SCOTUS Allows IRS to Carry Out Secret, Warrantless Searches of Innocent Taxpayers’ Bank Accounts

In order to identify and collect unpaid taxes from family members and associates who have no legal interest in those bank accounts.

By The Rutherford Institute

WASHINGTON, DC — In a unanimous opinion, the U.S. Supreme Court is allowing the IRS to go on secret, warrantless fishing expeditions through innocent taxpayers’ bank records in order to identify and collect unpaid taxes from family members and associates who have no legal interest in those bank accounts.

Despite acknowledging that “the authority vested in tax collectors may be abused, as all power is subject to abuse,” and that “Congress has given the IRS considerable power,” the Supreme Court’s 9-0 ruling in Polselli v. IRS declined to restrict the IRS’s authority. Attorneys for The Rutherford Institute and Cato Institute had filed an amicus brief in Polselli arguing that the sweeping investigatory power wielded by the IRS—to circumvent the Fourth Amendment by carrying out warrantless searches of the bank accounts and records of innocent people, who are given no notice or right to object to the search, merely because they may be associated with a delinquent taxpayer—offends every constitutional sensibility on the right to privacy.

“This practice of investigating the bank records of innocent taxpayers because they may have family members or associates who are delinquent on their taxes is merely a perverse form of guilt by association,” said constitutional attorney John W. Whitehead, president of The Rutherford Institute and author of Battlefield America: The War on the American People. “At a minimum, Fourth Amendment protections should not disappear just because sensitive information is shared with third parties, such as banks and attorneys.”

The case arose after an IRS Revenue Officer, seeking to collect underpaid federal taxes by Remo Polselli, served summonses on the banks of Polselli’s wife and attorney in order to find account and financial records concerning Polselli. The IRS agent did not notify Polselli’s wife or attorney of the summonses, but the banks voluntarily did so. Polselli’s wife and attorney subsequently filed motions in federal district court to quash the IRS’s summonses. In siding with the IRS, the district court held that Polselli’s wife and attorney are not entitled to notice of the summons and have no right to even be heard on their motions to quash the summonses. The Sixth Circuit Court of Appeals agreed and, not wanting to “significantly impede the IRS’s ‘expansive information-gathering authority,’” interpreted a federal statute to rule that the IRS may summon the recordkeeper of any person without notice to that person if the summons was issued in aid of the collection of an assessment against a delinquent taxpayer. Although the Sixth Circuit acknowledged that the IRS may be able to access information regarding blameless third parties, which could then be shared with the Department of Justice for a criminal prosecution, the court brushed aside such concerns as “conjectural fears.”

The Rutherford Institute and Cato had argued that the statute should rather be interpreted consistent with the Fourth Amendment’s privacy values and protections against unreasonable searches so that the IRS cannot sweep up sensitive information of innocent people who coincidentally happen to have the same employer, lawyer, or accountant as a delinquent taxpayer. The Supreme Court, however, affirmed the ruling of the Sixth Circuit, allowing IRS agents access to third-party financial records without any notice to the innocent account-holders, provided that the searches are done broadly “in aid of the collection” of another’s unpaid taxes.

Ethan H. Townsend, Michael B. Kimberly, and Emmett A. Witkovsky-Eldred of McDermott Will & Emery LLP advanced the arguments in the amicus brief in Polselli v. Internal Revenue Service.

The Rutherford Institute, a nonprofit civil liberties organization, defends individuals whose constitutional rights have been threatened or violated and educates the public on a wide spectrum of issues affecting their freedoms.

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