In United States v. Servin,[1] the Third Circuit recently addressed the IRS’s authority to issue summonses against attorneys to disclose unprivileged client information. In a brief opinion, the court emphasized the IRS’s broad summonsing power—even within the attorney-client context. The court’s holding allows the IRS to compel attorneys to disclose client information absent an unusual circumstance that would cause the disclosed information to reveal protected communications. Under Servin, the disclosure of client names and other contact and identifying information can be compelled by the IRS, under the rationale that this type of information will likely not reveal protected information. U.S. v. Servin aligns the Third Circuit with other circuits on this issue.[2]
The IRS’s Summon Enforcement Background in the Attorney-Client Context
The IRS has very broad authority to compel taxpayers to give testimony and documentation in support of determining a tax liability.[3] The IRS only needs to show good faith when issuing a summons; once it does, the burden shifts to the challenging party to show “any appropriate ground” to quash the summons.[4] Thus, the IRS’s power, while broad, is not without limits. It is, for example, “well-settled that the IRS’s summons power is not absolute and is limited by the traditional privileges, including the attorney-client privilege.”[5] The burden of proving the defense, however, “falls upon the party resisting enforcement of the summons.”[6]
U.S. v. Servin
In Servin, the IRS served Jeffrey Servin, an attorney, with administrative summonses in connection with its efforts to collect unpaid taxes from him. Servin, however, argued that he was prohibited from disclosing the requested information to the IRS under the attorney-client privilege and ethical rules. The IRS summonses requested two categories of information: (1) his current client list and basic identifying information concerning his current clients; and (2) a list of his cases that would be settling or settled during a specified timeframe, along with identifying information of the parties involved.
After an IRS complaint filed in district court and an order to respond from the district court, Servin filed an answer arguing that attorney-client privilege prevented him from disclosing this information without the informed consent of each client. The district court then ordered Servin to comply with the summonses, however it limited the second category of information requested to only cases that had settled, not those that would settle. The district court reasoned that with the limitation, the summonses did not invade the attorney-client privilege.
Citing United States v. Liebman,[7] the Third Circuit determined that whether or not the attorney-client privilege protects against the disclosure of client identities is to be determined under federal common law, not state law. While the court recognized that attorney-client privilege is highly protected by the courts and law, it is still not absolute, protecting only against the disclosure of confidential information.[8] Under the court’s ruling, absent unusual circumstances, the attorney-client privilege generally does not protect against the compelled disclosure of a client’s identity.[9] Because Servin could not show that disclosing the names and addresses of his clients would disclose confidential information, the summons issued by the IRS, as amended by the district court, was upheld.
Conclusion
Under Servin and holdings from other circuits, as long as the information sought by the IRS would not reveal privileged information concerning the attorney-client relationship, the IRS can generally compel an attorney to disclose information concerning their clients in connection with determining a tax liability against an attorney.
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[1] United States v. Servin, No. 17-1371, 2018 WL 658714, at *1 (3d Cir. Feb. 1, 2018).
[2] See United States v. Sindel, 53 F.3d 874, 876 (8th Cir. 1995) (vacating an order to comply with an IRS summons because the attorney taxpayer “could not release information about the payments on behalf of [client] without revealing the substance of a confidential communication.”); see also United States v. Blackman, 72 F.3d 1418 (9th Cir. 1995); United States v. Leventhal, 961 F.2d 936 (11th Cir. 1992); United States v. Goldberger & Dubin, P.C., 935 F.2d 501, 504 (2d Cir. 1991); DeGuerin v. United States, 214 F. Supp. 2d 726, 737-38 (S.D. Tex. 2002).
[3] United States v. Clarke, 134 S. Ct. 2361, 2364 (2014); see also 26 U.S.C. § 7602(a).
[4] Clarke, 134 S. Ct. at 2365.
[5] United States v. Rockwell Int’l, 897 F.2d 1255, 1264 (3d Cir. 1990) (internal quotation marks and citation omitted).
[6] Id.
[7] 742 F.2d 807, 809 (3d Cir. 1984).
[8] In re Teleglobe Commc’ns Corp., 493 F.3d 345, 359-60 (3d Cir. 2007); see also Upjohn Co. v. United States, 449 U.S. 383, 387, 101 S. Ct. 677, 681, 66 L. Ed. 2d 584 (1981).
[9] Liebman, 742 F.2d at 809.
