IRS cannot enforce summons.

• Author: Beavers, James A.

The IRS issued four summonses to banks in Oklahoma for records involving nursing homes owned by Sam Jewell. Under Sec. 7609, the IRS was required to notify Jewell at least 23 days before the examination date. However, he received the notices less than 23 days before the examination date. Alleging inadequate notice, Jewell filed petitions to quash the summonses in the eastern and western federal district courts in Oklahoma.

The two courts split on how to interpret the notice requirement. The western district court granted the government's summary judgment motion and denied Jewell's petition to quash, noting that he received the summonses in time to file his petition. The eastern district court granted Jewell's petition to quash and denied the government's motion to dismiss, reasoning that the IRS failed to comply with the notice requirement. Jewell appealed the ruling of the western district court, and the IRS appealed the ruling in the eastern district court.

Powell Requirements

In Powell, 379 U.S. 48 (1964), the Supreme Court listed four requirements for the IRS to make a prima facie case for enforcement of an administrative summons:

* The investigation in which the summons is issued must be conducted for a legitimate purpose;

* The summons must be relevant to that purpose;

* The IRS must not already have the information sought by the summons; and

* The IRS must have followed the administrative steps required by the Code for the summons.

Jewell and the IRS agreed in this case that only the fourth prong of the test was at issue.

Sec. 7609 contains the administrative procedures for the IRS to issue summonses to third parties. It requires that: notice of the summons shall be given to any person so identified within 3 days of the day on which such service is made, but no later than the 23rd day before the day fixed in the summons as the day upon which such records are to be examined.

The IRS admitted that Jewell had not received the required statutory notice of the summons.

The Tenth Circuit's Decision

The Tenth Circuit found that the 23-day notice requirement was an administrative step and that the IRS had failed to meet the Powell requirements to establish a prima fade case for enforcement of the summons. Splitting with other circuit courts that have addressed the issue, the court held that because the IRS failed to meet the Powell requirements, the court could not enforce the summons.

The IRS first argued that despite the use of the word...