Tax News

CCH (cch.taxgroup.com) reports:

The IRS has issued final regulations providing guidance on the manner in which a summons may be served on a third-party recordkeeper, the expanded notice requirements relating to third-party summonses, and the suspension of limitation periods when a third-party summons is challenged or a response to a summons is not resolved within six months after service. These final regulations are effective as of April 30, 2008.
CCH Comment. The regulations relate to third-party and John Doe summonses and reflect the amendments to Code Secs. 7603 and 7609
made by the Internal Revenue Service Restructuring and Reform Act of 1998 (P.L. 105-206) (RRA of 1998), the Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508), the Technical and Miscellaneous Revenue Act of 1988 (P.L. 100-647) and the Tax Reform Act of 1986 (P.L. 99-514).
Service of Third-Party Summons
Third-party recordkeeper summonses may be served in person or by certified or registered mail to the last known address of the third-party record keeper. The classes of persons defined as third-party recordkeepers includes banks, credit card issuers, attorneys, accountants and enrolled agents. The regulations preserve the requirement that records of a third-party recordkeeper be made or kept in the third-party recordkeeper's capacity as such, although this requirement was not incorporated in the amendments made by P.L. 106-206 to Code Sec. 7603, relating to enumerated classes of third-party recordkeepers. The regulations also define owners or developers of computer software source code. This class of third-party recordkeepers was added to Code Sec. 7603 by P.L. 106-206.
Notice Requirements
Third-party summonses are generally subject to notice, intervention and proceedings to quash unless they are excepted from these requirements under Code Sec. 7609(c). Notice of a third-party summons must be provided to any person identified in the summons, other than the party summoned, unless there is an applicable exception. The RRA of 1998 (P.L. 106-206) expanded the exception categories and the regulations clarify these exceptions. For example, third-party summonses issued in aid of collection under Code Sec. 7609(c)(2)(D) and summonses issued by a criminal investigator under Code Sec. 7602(c)(2)(E) are excepted from the notice requirement.
Suspension of Period of Limitations
The final regulations clarify that the period of limitations is suspended under Code Sec. 7609(e)(2) only for third-party summonses to which the notice requirements of Code Sec. 7609(a) apply, or to John Doe summonses for which taxpayers are entitled to notice of any statute suspension under Code Sec. 7609(i)(4). A definition of final resolution of a third party's response to a summons, the occurrence of which ends the suspension of the statutes of limitations, is also provided.
The regulations reflect the statutory changes to Code Sec. 7609 that provide protection from liability for disclosure of information by producing records or giving testimony to all recipients of third-party summonses subject to the notice requirements. The regulations also clarify that Code Sec. 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 records during an investigation.
T.D. 9395, 2008FED ¶47,031
T.D. 9395, FINH ¶43,117
Other References:
Code Sec. 7603
CCH Reference - 2008FED ¶42,835
CCH Reference - 2008FED ¶42,836A
CCH Reference - FINH ¶22,660
CCH Reference - FINH ¶22,663
Code Sec. 7609
CCH Reference - 2008FED ¶42,891
CCH Reference - 2008FED ¶42,892
CCH Reference - 2008FED ¶42,893
CCH Reference - 2008FED ¶42,894
CCH Reference - 2008FED ¶42,895
CCH Reference - FINH ¶22,701
CCH Reference - FINH ¶22,710
CCH Reference - FINH ¶22,715
CCH Reference - FINH ¶22,720
CCH Reference - FINH ¶22,725
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