Polselli v. IRS

Background

The dispute involves the IRS and a taxpayer, Remo Polselli, who received official assessments totaling more than $2 million for unpaid taxes and penalties. A revenue officer, Michael Bryant, issued summonses to a law firm and three banks seeking records that might help locate assets. The law firm, the lawyer, and Polselli’s wife moved to quash the summonses. The District Court and the Sixth Circuit concluded the IRS did not have to give notice to those third parties because the summonses were issued to aid collection of an assessment.

Reasoning

The Court looked at the statute that normally requires the IRS to notify anyone named in a summons, but also contains an exception when a summons is issued “in aid of the collection” of an official assessment or judgment against the person whose liability is at issue. The Court held the text does not add a separate requirement that the delinquent taxpayer have a legal or proprietary interest in the specific records. The Court rejected arguments that “in aid of” must mean a summons will directly produce collectible assets and explained the related clause covers different situations involving transferees or fiduciaries.

Real world impact

The decision makes it easier for the IRS to issue some third-party summonses without prior notice once it has made an official assessment, but the Court declined to define the full limits of what counts as being “in aid of” collection. That leaves room for future cases to sort out precise boundaries and for courts to consider privacy concerns on a case-by-case basis.

Dissents or concurrances

Justice Jackson, joined by Justice Gorsuch, concurred to stress that notice is the default, privacy matters, and courts and the IRS must carefully weigh when notice may be excused; she warned against too-broad use of the exception.