Suspension of Statutes of Limitations in Third-Party and John Doe Summons Disputes and Expansion of Taxpayers' Rights To Receive Notice and Seek Judicial Review of Third-Party Summonses, 23342-23349 [E8-9518]
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Federal Register / Vol. 73, No. 84 / Wednesday, April 30, 2008 / Rules and Regulations
Signing Authority
This document is being issued in
accordance with 19 CFR 0.1(a)(1),
pertaining to the authority of the
Secretary of the Treasury (or his/her
delegate) to approve regulations related
to certain customs revenue functions.
List of Subjects in 19 CFR Part 12
Cultural property, Customs duties and
inspection, Imports, Prohibited
merchandise.
Amendment to CBP Regulations
archaeological or ethnological material
that are subject to import restrictions.
Jayson P. Ahern,
Acting Commissioner, U.S. Customs and
Border Protection.
Approved: April 24, 2008.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. E8–9343 Filed 4–29–08; 8:45 am]
BILLING CODE 9111–14–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
For the reasons set forth above, part 12
of title 19 of the Code of Federal
Regulations (19 CFR part 12), is
amended as set forth below:
I
26 CFR Part 301
[TD 9395]
RIN 1545–BA31
PART 12—SPECIAL CLASSES OF
MERCHANDISE
1. The general authority citation for
part 12 continues to read, and specific
authority for new § 12.104j is added to
read, as follows:
I
Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1202
(General Note 3(i), Harmonized Tariff
Schedule of the United States (HTSUS)),
1624;
*
*
*
*
*
Section 12.104j also issued under Pub. L.
108–429, 118 Stat. 2600; 19 U.S.C.
2612;
*
*
*
*
*
2. Add a new § 12.104j to read as
follows:
I
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§ 12.104j Emergency protection for Iraqi
cultural antiquities.
(a) Restriction. Importation of
archaeological or ethnological material
of Iraq is restricted pursuant to the
Emergency Protection for Iraqi Cultural
Antiquities Act of 2004 (title III of Pub.
L. 108–429) and section 304 of the
Convention on Cultural Property
Implementation Act (19 U.S.C. 2603).
(b) Description of restricted material.
The term ‘‘archaeological or
ethnological material of Iraq’’ means
cultural property of Iraq and other items
of archaeological, historical, cultural,
rare scientific, or religious importance
illegally removed from the Iraq National
Museum, the National Library of Iraq,
and other locations in Iraq, since the
adoption of United Nations Security
Council Resolution 661 of 1990. CBP
Decision 08–17 sets forth the Designated
List of Archaeological and Ethnological
Material of Iraq that describes the types
of specific items or categories of
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Suspension of Statutes of Limitations
in Third-Party and John Doe Summons
Disputes and Expansion of Taxpayers’
Rights To Receive Notice and Seek
Judicial Review of Third-Party
Summonses
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
AGENCY:
SUMMARY: This document contains final
regulations relating to third-party and
John Doe summonses. These final
regulations reflect amendments to
sections 7603 and 7609 of the Internal
Revenue Code of 1986 made by the
Internal Revenue Service Restructuring
and Reform Act of 1998, the Omnibus
Budget Reconciliation Act of 1990, the
Technical and Miscellaneous Revenue
Act of 1988, and the Tax Reform Act of
1986. These final regulations provide
guidance relating to the manner by
which summonses may be served on
third-party recordkeepers, the expanded
class of third-party summonses subject
to notice requirements and other
procedures, and the suspension of
periods of limitations if a court
proceeding is brought involving a
challenge to a third-party summons, or
if a third party’s response to a summons
is not finally resolved within six months
after service. These final regulations
affect third parties who are served with
a summons, taxpayers identified in a
third-party summons, and other persons
entitled to notice of a third-party
summons.
DATES: Effective Date: These regulations
are effective April 30, 2008.
Applicability Date: For the date of
applicability, see §§ 301.7603–1(f);
301.7603–2(c); 301.7609–1(d);
301.7609–2(c); 301.7609–3(e);
301.7609–4(d); and 301.7609–5(f).
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FOR FURTHER INFORMATION CONTACT:
Elizabeth Rawlins at (202) 622–3630
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains final
regulations amending the Procedure and
Administration Regulations (26 CFR
part 301) under sections 7603 and 7609
of the Internal Revenue Code of 1986
(Code). The final regulations reflect
amendments to sections 7603 and 7609
made by the Internal Revenue Service
Restructuring and Reform Act of 1998
(Pub. L. 105–206, 112 Stat. 685) (RRA
1998), the Technical and Miscellaneous
Revenue Act of 1988 (Pub. L. 100–647,
102 Stat. 3343) (TAMRA 1988), and the
Tax Reform Act of 1986 (Pub. L. 99–514,
100 Stat. 2085) (TRA 1986). The final
regulations also reflect changes made to
section 6503(j) in the Omnibus Budget
Reconciliation Act of 1990 (Pub. L. 101–
508, 104 Stat. 1388) (OBRA 1990).
On July 21, 2006, the IRS published
in the Federal Register a notice of
proposed rulemaking (REG–153037–01;
71 FR 41377) that interprets the
amendments to sections 7603 and 7609.
Written comments from one
commentator on several of the proposed
sections were received. No request for a
public hearing was received, nor was
one held. The proposed regulations, as
revised by this Treasury decision, are
substantially adopted as final
regulations.
As described more fully in the
preamble to the proposed regulations,
these regulations provide guidance
relating to the manner in which
summonses may be served on thirdparty recordkeepers, the expanded class
of third-party summonses to which the
notice requirements and other
procedures apply, the suspension of a
taxpayer’s periods of limitations if that
taxpayer petitions to quash a third-party
summons or intervenes in a proceeding
to enforce such a summons, and the
suspension of a taxpayer’s periods of
limitations if a summoned third party
does not finally resolve its response to
a summons within six months after
service of a summons.
Comments on the Proposed Regulations
and Explanation of Changes
Section 301.7609–1(a)(2)—In General
Proposed § 301.7609–1(a)(2) provides
that neither section 7609 nor the
regulations ‘‘limit the IRS’s ability to
obtain information, other than by
summons, through formal or informal
procedures authorized by sections 7601
and 7602.’’ The commentator suggested
that this provision be prefaced with the
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phrase ‘‘[e]xcept as provided in section
7609 or Treasury Regulations’’ and
further explained that section 7609 does
contain provisions, such as section
7609(d), that limit the IRS’s ability to
obtain information when a summons
has been served.
This suggestion has not been adopted
in the final regulations. Proposed
§ 301.7609–1(a)(2) is consistent with the
language of section 7609(j), which
provides: ‘‘Nothing in this section shall
be construed to limit the [IRS’s] ability
to obtain information, other than by
summons, through formal or informal
procedures authorized by sections 7601
and 7602.’’ Section 7609(j) and
proposed § 301.7609–1(a)(2) are directed
to situations in which the IRS has not
issued a summons, but is instead
seeking information through informal
procedures authorized by sections 7601
and 7602. In these situations, section
7609 and the regulations do not apply.
Section 301.7609–2(a)(1)—Persons
Entitled to Notice
Section 7609(a)(1) provides that
notice of a third party summons shall be
given to ‘‘any person (other than the
person summoned) who is identified in
the summons.’’ Proposed § 301.7609–
2(a)(1) provides: ‘‘The only persons so
identified are the person with respect to
whose liability the summons is issued
and any other person identified in the
description of summoned records or
testimony. For example, if the IRS
issues a summons to a bank with respect
to the liability of C that requires the
production of account records of A and
B, both of whom are named in the
summons, the IRS must notify A, B, and
C of the summons.’’
The commentator suggested that the
statutory phrase ‘‘any person * * *
identified in the summons’’ should be
interpreted more broadly to encompass
persons to whom the summoned records
relate who belong to a specifically
identifiable class, but who are not
identified by name in the summons. The
commentator offered examples of
persons described generically by
phrases, such as ‘‘children’’ or ‘‘closelyheld corporations in which the taxpayer
is a shareholder.’’
This suggestion has not been adopted
in the final regulations. The requirement
that an identified person be named in
the summons is consistent with
longstanding regulations under section
7609. Nothing in the statutory
amendments to section 7609 since these
regulations were promulgated suggests
that Congress intended to change the
meaning of this concept.
The commentator also suggested that
the example in the proposed regulations
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could be read to mean that a person
named in a summons is only entitled to
notice if that person’s records are sought
from the third party. This reading is
incorrect. The regulations do not
condition the right to notice on a
finding that the identified person’s
records are sought. Instead, ‘‘any * * *
person identified in the description of
summoned records or testimony’’ is
entitled to notice, as is the taxpayer
with respect to whose liability the
summons is issued.
Section 301.7609–3(a)—Duty of the
Summoned Party
Proposed § 301.7609–3(a) provides:
‘‘Upon receipt of a summons, the
summoned party must begin to
assemble the summoned records. The
summoned party must be prepared to
produce the summoned records on the
date on which the summons states that
they are to be examined, regardless of
the institution or anticipated institution
of a proceeding to quash or the
summoned party’s intervention in a
proceeding to quash, as allowed under
section 7609(b)(2)(C).’’
The commentator suggested that
proposed § 301.7609–3(a) is overbroad
because the statutory provision on
which it is based, section 7609(i)(1), is
preceded by the heading: ‘‘Recordkeeper
Must Assemble Records and Be
Prepared To Produce Records.’’ The
commentator concluded that section
7609(i)(1) can apply only to third-party
recordkeepers. This conclusion is not
supported by the statutory amendment
to section 7609(i)(1) under RRA 98,
which replaced the prior reference to
‘‘third-party recordkeeper’’ with the
term summoned party. Thus, section
7609(i)(1) applies to all recipients of
third-party summonses (other than
certain excepted summonses under
section 7609(c)(2)).
The commentator also suggested that
proposed § 301.7609–3(a) is overbroad
because the requirements of section
7609(i)(1) do not apply if a proceeding
to quash is brought. Section 7609(i)(1),
however, does not require the
summoned party to produce the
documents when a petition to quash has
been filed but merely requires the
summoned party to ‘‘assemble’’ and ‘‘be
prepared to produce’’ them.
The commentator suggested that
proposed § 301.7609–3(a) would
infringe on the rights of those
summoned persons who receive a vague
or overbroad summons. This provision,
however, does not preclude a
summoned person from raising such a
defense in a summons enforcement
proceeding. Accordingly, the IRS and
Treasury have concluded that these
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suggestions provide no basis for
adopting changes in the final
regulations.
Section 301.7609–4(c)—Presumption No
Notice of Proceeding To Quash Has
Been Mailed
Section 7609(b) provides that any
person entitled to notice of a summons
may bring a proceeding to quash by
filing a petition in district court and
mailing notice of the petition to both the
IRS and the summoned person within
20 days of the day the notice was given.
Proposed § 301.7609–4(b)(3) provides
that if a person fails to give proper and
timely notice of the petition to quash,
then that person has failed to institute
a proceeding to quash and the district
court lacks jurisdiction to hear the
proceeding. Proposed § 301.7609–4(c)
provides that ‘‘it is presumed that the
notification [of the petition to quash]
was not timely mailed if the copy of the
petition was not delivered to the
summoned person or to the person and
office designated to receive the notice
on behalf of the IRS within three days
after the close of the 20-day period
allowed for instituting a proceeding to
quash.’’
The commentator suggested that
proposed § 301.7609–4(c) should be
clarified to provide that the
presumption of untimeliness would no
longer apply ‘‘if a copy of the petition
is subsequently received and it is
determined that it was mailed prior to
the close of the 20-day period.’’
Proposed § 301.7609–4(c) is identical,
however, in all salient respects to a
provision in the prior regulations that
the IRS has administered since 1986
without controversy. In cases where the
IRS has not received a copy of a petition
to quash within three days after the
close of the 20-day period, but it is later
determined that a copy of the petition
was timely mailed within the 20-day
period, the IRS has halted the
examination of summoned witnesses
and records upon receiving a timely
filed petition to quash, consistent with
IRM provisions providing that, if a
proceeding to quash is begun, no
examination of summoned records is
allowed until the court so orders.
Section 301.7609–5(e)(2)(i)—
Intervention in an Enforcement
Proceeding
Section 7609(e)(1) provides for the
suspension of the statute of limitations
with respect to a third-party summons
‘‘for the period during which a
proceeding, and appeals therein, with
respect to the enforcement of such
summons is pending.’’ Proposed
§ 301.7609(e)(2)(i) provides: ‘‘If,
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following issuance of an order to
enforce a third-party summons, a
collateral proceeding is brought
challenging whether production made
by the summoned party fully satisfied
the court order and whether sanctions
should be imposed against the
summoned party for a failure to satisfy
that order, the periods of limitations
remain suspended until all appeals of
the collateral proceeding are disposed
of, or until the expiration of the period
during which an appeal may be taken or
a request for further review of the
collateral proceeding may be made. Any
collateral proceeding to the original
proceeding shall be considered to be a
continuation of the original
proceeding.’’
The commentator suggested that
including collateral proceedings and
related appeals periods within the
suspension period under section
7609(e)(1) goes beyond the statutory
language and the IRS’s authority to
promulgate regulations. The statutory
phrase ‘‘a proceeding, and appeals
therein, with respect to the enforcement
of such summons’’ connotes a category
of court actions that are related to, but
not limited to, a summons enforcement
suit. Thus, section 7609(e)(1) is properly
interpreted to encompass collateral
proceedings and related appeals.
Section 301.7609–5(e)(3)—Final
Resolution of the Summoned Third
Party’s Response to a Summons
Section 7609(e)(2)(B) suspends a
taxpayer’s periods of limitations on
assessment and criminal prosecution
‘‘in the absence of the resolution of the
summoned party’s response to the
summons’’ for a period beginning six
months after service of the summons
and ending on the date of ‘‘final
resolution.’’ Proposed § 301.7609–
5(e)(3) provides that ‘‘final resolution’’
occurs when the summons or any
summons enforcement order is fully
complied with and all appeals are
disposed of or the period for appeal or
further review has expired. The
proposed regulation further provides
that the determination of whether there
has been full compliance will be made
within a reasonable time, given the
volume and complexity of the records
produced, after the later of the giving of
all testimony or the production of all
records requested by the summons. The
proposed regulation additionally
provides that the suspension shall
continue if, following an enforcement
order, collateral proceedings are brought
challenging whether the summoned
party fully satisfied the court order. The
suspension will continue until the
summons or the enforcement order is
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fully complied with and the decision in
the collateral proceeding becomes final,
which occurs when all appeals are
disposed of or when the period for
appeal or further review has expired.
The commentator suggested that
proposed § 301.7609–5(e)(3) be revised
to reflect that the suspension under
section 7609(e)(2) does not apply to a
taxpayer who brings a proceeding to
quash or who intervenes in an
enforcement suit. This suggestion has
not been adopted as the statutory
structure already provides for the
applicability of alternative suspension
periods. This suggestion has also not
been adopted as nothing prevents the
suspension under section 7609(e)(2)
from applying after the expiration of the
suspension under section 7609(e)(1).
The commentator also suggested that
the provisions concerning collateral
proceedings be removed. This
recommendation has not been adopted.
The suspension will only terminate
upon final resolution of the summoned
person’s response to the summons, and
collateral proceedings, such as contempt
proceedings, may be necessary to obtain
a summoned third party’s compliance
with an enforcement order.
The commentator further suggested
that the ‘‘operative fact’’ in determining
whether final resolution has occurred
should be the date of the summoned
person’s ‘‘actual compliance’’ with the
summons, not ‘‘the Service’s
determination as to whether and when
this has occurred.’’ This suggestion has
not been adopted because compliance
can only be determined after the records
are examined. The regulations provide
that the determination of whether there
has been full compliance will be made
within a reasonable time, given the
volume and complexity of the records
produced, after the later of the giving of
all testimony or the production of all
records requested by the summons or
required by any order enforcing any part
of the summons. In addition, as stated
in the preamble to the proposed
regulations, the IRS intends to publish
additional administrative procedures
regarding the compliance determination
in the Internal Revenue Manual. An
aspect of these procedures will involve
the creation of procedures by which
taxpayers can inquire about the
suspension of their periods of
limitations under section 7609(e)(2).
which they are published. This
suggestion was not adopted because
these regulations are interpretative of
statutory provisions that have existed as
law for several years.
Special Analyses
It has been determined that this final
regulation is not a significant regulatory
action as defined in Executive Order
12866. Therefore, a regulatory
assessment is not required. It also has
been determined that section 553(b) of
the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these
regulations and, because these
regulations do not impose a collection
of information under the Paperwork
Reduction Act (44 U.S.C. section 3501),
the Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply to these
regulations. Pursuant to section 7805(f)
of the Code, the regulations, when
published previously in the Notice of
Proposed Rulemaking, were submitted
to the Chief Counsel for Advocacy of the
Small Business Administration for
comment on its impact on small
business.
Drafting Information
The principal author of these
regulations is Elizabeth Rawlins of the
Office of the Associate Chief Counsel,
Procedure and Administration, Internal
Revenue Service.
List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes,
Excise taxes, Gift taxes, Income taxes,
Penalties, Reporting and recordkeeping
requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 301 is
amended as follows:
I
PART 301—PROCEDURE AND
ADMINISTRATION
I Paragraph 1 . The authority citation
for part 301 continues to read, in part,
as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 301.7603–1 is revised
to read as follows:
I
§ 301.7603–1
Service of summons.
(a) In general—(1) Hand delivery or
delivery to place of abode. Except as
Sections 301.7603–1(f); 301.7603–2(c);
otherwise provided in paragraph (a)(2)
301.7609–1(d); 301.7609–2(c); 301.7609– of this section, a summons issued under
3(e); 301.7609–4(d); and 301.7609–5(f)— section 6420(e)(2), 6421(g)(2), 6427(j)(2),
Effective/Applicability Date
or 7602 shall be served by an attested
The commentator suggested making
copy delivered in hand to the person to
these regulations applicable only to
whom it is directed, or left at such
summonses issued after the date on
person’s last and usual place of abode.
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(2) Summonses issued to third-party
recordkeepers. A summons issued
under section 6420(e)(2), 6421(g)(2),
6427(j)(2), or 7602 for the production of
records (or testimony about such
records) by a third-party recordkeeper,
as described in section 7603(b)(2) and
§ 301.7603–2, may also be served by
certified or registered mail to the thirdparty recordkeeper’s last known
address, as defined in § 301.6212–2. If
service to a third-party recordkeeper is
made by certified or registered mail, the
date of service is the date on which the
summons is mailed.
(b) Persons who may serve a
summons. The officers and employees
of the Internal Revenue Service whom
the Commissioner has designated to
carry out the authority described in
§ 301.7602–1(b) to issue a summons are
authorized to serve a summons issued
under section 6420(e)(2), 6421(g)(2),
6427(j)(2), or 7602.
(c) Effect of certificate of service. The
certificate of service signed by the
person serving the summons shall be
evidence of the facts it states on the
hearing of an application for the
enforcement of the summons.
(d) Sufficiency of description of
summoned records. When a summons
requires the production of records, it
shall be sufficient if such records are
described with reasonable certainty.
(e) Records. For purposes of this
section and § 301.7603–2, the term
records includes books, papers, or other
data.
(f) Effective/applicability date. This
section is applicable on April 30, 2008.
I Par. 3. Section 301.7603–2 is added to
read as follows:
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§ 301.7603–2
Third-party recordkeepers.
(a) Definitions—(1) Accountant. A
person is an accountant under section
7603(b)(2)(F) for purposes of
determining whether that person is a
third-party recordkeeper if, on the date
the records described in the summons
were created, the person was registered,
licensed, or certified as an accountant
under the authority of any state,
commonwealth, territory, or possession
of the United States, or of the District of
Columbia.
(2) Attorney. A person is an attorney
under section 7603(b)(2)(E) for purposes
of determining whether that person is a
third-party recordkeeper if, on the date
the records described in the summons
were created, the person was registered,
licensed, or certified as an attorney
under the authority of any state,
commonwealth, territory, or possession
of the United States, or of the District of
Columbia.
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(3) Credit cards—(i) Person extending
credit through credit cards. The term
person extending credit through the use
of credit cards or similar devices under
section 7603(b)(2)(C) generally includes
any person who issues a credit card.
The term does not include a seller of
goods or services who honors credit
cards issued by other parties but who
does not extend credit through the use
of credit cards or similar devices.
(ii) Devices similar to credit cards. An
object is a device similar to a credit card
under section 7603(b)(2)(C) only if it is
physical in nature, such as a charge
plate or similar device that may be
tendered to obtain an extension of
credit. Thus, a person who extends
credit by requiring customers to sign
sales slips without requiring the use of,
or reference to, a physical object issued
by that person is not a third-party
recordkeeper under section
7603(b)(2)(C).
(iii) Debit cards. A debit card is not
a credit card or similar device because
a debit card is not tendered to obtain an
extension of credit.
(4) Enrolled agent. A person is an
enrolled agent under section
7603(b)(2)(I) for purposes of
determining whether that person is a
third-party recordkeeper if the person is
enrolled as an agent authorized to
practice before the Internal Revenue
Service pursuant to Circular 230, 31
CFR Part 10.
(5) Owner or developer of certain
computer code and data. An owner or
developer of computer software source
code under section 7603(b)(2)(J) is a
third-party recordkeeper when
summoned to produce a computer
software source code (as defined in
section 7612(d)(2)), or an executable
code and associated data described in
section 7612(b)(1)(A)(ii), even if that
person did not make or keep records of
another person’s business transactions
or affairs.
(b) When third-party recordkeeper
status arises—(1) In general. Except as
provided in paragraph (a)(5) of this
section, a person listed in section
7603(b)(2) is a third-party recordkeeper
for purposes of section 7609(c)(2)(E) and
§ 301.7603–1 only if the summons
served on that person seeks records (or
testimony regarding such records) of a
third party’s business transactions or
affairs and such recordkeeper made or
kept the records in the capacity of a
third-party recordkeeper. For instance,
an accountant is not a third-party
recordkeeper (by reason of being an
accountant) with respect to the
accountant’s records of a sale of
property by the accountant to another
person. Similarly, a credit card issuer is
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not a third-party recordkeeper (by
reason of being a person extending
credit through the use of credit cards or
similar devices) with respect to—
(i) Records relating to non-credit card
transactions, such as a cash sale by the
issuer to a holder of the issuer’s credit
card; or
(ii) Records relating to transactions
involving the use of another issuer’s
credit card.
(2) Examples. The rules of paragraph
(b)(1) of this section are illustrated by
the following examples:
Example 1. V issues a credit card (the V
card) that is honored by R, a retailer. When
using the V card, C, a customer, signs a sales
slip in triplicate. C, R, and V each retain one
copy. Only the copy held by V is held by a
third-party recordkeeper under section
7603(b)(2), even though R may issue its own
credit card.
Example 2. R, a retailer, issues its own
credit card (the R card) to C, a customer.
When C makes a credit purchase from R
using the R card, C signs a sales slip in
duplicate. C and R each retain one copy.
Because R keeps the copy in its capacity as
credit card issuer, as well as in its capacity
as a retailer, it is a third-party recordkeeper
under section 7603(b)(2) with respect to its
copy of the sales slip.
(c) Effective/applicability date. This
section is applicable on April 30, 2008.
I Par. 4. Sections 301.7609–1 through
301.7609–5 are revised to read as
follows:
§ 301.7609–1 Special procedures for thirdparty summonses.
(a) In general—(1) Section 7609
requires the Internal Revenue Service
(IRS) to follow special procedures when
summoning a third party’s testimony,
records, or computer software source
code. Except as provided in § 301.7609–
2(b), the IRS must provide notice of a
third-party summons to any person
identified in the summons, other than
the person summoned. A person
entitled to notice of a third-party
summons may intervene in any
proceeding brought to enforce the
summons or may bring a proceeding to
quash the summons, regardless of
whether they receive notice of the
summons from the IRS pursuant to
section 7609(a) and § 301.7609–2.
(2) Neither section 7609 nor the
regulations hereunder limit the IRS’s
ability to obtain information, other than
by summons, through formal or
informal procedures authorized by
sections 7601 and 7602.
(b) Cross references. See § 301.7609–
2 for rules relating to persons who must
be notified of a third-party summons
and exceptions to the notification
requirements. See § 301.7609–3 for rules
relating to the rights and duties of
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summoned parties. See § 301.7609–4 for
rules relating to actions to quash a
summons or to intervene in a summons
enforcement proceeding. See
§ 301.7609–5 for rules relating to the
suspension of periods of limitations.
(c) Records. For purposes of
§§ 301.7609–1 through 301.7609–5, the
term records includes books, papers, or
other data.
(d) Effective/applicability date. This
section is applicable on April 30, 2008.
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§ 301.7609–2 Notification of persons
identified in third-party summonses.
(a) In general—(1) Persons entitled to
notice. Except as provided in
§ 301.7609–2(b), the Internal Revenue
Service (IRS) shall give notice of a thirdparty summons to any person, other
than the person summoned, who is
identified in the summons. The only
persons so identified are the person
with respect to whose liability the
summons is issued and any other
person identified in the description of
summoned records or testimony. For
example, if the IRS issues a summons to
a bank with respect to the liability of C
that requires the production of account
records of A and B, both of whom are
named in the summons, the IRS must
notify A, B and C of the summons.
(2) Time for providing notice. If notice
is required by this paragraph, such
notice must be given within three days
of the date on which the summons is
served on the third party, but no later
than 23 days prior to the date fixed in
the summons as the date on which the
examination of the summoned person or
records is scheduled.
(3) Methods for serving notice. Notice
may be served by hand delivery to any
person entitled to notice or by leaving
notice at such person’s last and usual
place of abode. Notice also may be
served by certified or registered mail to
the person’s last known address, as
defined in § 301.6212–2. If service to a
person entitled to notice is made by
certified or registered mail, the date of
service is the date on which the notice
is mailed.
(4) Content of the notice. Notice
required to be given to any person
entitled to notice must be accompanied
by a copy of the summons that has been
served and must include an explanation
of the right to bring a proceeding to
quash the summons. The copy of the
summons accompanying the notice is
not required to contain the attestation
that appears pursuant to section 7603 on
the copy of the summons served on the
summoned person.
(b) Exceptions. The IRS is not
required to provide notice to persons
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identified in the following third-party
summonses:
(1) Summons served on the taxpayer.
The IRS is not required to provide
notice of a summons served on the
person with respect to whose liability
the summons was issued, or any officer
or employee of such person.
(2) Existence of records. The IRS is
not required to provide notice in the
case of a summons issued to determine
whether or not records of the business
transactions or affairs of a person
identified in the summons have been
made or kept.
(3) Numbered account or similar
arrangement. The IRS is not required to
provide notice in the case of a summons
issued solely to determine the identity
of a person having a numbered account
or similar arrangement with a bank or
other institution. An account is a
numbered account or similar
arrangement within the meaning of this
paragraph if it is an account through
which a person may authorize
transactions solely through the use of a
number, symbol, code name, or other
device not involving the disclosure of
the person’s identity. The term person
having a numbered account or similar
arrangement includes the person who
opened the account and any person
authorized to access the account or to
receive records or statements
concerning it.
(4) Summonses in aid of the collection
of liabilities—(i) In general. The IRS is
not required to provide notice in the
case of a summons issued in aid of the
collection of liabilities. A summons is in
aid of the collection of liabilities within
the meaning of this paragraph if it is
issued in connection with the collection
of—
(A) An assessment or judgment
against the person with respect to whose
liability the summons is issued; or
(B) The liability determined at law or
in equity of any transferee or fiduciary
of a person described in paragraph
(b)(4)(i)(A) of this section.
(ii) Examples. The rules of paragraph
(b)(4) of this section are illustrated by
the following examples:
Example 1. A third-party summons is
issued to a bank to determine the amount
held in an account in the name of A, against
whom unpaid income taxes have been
assessed. Notice of the summons is not
required to be given to A or any other
persons identified in the summons because
the summons is issued in connection with
the collection of taxes that have been
assessed.
Example 2. A third-party summons is
issued to determine whether assessments
should be made against A, who is potentially
liable for a trust fund recovery penalty under
section 6672 with respect to the assessed but
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unpaid withholding tax liability of employer
E. The summons is captioned: In the matter
of A. Notice of the summons must be
provided to A and to any other persons
identified in the summons because the
summons was issued with respect to A’s
potential, unassessed liability under section
6672.
(5) Summonses issued by a criminal
investigator. The IRS is not required to
provide notice in the case of a summons
issued by a criminal investigator to a
person other than a third-party
recordkeeper, as defined in section
7603(b). For purposes of section
7609(c)(2)(E), a summons issued by a
criminal investigator is any summons
issued as part of a criminal investigation
by an IRS officer or employee having
authority to conduct a criminal
investigation and to issue a summons.
(6) John Doe summons. The IRS is not
required to provide notice in the case of
a John Doe summons issued under
section 7609(f).
(7) Summons issued pursuant to a
court order to prevent spoliation of
evidence. The IRS is not required to
provide notice in the case of a summons
for which a court determines there is
reasonable cause to believe the giving of
notice may lead to attempts to conceal,
destroy, or alter records relevant to the
examination, to prevent communication
of information from other persons
through intimidation, bribery, or
collusion, or to flee to avoid
prosecution, testifying, or production of
records.
(c) Effective/applicability date. This
section is applicable on April 30, 2008.
§ 301.7609–3 Duty of and protection for
the summoned party.
(a) Duty of the summoned party.
Upon receipt of a summons, the
summoned party must begin to
assemble the summoned records. The
summoned party must be prepared to
produce the summoned records on the
date on which the summons states that
they are to be examined, regardless of
the institution or anticipated institution
of a proceeding to quash or the
summoned party’s intervention in a
proceeding to quash, as allowed under
section 7609(b)(2)(C).
(b) Disclosing summoned party not
liable—(1) In general. A summoned
party, or an agent or employee thereof,
who makes a disclosure of records or
gives testimony as required by a
summons in good faith reliance on the
certificate of the Secretary (as defined in
paragraph (b)(2) of this section) or an
order of a court requiring production of
records or giving of testimony, will not
be liable for any claim arising from such
disclosure brought by any customer, any
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Federal Register / Vol. 73, No. 84 / Wednesday, April 30, 2008 / Rules and Regulations
party with respect to whose tax liability
the summons was issued, or any other
person.
(2) Certificate of the Secretary. The
Secretary may issue to the summoned
party a certificate if the person with
respect to whose liability the summons
was issued expressly consents to the
examination of the records summoned
and the taking of testimony. The
Secretary also may issue to the
summoned party a certificate stating
that—
(i) The 20-day period within which a
person entitled to notice of the
summons may institute a proceeding to
quash the summons has expired; and
(ii) No proceeding has been instituted
within that period.
(c) Reimbursement of costs.
Summoned third parties may be entitled
to reimbursement of their costs of
assembling and preparing to produce
summoned records, to the extent
allowed by section 7610 and
§ 301.7610–1.
(d) Notification of suspension of
periods of limitations in connection
with a John Doe summons—(1)
Requirement of notification. If any
periods of limitations are suspended
under section 7609(e)(2) and
§ 301.7609–5(d) with respect to a John
Doe summons described in section
7609(f), the summoned party is required
under section 7609(i)(4) to provide
notice of such suspension to all persons
with respect to whose liability the
summons was issued.
(2) Content of notification. A
summoned party required to notify a
person of the suspension of the periods
of limitations shall provide the
following information to such person—
(i) A John Doe summons was served
on the summoned party seeking records
that may be relevant to the person’s tax
liability;
(ii) The date on which the summons
was served;
(iii) The tax period(s) to which the
summons relates;
(iv) Six months have passed since
service of the summons and the
summoned party’s response to the
summons has not been finally resolved;
(v) The periods of limitations under
section 6501 (relating to assessment and
collection) and section 6531 (relating to
criminal prosecution), have been
suspended; and
(vi) The date on which suspension of
the periods of limitations under sections
6501 and 6531 began.
(3) Time and manner of notification.
The notification must be made in
writing and may be delivered in person,
by mail sent to the address last known
by the summoned party, or by use of
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16:50 Apr 29, 2008
Jkt 214001
any electronic means of transmission.
Notification should be made as soon as
possible after the suspension of the
periods of limitations begins. Failure by
a summoned party to give notice of the
suspension of periods of limitations as
required by section 7609(i)(4) does not
prevent the suspension of the periods of
limitations under section 7609(e)(2).
(e) Effective/applicability date. This
section is applicable on April 30, 2008.
§ 301.7609–4 Right to intervene; right to
institute a proceeding to quash.
(a) Intervention in proceeding with
respect to enforcement of a summons.
Under section 7609(b)(1), a person
entitled to notice of a summons under
section 7609(a) and § 301.7609–2 is
entitled to intervene in any proceeding
brought under section 7604 with respect
to the enforcement of that summons.
(b) Right to institute a proceeding to
quash—(1) In general. Under section
7609(b), a person entitled to notice of a
summons under section 7609(a) and
§ 301.7609–2 may institute a proceeding
to quash the summons in the United
States district court for the district in
which the summoned person resides or
is found.
(2) Requirements for a proceeding to
quash. To institute a proceeding to
quash a summons, a person entitled to
notice of the summons must, not later
than the 20th day following the day the
notice of the summons was served on or
mailed to such person—
(i) File a petition to quash a summons
in the name of the person entitled to
notice of the summons in the proper
district court;
(ii) Notify the Internal Revenue
Service (IRS) by sending a copy of that
petition to quash by registered or
certified mail to the IRS employee and
office designated in the notice of
summons to receive the copy; and
(iii) Notify the summoned person by
sending by registered or certified mail a
copy of the petition to quash to the
summoned person.
(3) Failure to give timely notice. If a
person entitled to notice of the
summons fails to give proper and timely
notice to either the summoned person or
the IRS in the manner described in this
paragraph, that person has failed to
institute a proceeding to quash and the
district court lacks jurisdiction to hear
the proceeding. For example, if the
person entitled to notice mails a copy of
the petition to the summoned person,
but fails to mail a copy of the petition
to the designated IRS employee and
office, the person entitled to notice has
failed to institute a proceeding to quash.
Similarly, if the person entitled to
notice mails a copy of such petition to
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Fmt 4700
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23347
the summoned person but, instead of
sending a copy of the petition by
registered or certified mail to the
designated IRS employee and office, the
person entitled to notice provides the
designated IRS employee and office the
petition by some other means, the
person entitled to notice has failed to
institute a proceeding to quash.
(4) Failure to institute a proceeding to
quash. If a person entitled to notice fails
to institute a proceeding to quash within
20 days following the day the notice of
the summons was served on or mailed
to such person, the IRS may examine
the summoned records and take
summoned testimony following the
23rd day after notice of the summons
was served on or mailed to the person
entitled to notice.
(c) Presumption no notice has been
mailed. Section 7609(b)(2)(B) permits a
person entitled to notice to institute a
proceeding to quash by filing a petition
in district court and notifying both the
IRS and the summoned person. Unless
the person entitled to notice has notified
both the IRS and the summoned person
in the appropriate manner, the person
entitled to notice has failed to institute
a proceeding to quash. For the purpose
of permitting the IRS to examine the
summoned witnesses and records, it is
presumed that the notification was not
timely mailed if the copy of the petition
was not delivered to the summoned
person or to the person and office
designated to receive the notice on
behalf of the IRS within three days after
the close of the 20-day period allowed
for instituting a proceeding to quash.
(d) Effective/applicability date. This
section is applicable on April 30, 2008.
§ 301.7609–5
limitations.
Suspension of periods of
(a) In general. Except in the case of a
summons that is a designated or related
summons described in section 6503(j),
the following rules relating to the
suspension of certain periods of
limitations apply to all third-party
summonses subject to the notice
requirements of section 7609(a) and to
all John Doe summonses subject to the
requirements of section 7609(f).
(b) Intervention in an action to
enforce the summons—(1) In general. If
a person entitled to notice of a summons
under section 7609(a) and § 301.7609–2
with respect to whose liability the
summons was issued, or such person’s
agent, nominee, or other person acting
under the direction or control of the
person entitled to notice, takes any
action to intervene in a proceeding with
respect to enforcement of such
summons brought pursuant to section
7604, that person’s periods of
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limitations under sections 6501 (relating
to assessment and collection) and 6531
(relating to criminal prosecutions) for
the tax period or periods that are the
subject of the summons are suspended
for the period during which such
proceeding is pending.
(2) Action to intervene. A person
entitled to notice takes any action to
intervene in a proceeding to enforce a
summons within the meaning of
§ 301.7609–4(a) on the date when a
motion to intervene is filed with the
court.
(c) Institution of a proceeding to
quash a summons—(1) In general. If a
person entitled to notice of a summons
under section 7609(a) and § 301.7609–2
with respect to whose liability the
summons was issued, or such person’s
agent, nominee, or other person acting
under the direction or control of such
person, takes any action described in
§ 301.7609–4(b) to institute a proceeding
to quash such summons, that person’s
periods of limitations under sections
6501 and 6531 for the tax period or
periods that are the subject of the
summons are suspended for the period
during which such proceeding is
pending.
(2) Action to institute a proceeding to
quash a summons. A person entitled to
notice takes any action to institute a
proceeding to quash if he or she files a
petition to quash the summons in any
district court, regardless of whether the
timely filing requirements of section
7609(b)(2)(A) or the notice requirements
of section 7609(b)(2)(B) are satisfied. For
example, a person entitled to notice
takes an action to institute a proceeding
to quash a summons for purposes of this
section if that person files a petition to
quash the summons in district court and
notifies the summoned person by
sending a copy of the petition by
registered or certified mail, but fails to
mail a copy of that notice to the
appropriate Internal Revenue Service
(IRS) person and office.
(d) Summoned party’s failure to
finally resolve the response to a
summons after six months from
service—(1) In general. If a third party’s
response to a summons for which the
IRS was required to provide notice to
persons identified in the summons, or to
a John Doe summons described in
section 7609(f), is not finally resolved
within six months after the date of
service of the summons, the periods of
limitations are suspended under
sections 6501 and 6531, for the person
with respect to whose liability the
summons was issued and for any person
whose identity is sought to be obtained
by a John Doe summons, for the tax
period or periods that are the subject of
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16:50 Apr 29, 2008
Jkt 214001
the summons. The suspension shall
begin on the date which is six months
after the service of the summons and
shall end on the date on which there is
a final resolution of the summoned
party’s response to the summons.
(2) Example. The rules of paragraph
(d)(1) of this section are illustrated by
the following example:
A John Doe summons is issued on April 1,
2004, to the promoter of a tax shelter and
seeks the names of all participants in the
shelter in order to investigate the
participants’ income tax liabilities for 2001
and 2002. The district court approves service
of the summons on April 30, 2004, and the
summons is served on the promoter on May
3, 2004. The promoter does not provide the
names of the participants. The periods of
limitations for the participants’ income tax
liabilities and criminal prosecution for 2001
and 2002 are suspended under section
7609(e)(2) beginning on November 3, 2004,
the date which is six months after the date
the John Doe summons was served until the
date on which the promoter’s response to the
summons is finally resolved.
(e) Definitions—(1) Agent, nominee,
etc. A person is the agent, nominee, or
other person of a person entitled to
notice under section 7609(a) and
§ 301.7609–2, and is acting under the
direction or control of the person
entitled to notice for purposes of section
7609(e)(1), if the person entitled to
notice has the ability in fact or at law
to cause the agent, nominee or other
person, to take the actions permitted
under section 7609(b).
(2) Period during which a proceeding
is pending—(i) Intervention in an
enforcement proceeding. The period
during which the periods of limitations
under sections 6501 and 6531 are
suspended under section 7609(e)(1)
begins on the date any person described
in paragraph (b) of this section
intervenes in an action to enforce the
summons. The periods of limitations
remain suspended until all appeals are
disposed of, or until the expiration of
the period during which an appeal may
be taken or a request for further review
may be made. The periods of limitations
remain suspended for the period during
which a proceeding is pending,
regardless of compliance (or partial
compliance) with the summons during
that period. If, following issuance of an
order to enforce a third-party summons,
a collateral proceeding is brought
challenging whether production made
by the summoned party fully satisfied
the court order and whether sanctions
should be imposed against the
summoned party for a failure to satisfy
that order, the periods of limitations
remain suspended until all appeals of
the collateral proceeding are disposed
of, or until the expiration of the period
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during which an appeal may be taken or
a request for further review of the
collateral proceeding may be made. Any
collateral proceeding to the original
proceeding shall be considered to be a
continuation of the original proceeding.
(ii) Proceeding to quash a summons.
The period during which the periods of
limitations under sections 6501 and
6531 are suspended under section
7609(e)(1) begins on the date any person
described in paragraph (c) of this
section files a petition to quash the
summons in district court. The periods
of limitations remain suspended until
all appeals are disposed of, or until
expiration of the period in which an
appeal may be taken or a request for
further review may be made. The
periods of limitations remain suspended
for the period during which a
proceeding is pending, regardless of
compliance (or partial compliance) with
the summons during that period.
(iii) Examples. The rules of paragraph
(e)(2) are illustrated by the following
examples:
Example 1. A revenue agent issues a
summons to A, an accountant for B, requiring
production of records relating to B’s income
tax liabilities for 2002. The summons is
served on A on March 1, 2004. B files a
petition to quash the summons in district
court on March 15, 2004. The district court
dismisses B’s petition on July 1, 2004. B fails
to appeal this decision by filing a notice of
appeal within 60 days from the date of the
district court’s order of dismissal. The
revenue agent notifies A that B did not
appeal the district court’s order. A turns over
all of the records requested in the summons.
The periods of limitations applicable to B for
2002 under sections 6501 and 6531 are
suspended under section 7609(e)(1) from
March 15, 2004, the date B filed a petition
to quash, until August 30, 2004, the last day
on which B could have filed a notice of
appeal.
Example 2. A revenue agent issues a
summons to A, an accountant for B, requiring
production of records relating to B’s income
tax liabilities for 2003. The summons is
served on A on June 1, 2005. B files an
untimely petition to quash the summons in
district court on June 29, 2005. The district
court dismisses B’s petition on July 29, 2005.
B does not file an appeal of the district
court’s order. The periods of limitations
applicable to B for 2003 under sections 6501
and 6531 are suspended under section
7609(e)(1) from June 29, 2005, the date B
filed an untimely petition to quash, until
September 27, 2005, the last day on which
B could have filed a notice of appeal.
(3) Final resolution of the summoned
third party’s response to a summons.
For purposes of section 7609(e)(2)(B),
final resolution with respect to a
summoned party’s response to a thirdparty summons occurs when the
summons or any order enforcing any
part of the summons is fully complied
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with and all appeals or requests for
further review are disposed of, the
period in which an appeal may be taken
has expired or the period in which a
request for further review may be made
has expired. The determination of
whether there has been full compliance
will be made within a reasonable time,
given the volume and complexity of the
records produced, after the later of the
giving of all testimony or the production
of all records requested by the summons
or required by any order enforcing any
part of the summons. If, following an
enforcement order, collateral
proceedings are brought challenging
whether the production made by the
summoned party fully satisfied the
court order and whether sanctions
should be imposed against the
summoned party for a failing to do so,
the suspension of the periods of
limitations shall continue until the
summons or any order enforcing any
part of the summons is fully complied
with and the decision in the collateral
proceeding becomes final. A decision in
a collateral proceeding becomes final
when all appeals are disposed of, the
period in which an appeal may be taken
has expired or the period in which a
request for further review may be made
has expired.
(f) Effective/applicability date. This
section is applicable on April 30, 2008.
Dated: April 17, 2008.
Linda E. Stiff,
Deputy Commissioner for Services and
Enforcement.
Eric Solomon,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. E8–9518 Filed 4–29–08; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Part 2550
RIN 1210–AB10
Default Investment Alternatives Under
Participant Directed Individual Account
Plans
Employee Benefits Security
Administration, Department of Labor.
ACTION: Correcting amendments.
mstockstill on PROD1PC66 with RULES
AGENCY:
The Department published in
the Federal Register of October 24, 2007
(72 FR 60452), a final regulation
providing relief from certain fiduciary
responsibilities for fiduciaries of
participant-directed individual account
SUMMARY:
VerDate Aug<31>2005
16:50 Apr 29, 2008
Jkt 214001
plans who, in the absence of directions
from a participant, invest the
participant’s account in a qualified
default investment alternative. The final
regulation implemented recent
amendments to title I of the Employee
Retirement Income Security Act of 1974
(ERISA) enacted as part of the Pension
Protection Act of 2006, Public Law 109–
280. The Department has determined
that two paragraphs in the final
regulation, and one statement in the
SUPPLEMENTARY INFORMATION, require
correction. Accordingly, this document
corrects the final regulation by revising
these paragraphs.
Effective Date: The amendments
to the final regulation are effective on
April 30, 2008.
Applicability Date: The amendments
to the final regulation apply on and after
December 24, 2007.
DATES:
FOR FURTHER INFORMATION CONTACT:
Allison Wielobob, Office of Regulations
and Interpretations, Employee Benefits
Security Administration, (202) 693–
8500. This is not a toll-free number.
SUPPLEMENTARY INFORMATION:
A. General
Section 624(a) of the Pension
Protection Act of 2006 (Pension
Protection Act) added a new section
404(c)(5) to ERISA. Section 404(c)(5)(A)
of ERISA provides that, for purposes of
section 404(c)(1) of ERISA, a participant
in an individual account plan shall be
treated as exercising control over the
assets in the account with respect to the
amount of contributions and earnings
which, in the absence of an investment
election by the participant, are invested
by the plan in accordance with
regulations prescribed by the Secretary
of Labor. On October 24, 2007, the
Department of Labor (Department)
published a final regulation
implementing the provisions of section
404(c)(5) of ERISA. A fiduciary of a plan
that complies with the final regulation
will not be liable for any loss, or by
reason of any breach, that occurs as a
result of investment in a qualified
default investment alternative. The
regulation describes the types of
investments that qualify as default
investment alternatives under section
404(c)(5) of ERISA.
B. Correcting Amendments
The Department has determined that
one statement in the text of the
SUPPLEMENTARY INFORMATION to the final
regulation and two regulatory
provisions require amendment.
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23349
1. Amendment of Supplementary
Information Text
In the Supplementary Information, 72
FR at 60456, the Department provides
an explanation of paragraph (c)(5)(ii) of
the final regulation. This paragraph
provides that any transfer or permissible
withdrawal from a qualified default
investment alternative resulting from a
participant’s or beneficiary’s election to
make such a transfer or withdrawal
during the 90-day period beginning on
the date of the participant’s first elective
contribution, or other first investment in
a qualified default investment
alternative, shall not be subject to any
restrictions, fees or expenses, other than
certain ongoing administrative and
investment fees. The Department
explained that this provision was
intended to prevent the imposition of
any restriction, fee, or expense on a
transfer or permissible withdrawal of
assets, whether assessed by the plan, the
plan sponsor, or as part of an underlying
investment product or portfolio. The
Department also provided a few
examples of restrictions that might
inhibit a participant’s or beneficiary’s
decision to withdraw, sell or transfer
assets out of a qualified default
investment alternative during this 90day period. One of the cited examples
was a ‘‘round-trip’’ restriction on the
ability of the participant or beneficiary
to reinvest within a defined period of
time. The Department has concluded
that the reference to ‘‘round-trip’’
restrictions was too broad and should
not have been included as an example
of an impermissible restriction. ‘‘Roundtrip’’ restrictions, unlike fees and
expenses assessed directly upon
liquidation of, or transfer from, an
investment, generally affect only a
participant’s ability to reinvest in the
qualified default investment alternative
for a limited period of time. This is not
a restriction prohibited by paragraph
(c)(5)(ii) of the final regulation.
However, to the extent that a ‘‘roundtrip’’ restriction would affect a
participant’s or beneficiary’s ability to
liquidate or transfer from a qualified
default investment alternative or restrict
a participant’s or beneficiary’s ability to
invest in any other investment
alternative available under the plan, it
would be impermissible for purposes of
paragraph (c)(5)(ii) of the final
regulation.
2. Regulatory Text Amendments
The Department is also amending
language in paragraph (e)(3) of the
regulation, describing persons that may
manage a qualified default investment
alternative. In response to comments on
E:\FR\FM\30APR1.SGM
30APR1
]]>Agencies
[Federal Register Volume 73, Number 84 (Wednesday, April 30, 2008)]
[Rules and Regulations]
[Pages 23342-23349]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-9518]
=======================================================================
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[TD 9395]
RIN 1545-BA31
Suspension of Statutes of Limitations in Third-Party and John Doe
Summons Disputes and Expansion of Taxpayers' Rights To Receive Notice
and Seek Judicial Review of Third-Party Summonses
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations relating to third-
party and John Doe summonses. These final regulations reflect
amendments to sections 7603 and 7609 of the Internal Revenue Code of
1986 made by the Internal Revenue Service Restructuring and Reform Act
of 1998, the Omnibus Budget Reconciliation Act of 1990, the Technical
and Miscellaneous Revenue Act of 1988, and the Tax Reform Act of 1986.
These final regulations provide guidance relating to the manner by
which summonses may be served on third-party recordkeepers, the
expanded class of third-party summonses subject to notice requirements
and other procedures, and the suspension of periods of limitations if a
court proceeding is brought involving a challenge to a third-party
summons, or if a third party's response to a summons is not finally
resolved within six months after service. These final regulations
affect third parties who are served with a summons, taxpayers
identified in a third-party summons, and other persons entitled to
notice of a third-party summons.
DATES: Effective Date: These regulations are effective April 30, 2008.
Applicability Date: For the date of applicability, see Sec. Sec.
301.7603-1(f); 301.7603-2(c); 301.7609-1(d); 301.7609-2(c); 301.7609-
3(e); 301.7609-4(d); and 301.7609-5(f).
FOR FURTHER INFORMATION CONTACT: Elizabeth Rawlins at (202) 622-3630
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains final regulations amending the Procedure and
Administration Regulations (26 CFR part 301) under sections 7603 and
7609 of the Internal Revenue Code of 1986 (Code). The final regulations
reflect amendments to sections 7603 and 7609 made by the Internal
Revenue Service Restructuring and Reform Act of 1998 (Pub. L. 105-206,
112 Stat. 685) (RRA 1998), the Technical and Miscellaneous Revenue Act
of 1988 (Pub. L. 100-647, 102 Stat. 3343) (TAMRA 1988), and the Tax
Reform Act of 1986 (Pub. L. 99-514, 100 Stat. 2085) (TRA 1986). The
final regulations also reflect changes made to section 6503(j) in the
Omnibus Budget Reconciliation Act of 1990 (Pub. L. 101-508, 104 Stat.
1388) (OBRA 1990).
On July 21, 2006, the IRS published in the Federal Register a
notice of proposed rulemaking (REG-153037-01; 71 FR 41377) that
interprets the amendments to sections 7603 and 7609. Written comments
from one commentator on several of the proposed sections were received.
No request for a public hearing was received, nor was one held. The
proposed regulations, as revised by this Treasury decision, are
substantially adopted as final regulations.
As described more fully in the preamble to the proposed
regulations, these regulations provide guidance relating to the manner
in which summonses may be served on third-party recordkeepers, the
expanded class of third-party summonses to which the notice
requirements and other procedures apply, the suspension of a taxpayer's
periods of limitations if that taxpayer petitions to quash a third-
party summons or intervenes in a proceeding to enforce such a summons,
and the suspension of a taxpayer's periods of limitations if a summoned
third party does not finally resolve its response to a summons within
six months after service of a summons.
Comments on the Proposed Regulations and Explanation of Changes
Section 301.7609-1(a)(2)--In General
Proposed Sec. 301.7609-1(a)(2) provides that neither section 7609
nor the regulations ``limit the IRS's ability to obtain information,
other than by summons, through formal or informal procedures authorized
by sections 7601 and 7602.'' The commentator suggested that this
provision be prefaced with the
[[Page 23343]]
phrase ``[e]xcept as provided in section 7609 or Treasury Regulations''
and further explained that section 7609 does contain provisions, such
as section 7609(d), that limit the IRS's ability to obtain information
when a summons has been served.
This suggestion has not been adopted in the final regulations.
Proposed Sec. 301.7609-1(a)(2) is consistent with the language of
section 7609(j), which provides: ``Nothing in this section shall be
construed to limit the [IRS's] ability to obtain information, other
than by summons, through formal or informal procedures authorized by
sections 7601 and 7602.'' Section 7609(j) and proposed Sec. 301.7609-
1(a)(2) are directed to situations in which the IRS has not issued a
summons, but is instead seeking information through informal procedures
authorized by sections 7601 and 7602. In these situations, section 7609
and the regulations do not apply.
Section 301.7609-2(a)(1)--Persons Entitled to Notice
Section 7609(a)(1) provides that notice of a third party summons
shall be given to ``any person (other than the person summoned) who is
identified in the summons.'' Proposed Sec. 301.7609-2(a)(1) provides:
``The only persons so identified are the person with respect to whose
liability the summons is issued and any other person identified in the
description of summoned records or testimony. For example, if the IRS
issues a summons to a bank with respect to the liability of C that
requires the production of account records of A and B, both of whom are
named in the summons, the IRS must notify A, B, and C of the summons.''
The commentator suggested that the statutory phrase ``any person *
* * identified in the summons'' should be interpreted more broadly to
encompass persons to whom the summoned records relate who belong to a
specifically identifiable class, but who are not identified by name in
the summons. The commentator offered examples of persons described
generically by phrases, such as ``children'' or ``closely-held
corporations in which the taxpayer is a shareholder.''
This suggestion has not been adopted in the final regulations. The
requirement that an identified person be named in the summons is
consistent with longstanding regulations under section 7609. Nothing in
the statutory amendments to section 7609 since these regulations were
promulgated suggests that Congress intended to change the meaning of
this concept.
The commentator also suggested that the example in the proposed
regulations could be read to mean that a person named in a summons is
only entitled to notice if that person's records are sought from the
third party. This reading is incorrect. The regulations do not
condition the right to notice on a finding that the identified person's
records are sought. Instead, ``any * * * person identified in the
description of summoned records or testimony'' is entitled to notice,
as is the taxpayer with respect to whose liability the summons is
issued.
Section 301.7609-3(a)--Duty of the Summoned Party
Proposed Sec. 301.7609-3(a) provides: ``Upon receipt of a summons,
the summoned party must begin to assemble the summoned records. The
summoned party must be prepared to produce the summoned records on the
date on which the summons states that they are to be examined,
regardless of the institution or anticipated institution of a
proceeding to quash or the summoned party's intervention in a
proceeding to quash, as allowed under section 7609(b)(2)(C).''
The commentator suggested that proposed Sec. 301.7609-3(a) is
overbroad because the statutory provision on which it is based, section
7609(i)(1), is preceded by the heading: ``Recordkeeper Must Assemble
Records and Be Prepared To Produce Records.'' The commentator concluded
that section 7609(i)(1) can apply only to third-party recordkeepers.
This conclusion is not supported by the statutory amendment to section
7609(i)(1) under RRA 98, which replaced the prior reference to ``third-
party recordkeeper'' with the term summoned party. Thus, section
7609(i)(1) applies to all recipients of third-party summonses (other
than certain excepted summonses under section 7609(c)(2)).
The commentator also suggested that proposed Sec. 301.7609-3(a) is
overbroad because the requirements of section 7609(i)(1) do not apply
if a proceeding to quash is brought. Section 7609(i)(1), however, does
not require the summoned party to produce the documents when a petition
to quash has been filed but merely requires the summoned party to
``assemble'' and ``be prepared to produce'' them.
The commentator suggested that proposed Sec. 301.7609-3(a) would
infringe on the rights of those summoned persons who receive a vague or
overbroad summons. This provision, however, does not preclude a
summoned person from raising such a defense in a summons enforcement
proceeding. Accordingly, the IRS and Treasury have concluded that these
suggestions provide no basis for adopting changes in the final
regulations.
Section 301.7609-4(c)--Presumption No Notice of Proceeding To Quash Has
Been Mailed
Section 7609(b) provides that any person entitled to notice of a
summons may bring a proceeding to quash by filing a petition in
district court and mailing notice of the petition to both the IRS and
the summoned person within 20 days of the day the notice was given.
Proposed Sec. 301.7609-4(b)(3) provides that if a person fails to give
proper and timely notice of the petition to quash, then that person has
failed to institute a proceeding to quash and the district court lacks
jurisdiction to hear the proceeding. Proposed Sec. 301.7609-4(c)
provides that ``it is presumed that the notification [of the petition
to quash] was not timely mailed if the copy of the petition was not
delivered to the summoned person or to the person and office designated
to receive the notice on behalf of the IRS within three days after the
close of the 20-day period allowed for instituting a proceeding to
quash.''
The commentator suggested that proposed Sec. 301.7609-4(c) should
be clarified to provide that the presumption of untimeliness would no
longer apply ``if a copy of the petition is subsequently received and
it is determined that it was mailed prior to the close of the 20-day
period.'' Proposed Sec. 301.7609-4(c) is identical, however, in all
salient respects to a provision in the prior regulations that the IRS
has administered since 1986 without controversy. In cases where the IRS
has not received a copy of a petition to quash within three days after
the close of the 20-day period, but it is later determined that a copy
of the petition was timely mailed within the 20-day period, the IRS has
halted the examination of summoned witnesses and records upon receiving
a timely filed petition to quash, consistent with IRM provisions
providing that, if a proceeding to quash is begun, no examination of
summoned records is allowed until the court so orders.
Section 301.7609-5(e)(2)(i)--Intervention in an Enforcement Proceeding
Section 7609(e)(1) provides for the suspension of the statute of
limitations with respect to a third-party summons ``for the period
during which a proceeding, and appeals therein, with respect to the
enforcement of such summons is pending.'' Proposed Sec.
301.7609(e)(2)(i) provides: ``If,
[[Page 23344]]
following issuance of an order to enforce a third-party summons, a
collateral proceeding is brought challenging whether production made by
the summoned party fully satisfied the court order and whether
sanctions should be imposed against the summoned party for a failure to
satisfy that order, the periods of limitations remain suspended until
all appeals of the collateral proceeding are disposed of, or until the
expiration of the period during which an appeal may be taken or a
request for further review of the collateral proceeding may be made.
Any collateral proceeding to the original proceeding shall be
considered to be a continuation of the original proceeding.''
The commentator suggested that including collateral proceedings and
related appeals periods within the suspension period under section
7609(e)(1) goes beyond the statutory language and the IRS's authority
to promulgate regulations. The statutory phrase ``a proceeding, and
appeals therein, with respect to the enforcement of such summons''
connotes a category of court actions that are related to, but not
limited to, a summons enforcement suit. Thus, section 7609(e)(1) is
properly interpreted to encompass collateral proceedings and related
appeals.
Section 301.7609-5(e)(3)--Final Resolution of the Summoned Third
Party's Response to a Summons
Section 7609(e)(2)(B) suspends a taxpayer's periods of limitations
on assessment and criminal prosecution ``in the absence of the
resolution of the summoned party's response to the summons'' for a
period beginning six months after service of the summons and ending on
the date of ``final resolution.'' Proposed Sec. 301.7609-5(e)(3)
provides that ``final resolution'' occurs when the summons or any
summons enforcement order is fully complied with and all appeals are
disposed of or the period for appeal or further review has expired. The
proposed regulation further provides that the determination of whether
there has been full compliance will be made within a reasonable time,
given the volume and complexity of the records produced, after the
later of the giving of all testimony or the production of all records
requested by the summons. The proposed regulation additionally provides
that the suspension shall continue if, following an enforcement order,
collateral proceedings are brought challenging whether the summoned
party fully satisfied the court order. The suspension will continue
until the summons or the enforcement order is fully complied with and
the decision in the collateral proceeding becomes final, which occurs
when all appeals are disposed of or when the period for appeal or
further review has expired.
The commentator suggested that proposed Sec. 301.7609-5(e)(3) be
revised to reflect that the suspension under section 7609(e)(2) does
not apply to a taxpayer who brings a proceeding to quash or who
intervenes in an enforcement suit. This suggestion has not been adopted
as the statutory structure already provides for the applicability of
alternative suspension periods. This suggestion has also not been
adopted as nothing prevents the suspension under section 7609(e)(2)
from applying after the expiration of the suspension under section
7609(e)(1).
The commentator also suggested that the provisions concerning
collateral proceedings be removed. This recommendation has not been
adopted. The suspension will only terminate upon final resolution of
the summoned person's response to the summons, and collateral
proceedings, such as contempt proceedings, may be necessary to obtain a
summoned third party's compliance with an enforcement order.
The commentator further suggested that the ``operative fact'' in
determining whether final resolution has occurred should be the date of
the summoned person's ``actual compliance'' with the summons, not ``the
Service's determination as to whether and when this has occurred.''
This suggestion has not been adopted because compliance can only be
determined after the records are examined. The regulations provide that
the determination of whether there has been full compliance will be
made within a reasonable time, given the volume and complexity of the
records produced, after the later of the giving of all testimony or the
production of all records requested by the summons or required by any
order enforcing any part of the summons. In addition, as stated in the
preamble to the proposed regulations, the IRS intends to publish
additional administrative procedures regarding the compliance
determination in the Internal Revenue Manual. An aspect of these
procedures will involve the creation of procedures by which taxpayers
can inquire about the suspension of their periods of limitations under
section 7609(e)(2).
Sections 301.7603-1(f); 301.7603-2(c); 301.7609-1(d); 301.7609-2(c);
301.7609-3(e); 301.7609-4(d); and 301.7609-5(f)--Effective/
Applicability Date
The commentator suggested making these regulations applicable only
to summonses issued after the date on which they are published. This
suggestion was not adopted because these regulations are interpretative
of statutory provisions that have existed as law for several years.
Special Analyses
It has been determined that this final regulation is not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. It also has been
determined that section 553(b) of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these regulations and, because
these regulations do not impose a collection of information under the
Paperwork Reduction Act (44 U.S.C. section 3501), the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does not apply to these
regulations. Pursuant to section 7805(f) of the Code, the regulations,
when published previously in the Notice of Proposed Rulemaking, were
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business.
Drafting Information
The principal author of these regulations is Elizabeth Rawlins of
the Office of the Associate Chief Counsel, Procedure and
Administration, Internal Revenue Service.
List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
0
Accordingly, 26 CFR part 301 is amended as follows:
PART 301--PROCEDURE AND ADMINISTRATION
0
Paragraph 1 . The authority citation for part 301 continues to read, in
part, as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 301.7603-1 is revised to read as follows:
Sec. 301.7603-1 Service of summons.
(a) In general--(1) Hand delivery or delivery to place of abode.
Except as otherwise provided in paragraph (a)(2) of this section, a
summons issued under section 6420(e)(2), 6421(g)(2), 6427(j)(2), or
7602 shall be served by an attested copy delivered in hand to the
person to whom it is directed, or left at such person's last and usual
place of abode.
[[Page 23345]]
(2) Summonses issued to third-party recordkeepers. A summons issued
under section 6420(e)(2), 6421(g)(2), 6427(j)(2), or 7602 for the
production of records (or testimony about such records) by a third-
party recordkeeper, as described in section 7603(b)(2) and Sec.
301.7603-2, may also be served by certified or registered mail to the
third-party recordkeeper's last known address, as defined in Sec.
301.6212-2. If service to a third-party recordkeeper is made by
certified or registered mail, the date of service is the date on which
the summons is mailed.
(b) Persons who may serve a summons. The officers and employees of
the Internal Revenue Service whom the Commissioner has designated to
carry out the authority described in Sec. 301.7602-1(b) to issue a
summons are authorized to serve a summons issued under section
6420(e)(2), 6421(g)(2), 6427(j)(2), or 7602.
(c) Effect of certificate of service. The certificate of service
signed by the person serving the summons shall be evidence of the facts
it states on the hearing of an application for the enforcement of the
summons.
(d) Sufficiency of description of summoned records. When a summons
requires the production of records, it shall be sufficient if such
records are described with reasonable certainty.
(e) Records. For purposes of this section and Sec. 301.7603-2, the
term records includes books, papers, or other data.
(f) Effective/applicability date. This section is applicable on
April 30, 2008.
0
Par. 3. Section 301.7603-2 is added to read as follows:
Sec. 301.7603-2 Third-party recordkeepers.
(a) Definitions--(1) Accountant. A person is an accountant under
section 7603(b)(2)(F) for purposes of determining whether that person
is a third-party recordkeeper if, on the date the records described in
the summons were created, the person was registered, licensed, or
certified as an accountant under the authority of any state,
commonwealth, territory, or possession of the United States, or of the
District of Columbia.
(2) Attorney. A person is an attorney under section 7603(b)(2)(E)
for purposes of determining whether that person is a third-party
recordkeeper if, on the date the records described in the summons were
created, the person was registered, licensed, or certified as an
attorney under the authority of any state, commonwealth, territory, or
possession of the United States, or of the District of Columbia.
(3) Credit cards--(i) Person extending credit through credit cards.
The term person extending credit through the use of credit cards or
similar devices under section 7603(b)(2)(C) generally includes any
person who issues a credit card. The term does not include a seller of
goods or services who honors credit cards issued by other parties but
who does not extend credit through the use of credit cards or similar
devices.
(ii) Devices similar to credit cards. An object is a device similar
to a credit card under section 7603(b)(2)(C) only if it is physical in
nature, such as a charge plate or similar device that may be tendered
to obtain an extension of credit. Thus, a person who extends credit by
requiring customers to sign sales slips without requiring the use of,
or reference to, a physical object issued by that person is not a
third-party recordkeeper under section 7603(b)(2)(C).
(iii) Debit cards. A debit card is not a credit card or similar
device because a debit card is not tendered to obtain an extension of
credit.
(4) Enrolled agent. A person is an enrolled agent under section
7603(b)(2)(I) for purposes of determining whether that person is a
third-party recordkeeper if the person is enrolled as an agent
authorized to practice before the Internal Revenue Service pursuant to
Circular 230, 31 CFR Part 10.
(5) Owner or developer of certain computer code and data. An owner
or developer of computer software source code under section
7603(b)(2)(J) is a third-party recordkeeper when summoned to produce a
computer software source code (as defined in section 7612(d)(2)), or an
executable code and associated data described in section
7612(b)(1)(A)(ii), even if that person did not make or keep records of
another person's business transactions or affairs.
(b) When third-party recordkeeper status arises--(1) In general.
Except as provided in paragraph (a)(5) of this section, a person listed
in section 7603(b)(2) is a third-party recordkeeper for purposes of
section 7609(c)(2)(E) and Sec. 301.7603-1 only if the summons served
on that person seeks records (or testimony regarding such records) of a
third party's business transactions or affairs and such recordkeeper
made or kept the records in the capacity of a third-party recordkeeper.
For instance, an accountant is not a third-party recordkeeper (by
reason of being an accountant) with respect to the accountant's records
of a sale of property by the accountant to another person. Similarly, a
credit card issuer is not a third-party recordkeeper (by reason of
being a person extending credit through the use of credit cards or
similar devices) with respect to--
(i) Records relating to non-credit card transactions, such as a
cash sale by the issuer to a holder of the issuer's credit card; or
(ii) Records relating to transactions involving the use of another
issuer's credit card.
(2) Examples. The rules of paragraph (b)(1) of this section are
illustrated by the following examples:
Example 1. V issues a credit card (the V card) that is honored
by R, a retailer. When using the V card, C, a customer, signs a
sales slip in triplicate. C, R, and V each retain one copy. Only the
copy held by V is held by a third-party recordkeeper under section
7603(b)(2), even though R may issue its own credit card.
Example 2. R, a retailer, issues its own credit card (the R
card) to C, a customer. When C makes a credit purchase from R using
the R card, C signs a sales slip in duplicate. C and R each retain
one copy. Because R keeps the copy in its capacity as credit card
issuer, as well as in its capacity as a retailer, it is a third-
party recordkeeper under section 7603(b)(2) with respect to its copy
of the sales slip.
(c) Effective/applicability date. This section is applicable on
April 30, 2008.
0
Par. 4. Sections 301.7609-1 through 301.7609-5 are revised to read as
follows:
Sec. 301.7609-1 Special procedures for third-party summonses.
(a) In general--(1) Section 7609 requires the Internal Revenue
Service (IRS) to follow special procedures when summoning a third
party's testimony, records, or computer software source code. Except as
provided in Sec. 301.7609-2(b), the IRS must provide notice of a
third-party summons to any person identified in the summons, other than
the person summoned. A person entitled to notice of a third-party
summons may intervene in any proceeding brought to enforce the summons
or may bring a proceeding to quash the summons, regardless of whether
they receive notice of the summons from the IRS pursuant to section
7609(a) and Sec. 301.7609-2.
(2) Neither section 7609 nor the regulations hereunder limit the
IRS's ability to obtain information, other than by summons, through
formal or informal procedures authorized by sections 7601 and 7602.
(b) Cross references. See Sec. 301.7609-2 for rules relating to
persons who must be notified of a third-party summons and exceptions to
the notification requirements. See Sec. 301.7609-3 for rules relating
to the rights and duties of
[[Page 23346]]
summoned parties. See Sec. 301.7609-4 for rules relating to actions to
quash a summons or to intervene in a summons enforcement proceeding.
See Sec. 301.7609-5 for rules relating to the suspension of periods of
limitations.
(c) Records. For purposes of Sec. Sec. 301.7609-1 through
301.7609-5, the term records includes books, papers, or other data.
(d) Effective/applicability date. This section is applicable on
April 30, 2008.
Sec. 301.7609-2 Notification of persons identified in third-party
summonses.
(a) In general--(1) Persons entitled to notice. Except as provided
in Sec. 301.7609-2(b), the Internal Revenue Service (IRS) shall give
notice of a third-party summons to any person, other than the person
summoned, who is identified in the summons. The only persons so
identified are the person with respect to whose liability the summons
is issued and any other person identified in the description of
summoned records or testimony. For example, if the IRS issues a summons
to a bank with respect to the liability of C that requires the
production of account records of A and B, both of whom are named in the
summons, the IRS must notify A, B and C of the summons.
(2) Time for providing notice. If notice is required by this
paragraph, such notice must be given within three days of the date on
which the summons is served on the third party, but no later than 23
days prior to the date fixed in the summons as the date on which the
examination of the summoned person or records is scheduled.
(3) Methods for serving notice. Notice may be served by hand
delivery to any person entitled to notice or by leaving notice at such
person's last and usual place of abode. Notice also may be served by
certified or registered mail to the person's last known address, as
defined in Sec. 301.6212-2. If service to a person entitled to notice
is made by certified or registered mail, the date of service is the
date on which the notice is mailed.
(4) Content of the notice. Notice required to be given to any
person entitled to notice must be accompanied by a copy of the summons
that has been served and must include an explanation of the right to
bring a proceeding to quash the summons. The copy of the summons
accompanying the notice is not required to contain the attestation that
appears pursuant to section 7603 on the copy of the summons served on
the summoned person.
(b) Exceptions. The IRS is not required to provide notice to
persons identified in the following third-party summonses:
(1) Summons served on the taxpayer. The IRS is not required to
provide notice of a summons served on the person with respect to whose
liability the summons was issued, or any officer or employee of such
person.
(2) Existence of records. The IRS is not required to provide notice
in the case of a summons issued to determine whether or not records of
the business transactions or affairs of a person identified in the
summons have been made or kept.
(3) Numbered account or similar arrangement. The IRS is not
required to provide notice in the case of a summons issued solely to
determine the identity of a person having a numbered account or similar
arrangement with a bank or other institution. An account is a numbered
account or similar arrangement within the meaning of this paragraph if
it is an account through which a person may authorize transactions
solely through the use of a number, symbol, code name, or other device
not involving the disclosure of the person's identity. The term person
having a numbered account or similar arrangement includes the person
who opened the account and any person authorized to access the account
or to receive records or statements concerning it.
(4) Summonses in aid of the collection of liabilities--(i) In
general. The IRS is not required to provide notice in the case of a
summons issued in aid of the collection of liabilities. A summons is in
aid of the collection of liabilities within the meaning of this
paragraph if it is issued in connection with the collection of--
(A) An assessment or judgment against the person with respect to
whose liability the summons is issued; or
(B) The liability determined at law or in equity of any transferee
or fiduciary of a person described in paragraph (b)(4)(i)(A) of this
section.
(ii) Examples. The rules of paragraph (b)(4) of this section are
illustrated by the following examples:
Example 1. A third-party summons is issued to a bank to
determine the amount held in an account in the name of A, against
whom unpaid income taxes have been assessed. Notice of the summons
is not required to be given to A or any other persons identified in
the summons because the summons is issued in connection with the
collection of taxes that have been assessed.
Example 2. A third-party summons is issued to determine whether
assessments should be made against A, who is potentially liable for
a trust fund recovery penalty under section 6672 with respect to the
assessed but unpaid withholding tax liability of employer E. The
summons is captioned: In the matter of A. Notice of the summons must
be provided to A and to any other persons identified in the summons
because the summons was issued with respect to A's potential,
unassessed liability under section 6672.
(5) Summonses issued by a criminal investigator. The IRS is not
required to provide notice in the case of a summons issued by a
criminal investigator to a person other than a third-party
recordkeeper, as defined in section 7603(b). For purposes of section
7609(c)(2)(E), a summons issued by a criminal investigator is any
summons issued as part of a criminal investigation by an IRS officer or
employee having authority to conduct a criminal investigation and to
issue a summons.
(6) John Doe summons. The IRS is not required to provide notice in
the case of a John Doe summons issued under section 7609(f).
(7) Summons issued pursuant to a court order to prevent spoliation
of evidence. The IRS is not required to provide notice in the case of a
summons for which a court determines there is reasonable cause to
believe the giving of notice may lead to attempts to conceal, destroy,
or alter records relevant to the examination, to prevent communication
of information from other persons through intimidation, bribery, or
collusion, or to flee to avoid prosecution, testifying, or production
of records.
(c) Effective/applicability date. This section is applicable on
April 30, 2008.
Sec. 301.7609-3 Duty of and protection for the summoned party.
(a) Duty of the summoned party. Upon receipt of a summons, the
summoned party must begin to assemble the summoned records. The
summoned party must be prepared to produce the summoned records on the
date on which the summons states that they are to be examined,
regardless of the institution or anticipated institution of a
proceeding to quash or the summoned party's intervention in a
proceeding to quash, as allowed under section 7609(b)(2)(C).
(b) Disclosing summoned party not liable--(1) In general. A
summoned party, or an agent or employee thereof, who makes a disclosure
of records or gives testimony as required by a summons in good faith
reliance on the certificate of the Secretary (as defined in paragraph
(b)(2) of this section) or an order of a court requiring production of
records or giving of testimony, will not be liable for any claim
arising from such disclosure brought by any customer, any
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party with respect to whose tax liability the summons was issued, or
any other person.
(2) Certificate of the Secretary. The Secretary may issue to the
summoned party a certificate if the person with respect to whose
liability the summons was issued expressly consents to the examination
of the records summoned and the taking of testimony. The Secretary also
may issue to the summoned party a certificate stating that--
(i) The 20-day period within which a person entitled to notice of
the summons may institute a proceeding to quash the summons has
expired; and
(ii) No proceeding has been instituted within that period.
(c) Reimbursement of costs. Summoned third parties may be entitled
to reimbursement of their costs of assembling and preparing to produce
summoned records, to the extent allowed by section 7610 and Sec.
301.7610-1.
(d) Notification of suspension of periods of limitations in
connection with a John Doe summons--(1) Requirement of notification. If
any periods of limitations are suspended under section 7609(e)(2) and
Sec. 301.7609-5(d) with respect to a John Doe summons described in
section 7609(f), the summoned party is required under section
7609(i)(4) to provide notice of such suspension to all persons with
respect to whose liability the summons was issued.
(2) Content of notification. A summoned party required to notify a
person of the suspension of the periods of limitations shall provide
the following information to such person--
(i) A John Doe summons was served on the summoned party seeking
records that may be relevant to the person's tax liability;
(ii) The date on which the summons was served;
(iii) The tax period(s) to which the summons relates;
(iv) Six months have passed since service of the summons and the
summoned party's response to the summons has not been finally resolved;
(v) The periods of limitations under section 6501 (relating to
assessment and collection) and section 6531 (relating to criminal
prosecution), have been suspended; and
(vi) The date on which suspension of the periods of limitations
under sections 6501 and 6531 began.
(3) Time and manner of notification. The notification must be made
in writing and may be delivered in person, by mail sent to the address
last known by the summoned party, or by use of any electronic means of
transmission. Notification should be made as soon as possible after the
suspension of the periods of limitations begins. Failure by a summoned
party to give notice of the suspension of periods of limitations as
required by section 7609(i)(4) does not prevent the suspension of the
periods of limitations under section 7609(e)(2).
(e) Effective/applicability date. This section is applicable on
April 30, 2008.
Sec. 301.7609-4 Right to intervene; right to institute a proceeding
to quash.
(a) Intervention in proceeding with respect to enforcement of a
summons. Under section 7609(b)(1), a person entitled to notice of a
summons under section 7609(a) and Sec. 301.7609-2 is entitled to
intervene in any proceeding brought under section 7604 with respect to
the enforcement of that summons.
(b) Right to institute a proceeding to quash--(1) In general. Under
section 7609(b), a person entitled to notice of a summons under section
7609(a) and Sec. 301.7609-2 may institute a proceeding to quash the
summons in the United States district court for the district in which
the summoned person resides or is found.
(2) Requirements for a proceeding to quash. To institute a
proceeding to quash a summons, a person entitled to notice of the
summons must, not later than the 20th day following the day the notice
of the summons was served on or mailed to such person--
(i) File a petition to quash a summons in the name of the person
entitled to notice of the summons in the proper district court;
(ii) Notify the Internal Revenue Service (IRS) by sending a copy of
that petition to quash by registered or certified mail to the IRS
employee and office designated in the notice of summons to receive the
copy; and
(iii) Notify the summoned person by sending by registered or
certified mail a copy of the petition to quash to the summoned person.
(3) Failure to give timely notice. If a person entitled to notice
of the summons fails to give proper and timely notice to either the
summoned person or the IRS in the manner described in this paragraph,
that person has failed to institute a proceeding to quash and the
district court lacks jurisdiction to hear the proceeding. For example,
if the person entitled to notice mails a copy of the petition to the
summoned person, but fails to mail a copy of the petition to the
designated IRS employee and office, the person entitled to notice has
failed to institute a proceeding to quash. Similarly, if the person
entitled to notice mails a copy of such petition to the summoned person
but, instead of sending a copy of the petition by registered or
certified mail to the designated IRS employee and office, the person
entitled to notice provides the designated IRS employee and office the
petition by some other means, the person entitled to notice has failed
to institute a proceeding to quash.
(4) Failure to institute a proceeding to quash. If a person
entitled to notice fails to institute a proceeding to quash within 20
days following the day the notice of the summons was served on or
mailed to such person, the IRS may examine the summoned records and
take summoned testimony following the 23rd day after notice of the
summons was served on or mailed to the person entitled to notice.
(c) Presumption no notice has been mailed. Section 7609(b)(2)(B)
permits a person entitled to notice to institute a proceeding to quash
by filing a petition in district court and notifying both the IRS and
the summoned person. Unless the person entitled to notice has notified
both the IRS and the summoned person in the appropriate manner, the
person entitled to notice has failed to institute a proceeding to
quash. For the purpose of permitting the IRS to examine the summoned
witnesses and records, it is presumed that the notification was not
timely mailed if the copy of the petition was not delivered to the
summoned person or to the person and office designated to receive the
notice on behalf of the IRS within three days after the close of the
20-day period allowed for instituting a proceeding to quash.
(d) Effective/applicability date. This section is applicable on
April 30, 2008.
Sec. 301.7609-5 Suspension of periods of limitations.
(a) In general. Except in the case of a summons that is a
designated or related summons described in section 6503(j), the
following rules relating to the suspension of certain periods of
limitations apply to all third-party summonses subject to the notice
requirements of section 7609(a) and to all John Doe summonses subject
to the requirements of section 7609(f).
(b) Intervention in an action to enforce the summons--(1) In
general. If a person entitled to notice of a summons under section
7609(a) and Sec. 301.7609-2 with respect to whose liability the
summons was issued, or such person's agent, nominee, or other person
acting under the direction or control of the person entitled to notice,
takes any action to intervene in a proceeding with respect to
enforcement of such summons brought pursuant to section 7604, that
person's periods of
[[Page 23348]]
limitations under sections 6501 (relating to assessment and collection)
and 6531 (relating to criminal prosecutions) for the tax period or
periods that are the subject of the summons are suspended for the
period during which such proceeding is pending.
(2) Action to intervene. A person entitled to notice takes any
action to intervene in a proceeding to enforce a summons within the
meaning of Sec. 301.7609-4(a) on the date when a motion to intervene
is filed with the court.
(c) Institution of a proceeding to quash a summons--(1) In general.
If a person entitled to notice of a summons under section 7609(a) and
Sec. 301.7609-2 with respect to whose liability the summons was
issued, or such person's agent, nominee, or other person acting under
the direction or control of such person, takes any action described in
Sec. 301.7609-4(b) to institute a proceeding to quash such summons,
that person's periods of limitations under sections 6501 and 6531 for
the tax period or periods that are the subject of the summons are
suspended for the period during which such proceeding is pending.
(2) Action to institute a proceeding to quash a summons. A person
entitled to notice takes any action to institute a proceeding to quash
if he or she files a petition to quash the summons in any district
court, regardless of whether the timely filing requirements of section
7609(b)(2)(A) or the notice requirements of section 7609(b)(2)(B) are
satisfied. For example, a person entitled to notice takes an action to
institute a proceeding to quash a summons for purposes of this section
if that person files a petition to quash the summons in district court
and notifies the summoned person by sending a copy of the petition by
registered or certified mail, but fails to mail a copy of that notice
to the appropriate Internal Revenue Service (IRS) person and office.
(d) Summoned party's failure to finally resolve the response to a
summons after six months from service--(1) In general. If a third
party's response to a summons for which the IRS was required to provide
notice to persons identified in the summons, or to a John Doe summons
described in section 7609(f), is not finally resolved within six months
after the date of service of the summons, the periods of limitations
are suspended under sections 6501 and 6531, for the person with respect
to whose liability the summons was issued and for any person whose
identity is sought to be obtained by a John Doe summons, for the tax
period or periods that are the subject of the summons. The suspension
shall begin on the date which is six months after the service of the
summons and shall end on the date on which there is a final resolution
of the summoned party's response to the summons.
(2) Example. The rules of paragraph (d)(1) of this section are
illustrated by the following example:
A John Doe summons is issued on April 1, 2004, to the promoter
of a tax shelter and seeks the names of all participants in the
shelter in order to investigate the participants' income tax
liabilities for 2001 and 2002. The district court approves service
of the summons on April 30, 2004, and the summons is served on the
promoter on May 3, 2004. The promoter does not provide the names of
the participants. The periods of limitations for the participants'
income tax liabilities and criminal prosecution for 2001 and 2002
are suspended under section 7609(e)(2) beginning on November 3,
2004, the date which is six months after the date the John Doe
summons was served until the date on which the promoter's response
to the summons is finally resolved.
(e) Definitions--(1) Agent, nominee, etc. A person is the agent,
nominee, or other person of a person entitled to notice under section
7609(a) and Sec. 301.7609-2, and is acting under the direction or
control of the person entitled to notice for purposes of section
7609(e)(1), if the person entitled to notice has the ability in fact or
at law to cause the agent, nominee or other person, to take the actions
permitted under section 7609(b).
(2) Period during which a proceeding is pending--(i) Intervention
in an enforcement proceeding. The period during which the periods of
limitations under sections 6501 and 6531 are suspended under section
7609(e)(1) begins on the date any person described in paragraph (b) of
this section intervenes in an action to enforce the summons. The
periods of limitations remain suspended until all appeals are disposed
of, or until the expiration of the period during which an appeal may be
taken or a request for further review may be made. The periods of
limitations remain suspended for the period during which a proceeding
is pending, regardless of compliance (or partial compliance) with the
summons during that period. If, following issuance of an order to
enforce a third-party summons, a collateral proceeding is brought
challenging whether production made by the summoned party fully
satisfied the court order and whether sanctions should be imposed
against the summoned party for a failure to satisfy that order, the
periods of limitations remain suspended until all appeals of the
collateral proceeding are disposed of, or until the expiration of the
period during which an appeal may be taken or a request for further
review of the collateral proceeding may be made. Any collateral
proceeding to the original proceeding shall be considered to be a
continuation of the original proceeding.
(ii) Proceeding to quash a summons. The period during which the
periods of limitations under sections 6501 and 6531 are suspended under
section 7609(e)(1) begins on the date any person described in paragraph
(c) of this section files a petition to quash the summons in district
court. The periods of limitations remain suspended until all appeals
are disposed of, or until expiration of the period in which an appeal
may be taken or a request for further review may be made. The periods
of limitations remain suspended for the period during which a
proceeding is pending, regardless of compliance (or partial compliance)
with the summons during that period.
(iii) Examples. The rules of paragraph (e)(2) are illustrated by
the following examples:
Example 1. A revenue agent issues a summons to A, an accountant
for B, requiring production of records relating to B's income tax
liabilities for 2002. The summons is served on A on March 1, 2004. B
files a petition to quash the summons in district court on March 15,
2004. The district court dismisses B's petition on July 1, 2004. B
fails to appeal this decision by filing a notice of appeal within 60
days from the date of the district court's order of dismissal. The
revenue agent notifies A that B did not appeal the district court's
order. A turns over all of the records requested in the summons. The
periods of limitations applicable to B for 2002 under sections 6501
and 6531 are suspended under section 7609(e)(1) from March 15, 2004,
the date B filed a petition to quash, until August 30, 2004, the
last day on which B could have filed a notice of appeal.
Example 2. A revenue agent issues a summons to A, an accountant
for B, requiring production of records relating to B's income tax
liabilities for 2003. The summons is served on A on June 1, 2005. B
files an untimely petition to quash the summons in district court on
June 29, 2005. The district court dismisses B's petition on July 29,
2005. B does not file an appeal of the district court's order. The
periods of limitations applicable to B for 2003 under sections 6501
and 6531 are suspended under section 7609(e)(1) from June 29, 2005,
the date B filed an untimely petition to quash, until September 27,
2005, the last day on which B could have filed a notice of appeal.
(3) Final resolution of the summoned third party's response to a
summons. For purposes of section 7609(e)(2)(B), final resolution with
respect to a summoned party's response to a third-party summons occurs
when the summons or any order enforcing any part of the summons is
fully complied
[[Page 23349]]
with and all appeals or requests for further review are disposed of,
the period in which an appeal may be taken has expired or the period in
which a request for further review may be made has expired. The
determination of whether there has been full compliance will be made
within a reasonable time, given the volume and complexity of the
records produced, after the later of the giving of all testimony or the
production of all records requested by the summons or required by any
order enforcing any part of the summons. If, following an enforcement
order, collateral proceedings are brought challenging whether the
production made by the summoned party fully satisfied the court order
and whether sanctions should be imposed against the summoned party for
a failing to do so, the suspension of the periods of limitations shall
continue until the summons or any order enforcing any part of the
summons is fully complied with and the decision in the collateral
proceeding becomes final. A decision in a collateral proceeding becomes
final when all appeals are disposed of, the period in which an appeal
may be taken has expired or the period in which a request for further
review may be made has expired.
(f) Effective/applicability date. This section is applicable on
April 30, 2008.
Dated: April 17, 2008.
Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. E8-9518 Filed 4-29-08; 8:45 am]
BILLING CODE 4830-01-P
