The John Doe summons is an information-gathering tool that has been available to the IRS for many years, traditionally used to seek information about unknown persons suspected of tax evasion from banks, investment advisors or tax shelter promoters. However, recently authorized John Doe summonses mark a significant development in the manner in which this powerful tool may be wielded. In effect, these summonses are going after the messenger—a development that may well presage much more frequent issuance of John Doe summonses to a variety of entities and raise compelling privacy concerns.

Who is “likely to have records”?

On December 19, 2014, the U.S. Department of Justice (DOJ) announced in a press release that a New York federal judge had authorized the IRS to issue John Doe summonses—not to a tax shelter promoter or investment advisor—but instead to document delivery and money transfer intermediaries including Federal Express, UPS, DHL and Western Union. The summonses seek information on unnamed clients of Sovereign Management & Legal, LTD, a Panamanian offshore services entity alleged to have assisted U.S. taxpayers to unlawfully avoid or evade paying tax. The IRS contends in the supporting documents that the domestic intermediaries, through which Sovereign and its clients corresponded and transferred funds, are “likely to have records” on Sovereign’s clients. The summonses direct the intermediaries to produce records identifying U.S. taxpayers who used the intermediaries’ services to communicate with Sovereign between 2005 and 2013.