[Federal Register Volume 73, Number 84 (Wednesday, April 30, 2008)]
[Rules and Regulations]
[Pages 23342-23349]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-9518]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[TD 9395]
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: Final regulations.

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SUMMARY: This document contains final regulations relating to third-
party and John Doe summonses. These final 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. 
These final regulations provide guidance relating to the manner by 
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 final 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: Effective Date: These regulations are effective April 30, 2008.
    Applicability Date: For the date of applicability, see Sec. Sec.  
301.7603-1(f); 301.7603-2(c); 301.7609-1(d); 301.7609-2(c); 301.7609-
3(e); 301.7609-4(d); and 301.7609-5(f).

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

SUPPLEMENTARY INFORMATION: 

Background

    This document contains final 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 final regulations 
reflect amendments to sections 7603 and 7609 made by 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 
final 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).
    On July 21, 2006, the IRS published in the Federal Register a 
notice of proposed rulemaking (REG-153037-01; 71 FR 41377) that 
interprets the amendments to sections 7603 and 7609. Written comments 
from one commentator on several of the proposed sections were received. 
No request for a public hearing was received, nor was one held. The 
proposed regulations, as revised by this Treasury decision, are 
substantially adopted as final regulations.
    As described more fully in the preamble to the proposed 
regulations, these regulations provide guidance relating to the manner 
in which summonses may be served on third-party recordkeepers, the 
expanded class of third-party summonses to which the notice 
requirements and other procedures apply, the suspension of a taxpayer's 
periods of limitations if that taxpayer petitions to quash a third-
party summons or intervenes in a proceeding to enforce such a summons, 
and the suspension of a taxpayer's periods of limitations if a summoned 
third party does not finally resolve its response to a summons within 
six months after service of a summons.

Comments on the Proposed Regulations and Explanation of Changes

Section 301.7609-1(a)(2)--In General

    Proposed Sec.  301.7609-1(a)(2) provides that neither section 7609 
nor the regulations ``limit the IRS's ability to obtain information, 
other than by summons, through formal or informal procedures authorized 
by sections 7601 and 7602.'' The commentator suggested that this 
provision be prefaced with the

[[Page 23343]]

phrase ``[e]xcept as provided in section 7609 or Treasury Regulations'' 
and further explained that section 7609 does contain provisions, such 
as section 7609(d), that limit the IRS's ability to obtain information 
when a summons has been served.
    This suggestion has not been adopted in the final regulations. 
Proposed Sec.  301.7609-1(a)(2) is consistent with the language of 
section 7609(j), which provides: ``Nothing in this section shall be 
construed to limit the [IRS's] ability to obtain information, other 
than by summons, through formal or informal procedures authorized by 
sections 7601 and 7602.'' Section 7609(j) and proposed Sec.  301.7609-
1(a)(2) are directed to situations in which the IRS has not issued a 
summons, but is instead seeking information through informal procedures 
authorized by sections 7601 and 7602. In these situations, section 7609 
and the regulations do not apply.

Section 301.7609-2(a)(1)--Persons Entitled to Notice

    Section 7609(a)(1) provides that notice of a third party summons 
shall be given to ``any person (other than the person summoned) who is 
identified in the summons.'' Proposed Sec.  301.7609-2(a)(1) provides: 
``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.''
    The commentator suggested that the statutory phrase ``any person * 
* * identified in the summons'' should be interpreted more broadly to 
encompass persons to whom the summoned records relate who belong to a 
specifically identifiable class, but who are not identified by name in 
the summons. The commentator offered examples of persons described 
generically by phrases, such as ``children'' or ``closely-held 
corporations in which the taxpayer is a shareholder.''
    This suggestion has not been adopted in the final regulations. The 
requirement that an identified person be named in the summons is 
consistent with longstanding regulations under section 7609. Nothing in 
the statutory amendments to section 7609 since these regulations were 
promulgated suggests that Congress intended to change the meaning of 
this concept.
    The commentator also suggested that the example in the proposed 
regulations could be read to mean that a person named in a summons is 
only entitled to notice if that person's records are sought from the 
third party. This reading is incorrect. The regulations do not 
condition the right to notice on a finding that the identified person's 
records are sought. Instead, ``any * * * person identified in the 
description of summoned records or testimony'' is entitled to notice, 
as is the taxpayer with respect to whose liability the summons is 
issued.

Section 301.7609-3(a)--Duty of the Summoned Party

    Proposed Sec.  301.7609-3(a) provides: ``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).''
    The commentator suggested that proposed Sec.  301.7609-3(a) is 
overbroad because the statutory provision on which it is based, section 
7609(i)(1), is preceded by the heading: ``Recordkeeper Must Assemble 
Records and Be Prepared To Produce Records.'' The commentator concluded 
that section 7609(i)(1) can apply only to third-party recordkeepers. 
This conclusion is not supported by the statutory amendment to section 
7609(i)(1) under RRA 98, which replaced the prior reference to ``third-
party recordkeeper'' with the term summoned party. Thus, section 
7609(i)(1) applies to all recipients of third-party summonses (other 
than certain excepted summonses under section 7609(c)(2)).
    The commentator also suggested that proposed Sec.  301.7609-3(a) is 
overbroad because the requirements of section 7609(i)(1) do not apply 
if a proceeding to quash is brought. Section 7609(i)(1), however, does 
not require the summoned party to produce the documents when a petition 
to quash has been filed but merely requires the summoned party to 
``assemble'' and ``be prepared to produce'' them.
    The commentator suggested that proposed Sec.  301.7609-3(a) would 
infringe on the rights of those summoned persons who receive a vague or 
overbroad summons. This provision, however, does not preclude a 
summoned person from raising such a defense in a summons enforcement 
proceeding. Accordingly, the IRS and Treasury have concluded that these 
suggestions provide no basis for adopting changes in the final 
regulations.

Section 301.7609-4(c)--Presumption No Notice of Proceeding To Quash Has 
Been Mailed

    Section 7609(b) provides that any person entitled to notice of a 
summons may bring a proceeding to quash by filing a petition in 
district court and mailing notice of the petition to both the IRS and 
the summoned person within 20 days of the day the notice was given. 
Proposed Sec.  301.7609-4(b)(3) provides that if a person fails to give 
proper and timely notice of the petition to quash, then that person has 
failed to institute a proceeding to quash and the district court lacks 
jurisdiction to hear the proceeding. Proposed Sec.  301.7609-4(c) 
provides that ``it is presumed that the notification [of the petition 
to quash] 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.''
    The commentator suggested that proposed Sec.  301.7609-4(c) should 
be clarified to provide that the presumption of untimeliness would no 
longer apply ``if a copy of the petition is subsequently received and 
it is determined that it was mailed prior to the close of the 20-day 
period.'' Proposed Sec.  301.7609-4(c) is identical, however, in all 
salient respects to a provision in the prior regulations that the IRS 
has administered since 1986 without controversy. In cases where the IRS 
has not received a copy of a petition to quash within three days after 
the close of the 20-day period, but it is later determined that a copy 
of the petition was timely mailed within the 20-day period, the IRS has 
halted the examination of summoned witnesses and records upon receiving 
a timely filed petition to quash, consistent with IRM provisions 
providing that, if a proceeding to quash is begun, no examination of 
summoned records is allowed until the court so orders.

Section 301.7609-5(e)(2)(i)--Intervention in an Enforcement Proceeding

    Section 7609(e)(1) provides for the suspension of the statute of 
limitations with respect to a third-party summons ``for the period 
during which a proceeding, and appeals therein, with respect to the 
enforcement of such summons is pending.'' Proposed Sec.  
301.7609(e)(2)(i) provides: ``If,

[[Page 23344]]

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.''
    The commentator suggested that including collateral proceedings and 
related appeals periods within the suspension period under section 
7609(e)(1) goes beyond the statutory language and the IRS's authority 
to promulgate regulations. The statutory phrase ``a proceeding, and 
appeals therein, with respect to the enforcement of such summons'' 
connotes a category of court actions that are related to, but not 
limited to, a summons enforcement suit. Thus, section 7609(e)(1) is 
properly interpreted to encompass collateral proceedings and related 
appeals.

Section 301.7609-5(e)(3)--Final Resolution of the Summoned Third 
Party's Response to a Summons

    Section 7609(e)(2)(B) suspends a taxpayer's periods of limitations 
on assessment and criminal prosecution ``in the absence of the 
resolution of the summoned party's response to the summons'' for a 
period beginning six months after service of the summons and ending on 
the date of ``final resolution.'' Proposed Sec.  301.7609-5(e)(3) 
provides that ``final resolution'' occurs when the summons or any 
summons enforcement order is fully complied with and all appeals are 
disposed of or the period for appeal or further review has expired. The 
proposed regulation further provides that 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. The proposed regulation additionally provides 
that the suspension shall continue if, following an enforcement order, 
collateral proceedings are brought challenging whether the summoned 
party fully satisfied the court order. The suspension will continue 
until the summons or the enforcement order is fully complied with and 
the decision in the collateral proceeding becomes final, which occurs 
when all appeals are disposed of or when the period for appeal or 
further review has expired.
    The commentator suggested that proposed Sec.  301.7609-5(e)(3) be 
revised to reflect that the suspension under section 7609(e)(2) does 
not apply to a taxpayer who brings a proceeding to quash or who 
intervenes in an enforcement suit. This suggestion has not been adopted 
as the statutory structure already provides for the applicability of 
alternative suspension periods. This suggestion has also not been 
adopted as nothing prevents the suspension under section 7609(e)(2) 
from applying after the expiration of the suspension under section 
7609(e)(1).
    The commentator also suggested that the provisions concerning 
collateral proceedings be removed. This recommendation has not been 
adopted. The suspension will only terminate upon final resolution of 
the summoned person's response to the summons, and collateral 
proceedings, such as contempt proceedings, may be necessary to obtain a 
summoned third party's compliance with an enforcement order.
    The commentator further suggested that the ``operative fact'' in 
determining whether final resolution has occurred should be the date of 
the summoned person's ``actual compliance'' with the summons, not ``the 
Service's determination as to whether and when this has occurred.'' 
This suggestion has not been adopted because compliance can only be 
determined after the records are examined. The regulations provide that 
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 or required by any 
order enforcing any part of the summons. In addition, as stated in the 
preamble to the proposed regulations, the IRS intends to publish 
additional administrative procedures regarding the compliance 
determination in the Internal Revenue Manual. An aspect of these 
procedures will involve the creation of procedures by which taxpayers 
can inquire about the suspension of their periods of limitations under 
section 7609(e)(2).

Sections 301.7603-1(f); 301.7603-2(c); 301.7609-1(d); 301.7609-2(c); 
301.7609-3(e); 301.7609-4(d); and 301.7609-5(f)--Effective/
Applicability Date

    The commentator suggested making these regulations applicable only 
to summonses issued after the date on which they are published. This 
suggestion was not adopted because these regulations are interpretative 
of statutory provisions that have existed as law for several years.

Special Analyses

    It has been determined that this final regulation 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. section 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, the regulations, 
when published previously in the Notice of Proposed Rulemaking, were 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on its impact on small business.

Drafting Information

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

Adoption of Amendments to the Regulations

0
Accordingly, 26 CFR part 301 is amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

0
Paragraph 1 . The authority citation for part 301 continues to read, in 
part, as follows:

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

0
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.

[[Page 23345]]

    (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/applicability date. This section is applicable on 
April 30, 2008.

0
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/applicability date. This section is applicable on 
April 30, 2008.

0
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 the regulations hereunder 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

[[Page 23346]]

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/applicability date. This section is applicable on 
April 30, 2008.


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 this 
paragraph, 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 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 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/applicability date. This section is applicable on 
April 30, 2008.


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

[[Page 23347]]

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 have 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/applicability date. This section is applicable on 
April 30, 2008.


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 this paragraph, 
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 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/applicability date. This section is applicable on 
April 30, 2008.


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

[[Page 23348]]

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:

    A John Doe summons is issued on April 1, 2004, 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 2001 and 2002. The district court approves service 
of the summons on April 30, 2004, and the summons is served on the 
promoter on May 3, 2004. The promoter does not provide the names of 
the participants. The periods of limitations for the participants' 
income tax liabilities and criminal prosecution for 2001 and 2002 
are suspended under section 7609(e)(2) beginning on November 3, 
2004, 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 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 2002. The summons is served on A on March 1, 2004. B 
files a petition to quash the summons in district court on March 15, 
2004. The district court dismisses B's petition on July 1, 2004. 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 2002 under sections 6501 
and 6531 are suspended under section 7609(e)(1) from March 15, 2004, 
the date B filed a petition to quash, until August 30, 2004, 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 2003. The summons is served on A on June 1, 2005. B 
files an untimely petition to quash the summons in district court on 
June 29, 2005. The district court dismisses B's petition on July 29, 
2005. B does not file an appeal of the district court's order. The 
periods of limitations applicable to B for 2003 under sections 6501 
and 6531 are suspended under section 7609(e)(1) from June 29, 2005, 
the date B filed an untimely petition to quash, until September 27, 
2005, 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

[[Page 23349]]

with and all appeals or requests for further review are disposed of, 
the period in which an appeal may be taken has expired or the period in 
which 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 or required by any 
order enforcing any part of 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, the period in which an appeal 
may be taken has expired or the period in which a request for further 
review may be made has expired.
    (f) Effective/applicability date. This section is applicable on 
April 30, 2008.

    Dated: April 17, 2008.
Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
 [FR Doc. E8-9518 Filed 4-29-08; 8:45 am]
BILLING CODE 4830-01-P