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SCHLICK v. U.S.

April 24, 1984

ALBERT AND SANDRA SCHLICK, PETITIONERS,
v.
UNITED STATES OF AMERICA, RESPONDENT.



The opinion of the court was delivered by: Parsons, District Judge.

MEMORANDUM OPINION AND ORDER

This case was begun by a petition by plaintiffs to quash the service of summonses issued by the Internal Revenue Service to a Frederick D. Rawles, who is the Secretary and Registered Agent for two of plaintiffs' corporations, and to a Lee H. Frank, who is the plaintiffs' accountant. The plaintiffs moved to quash the summons on the ground that Rawles and Frank were "third-party recordkeepers" and under the provisions of the applicable federal law, their status as third-party recordkeepers gives the taxpayer (Schlick) the right to intervene and begin a proceeding to quash the summonses.

This case is one of the first filed in this district demanding an interpretation of the new Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) which took effect on January 1st of 1983. The facts are sufficient in the pleadings and uncontroverted representations of the parties to permit me to rule dispositively on the matter.

The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) affected many areas of Title 26 — the Internal Revenue Code, from tax deductions to casualty losses. The only provision of the new law which concerns us in this Schlick case is § 7609 which changes the procedure by which the taxpayer can prevent a "third-party recordkeeper" from complying with an administrative summons.

Under the old law, if a summons were issued to a third-party recordkeeper, notice had to be given to the taxpayer by the government and the taxpayer could prevent the third-party from complying by writing a stay letter to the third party. The government then had to go to the District Court to enforce the summons and the noticee (taxpayer) could intervene and object to the summons. Under TEFRA, the summons must be complied with unless the taxpayer begins a proceeding to quash the summons.

In the Schlick case here, the government issued two summonses to Mr. Rawles, Secretary and Registered Agent for two of Mr. Schlick's corporations. Mr. Rawles is also an attorney. The government also issued one summons to Mr. Frank, the Schlicks' accountant. The government's first argument is that taxpayer Schlick has no right to enter a motion to quash the summons because Mr. Rawles is not a third-party recordkeeper.

Section 7609 waives sovereign immunity and grants a right to sue the United States in the limited case of a petition to quash summons. Only persons entitled to notice under § 7609 may sue, and a person is not entitled to notice unless a summons is issued to a "third-party recordkeeper."

Under the statute, * a third-party recordkeeper is:

  (A) any mutual savings bank, cooperative bank, savings
  and loan, etc.

(B) any consumer reporting agency;

(C) any person extending credit through credit cards;

(D) any broker;

(E) any attorney;

(F) any ...


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