[Federal Register Volume 71, Number 140 (Friday, July 21, 2006)]
[Proposed Rules]
[Pages 41377-41384]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-11543]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[REG-153037-01]
RIN 1545-BA31


Suspension of Statutes of Limitations in Third-Party and John Doe 
Summons Disputes and Expansion of Taxpayers' Rights To Receive Notice 
and Seek Judicial Review of Third-Party Summonses

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed amendments to the regulations 
relating to third-party and John Doe summonses. These proposed 
regulations reflect amendments to sections 7603 and 7609 of the 
Internal Revenue Code of 1986 made by the Internal Revenue Service 
Restructuring and Reform Act of 1998, the Omnibus Budget Reconciliation 
Act of 1990, the Technical and Miscellaneous Revenue Act of 1988, and 
the Tax Reform Act of 1986, which were enacted subsequent to adoption 
of the current regulations. These proposed regulations provide guidance 
relating to the manner in which summonses may be served on third-party 
recordkeepers, the expanded class of third-party summonses subject to 
notice requirements and other procedures, and the suspension of periods 
of limitations if a court proceeding is brought involving a challenge 
to a third-party summons, or if a third party's response to a summons 
is not finally resolved within six months after service. These proposed 
regulations affect third parties who are served with a summons, 
taxpayers identified in a third-party summons, and other persons 
entitled to notice of a third-party summons.

DATES: Written comments and requests for a public hearing must be 
received by October 19, 2006.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-153037-01), room 
5203, Internal Revenue Service, POB 7604, Ben Franklin Station, 
Washington, DC 20044. Alternatively, submissions may be hand delivered 
between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-153037-
01), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue, NW., Washington, DC. Comments may also be submitted 
electronically to http://www.irs.gov/regs or the Federal eRulemaking 
Portal at http://www.regulations.gov (IRS-REG-153037-01).

FOR FURTHER INFORMATION CONTACT: Elizabeth Rawlins at (202) 622-3630 
(not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document contains proposed regulations amending the Procedure 
and Administration Regulations (26 CFR part 301) under sections 7603 
and 7609 of the Internal Revenue Code of 1986 (Code). The proposed 
regulations reflect amendments to sections 7603 and 7609 enacted in the 
Internal Revenue Service Restructuring and Reform Act of 1998 (Pub. L. 
105-206, 112 Stat. 685) (RRA 1998), the Technical and Miscellaneous 
Revenue Act of 1988 (Pub. L. 100-647, 102 Stat. 3343) (TAMRA 1988), and 
the Tax Reform Act of 1986 (Pub. L. 99-514, 100 Stat. 2085) (TRA 1986). 
The proposed regulations also reflect changes made to section 6503(j) 
in the Omnibus Budget Reconciliation Act of 1990 (Pub. L. 101-508, 104 
Stat. 1388) (OBRA 1990).

Explanation of Provisions

    In general, section 7609 provides that if a summons is served on a 
third party requiring the third party to give testimony or produce 
records relating to a taxpayer or other person identified in the 
summons, the Internal Revenue Service (IRS) must provide notice of the 
summons to the taxpayer and to any other person identified in the 
description of summoned records and testimony within three days of the 
date on which the summons was served, but no later than 23 days prior 
to the date fixed in the summons as the day on which the examination of 
the summoned person or materials is scheduled. Persons entitled to 
notice of a third-party summons are entitled to bring a proceeding to 
quash the summons by filing a petition in district court within 20 days 
after notice is

[[Page 41378]]

given. Persons entitled to notice also may intervene in any proceeding 
to enforce the summons. During the pendency of a proceeding to quash a 
summons brought by the taxpayer, or during the pendency of a proceeding 
to enforce a summons in which the taxpayer has intervened, the periods 
of limitations on assessment and criminal prosecution are suspended. 
These periods of limitations are also suspended if the third-party's 
response to the summons remains unresolved six months after the summons 
is served, regardless of whether a proceeding has been brought with 
respect to the summons. These proposed regulations amend prior 
regulations relating to third-party summonses to reflect the statutory 
changes to sections 7603 and 7609 described below.

Notice of Third-Party Summonses

    Section 7609(a) requires the IRS to provide notice of a third-party 
summons to the taxpayer being investigated and every person identified 
in the description of summoned records and testimony unless the summons 
is excepted from the notice requirements under section 7609(c)(2). 
Prior to RRA 1998, the IRS was required to provide notice of a third-
party summons only if the summons was served on a third-party 
recordkeeper and the summons required the production of records made or 
kept of another person's business transactions or affairs (or testimony 
about such records). RRA 1998 expanded the types of third-party 
summonses to which the notice, intervention, and proceeding to quash 
procedures apply by removing the prior specifically-defined third-party 
recordkeeper limitation. The proposed regulations reflect the expansion 
of the notice procedures to all third-party summonses not excepted by 
section 7609(c)(2).

Exceptions To Notice, Intervention, and Proceeding To Quash Procedures

    Section 7609(c)(2) provides that certain summonses, including 
summonses served on the person with respect to whose liability the 
summons was issued, third-party summonses issued to confirm or deny the 
existence of records, and summonses that require court approval before 
service, are excepted from the notice, intervention, and proceeding to 
quash provisions of subsections 7609(a) and (b). Two additional 
exceptions, relating to third-party summonses issued in aid of 
collection under section 7609(c)(2)(D) and summonses issued by a 
criminal investigator under section 7602(c)(2)(E), were the subject of 
recent statutory changes.
    Prior to RRA 1998, former section 7609(c)(2)(B) broadly excepted 
from the notice requirements and other procedural rules a summons 
issued in aid of the collection of any person's liability. RRA 1998 
narrowed the collection exception, now found in section 7609(c)(2)(D), 
to except only summonses issued in aid of the collection of either: (i) 
An assessment or judgment against the person with respect to whose 
liability the summons is issued, or (ii) the liability of a transferee 
or fiduciary of the liable person. Under section 7609(c)(2)(D), as 
amended, the IRS now must give notice of a third-party summons issued 
in aid of the collection of a person's potential liability for an 
unassessed tax. For example, the IRS must provide notice of a third-
party summons to a potentially responsible person if the purpose of the 
third-party summons is to determine whether the person is liable for 
the trust fund recovery penalty under section 6672.
    The exception from notice, intervention, and proceeding to quash 
procedures for summonses issued by a criminal investigator under 
section 7609(c)(2)(E) was added by RRA 1998. Section 7609(c)(2)(E) 
excepts third-party summonses issued by criminal investigators if the 
summoned third party is not a third-party recordkeeper, as that term is 
defined under new section 7603(b).

Third-Party Recordkeepers

    Section 7603(b)(1) provides that third-party recordkeeper summonses 
may be served by certified or registered mail to the last known address 
of the third-party recordkeeper. Section 7603(b)(2) enumerates classes 
of persons that are third-party recordkeepers, including banks, credit 
card issuers, attorneys, accountants, and enrolled agents.
1. When Third-Party Recordkeeper Status Arises
    Prior to RRA 1998, third-party recordkeeper summonses were defined 
under former section 7609(a)(1) as summonses that were served on a 
third-party recordkeeper, i.e., a person belonging to one of several 
enumerated classes of business occupations, for the production of 
records made or kept of another person's business transactions or 
affairs. Based on these requirements, existing Sec.  301.7609-2(b) 
provides that ``[a] person is a `third-party recordkeeper' with respect 
to a given set of records only if the person made or kept the records 
in the person's capacity as a third-party recordkeeper.''
    RRA 1998 amended section 7603, relating to service of summonses, by 
adding to new subsection (b) the enumerated classes of third-party 
recordkeepers, but did not incorporate the requirement of former 
section 7609(a)(1)(B) that the records of the business transactions or 
affairs be made or kept by the third-party recordkeeper in its capacity 
as such. There is no indication in the legislative history to RRA 1998 
that Congress intended to alter the requirement under Sec.  301.7609-
2(b) that the records of a third-party recordkeeper be made or kept in 
the third-party recordkeeper's capacity as such. Accordingly, the 
proposed regulations maintain the requirement under existing Sec.  
301.7609-2(b).
2. Owners or Developers of Computer Software Source Code
    RRA 1998 added owners or developers of computer software source 
code to the enumerated classes of third-party recordkeepers under 
section 7603(b)(2). The proposed regulations define owners or 
developers of computer software source code as third-party 
recordkeepers if they are summoned to produce the source code or the 
programs and data to which the source code relates, whether or not they 
make or keep records of another person's business transactions or 
affairs.

Suspension of Periods of Limitations

1. Suspension Under Section 7609(e)(1)
    Section 7609(e)(1) provides that the periods of limitations under 
section 6501 (relating to assessment and collection) and section 6531 
(relating to criminal prosecution) are suspended if any person with 
respect to whose liability a third-party summons was issued (or the 
agent, nominee, or other person acting under the direction and control 
of such person), pursuant to section 7609(b), intervenes in a judicial 
proceeding to enforce a third-party summons or brings a proceeding to 
quash a third-party summons. The suspension continues for the period 
during which the proceeding, including appeals, is pending.
2. Suspension Under Section 7609(e)(2)
    Section 7609(e)(2) provides that the periods of limitations under 
section 6501 and section 6531, are suspended if there is no final 
resolution of the third party's response to the summons within six 
months after service of such summons, regardless of whether the person 
with respect to whose liability the summons was issued has intervened 
in an enforcement proceeding or brought a proceeding to quash.

[[Page 41379]]

    Suspension of the periods of limitations under section 7609(e)(2) 
begins six months after the summons is served and ends upon the final 
resolution of the summoned party's response. The proposed regulations 
describe the types of summonses to which the suspension of periods of 
limitations under section 7609(e)(2) apply and define final resolution.
a. Summonses to Which Suspension Under Section 7609(e)(2) May Apply
    Prior to RRA 1998, former section 7609(e)(2) suspended a taxpayer's 
periods of limitations if either a third-party recordkeeper's response 
to a summons, for which the taxpayer was entitled to receive notice 
under section 7609(a), or if a summoned person's response to a John Doe 
summons was not finally resolved within six months after the summons 
was served. Nothing in the legislative history to RRA 1998 suggests 
that Congress intended to expand the basic statutory structure of 
section 7609(e)(2) to encompass any summonses other than John Doe 
summonses and third-party summonses subject to the notice requirement 
of section 7609(a). Therefore, the proposed regulations provide that 
the periods of limitations are suspended under section 7609(e)(2) only 
with respect to third-party summonses to which the notice requirements 
of section 7609(a) apply, or to John Doe summonses for which taxpayers 
are entitled to notice of any statute suspension pursuant to section 
7609(i)(4).
b. Final Resolution of a Third Party's Response to a Summons
    Section 7609(e)(2) provides that suspension of the periods of 
limitations ends on the date of final resolution of the third party's 
response to the summons. The purpose of section 7609(e)(2) is to 
suspend the periods of limitations if an investigation is delayed by a 
summoned person's failure to produce all of the summoned information 
within six months. Although final resolution is not defined in section 
7609, nor is it elaborated on in the legislative history of that 
statute, the same term is found in section 6503(j), which suspends the 
period of limitations on assessment during a judicial enforcement 
period relating to designated and related summonses. Like section 
7609(e)(2), section 6503(j) provides that the suspension period will 
not end until there is final resolution of the summoned person's 
response to the summons. The legislative history of section 6503(j) 
indicated that the term final resolution means, in cases in which a 
court proceeding is brought, that no court proceeding remains pending 
and the summoned party has complied with the summons to the extent the 
court required. Therefore, the proposed regulations define final 
resolution as occurring when the summoned person fully complies with 
the production required by the summons. If the summons is the subject 
of litigation, full compliance occurs when any order enforcing any part 
of the summons is fully complied with and all appeals are either 
disposed of or the period in which an appeal may be taken or a request 
for further review may be made has expired. The IRS will 
administratively create procedures by which taxpayers can inquire about 
the suspension of their periods of limitations under section 
7609(e)(2).

Protections for and Duties of Summoned Third Parties

    Section 7609(i)(3) provides that any summoned party who produces 
records or gives testimony in good faith reliance on an IRS certificate 
or court order is not liable to a customer or other person for 
disclosure of records or testimony in response to a third-party 
summons. RRA 1998 modified these provisions by extending protection to 
all recipients of third-party summonses subject to the notice 
requirements of section 7609(a) and by expanding the protection from 
liability to include the giving of testimony by a third party, in 
addition to the production of records. The proposed regulations reflect 
these statutory changes.

Notification Requirement for John Doe Summonses Under Section 
7609(i)(4)

    Section 7609(i)(4) requires the recipient of a John Doe summons to 
notify the unnamed taxpayers to which the summons applies if those 
taxpayers' periods of limitations are suspended by operation of section 
7609(e)(2), relating to the absence of a resolution to the summoned 
party's response six months after service of the summons.
    The proposed regulations specify the time and the manner for 
providing the notice required under section 7609(i)(4). Notice must be 
given as soon as possible after the suspension of the periods of 
limitations and must be made in writing. The written notification may 
be hand delivered, sent to the address of the taxpayer last known by 
the summoned person to be valid, or transmitted by any electronic 
means. Failure by the summoned party to comply with the notice 
requirements of section 7609(i)(4) will not preclude the suspension of 
the periods of limitations pursuant to section 7609(e)(2).

Use of Informal Procedures Not Precluded by Section 7609

    Section 7609(j) provides that nothing in section 7609 shall be 
construed to limit the IRS's ability to obtain information through 
formal or informal procedures authorized by sections 7601 and 7602. The 
proposed regulations provide that section 7609 does not require the IRS 
to issue a third-party summons before conducting an informal inquiry of 
a third party or examining a third party's books, papers, records, or 
other data during an investigation.

Proposed Effective Dates

    These amendments are proposed to be applicable on the date the 
final regulations are filed with the Federal Register.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866. Therefore, a regulatory assessment is not required. It also has 
been determined that section 553(b) of the Administrative Procedure Act 
(5 U.S.C. chapter 5) does not apply to these regulations and, because 
these regulations do not impose a collection of information under the 
Paperwork Reduction Act (44 U.S.C. 3501), the Regulatory Flexibility 
Act (5 U.S.C. chapter 6) does not apply to these regulations. Pursuant 
to section 7805(f) of the Code, this notice of proposed rulemaking will 
be submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on its impact on small business.

Comments and Requests for a Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (preferably a 
signed original and eight (8) copies) that are submitted timely to the 
IRS. The IRS and the Treasury Department specifically request comments 
on the clarity of the proposed rule and how it may be made easier to 
understand. All comments will be available for public inspection and 
copying. A public hearing may be scheduled if requested in writing by a 
person who timely submits written comments. If a public hearing is 
scheduled, notice of the date, time, and place for the hearing will be 
published in the Federal Register.

Drafting Information

    The principal author of these regulations is Elizabeth Rawlins of 
the Office of the Associate Chief Counsel, Procedure and Administration

[[Page 41380]]

(Collection, Bankruptcy and Summonses Division), Internal Revenue 
Service.

List of Subjects in 26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

Proposed Amendment to the Regulations

    Accordingly, 26 CFR part 301 is proposed to be amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

    Paragraph 1. The authority citation for part 301 continues to read, 
in part, as follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 2. Section 301.7603-1 is revised to read as follows:


Sec.  301.7603-1  Service of summons.

    (a) In general--(1) Hand delivery or delivery to place of abode. 
Except as otherwise provided in paragraph (a)(2) of this section, a 
summons issued under section 6420(e)(2), 6421(g)(2), 6427(j)(2), or 
7602 shall be served by an attested copy delivered in hand to the 
person to whom it is directed, or left at such person's last and usual 
place of abode.
    (2) Summonses issued to third-party recordkeepers. A summons issued 
under section 6420(e)(2), 6421(g)(2), 6427(j)(2), or 7602 for the 
production of records (or testimony about such records) by a third-
party recordkeeper, as described in section 7603(b)(2) and Sec.  
301.7603-2, may also be served by certified or registered mail to the 
third-party recordkeeper's last known address, as defined in Sec.  
301.6212-2. If service to a third-party recordkeeper is made by 
certified or registered mail, the date of service is the date on which 
the summons is mailed.
    (b) Persons who may serve a summons. The officers and employees of 
the Internal Revenue Service whom the Commissioner has designated to 
carry out the authority described in Sec.  301.7602-1(b) to issue a 
summons are authorized to serve a summons issued under section 
6420(e)(2), 6421(g)(2), 6427(j)(2), or 7602.
    (c) Effect of certificate of service. The certificate of service 
signed by the person serving the summons shall be evidence of the facts 
it states on the hearing of an application for the enforcement of the 
summons.
    (d) Sufficiency of description of summoned records. When a summons 
requires the production of records, it shall be sufficient if such 
records are described with reasonable certainty.
    (e) Records. For purposes of this section and Sec.  301.7603-2, the 
term records includes books, papers, or other data.
    (f) Effective date. This section is applicable on the date final 
regulations are published in the Federal Register.
    Par. 3. Section 301.7603-2 is added to read as follows:


Sec.  301.7603-2  Third-party recordkeepers.

    (a) Definitions--(1) Accountant. A person is an accountant under 
section 7603(b)(2)(F) for purposes of determining whether that person 
is a third-party recordkeeper if, on the date the records described in 
the summons were created, the person was registered, licensed, or 
certified as an accountant under the authority of any state, 
commonwealth, territory, or possession of the United States, or of the 
District of Columbia.
    (2) Attorney. A person is an attorney under section 7603(b)(2)(E) 
for purposes of determining whether that person is a third-party 
recordkeeper if, on the date the records described in the summons were 
created, the person was registered, licensed, or certified as an 
attorney under the authority of any state, commonwealth, territory, or 
possession of the United States, or of the District of Columbia.
    (3) Credit cards--(i) Person extending credit through credit cards. 
The term person extending credit through the use of credit cards or 
similar devices under section 7603(b)(2)(C) generally includes any 
person who issues a credit card. The term does not include a seller of 
goods or services who honors credit cards issued by other parties but 
who does not extend credit through the use of credit cards or similar 
devices.
    (ii) Devices similar to credit cards. An object is a device similar 
to a credit card under section 7603(b)(2)(C) only if it is physical in 
nature, such as a charge plate or similar device that may be tendered 
to obtain an extension of credit. Thus, a person who extends credit by 
requiring customers to sign sales slips without requiring the use of, 
or reference to, a physical object issued by that person is not a 
third-party recordkeeper under section 7603(b)(2)(C).
    (iii) Debit cards. A debit card is not a credit card or similar 
device because a debit card is not tendered to obtain an extension of 
credit.
    (4) Enrolled agent. A person is an enrolled agent under section 
7603(b)(2)(I) for purposes of determining whether that person is a 
third-party recordkeeper if the person is enrolled as an agent 
authorized to practice before the Internal Revenue Service pursuant to 
Circular 230, 31 CFR part 10.
    (5) Owner or developer of certain computer code and data. An owner 
or developer of computer software source code under section 
7603(b)(2)(J) is a third-party recordkeeper when summoned to produce a 
computer software source code (as defined in section 7612(d)(2)), or an 
executable code and associated data described in section 
7612(b)(1)(A)(ii), even if that person did not make or keep records of 
another person's business transactions or affairs.
    (b) When third-party recordkeeper status arises--(1) In general. 
Except as provided in paragraph (a)(5) of this section, a person listed 
in section 7603(b)(2) is a third-party recordkeeper for purposes of 
section 7609(c)(2)(E) and Sec.  301.7603-1 only if the summons served 
on that person seeks records (or testimony regarding such records) of a 
third party's business transactions or affairs and such recordkeeper 
made or kept the records in the capacity of a third-party recordkeeper. 
For instance, an accountant is not a third-party recordkeeper (by 
reason of being an accountant) with respect to the accountant's records 
of a sale of property by the accountant to another person. Similarly, a 
credit card issuer is not a third-party recordkeeper (by reason of 
being a person extending credit through the use of credit cards or 
similar devices) with respect to--
    (i) Records relating to non-credit card transactions, such as a 
cash sale by the issuer to a holder of the issuer's credit card; or
    (ii) Records relating to transactions involving the use of another 
issuer's credit card.
    (2) Examples. The rules of paragraph (b)(1) of this section are 
illustrated by the following examples:

    Example 1. V issues a credit card (the V card) that is honored 
by R, a retailer. When using the V card, C, a customer, signs a 
sales slip in triplicate. C, R, and V each retain one copy. Only the 
copy held by V is held by a third-party recordkeeper under section 
7603(b)(2), even though R may issue its own credit card.
    Example 2. R, a retailer, issues its own credit card (the R 
card) to C, a customer. When C makes a credit purchase from R using 
the R card, C signs a sales slip in duplicate. C and R each retain 
one copy. Because R keeps the copy in its capacity as credit card 
issuer, as well as in its capacity as a retailer, it is a third-
party recordkeeper under section 7603(b)(2) with respect to its copy 
of the sales slip.

    (c) Effective date. This section is applicable on the date the 
final

[[Page 41381]]

regulations are published in the Federal Register.
    Par. 4. Sections 301.7609-1 through 301.7609-5 are revised to read 
as follows:


Sec.  301.7609-1  Special procedures for third-party summonses.

    (a) In general--(1) Section 7609 requires the Internal Revenue 
Service (IRS) to follow special procedures when summoning a third 
party's testimony, records, or computer software source code. Except as 
provided in Sec.  301.7609-2(b), the IRS must provide notice of a 
third-party summons to any person identified in the summons, other than 
the person summoned. A person entitled to notice of a third-party 
summons may intervene in any proceeding brought to enforce the summons 
or may bring a proceeding to quash the summons, regardless of whether 
they receive notice of the summons from the IRS pursuant to section 
7609(a) and Sec.  301.7609-2.
    (2) Neither section 7609 nor Sec.  301.7603-1, Sec.  301.7603-2, or 
Sec. Sec.  301.7609-1 through 301.7609-5 limit the IRS's ability to 
obtain information, other than by summons, through formal or informal 
procedures authorized by sections 7601 and 7602.
    (b) Cross references. See Sec.  301.7609-2 for rules relating to 
persons who must be notified of a third-party summons and exceptions to 
the notification requirements. See Sec.  301.7609-3 for rules relating 
to the rights and duties of summoned parties. See Sec.  301.7609-4 for 
rules relating to actions to quash a summons or to intervene in a 
summons enforcement proceeding. See Sec.  301.7609-5 for rules relating 
to the suspension of periods of limitations.
    (c) Records. For purposes of Sec. Sec.  301.7609-1 through 
301.7609-5, the term ``records'' includes books, papers, or other data.
    (d) Effective date. This section is applicable on the date the 
final regulations are published in the Federal Register.


Sec.  301.7609-2  Notification of persons identified in third-party 
summonses.

    (a) In general--(1) Persons entitled to notice. Except as provided 
in Sec.  301.7609-2(b), the Internal Revenue Service (IRS) shall give 
notice of a third-party summons to any person, other than the person 
summoned, who is identified in the summons. The only persons so 
identified are the person with respect to whose liability the summons 
is issued and any other person identified in the description of 
summoned records or testimony. For example, if the IRS issues a summons 
to a bank with respect to the liability of C that requires the 
production of account records of A and B, both of whom are named in the 
summons, the IRS must notify A, B and C of the summons.
    (2) Time for providing notice. If notice is required by paragraph 
(a)(2) of this section, such notice must be given within three days of 
the date on which the summons is served on the third party, but no 
later than 23 days prior to the date fixed in the summons as the date 
on which the examination of the summoned person or records is 
scheduled.
    (3) Methods for serving notice. Notice may be served by hand 
delivery to any person entitled to notice or by leaving notice at such 
person's last and usual place of abode. Notice also may be served by 
certified or registered mail to the person's last known address, as 
defined in Sec.  301.6212-2. If service to a person entitled to notice 
is made by certified or registered mail, the date of service is the 
date on which the notice is mailed.
    (4) Content of the notice. Notice required to be given to any 
person entitled to notice must be accompanied by a copy of the summons 
that has been served and must include an explanation of the right to 
bring a proceeding to quash the summons. The copy of the summons 
accompanying the notice is not required to contain the attestation that 
appears pursuant to section 7603 on the copy of the summons served on 
the summoned person.
    (b) Exceptions. The IRS is not required to provide notice to 
persons identified in the following third-party summonses:
    (1) Summons served on the taxpayer. The IRS is not required to 
provide notice of a summons served on the person with respect to whose 
liability the summons was issued, or any officer or employee of such 
person.
    (2) Existence of records. The IRS is not required to provide notice 
in the case of a summons issued to determine whether or not records of 
the business transactions or affairs of a person identified in the 
summons have been made or kept.
    (3) Numbered account or similar arrangement. The IRS is not 
required to provide notice in the case of a summons issued solely to 
determine the identity of a person having a numbered account or similar 
arrangement with a bank or other institution. An account is a numbered 
account or similar arrangement within the meaning of this paragraph 
(b)(3) if it is an account through which a person may authorize 
transactions solely through the use of a number, symbol, code name, or 
other device not involving the disclosure of the person's identity. The 
term person having a numbered account or similar arrangement includes 
the person who opened the account and any person authorized to access 
the account or to receive records or statements concerning it.
    (4) Summonses in aid of the collection of liabilities--(i) In 
general. The IRS is not required to provide notice in the case of a 
summons issued in aid of the collection of liabilities. A summons is in 
aid of the collection of liabilities within the meaning of this 
paragraph if it is issued in connection with the collection of--
    (A) An assessment or judgment against the person with respect to 
whose liability the summons is issued; or
    (B) The liability determined at law or in equity of any transferee 
or fiduciary of a person described in paragraph (b)(4)(i)(A) of this 
section.
    (ii) Examples. The rules of paragraph (b)(4) of this section are 
illustrated by the following examples:

    Example 1. A third-party summons is issued to a bank to 
determine the amount held in an account in the name of A, against 
whom unpaid income taxes have been assessed. Notice of the summons 
is not required to be given to A or any other persons identified in 
the summons because the summons is issued in connection with the 
collection of taxes that have been assessed.
    Example 2. A third-party summons is issued to determine whether 
assessments should be made against A, who is potentially liable for 
a trust fund recovery penalty under section 6672 with respect to the 
assessed but unpaid withholding tax liability of employer E. The 
summons is captioned: In the matter of A. Notice of the summons must 
be provided to A and to any other persons identified in the summons 
because the summons was issued with respect to A's potential, 
unassessed liability under section 6672.

    (5) Summonses issued by a criminal investigator. The IRS is not 
required to provide notice in the case of a summons issued by a 
criminal investigator to a person other than a third-party 
recordkeeper, as defined in section 7603(b). For purposes of section 
7609(c)(2)(E), a summons issued by a criminal investigator is any 
summons issued as part of a criminal investigation by an IRS officer or 
employee having authority to conduct a criminal investigation and to 
issue a summons.
    (6) John Doe summons. The IRS is not required to provide notice in 
the case of a John Doe summons issued under section 7609(f).
    (7) Summons issued pursuant to a court order to prevent spoliation 
of evidence. The IRS is not required to

[[Page 41382]]

provide notice in the case of a summons for which a court determines 
there is reasonable cause to believe the giving of notice may lead to 
attempts to conceal, destroy, or alter records relevant to the 
examination, to prevent communication of information from other persons 
through intimidation, bribery, or collusion, or to flee to avoid 
prosecution, testifying, or production of records.
    (c) Effective date. This section is applicable on date the final 
regulations are published in the Federal Register.


Sec.  301.7609-3  Duty of and protection for the summoned party.

    (a) Duty of the summoned party. Upon receipt of a summons, the 
summoned party must begin to assemble the summoned records. The 
summoned party must be prepared to produce the summoned records on the 
date on which the summons states that they are to be examined, 
regardless of the institution or anticipated institution of a 
proceeding to quash or the summoned party's intervention in a 
proceeding to quash, as allowed under section 7609(b)(2)(C).
    (b) Disclosing summoned party not liable--(1) In general. A 
summoned party, or an agent or employee thereof, who makes a disclosure 
of records or gives testimony as required by a summons in good faith 
reliance on the certificate of the Secretary (as defined in paragraph 
(b)(2) of this section) or an order of a court requiring production of 
records or giving of testimony, will not be liable for any claim 
arising from such disclosure brought by any customer, any party with 
respect to whose tax liability the summons was issued, or any other 
person.
    (2) Certificate of the Secretary. The Secretary may issue to the 
summoned party a certificate if the person with respect to whose 
liability the summons was issued expressly consents to the examination 
of the records summoned and the taking of testimony. The Secretary also 
may issue to the summoned party a certificate stating that--
    (i) The 20-day period within which a person entitled to notice of 
the summons may institute a proceeding to quash the summons has 
expired; and
    (ii) No proceeding has been instituted within that period.
    (c) Reimbursement of costs. Summoned third parties may be entitled 
to reimbursement of their costs of assembling and preparing to produce 
summoned records, to the extent allowed by section 7610 and Sec.  
301.7610-1.
    (d) Notification of suspension of periods of limitations in 
connection with a John Doe summons--(1) Requirement of notification. If 
any periods of limitations are suspended under section 7609(e)(2) and 
Sec.  301.7609-5(d) with respect to a John Doe summons described in 
section 7609(f), the summoned party is required under section 
7609(i)(4) to provide notice of such suspension to all persons with 
respect to whose liability the summons was issued.
    (2) Content of notification. A summoned party required to notify a 
person of the suspension of the periods of limitations shall provide 
the following information to such person--
    (i) A John Doe summons was served on the summoned party seeking 
records that may be relevant to the person's tax liability;
    (ii) The date on which the summons was served;
    (iii) The tax period(s) to which the summons relates;
    (iv) Six months has passed since service of the summons and the 
summoned party's response to the summons has not been finally resolved;
    (v) The periods of limitations under section 6501 (relating to 
assessment and collection) and section 6531 (relating to criminal 
prosecution), have been suspended; and
    (vi) The date on which suspension of the periods of limitations 
under sections 6501 and 6531 began.
    (3) Time and manner of notification. The notification must be made 
in writing and may be delivered in person, by mail sent to the address 
last known by the summoned party, or by use of any electronic means of 
transmission. Notification should be made as soon as possible after the 
suspension of the periods of limitations begins. Failure by a summoned 
party to give notice of the suspension of periods of limitations as 
required by section 7609(i)(4) does not prevent the suspension of the 
periods of limitations under section 7609(e)(2).
    (e) Effective date. This section is applicable on the date the 
final regulations are published in the Federal Register.


Sec.  301.7609-4  Right to intervene; right to institute a proceeding 
to quash.

    (a) Intervention in proceeding with respect to enforcement of a 
summons. Under section 7609(b)(1), a person entitled to notice of a 
summons under section 7609(a) and Sec.  301.7609-2 is entitled to 
intervene in any proceeding brought under section 7604 with respect to 
the enforcement of that summons.
    (b) Right to institute a proceeding to quash--(1) In general. Under 
section 7609(b), a person entitled to notice of a summons under section 
7609(a) and Sec.  301.7609-2 may institute a proceeding to quash the 
summons in the United States district court for the district in which 
the summoned person resides or is found.
    (2) Requirements for a proceeding to quash. To institute a 
proceeding to quash a summons, a person entitled to notice of the 
summons must, not later than the 20th day following the day the notice 
of the summons was served on or mailed to such person--
    (i) File a petition to quash a summons in the name of the person 
entitled to notice of the summons in the proper district court;
    (ii) Notify the Internal Revenue Service (IRS) by sending a copy of 
that petition to quash by registered or certified mail to the IRS 
employee and office designated in the notice of summons to receive the 
copy; and
    (iii) Notify the summoned person by sending by registered or 
certified mail a copy of the petition to quash to the summoned person.
    (3) Failure to give timely notice. If a person entitled to notice 
of the summons fails to give proper and timely notice to either the 
summoned person or the IRS in the manner described in paragraph (b)(2) 
of this section, that person has failed to institute a proceeding to 
quash and the district court lacks jurisdiction to hear the proceeding. 
For example, if the person entitled to notice mails a copy of the 
petition to the summoned person, but fails to mail a copy of the 
petition to the designated IRS employee and office, the person entitled 
to notice has failed to institute a proceeding to quash. Similarly, if 
the person entitled to notice mails a copy of such petition to the 
summoned person but, instead of sending a copy of the petition by 
registered or certified mail to the designated IRS employee and office, 
the person entitled to notice provides the designated IRS employee and 
office the petition by some other means, the person entitled to notice 
has failed to institute a proceeding to quash.
    (4) Failure to institute a proceeding to quash. If a person 
entitled to notice fails to institute a proceeding to quash within 20 
days following the day the notice of the summons was served on or 
mailed to such person, the IRS may examine the summoned records and 
take summoned testimony following the 23rd day after notice of the 
summons was served on or mailed to the person entitled to notice.
    (c) Presumption no notice has been mailed. Section 7609(b)(2)(B) 
permits a person entitled to notice to institute a

[[Page 41383]]

proceeding to quash by filing a petition in district court and 
notifying both the IRS and the summoned person. Unless the person 
entitled to notice has notified both the IRS and the summoned person in 
the appropriate manner, the person entitled to notice has failed to 
institute a proceeding to quash. For the purpose of permitting the IRS 
to examine the summoned witnesses and records, it is presumed that the 
notification was not timely mailed if the copy of the petition was not 
delivered to the summoned person or to the person and office designated 
to receive the notice on behalf of the IRS within three days after the 
close of the 20-day period allowed for instituting a proceeding to 
quash.
    (d) Effective date. This section is applicable on the date the 
final regulations are published in the Federal Register.


Sec.  301.7609-5  Suspension of periods of limitations.

    (a) In general. Except in the case of a summons that is a 
designated or related summons described in section 6503(j), the 
following rules relating to the suspension of certain periods of 
limitations apply to all third-party summonses subject to the notice 
requirements of section 7609(a) and to all John Doe summonses subject 
to the requirements of section 7609(f).
    (b) Intervention in an action to enforce the summons--(1) In 
general. If a person entitled to notice of a summons under section 
7609(a) and Sec.  301.7609-2 with respect to whose liability the 
summons was issued, or such person's agent, nominee, or other person 
acting under the direction or control of the person entitled to notice, 
takes any action to intervene in a proceeding with respect to 
enforcement of such summons brought pursuant to section 7604, that 
person's periods of limitations under sections 6501 (relating to 
assessment and collection) and 6531 (relating to criminal prosecutions) 
for the tax period or periods that are the subject of the summons are 
suspended for the period during which such proceeding is pending.
    (2) Action to intervene. A person entitled to notice takes any 
action to intervene in a proceeding to enforce a summons within the 
meaning of Sec.  301.7609-4(a) on the date when a motion to intervene 
is filed with the court.
    (c) Institution of a proceeding to quash a summons--(1) In general. 
If a person entitled to notice of a summons under section 7609(a) and 
Sec.  301.7609-2 with respect to whose liability the summons was 
issued, or such person's agent, nominee, or other person acting under 
the direction or control of such person, takes any action described in 
Sec.  301.7609-4(b) to institute a proceeding to quash such summons, 
that person's periods of limitations under sections 6501 and 6531 for 
the tax period or periods that are the subject of the summons are 
suspended for the period during which such proceeding is pending.
    (2) Action to institute a proceeding to quash a summons. A person 
entitled to notice takes any action to institute a proceeding to quash 
if he or she files a petition to quash the summons in any district 
court, regardless of whether the timely filing requirements of section 
7609(b)(2)(A) or the notice requirements of section 7609(b)(2)(B) are 
satisfied. For example, a person entitled to notice takes an action to 
institute a proceeding to quash a summons for purposes of this section 
if that person files a petition to quash the summons in district court 
and notifies the summoned person by sending a copy of the petition by 
registered or certified mail, but fails to mail a copy of that notice 
to the appropriate Internal Revenue Service (IRS) person and office.
    (d) Summoned party's failure to finally resolve the response to a 
summons after six months from service--(1) In general. If a third 
party's response to a summons for which the IRS was required to provide 
notice to persons identified in the summons, or to a John Doe summons 
described in section 7609(f), is not finally resolved within six months 
after the date of service of the summons, the periods of limitations 
are suspended under sections 6501 and 6531, for the person with respect 
to whose liability the summons was issued and for any person whose 
identity is sought to be obtained by a John Doe summons, for the tax 
period or periods that are the subject of the summons. The suspension 
shall begin on the date which is six months after the service of the 
summons and shall end on the date on which there is a final resolution 
of the summoned party's response to the summons.
    (2) Example. The rules of paragraph (d)(1) of this section are 
illustrated by the following example:

    Example.  A John Doe summons is issued on April 1, 2000, to the 
promoter of a tax shelter and seeks the names of all participants in 
the shelter in order to investigate the participants' income tax 
liabilities for 1997 and 1998. The district court approves service 
of the summons on April 30, 2000, and the summons is served on the 
promoter on May 1, 2000. The promoter does not provide the names of 
the participants. The periods of limitations for the participants' 
income tax liabilities and criminal prosecution for 1997 and 1998 
are suspended under section 7609(e)(2) beginning on November 1, 
2000, the date which is six months after the date the John Doe 
summons was served until the date on which the promoter's response 
to the summons is finally resolved.

    (e) Definitions--(1) Agent, nominee, etc. A person is the agent, 
nominee, or other person of a person entitled to notice under section 
7609(a) and Sec.  301.7609-2, and is acting under the direction or 
control of the person entitled to notice for purposes of section 
7609(e)(1), if the person entitled to notice has the ability in fact or 
at law to cause the agent, nominee or other person, to take the actions 
permitted under section 7609(b).
    (2) Period during which a proceeding is pending--(i) Intervention 
in an enforcement proceeding. The period during which the periods of 
limitations under sections 6501 and 6531 are suspended under section 
7609(e)(1) begins on the date any person described in paragraph (b) of 
this section intervenes in an action to enforce the summons. The 
periods of limitations remain suspended until all appeals are disposed 
of, or until the expiration of the period during which an appeal may be 
taken or a request for further review may be made. The periods of 
limitations remain suspended for the period during which a proceeding 
is pending, regardless of compliance (or partial compliance) with the 
summons during that period. If, following issuance of an order to 
enforce a third-party summons, a collateral proceeding is brought 
challenging whether production made by the summoned party fully 
satisfied the court order and whether sanctions should be imposed 
against the summoned party for a failure to satisfy that order, the 
periods of limitations remain suspended until all appeals of the 
collateral proceeding are disposed of, or until the expiration of the 
period during which an appeal may be taken or a request for further 
review of the collateral proceeding may be made. Any collateral 
proceeding to the original proceeding shall be considered to be a 
continuation of the original proceeding.
    (ii) Proceeding to quash a summons. The period during which the 
periods of limitations under sections 6501 and 6531 are suspended under 
section 7609(e)(1) begins on the date any person described in paragraph 
(c) of this section files a petition to quash the summons in district 
court. The periods of limitations remain suspended until all appeals 
are disposed of, or until expiration of the period in which an appeal 
may be taken or a request for further review may be made. The

[[Page 41384]]

periods of limitations remain suspended for the period during which a 
proceeding is pending, regardless of compliance (or partial compliance) 
with the summons during that period.
    (iii) Examples. The rules of paragraph (e)(2) are illustrated by 
the following examples:

    Example 1. A revenue agent issues a summons to A, an accountant 
for B, requiring production of records relating to B's income tax 
liabilities for 1998. The summons is served on A on March 1, 2000. B 
files a petition to quash the summons in district court on March 15, 
2000. The district court dismisses B's petition on July 1, 2000. B 
fails to appeal this decision by filing a notice of appeal within 60 
days from the date of the district court's order of dismissal. The 
revenue agent notifies A that B did not appeal the district court's 
order. A turns over all of the records requested in the summons. The 
periods of limitations applicable to B for 1998 under sections 6501 
and 6531 are suspended under section 7609(e)(1) from March 15, 2000, 
the date B filed a petition to quash, until August 30, 2000, the 
last day on which B could have filed a notice of appeal.
    Example 2. A revenue agent issues a summons to A, an accountant 
for B, requiring production of records relating to B's income tax 
liabilities for 1999. The summons is served on A on June 1, 2001. B 
files an untimely petition to quash the summons in district court on 
June 30, 2001. The district court dismisses B's petition on July 31, 
2001. B does not file an appeal of the district court's order. The 
periods of limitations applicable to B for 1999 under sections 6501 
and 6531 are suspended under section 7609(e)(1) from June 30, 2001, 
the date B filed an untimely petition to quash, until September 29, 
2001, the last day on which B could have filed a notice of appeal.

    (3) Final resolution of the summoned third party's response to a 
summons. For purposes of section 7609(e)(2)(B), final resolution with 
respect to a summoned party's response to a third-party summons occurs 
when the summons or any order enforcing any part of the summons is 
fully complied with and all appeals are disposed of or the period in 
which an appeal may be taken or a request for further review may be 
made has expired. The determination of whether there has been full 
compliance will be made within a reasonable time, given the volume and 
complexity of the records produced, after the later of the giving of 
all testimony or the production of all records requested by the 
summons. If, following an enforcement order, collateral proceedings are 
brought challenging whether the production made by the summoned party 
fully satisfied the court order and whether sanctions should be imposed 
against the summoned party for a failing to do so, the suspension of 
the periods of limitations shall continue until the summons or any 
order enforcing any part of the summons is fully complied with and the 
decision in the collateral proceeding becomes final. A decision in a 
collateral proceeding becomes final when all appeals are disposed of or 
when the period in which an appeal may be taken or a request for 
further review may be made has expired.
    (f) Effective date. This section is applicable on the date the 
final regulations are published in the Federal Register.

 Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
 [FR Doc. E6-11543 Filed 7-20-06; 8:45 am]
BILLING CODE 4830-01-P