Summonses
TAXPAYER BILL OF RIGHTS II
11. TITLE X--MODIFICATIONS OF RULES RELATING TO SUMMONSES
11.1. Enrolled Agents Included As Third-Party Recordkeepers. Section 7609 contains special procedures that the IRS must follow before it issues a third-party summons. A third-party summons is a summons issued to a third-party recordkeeper compelling
him to provide information with respect to the taxpayer. If a thirdparty summons is served on a third-party recordkeeper listed in section 7609(a)(3), then the taxpayer must receive notice of the summons and have an opportunity to challenge the summons
in court. Otherwise the taxpayer has no statutory right to receive notice of the summons and accordingly he will not have the opportunity to challenge it in court. Section 7609(a)(3) lists attorneys and accountants as third-party recordkeepers, but it
does not list "enrolled agents", who are authorized to practice before the IRS. The new law includes enrolled agents as thirdparty recordkeepers. The provision applies to summonses issued after the date of enactment. TPBR2 §1001. IRC §7609(a)(3). SEC. 1001 OF THE BILL
11.2. Safeguards Relating To Designated Summonses. The period for assessment of additional tax with respect to most tax returns, corporate or otherwise, is three years. The IRS and the taxpayer can together agree to extend the period,
either for a specified period of time or indefinitely. The taxpayer may terminate an indefinite agreement to extend the period by providing notice to the IRS. During an audit, the IRS may informally request that the taxpayer provide additional
information necessary to arrive at a fair and accurate audit adjustment, if any adjustment is warranted. In some cases the IRS seeks information by issuing an administrative summons. Such a summons will not be judicially enforced unless the Government
(as a practical matter, the Department of Justice) seeks and obtains an order for enforcement in Federal court. In addition, a taxpayer may petition the court to quash an administrative summons where this is permitted by statute.In certain cases, the
running of the assessment period is suspended during the period when the parties are in court to obtain or avoid judicial enforcement of an administrative summons. Such a suspension is provided in the case of litigation over a third-party summons (sec.
7609(e)) or litigation over a summons regarding the examination of a related party transaction. Such a suspension can also occur with respect to a corporate tax return if a summons is issued at least 60 days before the day on which the assessment period
(as extended) is scheduled to expire. In this case, suspension is only permitted if the summons clearly states that it is a "designated summons" for this purpose. Only one summons may be treated as a designated summons for purposes of any one tax return.
The limitations period is suspended during the judicial enforcement period of the designated summons and of any other summons relating to the same tax return that is issued within 30 days after the designated summons is issued. Under current internal
procedures of the IRS, no designated summons is issued unless first reviewed by the Office of Chief Counsel to the IRS, including review by an IRS Deputy Regional Counsel for the Region in which the examination of the corporation's return is being
conducted.
The new law requires that issuance of any designated summons with respect to a corporation's tax return must be preceded by review of such issuance by the Regional Counsel, Office of Chief Counsel to the IRS, for the Region in which the
examination of the corporation's return is being The new law also limits the use of a designated summons to corporations (or to any other person to whom the corporation has transferred records) that are being examined as part of the Coordinated
Examination Program (CEP) or its successor. CEP audits cover about 1,600 of the largest corporate taxpayers. If a corporation moves between CEP and non-CEP audit categories only the tax years covered by the CEP may be the subject of a designated summons.
The new law does not affect Code section 6038A(e)(1), which relates to a U.S. reporting corporation that acts merely as the agent of the foreign related party by receiving summonses on behalf of the foreign party. TPBR2 §1002. IRC §6501(k)(1) and §6503(k)(2)(A). SEC. 1002 OF THE BILL
11.3. Annual Report To Congress Concerning Designated Summonses. The new law requires that the Treasury report annually to the Congress on the number of designated summonses issued in the preceding 12 months. The provision applies to
summonses issued after date of enactment. TPBR2 §1003. SEC. 1003 OF THE BILL
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