WASHINGTON (CN) — The Supreme Court on Thursday ruled against law firms and an attorney who sued the IRS, finding that the agency was not required to notify the parties of a summons for their financial records.
Chief Justice John Roberts wrote the opinion for the unanimous court. The George W. Bush appointee said there has always been a push and pull between Americans' reluctance to pay taxes, so Congress gave the IRS broad power to collect unpaid taxes.
“Congress has given the IRS considerable power to go after unpaid taxes,” Roberts wrote. “One tool at the Service’s disposal is the authority to summon people with information concerning a delinquent taxpayer.”
Even with its broad authority, the agency is still beholden to taxpayers, the justices ruled. The IRS generally must notify taxpayers when issuing summons, but as with this case, there are exceptions to that rule.
After failing to pay taxes for several years, the IRS found that Remo Polselli was liable for $2 million. The government attempted to locate Polselli’s assets to satisfy what he owed the agency and found he had extensive financial dealings with his wife, Hanna Karcho Polselli.
The government determined that Polselli could access his wife’s accounts, so they obtained her bank records to locate any assets held in Polselli’s name. After summoning records from Wells Fargo Bank, the IRS targeted the law firm, Abraham and Rose.
The firm resisted the government’s attempts to obtain Polselli’s records so the IRS issued a summons to the banks where Abraham and Rose held accounts. When the banks notified the Hanna Polselli and the firms of the summons, they filed a suit to quash them.
Dismissed by the district court and affirmed on appeal, Polselli and the firms then turned to the Supreme Court for relief.
The government argues it did not have to notify Polselli or the firms of the summons because of an exception to the law that applies to summons attempting to collect taxpayer liability payments.
“A summons issued in aid of collection is one that helps the government obtain payment of taxes due,” U.S. Solicitor General Elizabeth Prelogar wrote. “And the other terms of the exception are satisfied when there has been an assessment against the taxpayer whose liability the Service seeks to collect.”
Polselli and the firms argued that Congress never authorized this “inquisitorial process.”
“The IRS’s claim to such a clandestine summons power disrespects our legal tradition, disappoints our democratic expectations, and defies § 7609 of the Internal Revenue Code,” Shay Dvoretzky, an attorney with Skadden, Arps, Slate representing Polselli and the firms, wrote in a brief.
Roberts said the IRS did not need to notify Polselli and the law firm because it had already begun collecting on the tax liability. He said this exception to the notification requirement fits squarely within the statute.
“A straightforward reading of the statutory text supplies a ready answer: The notice exception does not contain such a limitation,” Roberts wrote.
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