fit within the permissible purpose provision relating to credit set forth in 15 USC § 1681b(a)(3)(A).

Based on written opinions by the Federal Trade Commission, the Service takes the view that a credit relationship exists within the meaning of subsection 1681b(a)(3)(A) where the Service has an assessment lien against the taxpayer, has reduced a taxpayer’s liability to judgment, or has entered into an offer in compromise or settlement agreement with the taxpayer. Accordingly, in many collection cases, the Service can obtain a full credit report pursuant to subsection 1681b(a)(3)(A) without issuing a summons.

Some collection cases begin as tax delinquency investigations, i.e., the investigation begins before there is an assessed tax liability. In these cases, the Service must issue a summons to obtain a credit report; it cannot lawfully request a credit report under 15 USC § 1681b(a)(3)(A). The Service can obtain a full credit report by issuing a summons because this action satisfies the permissible circumstance requirement of 15 USC § 1681b(a)(1), which provides that a consumer reporting agency may furnish a full credit report "in response to the order of a court having jurisdiction to issue such an order ... ." The Service takes the position that a third-party recordkeeper summons satisfies the court order requirement in subsection 1681b(1)(a) because IRC § 7609 specifically requires a credit bureau to respond to the summons if the person entitled to notice of the summons does not file a timely motion to quash with the district court. Subsection 1681b(a)(1) does not require the Service to be a creditor of the taxpayer before acquiring a full credit report by summons.

Any questions concerning the scope of the Fair Credit Reporting Act or its application to specific situations should be referred to Area Counsel.

The First Amendment to the Constitution guarantees the right of free expression; this includes the right to assemble freely; freedom of the press; freedom of religion; and freedom of speech.

The Fourth Amendment protects against unreasonable searches and seizures. Unlike the Fifth Amendment, discussed below, corporations and other organizations are entitled to the protection afforded by the Fourth.

The Fifth Amendment affords a person a privilege against self-incrimination. It applies to both documentary requests and requests for oral testimony. There are different analyses for each type of request.

Area Counsel should be contacted in any case in which the taxpayer raises a constitutional defense to summons enforcement, or for any questions concerning the application of a constitutional argument to a specific situation.

The type of information sought by a revenue officer through the issuance of a summons generally does not tend to develop criminal potential of a case. Therefore, it is not mandatory that the person summoned be informed of his constitutional privilege against self-incrimination. In any case in which the revenue officer believes the criminal potential is so manifest that a warning may be appropriate, Area Counsel should be contacted.

Certain confidential relationships between a taxpayer and a witness or another person may give rise to a claim of a privilege from testifying or providing information pursuant to a summons. In the context of IRS summonses, the determination of whether a particular matter is privileged is governed by federal law. Questions concerning the validity of a privilege or its applicability to a particular situation should be referred to Area Counsel.

A person cannot successfully refuse to testify or provide information solely on the basis that she stands in a confidential relationship with another person. The burden is on the witness first to establish the facts on which the asserted privilege is based and then to demonstrate how, and the extent to which, the requested information is covered by the privilege. United States v. Kovel, 296 F. 2d 918 (2d Cir. 1961).

A person may forfeit a privilege either by expressly waiving it or failing to assert it. Fed.R.Civ.P. 12(b); see Hunt v. Blackburn, 128 U.S. 464 (1888); Colton v. United States, 306 F.2d 633, 637 (2d Cir. 1962), citing United States v. United Shoe Mach. Corp., 89 F. Supp. 357, 358-59 (D. Mass. 1950).

In general, communications from a taxpayer to an attorney made in confidence for the purpose of obtaining legal advice are privileged, and the attorney cannot be compelled to disclose that information to the Service. 8 Wigmore, Evidence § 2291 (McNaughton rev. 1961); United States v. United Shoe Mach. Corp., 89 F.Supp. 357, 358-59 (D. Mass.1950). Also, if the taxpayer creates records to facilitate the exchange of privileged communications with the attorney, those records are privileged. United States v. Davis, 636 F.2d 1028, 1041 (5th Cir. 1981); United States v. Bartlett, 449 F.2d 700, 703 (8th Cir. 1971). However, if a taxpayer turns over pre-existing records to an attorney, the Service can obtain those records by summons, unless the records were otherwise privileged from production while in the taxpayer’s possession. Id.

As the foregoing information suggests, the attorney-client privilege is not all-inclusive and does not protect everything an attorney may do for a client. The privilege is confined to communications made in confidence by the client for the purpose of obtaining legal advice from an attorney. United States v. Rockwell International, 897 F.2d 1255 (3d Cir. 1990). The client in a corporate setting may be any officer or employee of the corporation. Upjohn v. United States, 449 U.S. 383 (1981). Also, underlying factual information can be obtained from the employees whether or not this same information has been communicated to the corporation’s attorney. Books and records of a taxpayer are not privileged merely because they are in the hands of his attorney. If the records were compellable from the taxpayer, the taxpayer cannot cloak them with the privilege by transferring them to an attorney. Fisher v. United States , 425 U.S. 391 (1976).

Ministerial or clerical services are not within the attorney-client privilege. Records of financial transactions involving monies paid by or on behalf of a client to an attorney are not covered by the privilege. When an attorney acts as the client’s business advisor, or agent for the receipt or disbursement of money or property to or from third parties, the attorney is not acting in a legal capacity and records of such transactions are not privileged. United States v. Davis, 636 F.2d 1028 (5th Cir.), cert. denied, 454 U.S. 862 (1981). The identity of a client or the fact that a given individual has become a client are matters which are not usually within the privilege in the absence of special circumstances. In re Grand Jury Investigation No. 83-2-85, 723 F.2d 447 (6th Cir. 1983).

The preparation of a tax return is primarily an accounting service. When an attorney prepares his or her client’s tax returns, the workpapers produced by the attorney while preparing the returns and the tax records on which they are based are not shielded by the attorney-client privilege. United States v. Under Seal, 748 F.2d 871, 877 (4th Cir. 1984); United States v. Lawless, 709 F.2d 485, 487 (7th Cir. 1983) ("When information is transmitted to an attorney with the intent that the information will be transmitted to a third party (in this case on a tax return), such information is not confidential." ); United States v. Pipkins, 528 F.2d 559, 563 (5th Cir. 1976) ("Courts have refused to apply the privilege to information that the client intends his attorney to impart to others." ). The same is true of the communications between the client and the attorney about the return being prepared. Id.