The IRS' New Third-Party Summons Power: United States v. Tiffany Fine Arts, Inc

In US versus Tiffany Fine Arts Inc (1985), the Supreme Court held that, when the information requested is relevant to a legitimate investigation of the known, summoned taxpayer, prior judicial approval is not required for a summons served with a dual purpose of investigating the taxpayer's tax liability and that of an unnamed party or parties. Reasoning that the known taxpayer's interest in resisting the summons sufficiently safeguards against overly broad and intrusive summonses, the Court upheld an interpretation of Internal Revenue Code Section 7609 that broadens and strengthens the Internal Revenue Service's (IRS) summons power. This follows substantial precedent construing congressional intent to uphold the IRS' enforcement authority when necessary for effective enforcement of tax laws and not contrary to legislative purposes. However, it remains to be seen whether some of the concerns raised about the unprotected rights of unknown taxpayers will reappear in later cases and whether the decision grants the IRS the potential to abuse its summons power.