Polselli v. Internal Revenue Service

The IRS investigated Remo Polselli for unpaid taxes and issued administrative summonses to banks for records of his wife Hanna K. Polselli, his mother Dolores M. Polselli, and a law firm, believing the accounts might contain concealed assets. The account holders were not notified, relying on an exception in 26 U.S.C. §7609(c)(2)(D)(i) for summonses issued in aid of collecting an assessed tax liability. The third parties challenged the lack of notice, arguing the exception did not apply because the summonses did not name the delinquent taxpayer. The district court and the Sixth Circuit sided with the IRS. The Supreme Court granted certiorari to resolve a circuit split on whether the notice exception requires the taxpayer to be identified in the summons.

The Supreme Court unanimously held that the notice exception applies. The IRS is not required to notify third parties whose records are summoned in aid of collecting an assessed tax liability, provided the IRS establishes a reasonable basis that the records may be relevant to that collection effort. The judgment of the Sixth Circuit was affirmed.

Whether the exception to third-party notice in 26 U.S.C. §7609(c)(2)(D)(i) applies when an IRS summons seeks records of a third party to aid in collecting a tax assessment against a known taxpayer, even if the summons does not name that taxpayer.

The ruling strengthens the IRS's ability to obtain third-party financial records without prior notice in tax collection cases, reducing procedural hurdles for tax enforcement. It clarifies the scope of Section 7609(c)(2)(D)(i) and may raise privacy concerns for banks and account holders, but it also provides judicial confirmation of long-standing IRS practice.