NOTICE: This opinion is subject to
formal revision before publication in the United States
Reports. Readers are requested to notify the Reporter of Decisions,
Supreme Court of the United States, Washington, D. C. 20543,
pio@supremecourt.gov, of any typographical or other formal
errors.
SUPREME COURT OF THE UNITED STATES
_________________
No. 21–1599
_________________
HANNA KARCHO POLSELLI, et al.,
PETITIONERS
v. INTERNAL REVENUE SERVICE
on writ of certiorari to the united states
court of appeals for the sixth circuit
[May 18, 2023]
Chief Justice Roberts delivered the opinion of
the Court.
For as long as Americans have had to pay taxes,
at least some have tried to avoid them. And for as long as
Americans have avoided taxes, the Internal Revenue Service and its
predecessors have tried to collect them. As an old joke goes: “I
believe we should all pay taxes with a smile. I tried but they
wanted cash.”
Congress has given the IRS considerable power to
go after unpaid taxes. One tool at the Service’s disposal is the
authority to summon people with information concerning a delinquent
taxpayer. But to safeguard privacy, the IRS is generally required
to provide notice to anyone named in a summons, who can then sue to
quash it. Today’s case concerns an exception to that general
rule.
I
To pursue unpaid taxes and the people who owe
them, “Congress has granted the Service broad latitude to issue
summonses.”
United States v.
Clarke,
573 U.S.
248, 250 (2014). Among other things, the IRS may issue a
summons to “determin[e] the liability” of a taxpayer or “any
transferee or fiduciary” for unpaid taxes. 26 U. S. C.
§7602(a). The IRS also may serve a summons to “collec[t] any such
liability.”
Ibid. These summonses can extend to third
parties beyond the taxpayer under investigation.
Tiffany Fine
Arts, Inc. v.
United States,
469
U.S. 310, 315–316 (1985). Accordingly, the IRS may request the
production of “books, papers, records, or other data” from “any
person” who possesses information concerning a delinquent taxpayer.
§7602(a)(2).
Given the breadth of this power, Congress has
imposed certain safeguards. The IRS must generally give “notice of
the summons” to “any person . . . identified in
the summons.” §7609(a)(1). Anyone entitled to notice can bring a
motion to quash the summons. §7609(b)(2)(A). And the Internal
Revenue Code provides district courts with “jurisdiction to hear
and determine any proceeding” concerning a motion to quash,
§7609(h)(1), thereby waiving the sovereign immunity of the United
States, see
FAA v.
Cooper,
566
U.S. 284, 290 (2012).
There are, however, exceptions to the notice
requirement. As relevant, the IRS need not provide notice to a
person “who is identified in the summons,” §7609(a)(1), if the
summons is:
“issued in aid of the collection of—
“(i) an assessment made or judgment rendered
against the person with respect to whose liability the summons is
issued; or
“(ii) the liability at law or in equity of any
transferee or fiduciary of any person referred to in clause (i).”
§7609(c)(2)(D)
In other words, the IRS may issue summonses both
to determine whether a taxpayer owes money and later to collect any
outstanding liability. When the IRS conducts an investigation for
the purpose of “determining the liability” of a taxpayer, §7602(a),
it must provide notice, §7609(a)(1). But once the Service has
reached the stage of “collecting any such liability,”
§7602(a)—which is a distinct activity—notice may not be required,
§7609(c)(2)(D).
II
For multiple years between 2005 and 2017, Remo
Polselli underpaid his federal taxes. App. to Pet. for Cert.
65a–66a. After investigating, the IRS determined that Mr. Polselli
was liable for the unpaid amounts and other penalties, and entered
official assessments against him totaling more than $2 million.
Id., at 66a. Revenue Officer Michael Bryant then set out to
collect the money, and he developed a few leads in his search for
assets that Mr. Polselli may have been concealing. Bryant focused
on bank accounts belonging to Mr. Polselli’s wife, petitioner Hanna
Karcho Polselli.
Ibid. Bryant also knew that Mr. Polselli
had paid nearly $300,000 toward part of his outstanding tax
liability from an account owned by Dolce Hotel Management, LLC, and
surmised that Mr. Polselli might have control over funds belonging
to that company.
Id., at 67a. To further his investigation,
Bryant issued a summons under §7602 to the law firm Abraham &
Rose, PLC, where Mr. Polselli had long been a client.
Ibid.
But the firm produced no records in response, stating that it “did
not retain any of the documents requested.”
Ibid.
Bryant then issued several additional summonses
seeking records concerning Mr. Polselli. Bryant issued one summons
to Wells Fargo, requesting the financial records of both Mrs.
Polselli and Dolce Hotel Management.
Id., at 70a–71a. He
also issued summonses to JP Morgan Chase and Bank of America,
seeking among other things “[c]opies of all bank statements”
relating to Mr. Polselli and petitioners Jerry R. Abraham,
P. C., and Abraham & Rose, PLC.
Id., at 78a–79a,
85a–86a. Bryant did not provide notice to any of the third parties
named in the three summonses. But the banks did, and Mrs. Polselli,
Jerry R. Abraham, and Abraham & Rose filed motions to quash in
Federal District Court.
The District Court dismissed the case for lack
of subject-matter jurisdiction, reasoning that the IRS did not need
to provide notice.
Polselli v.
United States, 2020 WL
12688176, *4 (ED Mich., Nov. 16, 2020). The District Court credited
Bryant’s assertions that “the purpose of his investigation [was] to
locate assets to satisfy Mr. Polselli’s existing assessed federal
tax liability and that the IRS issued the summonses in question to
aid in the collection of these assessed liabilities.”
Ibid.
Because the Code excluded petitioners from the required notice,
there was no waiver of sovereign immunity, and the District Court
therefore lacked jurisdiction to entertain the motions to quash.
Id., at *5.
The Sixth Circuit affirmed in a divided opinion,
reasoning that no notice was required because “the summonses at
issue fall squarely within the exception listed in
§7609(c)(2)(D)(i).”
Polselli v.
Department of
Treasury–IRS, 23 F. 4th 616, 623 (2022). Before the Sixth
Circuit, petitioners had argued in favor of a rule—previously
adopted by the Ninth Circuit—requiring that a taxpayer have “some
legal interest or title in the object of the summons” for the
notice exception to apply.
Ip v.
United States,
205 F.3d 1168, 1175 (2000). To decide whether a taxpayer
maintains a sufficient legal interest “in the object of the
summons,” the Ninth Circuit considers “whether there was an
employment, agency, or ownership relationship between the taxpayer
and third party.”
Viewtech, Inc. v.
United States,
653 F.3d 1102, 1106 (2011). But the Sixth Circuit below rejected
the Ninth Circuit’s legal interest test, concluding that it was
contrary to the plain language of §7609(c)(2)(D)(i). 23
F. 4th, at 625. The panel below instead held that “as long as
the third-party summons is issued to aid in the collection of any
assessed tax liability the notice exception applies.”
Id.,
at 624 (internal quotation marks omitted). In so concluding, the
Sixth Circuit aligned itself with both the Seventh and Tenth
Circuits. See
Davidson v.
United States, 149 F.3d
1190 (CA10 1998) (Table);
Barmes v.
United States,
199 F.3d 386 (CA7 1999) (
per curiam).
Judge Kethledge dissented. He acknowledged that
an ordinary reading of the statute exempted the summonses from
notice but thought the statutory context compelled a narrower
construction. As an initial matter, Judge Kethledge expressed
concern that the panel’s reading of the notice exception risked “a
significant intrusion upon the privacy of . . . account
holders.” 23 F. 4th, at 631. He argued that an ordinary
reading of the first exception to notice would render the second
exception—codified in §7609(c)(2)(D)(ii)—“superfluous.”
Ibid. To avoid that, Judge Kethledge would have narrowed the
first exception by adopting the legal interest test from the Ninth
Circuit. We granted certiorari to resolve the division among the
Circuits. 598 U. S. ___ (2022).
III
The question presented is whether the
exception to the notice requirement in §7609(c)(2)(D)(i) applies
only where a delinquent taxpayer has a legal interest in accounts
or records summoned by the IRS under §7602(a). A straightforward
reading of the statutory text supplies a ready answer: The notice
exception does not contain such a limitation.
A
The statute sets forth three conditions to
exempt the IRS from providing notice in circumstances like these.
First, a summons must be “issued in aid
of . . . collection.” §7609(c)(2)(D). Second,
it must aid the collection of “an assessment made or judgment
rendered.” §7609(c)(2)(D)(i). By “assessment,” the Code “refers to
the official recording of a taxpayer’s liability.”
Direct
Marketing Assn. v.
Brohl, 575 U.S. 1, 9 (2015); see also
Hibbs v.
Winn,
542 U.S.
88, 100 (2004). Section 7609(c)(2)(D)(i) does not excuse
notice, therefore, until the IRS makes an official assessment or a
judgment has been rendered with respect to a taxpayer’s liability.
Third, a summons must aid the collection of assessments or
judgments “against the person with respect to whose liability the
summons is issued.” §7609(c)(2)(D)(i). This requirement links the
subject of the assessment or judgment with the subject of the
collection effort—they must concern the same delinquent taxpayer.
None of the three components for excusing notice in
§7609(c)(2)(D)(i) mentions a taxpayer’s legal interest in records
sought by the IRS, much less requires that a taxpayer maintain such
an interest for the exception to apply.
Had Congress wanted to include a legal interest
requirement, it certainly knew how to do so. The very next
provision—also enacted as part of the Tax Reform Act of
1976—requires the IRS to “establish the rates and conditions” for
reimbursing costs “incurred in searching for, reproducing, or
transporting” information sought by a summons. §7610(a)(2); see
90Stat. 1702. But the IRS may not provide reimbursement if “the
person with respect to whose liability the summons is issued has a
proprietary interest in” the records “to be produced.” §7610(b)(1).
We assume that Congress “acts intentionally and purposely” when it
“includes particular language in one section of a statute but omits
it in another section of the same Act.”
Sebelius v.
Cloer,
569 U.S.
369, 378 (2013) (internal quotation marks omitted). The fact
that the exception to the reimbursement provision expressly turns
on a taxpayer’s “proprietary interest” in records summoned by the
IRS strongly suggests that Congress deliberately omitted a similar
requirement with respect to the notice exception in
§7609(c)(2)(D)(i). And here the provision in question is not just
in the “same Act”—it is in the adjacent section, having been
enacted in the same Public Law.
B
Petitioners advance two primary arguments in
support of their proposed legal interest test, neither of which
convinces us to abandon an ordinary reading of the notice
exception.
First, petitioners adopt a narrow definition of
“in aid of the collection.” In their view, the phrase refers only
to inquiries that “directly advance” the IRS’s collection efforts.
Brief for Petitioners 21. A summons will not directly advance those
efforts, they contend, unless it is targeted at an account
containing assets that the IRS can collect to satisfy the
taxpayer’s liability. And, petitioners say, the only way that a
summons issued to a third party will produce collectible assets is
if the delinquent taxpayer has a legal interest in the targeted
account.
This argument does not give a fair reading to
the phrase “in aid of the collection.” According to petitioners,
the phrase requires that a summons produce collectible assets. But
to “aid” means “[t]o help” or “assist.” American Heritage
Dictionary 26 (1969). Petitioners agree. See Brief for Petitioners
21 (“aid” means to “support,” “help,” or “assist”). Even if a
summons may not itself reveal taxpayer assets that can be
collected, it may nonetheless help the IRS find such assets.
Consider this case. The IRS’s investigation
“suggest[ed] that Mr. Polselli often uses other entities to shield
assets from the Internal Revenue Service.” App. to Pet. for Cert.
68a. Bryant suspected, for instance, that Mr. Polselli was using
Dolce Hotel Management as an alter ego, and also that he might have
access to and use of Mrs. Polselli’s bank accounts. Based on those
leads, Bryant initially requested that Abraham & Rose produce
“cancelled checks, wire transfer/credit documents, and all other
instruments used by Mr. Polselli to pay the firm.”
Id., at
67a. Whether Mr. Polselli maintains a “legal interest” in those
records—a confounding question, see
Viewtech, 653
F. 3d, at 1106—is neither here nor there. The IRS could not,
of course, use records of canceled checks and the like to satisfy
Mr. Polselli’s tax deficiency. But if those records showed that
money from Dolce Hotel Management was used to pay Mr. Polselli’s
account at Abraham & Rose, or to pay others through Abraham
& Rose, that could aid in collecting funds from Dolce Hotel
Management to help pay Mr. Polselli’s debt to the IRS. Or the
Service could use those records to try to identify other alter
egos—besides Dolce Hotel Management—where Mr. Polselli might have
hidden assets.
By the same token, the summonses Bryant issued
to the three banks sought records to “identify . . .
entities whose funds Mr. Polselli has control over without formal
ownership” and “bank accounts associated with such entities.” App.
to Pet. for Cert. 68a. As with the request Bryant issued to Abraham
& Rose, even if the three bank summonses did not reveal bank
accounts in which Mr. Polselli has a legal interest, they could
lead to assets parked elsewhere that the IRS could collect to
satisfy his $2 million liability.
IRS investigations are much like any other: A
detective might order forensic testing or speak to witnesses to
help identify a culprit, even if those activities are unlikely—in
and of themselves—to solve the crime. Similarly, documents in the
accounts belonging to Mrs. Polselli or Dolce Hotel Management may
be a step in a paper trail leading to assets owned by Mr. Polselli.
Everyday tasks illustrate the same point: A recipe might help a
chef shop for needed groceries, even though more steps are required
before dinner will be ready. By conflating activities that help
advance a goal with activities sure to accomplish it, petitioners
ignore the typical meaning of “in aid of.”
Petitioners next argue that the exception
provided in clause (i) must be read narrowly so as to avoid making
entirely superfluous the exception found in clause (ii). Clause (i)
excuses notice when the IRS issues a summons “in aid of the
collection of . . . an assessment made or judgment
rendered against” the delinquent taxpayer. §7609(c)(2)(D)(i).
Clause (ii) exempts from notice any summons “issued in aid of the
collection of . . . the liability at law or in equity of
any transferee or fiduciary of any person referred to in clause
(i).” §7609(c)(2)(D)(ii). We ordinarily aim to “giv[e] effect to
every clause and word of a statute.”
Microsoft Corp. v.
i4i L. P.,
564 U.S.
91, 106 (2011) (internal quotation marks omitted). If clause
(i) already exempts from notice every summons that helps the IRS
collect an “assessment” against a delinquent taxpayer, petitioners
argue, there would be no work left for clause (ii) to do. Adding a
“legal interest” requirement, on the other hand, would cabin the
scope of clause (i), leaving some purpose for clause (ii).
But this argument overlooks two differences
between clause (i) and clause (ii). First, clause (i) is applicable
upon an
assessment, while clause (ii) is applicable upon a
finding of
liability. Under the Code, a taxpayer’s
“liability” for unpaid taxes arises before the IRS makes an
official “assessment” of what the delinquent taxpayer owes. See
§6203 (“The assessment shall be made by recording the liability of
the taxpayer . . . .”); see also
United
States v.
Galletti,
541 U.S.
114, 122 (2004) (assessment refers to “the calculation or
recording of a tax liability”). Although an assessment may
“trigge[r] levy and collection efforts,”
Hibbs, 542
U. S., at 101, the Code does not require in all cases that the
IRS make a formal assessment before attempting to collect an
outstanding tax liability. See §§6501(c)(1)–(3) (authorizing the
IRS to bring “a proceeding in court for collection of [a] tax
. . . without assessment” in situations involving false
returns, willful attempts to evade taxes, and failures to file a
return).
Second, petitioners’ argument overlooks that
clause (i) and clause (ii) are addressed to different entities.
Clause (i) concerns assessments or judgments against a
taxpayer—“the person with respect to whose liability the
summons is issued.” §7609(c)(2)(D)(i). Clause (ii), in contrast,
concerns the liability of a “transferee or fiduciary.”
§7609(c)(2)(D)(ii). That the notice exception distinguishes between
taxpayers and their fiduciaries or transferees should come as no
surprise. The Code elsewhere separately empowers the IRS to collect
outstanding tax liabilities from taxpayers, on the one hand, and
from transferees or fiduciaries, on the other. See §6901. The Code
also differentiates between taxpayers and their fiduciaries or
transferees in empowering the IRS to issue summonses in the first
place. See §7602(a).
These distinctions—between liability and
assessment or judgment, and between taxpayers and their transferees
or fiduciaries—are not just academic. They show that the second
notice exception found in clause (ii) applies in situations where
clause (i) may not. To dispense with notice, clause (i) requires
that there be “an assessment made or judgment rendered against the
person with respect to whose liability the summons is issued.”
§7609(c)(2)(D)(i). By contrast, clause (ii) does not impose the
same conditions. It instead authorizes the IRS to issue a summons
in aid of collecting a “liability at law or in equity,” and refers
specifically to the liability of any “transferee or fiduciary” of
the delinquent taxpayer. §7609(c)(2)(D)(ii). As a result, clause
(ii) permits the IRS to issue unnoticed summonses to aid its
collection from transferees or fiduciaries
before it makes
an “official recording of a taxpayer’s liability.”
Direct
Marketing Assn., 575 U. S., at 9. “That may not be very
heavy work for the phrase to perform, but a job is a job, and
enough to bar the rule against redundancy from disqualifying an
otherwise sensible reading.”
Gutierrez v.
Ada,
528 U.S.
250, 258 (2000); see also
Nielson v.
Preap, 586
U. S. ___, ___ (2019) (slip op., at 21) (a clause that “still
has work to do” is not superfluous).
Clause (ii) addresses an additional potential
problem as well. Delinquent taxpayers sometimes declare bankruptcy
or otherwise discharge debt. When they do so, the Government may
not be able to collect “an assessment made or judgment rendered
against the” taxpayer. §7609(c)(2)(D)(i). In those situations,
clause (i) may not apply, for a summons cannot be “issued in aid
of ” an impossible collection effort. §7609(c)(2)(D). But
clause (ii) may nevertheless permit the IRS to issue unnoticed
summonses to collect the “liability” of the taxpayer’s transferee
or fiduciary. §7609(c)(2)(D)(ii).
IV
Petitioners also emphasize the privacy
concerns that led Congress to enact the notice requirement in the
first place. They highlight that “Congress enacted §7609 in
response to two decisions in which we gave a broad construction to
the IRS’s general summons power.”
Tiffany Fine Arts, 469
U. S., at 314. In
Donaldson v.
United States,
400 U.S.
517 (1971), we considered whether the employee of a company to
which the IRS had issued a summons could intervene to prevent his
employer’s compliance with the Service’s request.
Id., at
527. We concluded that the employee had no right to do so.
Id., at 530. And in
United States v.
Bisceglia,
420 U.S.
141 (1975), we approved an IRS summons issued to a bank “for
the purpose of identifying an unnamed individual who had deposited
a large amount of money in severely deteriorated bills,” concluding
that the IRS had not abused its authority.
Tiffany Fine
Arts, 469 U. S., at 315 (characterizing
Bisceglia).
Donaldson and
Bisceglia help
explain why Congress enacted §7609, which establishes a baseline
rule requiring the IRS to provide notice and which authorizes
anyone entitled to notice to move to quash a summons. §7609(a). But
neither case obliges us to read the notice exception in
§7609(c)(2)(D)(i) more narrowly than its terms provide. We think
the history highlighted by petitioners supports a contrary
conclusion. That Congress proved acutely aware of our prior
decisions supports a plain reading not only of the general notice
requirement, but also of the specific exception the statute
provides.
We do not dismiss any apprehension about the
scope of the IRS’s authority to issue summonses. As we have said,
“the authority vested in tax collectors may be abused, as all power
is subject to abuse.”
Bisceglia, 420 U. S., at 146. Tax
investigations often involve the pursuit of sensitive records. In
this case, for instance, the IRS sought information from law firms
concerning client accounts. And even the Government concedes that
the phrase “in aid of the collection” is not “limitless.” Tr. of
Oral Arg. 33. The Government proposes a test turning on
reasonableness: So long as a summons is “reasonably calculated to
assisting in collection,” it can fairly be characterized as being
issued “in aid of ” that collection.
Id., at 26; see
also
id., at 36 (“[T]he third party should have some
financial ties or ha[ve] engaged in financial transactions with the
delinquent taxpayer.”).
This is not, however, the case to try to define
the precise bounds of the phrase “in aid of the collection.” The
parties did not argue, and the panel below did not decide, the
contours of that phrase. See
Illinois v.
Gates,
462 U.S.
213, 222–223 (1983). In addition, both the briefing by the
parties and the question presented focus only on whether the
exception provided in §7609(c)(2)(D)(i) requires that a taxpayer
maintain a legal interest in records summoned by the IRS. For the
reasons we have given, the answer is no.
The judgment of the Court of Appeals for the
Sixth Circuit is affirmed.
It is so ordered.