Supreme Court Agrees to Hear Case Over IRS Bank Summons Notice

The US Supreme Court agreed to hear a case over whether the IRS needed to notify bank account holders when it summoned their records to collect on a different taxpayer’s liabilities.

Hanna Karcho Polselli and two law firms brought the suit after the IRS seized their records without notification to try to collect on more than $2 million in tax liabilities for Polselli’s husband, Remo Polselli. The law firms—Abraham & Rose PLC and Jerry R. Abraham PC—had represented Remo Polselli.

In their petition to the high court, Hanna Karcho Polselli and the firms argued that the US Court of Appeals for the Sixth Circuit’s ruling against them diverged from a Ninth Circuit 2000 ruling, reflecting a circuit split that they urged the high court to resolve. They also pointed to a Seventh Circuit 1999 ruling as diverging from the Ninth Circuit.

The Supreme Court agreed to review the case in a Friday order.

The Sixth Circuit had said the summonses at issue fell within an exception to notification requirements under tax code Section 7609(c)(2)(D)(i) for summonses to third-party record keepers to help collect on assessed or adjudged tax delinquencies. It specifically said it was rejecting the Ninth Circuit’s standard in the 2000 ruling—namely that the exception applies only when the assessed taxpayer has a recognizable legal interest in the summoned records.

The IRS urged the Supreme Court to reject the case, writing that the purported split between the circuits “seems to be more apparent than real,” and that notice to Hanna Karcho Polselli and the firms wouldn’t have been required under the Ninth Circuit’s current standard.

The agency pointed in particular to a 2011 Ninth Circuit ruling that applied the 2000 decision. In the later case, the Ninth Circuit said a taxpayer has a sufficient legal interest in the third party’s summoned records to trigger the notice exception if the taxpayer has transferred funds into the third party’s account or has a relationship of ownership, agency, or employment with the third party.

Polselli and the firms replied that the government was wrong to argue that they wouldn’t be entitled to notice under the Ninth Circuit’s rulings, and that those arguments from the government “would at most be questions” for a lower court to examine.

Shay Dvoretzky of Skadden, Arps, Slate, Meagher & Flom LLP, who represented the petitioners, didn’t immediately respond to a request for comment. The Justice Department also didn’t immediately respond to a request for comment.

The case is Polselli v. IRS, U.S., No. 21-1599, 12/9/22.