25.5.7. Special Procedures for John Doe Summonses

(1) There are times when the IRS must investigate violations, or potential violations, of internal revenue law by a person, group or class of persons without identifying a specific individual. A John Doe summons is a summons that does not identify the person with respect to whose liability the summons is issued. The Internal Revenue Code authorizes the IRS to issue a John Doe summons pursuant to an investigation of a specific, unidentified person or an ascertainable group or class of persons. See IRC 7609(f).

(2) With a normal summons, the IRS seeks information about a specific taxpayer whose identity is known. In contrast, a John Doe summons allows the IRS to obtain the names, requested information and documents concerning all taxpayers in a certain group. A John Doe summons can be a useful tool when trying to obtain information like a list of investors in a certain tax shelter, owners of tax-exempt bonds, or account holders at a financial institution.

(1) IRC 7609(c)(3) and IRC 7609(f) provide the IRS with John Doe summons authority.

(2) The authority to issue John Doe summonses is limited to individuals who are specifically authorized by Delegation Order 25-1. See IRM 1.2.2, Servicewide Delegations of Authority.

(1) Paragraph (3) in Delegation Order 25-1, lists the individuals who are authorized to issue John Doe summonses. See IRM 1.2.2, Servicewide Delegations of Authority.

(2) US District Court approval is required to serve a John Doe summons. See IRM 25.5.7.2, Procedures.

(3) Requests for US District Court approval to serve John Doe summonses are submitted to Area or Associate Area Counsel. Counsel reviews these requests for legal sufficiency and appropriate requests are referred to the Department of Justice (DOJ). See IRM 25.5.7.2, Procedures. DOJ will file an ex parte proceeding in US District Court requesting permission for the IRS to serve the John Doe summons. See IRM 25.5.7.4, Statutory Requirements For a Valid John Doe Summons.

(1) In general, the IRS issues summonses only when the taxpayer (or other witness) will not produce the desired records or other information voluntarily. In contrast, a John Doe summons is issued to investigate violations or potential violations of internal revenue law when the specific individuals are not known. John Doe summonses require US District Court approval, therefore reports associated with these cases are maintained by the Office of Chief Counsel.

(1) The submission of a pre-approval request to Area or Associate Area Counsel and the requirement for approval, pursuant to Delegation Order 25-1, provide oversight to the John Doe summons program. See IRM 25.5.7.2, Procedures and IRM 1.2.2, Servicewide Delegations of Authority.

(2) Once a summons is served, a copy of the original Page 1 of the summons labeled “Original” is maintained. The original summons is needed when referring a summons for enforcement. See IRM 25.5.7.3.6, Enforcement of a John Doe Summons and IRM 25.5.10, Enforcement of Summons.

(3) IRS Counsel maintains procedures regarding US District Court matters in Chief Counsel Directives Manual, CCDM 34.1, Jurisdiction of the District Courts.

(4) John Doe summons requests processed from Collection are processed through CEASO. See IRM 25.5.7.2, Procedures.

(1) The table below lists commonly used acronyms and their definitions.Acronyms

(1) IRM 25.5, Summons, provides guidelines for all IRS functions in one multifunctional handbook. The sections are:

• IRM 25.5.1, Introduction

• IRM 25.5.2, Preparation

• IRM 25.5.3, Procedures

• IRM 25.5.4, Examination of Books and Witnesses

• IRM 25.5.5, Summons for Taxpayer Records and Testimony

• IRM 25.5.6, Summonses on Third Party Witnesses

• IRM 25.5.7, Special Procedures for John Doe Summonses

• IRM 25.5.8, Use of Summons Special Applications

• IRM 25.5.9, Fees and Costs for Summoned Witnesses

• IRM 25.5.10, Enforcement of Summons

(2) The basic legal concepts governing the use and enforcement of administrative summonses can be found in IRM 5.17.6, Legal Reference Guide for Revenue Officers, Summonses.

(3) The Taxpayer Bill of Rights (TBOR) lists rights that already exist in the tax code, putting them in simple language and grouping them into 10 broad categories. Employees are responsible for being familiar with and acting in accordance with taxpayer rights. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights. For additional information about the TBOR, see https://www.irs.gov/taxpayer-bill-of-rights and Policy Statement 1-236 in IRM 1.2.1, Servicewide Policy Statements.

(4) Additional summons guidance can be found on the Summons Knowledge Base, https://portal.ds.irsnet.gov/sites/vl053/pages/default.aspx

(1) A John Doe summons can only be issued by high ranking individuals who are specifically authorized to do so in Delegation Order No. 25-1. Special agents, revenue agents and revenue officers are not authorized to issue these summonses. When considering a John Doe summons, consult IRM 1.2.2, Servicewide Delegations of Authority, Delegation Order 25-1.

(1) The purpose of a John Doe summons must be to investigate the tax liability of a specific unidentified taxpayer, (or a group of such taxpayers), even if a secondary purpose is to gather information for research purposes.

(2) The IRS should no longer be in the information-gathering or research stage of a project when it decides to seek court authorization to serve a John Doe summons. The project research should be sufficiently developed to enable the IRS to identify a specific tax compliance problem. The IRS should be prepared to investigate the tax liabilities of specific taxpayers based on the information received from the John Doe summons. A John Doe summons cannot be used to conduct a "fishing expedition." See IRM 25.5.7.4 , Statutory Requirements For a Valid John Doe Summons.

(1) A dual-purpose summons is a summons issued with the purposes of investigating both the tax liability of a named taxpayer and the tax liability of other, unnamed parties. In some investigations, it may be possible for the IRS to obtain the identities of taxpayers without issuing a John Doe summons. If the IRS is conducting an investigation of a known taxpayer, (such as a tax shelter promoter), who can identify an unknown taxpayer or class of taxpayers, (such as the shelter investors), and the identities of the unknown taxpayers are relevant to the investigation of the known taxpayer, the IRS can issue a standard, non-John Doe summons, as part of the investigation of the known taxpayer. The IRS can require the production of the identities of the unknown taxpayers. This technique is only acceptable where discovering the identities of the unknown taxpayers is relevant to the investigation of the known taxpayer. A dual-purpose summons should be considered before issuance of a John Doe summons.

(2) The Supreme Court has held "that where, pursuant to § 7602, the IRS serves a summons on a known taxpayer with the dual purpose of investigating both the tax liability of that taxpayer and the tax liabilities of unnamed parties, it need not comply with the requirements for John Doe summonses set out in § 7609(f), as long as all the information sought is relevant to a legitimate investigation of the summoned taxpayer." Tiffany Fine Arts, Inc v. United States, 469 U.S. 310, 324 (1985); Section 7609.

(1) A John Doe Summons is exempt from third party notice requirements per IRC 7609(c)(3). Advance notice by the IRS to the unknown taxpayers constituting the John Doe class is not possible.

(1) Pursuant to IRC 7609(e)(2), if the summoned party's response to the John Doe summons is not resolved six months after the date the summons is served, the period of limitations under IRC 6501 and IRC 6531 with respect to any person whose identity is sought, will be suspended in relation to the tax period or periods that are the subject of the summons, for the period:

1. Beginning on the date which is six months after the service of the summons, and

2. Ending with the final resolution of the summons response. See Treas. Reg. 301.7609-5(e)(3).

(2) In the case of a John Doe summons in which any period of limitations has been suspended, the summoned party shall provide notice of such suspension to any person described in the John Doe summons per IRC 7609(i)(4). The content of the notification can be found in Treas. Reg. 301.7609-3(d)(2).

(1) The enforcement of a John Doe summons is essentially the same as other IRS summonses as discussed in IRM 25.5.10, Enforcement of Summons. However, a John Doe summons has already been referred to DOJ and approved by a US District Court prior to issuance. Therefore, in the event that a John Doe summons requires enforcement, contact Area or Associate Area Counsel for guidance.

(1) The unidentified person, group or class of persons under investigation, and the activity or transaction under investigation must be described with particularity on the line of the summons that begins with "In the matter of." The phrase "group or class" refers to a group or class of persons who have engaged in specifically described transactions or activities that are common to all persons or entities in the group or class. Generally, the common activities or transactions of the group or class of persons will directly relate to compliance with the internal revenue laws.

(2) Examples.

(1) The IRS must establish a reasonable basis for suspecting noncompliance with the tax laws by the unidentified person or the group or class of unidentified persons that are the subject of the investigation. The IRS need not establish probable cause for suspecting noncompliance or meet any other evidentiary standard greater than a reasonable basis for suspecting noncompliance. The IRS can establish per IRC 7609(f)(2) that it has reasonable basis for believing that an individual or a group or class may have or will fail to comply with the tax laws by showing:

1. The unidentified person or group has engaged in or is engaging in a transaction or transactions that the IRS has determined to be noncompliant with the tax laws, or

2. The unidentified person or group has engaged in or is engaging in an activity or course of actions that is of such a nature that there is a likelihood of underreporting or other type of noncompliance with the tax laws.

(2) Common Financial Transaction or Activity Related to Tax Law Compliance. A John Doe summons will usually not be appropriate unless the unidentified group or class of persons has engaged in a common financial transaction or an activity directly related to compliance with the tax laws. For example, a group that participates in financial activities not susceptible to detection, or designed to avoid detection, or to defeat the payment of taxes may be a candidate for a John Doe summons. On the other hand, members of a group whose only common characteristics relate to non-tax factors, such as political or ideological beliefs, or memberships in trade or professional organizations, should not normally be the subject of a John Doe investigation.

(3) Statistical Data Needed as Evidence. To determine whether there is a high degree of noncompliance, the IRS should attempt to investigate or canvass as many of the group members that it can identify before considering a John Doe summons. The information gathered from these investigations or compliance checks will support the Government's position that a reasonable basis exists to believe that the group or class of persons may have failed to comply with the tax laws. Information or statistical data from investigations of group members from other parts of the country may be used to support a John Doe summons issued to investigate members in a particular area.

(4) Statistical Data Not Needed as Evidence. While canvassing or performing compliance checks on the identified members of a group is generally useful in any John Doe summons case, there may be situations where, in the exercise of sound judgment, such steps can be deemed unnecessary. For example, where the IRS is investigating the promotion of a particular financial transaction and the promoters have taken a position in the prospectus or other document that is contrary to the IRS's announced position, it is not necessary to canvass the identified members to learn whether they did in fact follow the promoters' tax advice. The reasonable basis standard is met by the promoters' documents. Also, for example, if a person or persons deposit a large amount of high denomination currency in decrepit condition within a period of a few weeks, the IRS need not try to obtain more factual background on the unidentified person or persons. The inherently suspicious nature of the deposits meets the reasonable basis standard and makes appropriate a John Doe summons directed to the bank where the deposits took place.

(5) Statistical Evidence Needed Where a Common Financial Transaction is Absent. If the IRS has not discovered a common financial transaction suggesting noncompliance with tax laws in a group or class of persons, a John Doe summons may still be appropriate if investigations of known taxpayers in the group produce a significant statistical sample showing a very compelling degree of noncompliance. (A statistical sample that shows 50 percent or more of noncompliance indicates a high degree of noncompliance. While this is not intended as a bright-line test, to the extent the percentage is less than 50 percent, it will become more difficult to argue that a reasonable basis exists, and Area Counsel should consider whether a John Doe summons is appropriate). A John Doe summons should not be considered where a common financial transaction suggesting noncompliance does not exist unless the IRS has first gathered statistical data from identified group members establishing a factual basis for issuing the summons.

(6) Examples. The following examples illustrate what evidence satisfies the reasonable basis requirement of IRC 7609(f)(2) and when statistical data must be used:

(1) The information to be obtained, including the identities of the John Does, is not readily available from other sources when the information cannot be obtained from IRS records or public sources such as telephone directories, professional directories, or reporting services, and the information cannot be obtained voluntarily from entities such as state agencies and industry or professional organizations. The fact that it may be more difficult administratively for the IRS to conduct the investigation by relying on its own records or on public sources may not satisfy the statutory requirement. The IRS must show that retrieving the data from other sources will be impractical. This may be shown by specifying the additional staff hours or procedures which will be necessary, and the significant impact on IRS normal operations if the information cannot be obtained by the summons.

(2) Where some, but not all, of the information is readily available from public sources, the IRS must establish that the public sources are not complete or not comprehensive, and that the summoned data is necessary to ensure a thorough investigation of all taxpayers in the group under investigation.