Polselli v. Internal Revenue Service

Remo Polselli owed substantial federal tax liabilities. To collect the assessed amount, the IRS issued administrative summonses to banks and an accounting firm for financial records belonging to his wife, Hanna Karcho Polselli, without notifying her. She sued, arguing the Internal Revenue Code required the IRS to give her notice of such third-party summonses. The U.S. Court of Appeals for the Sixth Circuit upheld the summonses, holding they fell within the exception in § 7609(c)(2)(D)(i) for summonses issued “in aid of the collection” of an assessed tax. On May 18, 2023, the U.S. Supreme Court unanimously affirmed, ruling that the notice exception applies whenever a summons is issued to assist in collecting a particular taxpayer’s assessed liability, even if the records belong to a third party who is not the delinquent taxpayer.

The Supreme Court unanimously affirmed the Sixth Circuit, holding that the IRS need not provide notice to a record owner who is not the taxpayer when the summons is issued in aid of collecting an assessed tax liability.

Whether the exception in 26 U.S.C. § 7609(c)(2)(D)(i), which exempts the IRS from giving notice of a third-party summons issued “in aid of the collection” of an assessed tax, applies when the summoned records relate to a person who is not the delinquent taxpayer.

The decision significantly strengthened the IRS’s investigative authority to access third-party financial records during tax collection without prior notice, sparking debate among privacy advocates about diminished financial privacy protections. Meanwhile, it was praised as an essential tool to prevent delinquent taxpayers from shielding assets through family accounts.