Polselli v. IRS

by Supreme Court of the United States

Note: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

POLSELLI ET AL. v. INTERNAL REVENUE SERVICE
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
No. 21–1599. Argued March 29, 2023—Decided May 18, 2023

The Internal Revenue Service has the power to issue summonses to pursue unpaid federal taxes and the people who owe them. When the IRS issues a summons, it must generally provide notice to any person identified in the summons, §7609(a)(1). Anyone entitled to such notice may then bring a motion to quash the summons, §7609(b)(2)(A). But when the IRS issues a summons “in aid of the collection of … an assessment made … against the person with respect to whose liability the summons is issued,” no notice is required, §7609(c)(2)(D)(i).

In this case, the IRS entered official assessments against Remo Polselli for more than $2 million in unpaid taxes and penalties. Revenue Officer Michael Bryant issued summonses to three banks seeking financial records of several third parties, including petitioners, who then moved to quash the summonses. The District Court concluded that, under §7609(c)(2)(D)(i), no notice was required and that petitioners therefore could not bring a motion to quash. The Sixth Circuit affirmed, finding that the summonses fell squarely within the exception in §7609(c)(2)(D)(i) to the general notice requirement.

Held: The Court rejects petitioners’ argument that the exception to the notice requirement in §7609(c)(2)(D)(i) applies only if the delinquent taxpayer has a legal interest in the accounts or records summoned by the IRS. Pp. 5–12.

(a) The statute sets forth three conditions to exempt the IRS from providing notice in circumstances like these. First, a summons must be “issued in aid of … collection,” §7609(c)(2)(D). Second, it must aid the collection of “an assessment made or judgment rendered,” §7609(c)(2)(D)(i). Third, a summons must aid the collection of assessments or judgments “against the person with respect to whose liability the summons is issued,” §7609(c)(2)(D)(i). The statute does not mention legal interest, much less require that a taxpayer maintain such an interest for the exception to apply. Pp. 5–7.

(b) Petitioners’ arguments in support of their proposed legal interest test do not convince the Court to abandon an ordinary reading of the notice exception. Petitioners first contend the phrase “in aid of the collection” refers only to inquiries that “directly advance” the IRS’s collection efforts, which a summons will not accomplish unless it is targeted at an account containing assets that the IRS can collect to satisfy the taxpayer’s liability. This argument ignores the typical meaning of “in aid of.” To “aid” means “[t]o help” or “assist.” A summons that may not itself reveal taxpayer assets that can be collected may nonetheless help the IRS find such assets.

Petitioners next argue that if §7609(c)(2)(D)(i) is read to exempt from notice every summons that helps the IRS collect an “assessment” against a delinquent taxpayer, there would be no work left for the second exception to notice, found in §7609(c)(2)(D)(ii), to do. Clause (ii) exempts from notice any summons “issued in aid of the collection of … the liability at law or in equity of any transferee or fiduciary of any person referred to in clause (i).” The two clauses apply in different circumstances: clause (i) applies upon an assessment, while clause (ii) applies upon a finding of liability. In addition, clause (i) concerns delinquent taxpayers, while clause (ii) concerns transferees or fiduciaries. As a result, clause (ii) permits the IRS to issue unnoticed summonses to aid its collection from transferees or fiduciaries before it makes an official assessment of liability. Pp. 7–11.

(c) The Court does not dismiss any apprehension about the scope of the IRS’s power to issue summonses and does not define the precise contours of the phrase “in aid of the collection.” The briefing by the parties and the question presented focus only on whether §7609(c)(2)(D)(i) requires that a taxpayer maintain a legal interest in records summoned by the IRS. The answer is no.

23 F. 4th 616, affirmed.

Roberts, C. J., delivered the opinion for a unanimous Court. Jackson, J., filed a concurring opinion, in which Gorsuch, J., joined.

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