J.B. v. United States

FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

J.B.; P.B., No. 16-15999
Petitioners-Appellees,
D.C. No.
v. 4:15-cv-04764-YGR

UNITED STATES OF AMERICA,
Respondent-Appellant. OPINION

Appeal from the United States District Court
for the Northern District of California
Yvonne Gonzalez Rogers, District Judge, Presiding

Argued and Submitted April 12, 2018
San Francisco, California

Filed February 26, 2019

Before: Kim McLane Wardlaw and Jacqueline H. Nguyen,
Circuit Judges, and Solomon Oliver, Jr., * District Judge.

Opinion by Judge Wardlaw

*
The Honorable Solomon Oliver, Jr., United States District Judge
for the Northern District of Ohio, sitting by designation.
2 J.B. V. UNITED STATES

SUMMARY **

Tax

The panel affirmed the district court’s order quashing the
Internal Revenue Service’s subpoena to the California
Supreme Court, seeking documents in connection with a tax
audit.

Taxpayers J.B and P.B. are an elderly married couple
who were selected at random for a compliance research
examination, as part of the IRS’s National Research
Program. In connection with the audit, the IRS issued a
summons to the California Supreme Court seeking various
documents, and taxpayers filed a petition to quash. The
district court concluded that the IRS had not provided
sufficient notice to taxpayers that it would contact the
California Supreme Court, in violation of I.R.C.
§ 7602(c)(1)’s requirement that the IRS provide “reasonable
notice in advance” to taxpayers.

The panel concluded that “reasonable notice in advance”
means notice reasonably calculated, under all the relevant
circumstances, to apprise interested parties of the possibility
that the IRS may contact third parties, and that affords
interested parties a meaningful opportunity to resolve issues
and volunteer information before third-party contacts are
made. Although the IRS argued that its Publication 1
provided adequate notice, reviewing the totality of the
circumstances, the panel agreed with the district court that

**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
 J.B. V. UNITED STATES 3

Publication 1 did not provide the requisite reasonable
advance notice. The panel explained that a reasonable notice
must provide the taxpayer with a meaningful opportunity to
volunteer records on his own, so that third-party contacts
may be avoided if the taxpayer complies with the IRS’s
demand.

COUNSEL

Nathaniel S. Pollock (argued), Robert W. Metzler, and
Michael J. Huangs, Attorneys; Caroline D. Ciraolo,
Principal Deputy Assistant Attorney General; David A.
Hubbert, Acting Assistant Attorney General; Brian Stretch,
United States Attorney; United States Department of Justice,
Washington, D.C.; for Respondent-Appellant.

Norren Evans (argued), O’Brien Watters & Davis LLP,
Santa Rosa, California; Sara Baxter and Joseph Baxter,
Santa Rosa, California; for Petitioners-Appellees.

Felipe S. Bohnet-Gomez, Steven T. Miller, and Dean A.
Zerbe, Zerbe Miller Fingeret Frank & Jadav LLP,
Washington, D.C., for Amicus Curiae Zerbe Miller Fingeret
Frank & Jadav LLP.
4 J.B. V. UNITED STATES

OPINION

WARDLAW, Circuit Judge:

Before the Internal Revenue Service (IRS) summons a
taxpayer’s financial records from employers, financial
institutions, or other third parties, the IRS must provide the
taxpayer with “reasonable notice in advance.” 26 U.S.C.
§ 7602(c)(1). 1 Our Circuit has yet to determine what notice
amounts to “reasonable notice in advance.” See Estate of
Chaiken v. United States, No. CV 16-80155 MC (DMRx),
2016 WL 8255575, at *5–6 (N.D. Cal. Dec. 27, 2016)
(describing intracircuit split). The IRS argues that a “general
notice,” like its “Publication 1,” 2 suffices in every
circumstance. Reaching the opposite conclusion, the district
court opined that “the advance notice procedure cannot be
satisfied by the transmission of a publication about the audit
process generally.”

We reject a categorical approach to this question. We
conclude that “reasonable notice in advance” means notice
reasonably calculated, under all the relevant circumstances,
to apprise interested parties of the possibility that the IRS
may contact third parties, and that affords interested parties
a meaningful opportunity to resolve issues and volunteer
information before third-party contacts are made. See Jones

1
Because Title 26 of the U.S. Code contains the entire Internal
Revenue Code (I.R.C.), we refer interchangeably to Title 26 and the
I.R.C.

2
A version of Publication 1, updated September 2017, is publicly
available at https://www.irs.gov/pub/irs-pdf/p1.pdf. The version of
Publication 1 that the IRS mailed to J.B. and P.B. is attached as Appendix
A.
 J.B. V. UNITED STATES 5

v. Flowers, 547 U.S. 220, 226 (2006) (citing Mullane v.
Central Hanover Bank & Trust Co., 339 U.S. 306, 314
(1950) (discussing notice due to mortgagee)). Reviewing
the totality of the circumstances here, we affirm the district
court’s order quashing the IRS’s 2011 subpoena to the
California Supreme Court. 3

I.

J.B. and P.B. are an elderly married couple living in
northern California. J.B. is an attorney who accepts
appointments from the California Supreme Court to
represent indigent criminal defendants in capital cases. On
July 25, 2013, J.B. and P.B. received a letter in the mail from
the IRS, indicating that they had been “selected at random
for a compliance research examination.” J.B. and P.B., who
had already been selected for audits in 2008 and 2009,
recognized that the 2011 audit was unlike the 2008 and 2009
audits. The 2011 audit was part of the IRS’s National
Research Program (NRP), which randomly selects taxpayers
for exhaustive audits to help the IRS “better understand tax
compliance and improve the fairness of the tax system.” 4
Because the NRP is so demanding and so unpopular with
taxpayers, Congress discontinued a prior iteration of the

3
Zerbe, Miller, Fingeret, Frank & Jadav LLP’s motion for leave to
file a brief amicus curiae out of time (ECF No. 39) is GRANTED. J.B.
and P.B.’s motion requesting leave to file a brief in response to
Appellant’s response to the amicus curiae brief (ECF No. 53) is
GRANTED. J.B. and P.B.’s unopposed motion to take judicial notice
(ECF No. 56) is GRANTED.
4
Government data suggests that, in 2003, as many as 47,000
taxpayers were selected at random for a NRP audit. See U.S. Gov’t
Accountability Office, GAO-03-614, Tax Administration, IRS Is
Implementing the National Research Program as Planned (2003), at 1,
https://www.gao.gov/products/GAO-03-614.
6 J.B. V. UNITED STATES

NRP, known as the Taxpayer Compliance Measurement
Program, in 1988. A Closer Look at the Size and Sources of
the Tax Gap: Hearing Before the Subcomm. on Taxation and
IRS Oversight of the Senate Comm. on Finance, 109th
Cong. 3 (2006) (statement of Mark J. Mazur, director of
research, analysis, and statistics, IRS). The IRS reinstated
the program under its current name in 1998. Internal
Revenue Manual (hereinafter IRM) 4.22.1.1.1 (Sept. 6,
2017).

The IRS letter instructed J.B. and P.B. to contact a
revenue agent at the IRS to discuss items on their 2011 tax
return, as well as the “examination process” and “[a]ny
concerns or questions you may have.” In the same mailing,
the IRS enclosed a two-page notice entitled “Your Rights as
a Taxpayer.” The IRS refers to this notice as “Publication 1”
or “The Taxpayer Bill of Rights.” On the second page of the
notice, under a heading entitled “Potential Third Party
Contacts,” the notice warns:

Generally, the IRS will deal directly with you
or your duly authorized representative.
However, we sometimes talk with other
persons if we need information that you have
been unable to provide, or to verify
information we have received. If we do
contact other persons, such as a neighbor,
bank, employer, or employees, we will
generally need to tell them limited
information, such as your name. . . . Our need
to contact other persons may continue as long
as there is activity in your case. If we do
contact other persons, you have a right to
request a list of those contacted.
 J.B. V. UNITED STATES 7

Two months later, in September 2013, the IRS requested
documents from J.B. and P.B. J.B. and P.B. asked the IRS
to excuse them from the NRP audit because of J.B.’s poor
health and the couples’ advanced age. J.B. remitted doctor’s
declarations to the IRS showing that the NRP audit would
worsen his hypertension and contribute to hypertensive
retinopathy, a deteriorating eye condition, as well as his
serious hearing loss. The IRS refused the couple’s request
for an exemption, leading J.B. and P.B. to file a separate suit
to stop the audit in the Northern District of California in May
2015. See No. CV 15-2138 (YGR) (N.D. Cal.).

Even after J.B. and P.B. filed suit, however, the IRS
marched forward with its NRP audit. In September 2015,
the IRS issued a summons to the California Supreme Court
seeking “copies of billing statements, invoices, or other
documents . . . that resulted in payment to” J.B. for the 2011
calendar year. 5 The second page of the four-page summons
warned that the IRS had the power to “enforce obedience to
the requirements of the summons and to punish such person
for his default or disobedience.” The penalties for
noncompliance included a fine of “not more than $1,000” or
imprisonment “not more than 1 year, or both, together with
costs of prosecution.”

5
The IRS also issued a summons to the California Supreme Court
for the 2012 calendar year. The district court dismissed the petition to
quash the 2012 summons as untimely. Although J.B. and P.B. initially
appealed this decision, they voluntarily dismissed their appeal pursuant
to Federal Rule of Appellate Procedure 42(b). J.B. and P.B. concede that
the 2012 summons is not at issue in this cross-appeal. Nor do they
challenge the district court’s conclusion, on reconsideration, that it did
not have jurisdiction to review, in camera, any documents that the
California Supreme Court issued in response to the 2012 summons.
8 J.B. V. UNITED STATES

J.B. and P.B. did not learn that the IRS had issued the
summons until after-the-fact, when J.B. and P.B.’s daughter,
whom they had listed as a personal representative, received
a notice of service of summons in the mail. 6 In October
2015, the couple filed a timely petition to quash the
summons in the Northern District of California.

The district court evaluated J.B. and P.B.’s petition under
Powell v. United States, 379 U.S. 48 (1964), which sets forth
four requirements that the IRS must satisfy to enforce an
administrative summons. Under Powell, the IRS must
establish a prima facie case of good faith by showing that:
(1) the underlying investigation is for a legitimate purpose,
(2) the inquiry requested is relevant to that purpose, (3) the
information sought is not already in the government’s
possession, and (4) the IRS followed the administrative
requirements of the Internal Revenue Code (I.R.C.). Id.
at 57–58. A court may quash a summons if the resisting
party disproves any of the four Powell elements or
successfully challenges the summons on “any appropriate
ground.” Id. at 58.

Although the district court concluded that the
government had satisfied the first three steps of the Powell
6
According to the National Taxpayer Advocate, an independent
body within the IRS, J.B. and P.B.’s experience receiving notice after a
third party has been contacted is becoming more common. In 2015, the
IRS did not first ask the taxpayer for documents requested from a third
party in 22.8 percent of field examination cases and 11.1 percent of field
collection cases. 2015 Nat’l Taxpayer Advocate Ann. Rep. vol. 1, at
128, https://taxpayeradvocate.irs.gov/reports/2015-annual-report-to-
congress. In June 2017, the National Taxpayer Advocate identified
“third party contacts” as one of thirteen “areas of focus” needed to
improve taxpayer rights. 2018 Nat’l Taxpayer Advocate Objectives Rep.
to Congress vol. 1, at 98–101, https://www.irs.gov/advocate/reports-to-
congress.
 J.B. V. UNITED STATES 9

test, it found the last step unsatisfied. The IRS, it concluded,
had not provided sufficient notice to J.B. and P.B. that it
would contact the California Supreme Court, in violation of
I.R.C. § 7602(c)(1)’s requirement that the IRS provide
“reasonable notice in advance” to the taxpayer. The district
court rejected the IRS’s argument that IRS Publication 1
provided sufficient advance notice, and instead concluded
that “the advance notice procedure cannot be satisfied by the
transmission of a publication about the audit process
generally.” It then instructed that “advance notice should be
specific to a particular third party,” reasoning that “the
implementing regulations contemplate notice for each
contact, not a generic publication’s reference that the IRS
may talk to third parties throughout the course of an
investigation.”

Because the district court’s decision conflicts with the
decisions of other district courts in our Circuit, see Estate of
Chaiken, 2016 WL 8255575, at *6, we must clarify I.R.C.
§ 7602(c)(1)’s notice requirement for the Circuit. A district
court’s ruling on a petition to quash an IRS summons is
generally reviewed for clear error. Fortney v. United States,
59 F.3d 117, 119 (9th Cir. 1995) (citing Tornay v. United
States, 840 F.2d 1424, 1426 (9th Cir. 1988)). But, here,
where the district court “interpreted statutory law,” we
review de novo. Id. (citing United States v. Yacoubian,
24 F.3d 1, 3 (9th Cir. 1994)).

II.

In connection with the IRS powers to review tax returns
and liabilities, § 7602 of the Internal Revenue Code provides
for the examination of books and witnesses. However,
§ 7602(c) specifically prohibits third-party contacts unless
advance reasonable notice is given to the taxpayer. It
specifically provides:
10 J.B. V. UNITED STATES

(c) Notice of contact of third parties.—

(1) General notice.—An officer or
employee of the Internal Revenue
Service may not contact any person
other than the taxpayer with respect to
the determination or collection of the
tax liability of such taxpayer without
providing reasonable notice in
advance to the taxpayer that contacts
with persons other than the taxpayer
may be made.

(2) Notice of specific contacts.—The
Secretary shall periodically provide
to a taxpayer a record of persons
contacted during such period by the
Secretary with respect to the
determination or collection of the tax
liability of such taxpayer. Such
record shall also be provided upon
request of the taxpayer.

(3) Exceptions.—This subsection shall
not apply –

(A) to any contact which the taxpayer
has authorized;

(B) if the Secretary determines for
good cause shown that such
notice would jeopardize
collection of any tax or such
notice may involve reprisal
against any person; or
 J.B. V. UNITED STATES 11

(C) with respect to any pending
criminal investigation.

I.R.C. § 7602(c). Section 7602(c) is structured in three parts:
a pre-contact notice requirement (§ 7602(c)(1)), a post-
contact notice requirement (§ 7602(c)(2)), and exceptions
(§ 7602(c)(3)), 7 which apply to both the pre- and post-
contact notice requirements. Section 7602(c)(1), the pre-
contact notice requirement, is the provision at issue in this
appeal.

We must determine the meaning of the phrase
“reasonable notice in advance.” We begin the task of
statutory interpretation with the text of the statute. See
Yokeno v. Sekiguchi, 754 F.3d 649, 653 (9th Cir. 2014).
“Where the statute’s language is plain, the sole function of
the courts is to enforce it according to its terms.” Int’l Ass’n
of Machinists & Aerospace Workers v. BF Goodrich
Aerospace Aerostructurers Grp., 387 F.3d 1046, 1051 (9th
Cir. 2004) (quoting United States v. Ron Pair Enters.,
489 U.S. 235, 241 (1989)) (citation and internal quotation
marks omitted). “Only if this approach leaves or reveals
ambiguity may we turn to extrinsic evidence such as
legislative history.” Yokeno, 754 F.3d at 653; see also
Satterfield v. Simon & Schuster, Inc., 569 F.3d 946, 951 (9th
Cir. 2009) (“[O]ur inquiry begins with the statutory text, and
ends there as well if the text is unambiguous.” (citations
omitted)).

To start, the phrase “reasonable notice in advance” in
§ 7602(c)(1) is not ambiguous. A term is ambiguous only if
it is “susceptible to more than one reasonable interpretation,”
Guido v. Mount Lemmon Fire Dist., 859 F.3d 1168, 1173

7
No one here argues that any of § 7602(c)(3)’s exceptions applies.
12 J.B. V. UNITED STATES

(9th Cir. 2017) (quoting Alaska Wilderness League v. EPA,
727 F.3d 934, 938 (9th Cir. 2013)), and “reasonable notice
in advance” does not have more than one meaning. The
Supreme Court has interpreted “notice” to mean “notice
reasonably calculated, under all circumstances, to apprise
interested parties” and “afford them an opportunity to
present their objections.” See, e.g., Jones, 547 U.S. at 226.
The Court has used the same test to evaluate the adequacy of
notice in various circumstances. See, e.g., id. (notice due to
property owner in advance of tax sale); Dusenbery v. United
States, 534 U.S. 161, 170 (2002) (notice due to owners of
seized cash and automobiles); Greene v. Lindsey, 456 U.S.
444 (1982) (notice due to tenants living in public housing);
Mullane, 339 U.S. at 314–15 (notice due to mortgagee);
accord Low v. Trump University, 881 F.3d 1111, 1117–22
(9th Cir. 2018) (sufficiency of class notice).

Our interpretation of the phrase “reasonable notice in
advance” is supported by the “specific context in which that
language is used, and the broader context of the statute as a
whole.” Yates v. United States, 135 S. Ct. 1074, 1082 (2015)
(quoting Robinson v. Shell Oil, Co., 519 U.S. 337, 341
(1997)). I.R.C. § 7602 is an exception to the general rule
that the IRS must keep taxpayer records confidential. See
I.R.C. § 6103. Section 7602(a) allows the IRS to disclose
information “[f]or the purpose of ascertaining the
correctness of any return, making a return where none has
been made, determining the liability of any person . . . or
collecting any such liability,” I.R.C. § 7602(a), while
§ 7602(c) protects the taxpayer from unnecessary third-party
contacts. As an exception to the general rule that taxpayer
records are to be kept confidential, we construe § 7602(a)
narrowly in favor of the taxpayer and § 7602(c) broadly as a
protective measure. See A.H. Phillips, Inc. v. Walling,
324 U.S. 490, 493 (1945).
 J.B. V. UNITED STATES 13

I.R.C. § 7602(c)(1)’s notice requirement also
complements other notice requirements in the Internal
Revenue Code, including I.R.C. § 7609(a)(1), which
instructs the IRS to provide the taxpayer with a copy of any
summons it serves on a third party. While § 7609 gives the
taxpayer an opportunity to quash the summons in a federal
district court, § 7602(c)(1), in comparison, protects the
taxpayer’s reputational interest. It gives the taxpayer a
meaningful opportunity to resolve issues and volunteer
information before the IRS seeks information from third
parties, which would be unnecessary if the relevant
information is provided by the taxpayer himself. See S. Rep.
No. 105-174, at 77 (1988), reprinted in 1998-3 C.B. 537, 613
(1988); see also IRM 4.11.57.2(3) (May 26, 2017) (“The
intent behind this statute is to provide the taxpayer, in most
cases, with the opportunity to produce the information and
documents the Service needs before the Service must obtain
the information from third parties.”); Third Party Contacts,
67 Fed. Reg. 77,419, 77,419–20 (Dec. 18, 2002) (“[T]hese
final regulations enable a taxpayer to come forward with
information required by the IRS before third parties are
contacted.”).

The exceptions to I.R.C. § 7602(c)(1)’s notice
requirement further demonstrate that Congress meant for the
advance notice provision to provide the taxpayer with a
meaningful opportunity to produce information to avoid
third-party contacts. I.R.C. § 7602(c)(3) waives the advance
notice requirement if (a) the taxpayer already authorized the
contact; (b) the Commissioner, with good cause, believes
that notice may jeopardize the IRS’s tax collection efforts or
open a third party to reprisal; or (c) there is a pending
criminal investigation against the taxpayer. I.R.C.
§ 7602(c)(3). These exceptions demonstrate that Congress
intended § 7602(c)(1)’s advance notice requirement to give
14 J.B. V. UNITED STATES

the taxpayer a meaningful opportunity to respond to the
IRS’s request; it is only if the taxpayer knows who the IRS
plans to contact or the documents that the IRS plans to
request that the taxpayer may authorize the contact, or more
cynically, impede the contact by jeopardizing tax collection
efforts, retaliating against third parties, or interfering in a
pending criminal investigation. Publication 1, alone, does
not offer this level of specificity. It simply tells the taxpayer
that the IRS may “sometimes talk with other persons if we
need information that you have been unable to provide . . .”;
it does not reference specific documents or people, or even
categories of documents or people. When the IRS uses
Publication 1 as it was used here, mailed with an
introductory letter and divorced from any specific request for
documents, we do not think it reasonable for the IRS to fear
that a person who received the publication would have
enough information to spoil a criminal investigation or
retaliate against a potential third-party source.

The IRS counters that I.R.C. § 7602(c)(1) cannot require
the IRS to provide advance notice “specific to a particular
third party,” as the district court held, because that would
render superfluous the post-contact notice provision,
§ 7602(c)(2), which requires the IRS to provide the taxpayer
with a “record of persons contacted” after the contact is
made. This argument fails for two reasons. First, we do not
require the IRS to provide the taxpayer with a list of the
people it may contact in advance. Rather, we require what
the statute requires: “reasonable notice in advance.” I.R.C.
§ 7602(c)(1). What is reasonable depends on the facts.
Second, even if we required the IRS to provide the taxpayer
with a list of people it may contact in advance, the IRS’s
argument nonetheless fails because the group of people
covered by the advance notice provision, I.R.C.
§ 7602(c)(1), is larger than the group of people covered by
 J.B. V. UNITED STATES 15

the post-contact notice provision, I.R.C. § 7602(c)(2). The
advance notice provision covers every third-party contact
that the IRS “may” make, while the post-contact notice
provision covers only “persons contacted” and excludes
every third-party contact where the IRS sent a copy of the
third-party summons to the taxpayer. Cf. I.R.C. § 7602(c)(1)
with I.R.C. § 7602(c)(2); see also Treas. Reg. § 301.7602-
2(e)(4), Ex. 4 (explaining that “providing a copy of the third-
party summons to the taxpayer pursuant to section 7609
satisfies the post-contact recording and reporting
requirement”). In J.B. and P.B.’s case, for example, the
advance notice provision would have required the IRS to
notify J.B. and P.B. before contacting the California
Supreme Court. But, because J.B. and P.B. received a copy
of the summons that the IRS ultimately sent to the California
Supreme Court, the IRS would not need to include the
California Supreme Court on a list of “persons contacted” if
J.B. and P.B. later requested such a list from the IRS. See
Treas. Reg. § 301.7602-2(e)(4), Ex. 4. Because § 7602(c)(2)
covers a different group of contacts, serves a different
purpose than § 7602(c)(1), and has its own place in a
comprehensive statutory scheme, interpreting § 7602(c)(1)
as we do here does not render § 7602(c)(2) superfluous. See
TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001) (explaining
that it is a “cardinal principle of statutory construction” that
“a statute ought, upon the whole, to be so construed that, if
it can be prevented, no clause, sentence, or word shall be
superfluous, void, or insignificant” (quoting Duncan v.
Walker, 533 U.S. 167, 174 (2001) (internal quotation marks
omitted))).

Section 7602(c)(1)’s language could become ambiguous
only if we consider the subsection titles, as the IRS urges us
to do. The subsection title for § 7602(c)(1) is “General
notice” and the subsection title for § 7602(c)(2) is “Notice of
16 J.B. V. UNITED STATES

specific contacts.” We are unpersuaded, however, that the
subsection titles render the actual text of the statute
ambiguous. Not only are the titles themselves unclear, but
they also contradict the plain meaning of the statute’s text,
as well as the specific context in which that language is used
and the broader context of the statute. Because the statutory
text is clear, there is no need to rely on ambiguous subsection
headings or other evidence of legislative intent. See Or.
Public Utility Comm’n v. ICC, 979 F.2d 778, 780 (9th Cir.
1992) (“[While] [t]he title of a statute can be used to resolved
[sic] ambiguity,” “the title cannot control the plain meaning
of a statute.” (citing Bhd. of R.R. Trainmen v. Baltimore
O.R.R. Co., 331 U.S. 519, 528–29 (1947))); see also Merit
Mgmt. Grp., LP v. FTI Consulting, Inc., 138 S. Ct. 883, 893
(2018) (“Although section headings cannot limit the plain
meaning of a statutory text, ‘they supply cues’ as to what
Congress intended.” (internal citations omitted)).

Even if we were to consider legislative intent, however,
we would find ample support for the proposition that
Congress intended that the IRS provide notice reasonably
calculated to apprise taxpayers that the IRS may contact
third parties. Congress added the third-party contact notice
requirement to the I.R.C. as part of the Internal Revenue
Service Restructuring and Reform Act of 1998 (1998
Restructuring Act), Pub. L. No. 105-206, 112 Stat. 685, 757–
58. The notice requirement’s proponents were the members
of the Senate Finance Committee, which adopted an
amendment that prohibited the IRS from contacting “any
person other than the taxpayer” unless the IRS provided
“reasonable notice to the taxpayer that such contact will be
made.” H.R. 2676, 105th Cong. § 3417 (as passed by Senate
May 7, 1998). The Committee recognized that taxpayer
protections needed to be robust because “[s]uch contacts
may have a chilling effect on the taxpayer’s business and
 J.B. V. UNITED STATES 17

could damage the taxpayer’s reputation in the community.”
S. Rep. No. 105-174, at 77 (1998), reprinted in 1998-3 C.B.
537, 613 (1998).

The joint Conference Committee that considered the
different versions of the House and Senate bills preserved
the Senate Finance Committee’s amendment, but bifurcated
it into an advance notice and post-contact notice
requirement. The Conference Committee clarified that “in
general,” the IRS could provide advance notice to the
taxpayer “as part of an existing IRS notice provided to
taxpayers,” 8 but the Conference Committee did not refer to
Publication 1 by name. H.R. Conf. Rep. No. 105-599, at 277
(1998).

The IRS insists that the “existing IRS notice” is
Publication 1, but in July 1998, at the time Congress passed
the Restructuring Act, the IRS had not yet determined what
method it would use to notify taxpayers of potential third-
party contacts. See Status of IRS Reform: Hearing Before
the S. Fin. Comm., 106th Cong. 69 (Feb. 2, 2000). Tellingly,
Congress knew how to refer to Publication 1 by name in the
1998 Restructuring Act when it wished to do so. Congress
specifically referred to Publication 1 three times in the 1998
Restructuring Act to, among other things, instruct the
Treasury Department to notify taxpayers of their rights in
interviews with the IRS. Pub. L. No. 105-206, §§ 1102,
3501–3503; 112 Stat. 685, 703, 770, 771. However, it did
not refer to Publication 1 by name in § 7602(c).

8
The IRS contorts this statement in the Conference Committee
report to support its claim that “the advance notice requirement
contemplates merely general notice.” But, other than the headers in the
statute, the Conference Committee report makes no mention of general
notice.
18 J.B. V. UNITED STATES

The timeline for the development of Publication 1 and
related forms of notice further illustrates the implausibility
of the IRS’s insistence that Publication 1 provides
“reasonable notice in advance” in all circumstances. After
the 1998 Restructuring Act, IRS staff worked with Senate
Finance Committee members, all twenty of whom had voted
in favor of the Restructuring Act, to implement § 7602(c)(1)
in a way that “carries out the intent of the legislation.” 9
S. Rep. No. 107-19, at 46, 51 (2001). The IRS first issued
Notice 1219, 10 followed by Letter 3164, an even more
protective notice. 11 See Taxpayer Advocate Service, 2015
Annual Report to Congress, Vol. 1, 127 n.23. In 1999, when
it used Notice 1219, the IRM cautioned that “providing the
taxpayer with Notice 1219 alone does not constitute

9
The IRS initially prepared a “broad” notice but did not use it after
Senator Christopher Bond, chairman of the Senate Committee on Small
Business and Entrepreneurship, wrote to IRS Commissioner Charles
Rossotti to tell him that the IRS was “incorrectly implementing the new
taxpayer protection.” S. Rep. 107-19, at 58 (quoting February 25, 1999
letter).
10
Notice 1219 stated that the IRS “sometimes talk[s] with other
persons when [it needs] information that the taxpayer has been unable to
provide, or to verify information [the IRS has] received. This notice is
provided to tell you that [the IRS] may contact other persons, such as a
neighbor, bank, employer or employees, and will generally need to tell
them limited information, such as your name. The law prohibits [the
IRS] from disclosing any more information than is necessary to obtain
or verify the information [it is] seeking. [The IRS’s] need to contact
other persons may continue as long as there is activity on this matter. If
[the IRS contacts] other persons, you have the right to request a list of
those contacted.” Notice 1219-B (August 2005).
11
“There are over twenty versions of the general Letter 3164,
available to meet specific functional requirements.” IRM 25.27.1.3.1
(October 19, 2017).
 J.B. V. UNITED STATES 19

adequate notification of third-party contacts. It must be
attached to another letter that contains the required
information found in Letter 3164.” IRM 4.10.1.6.12.2.1(5)
(May 14, 1999); see also IRM 13.1.10.2.3(1) (August 21,
2000) (“Under [§ 7602(c)] you must provide taxpayers with
prior notification that third parties may be contacted during
the determination or collection of that specific taxpayer’s
federal tax liability.” (emphasis added)). When the IRS
started using Letter 3164 more regularly, 12 it developed
more than twenty versions of Letter 3164 to meet “specific
functional requirements.” IRM 25.27.1.3.1 (Oct. 19, 2017).
Some versions of the letter notify the taxpayer, specifically,
that the IRS would contact third parties because the taxpayer
had not provided certain documents requested in an audit.13
See IRM 4.11.57.4.1.1 (Dec. 20, 2011). The IRS manual
instructs IRS agents to prepare the appropriate letter, 14
include the IRS employee’s identification number and
telephone number, and deliver the letter to the taxpayer.
IRM 25.27.1.3.1(6) (Oct. 19, 2017).

Although they do not say so explicitly, the Treasury
Department regulations also support an interpretation of
“reasonable notice” that requires meaningful notice to the

12
It is unclear from the record whether the IRS continues to use
Letter 3164, or its various versions, today.
13
For example, Letter 3164-G (no longer in use per IRM
4.11.57.4.1.1 (Dec. 20, 2011)) states “we previously requested the
following information from you. . . . Since you have been unable to
provide the requested information, we are writing to tell you that we may
contact other persons to obtain this and any related information.”
14
The manual indicates that, “[i]f the tax liability is due to a joint
return, each spouse must receive a separate Letter 3164.” IRM
25.27.1.3.1(6)(a) (Oct. 19, 2017).
20 J.B. V. UNITED STATES

taxpayer. See Treas. Reg. § 301.7602-2 (2002). The
regulations state that “the pre-contact notice may be given
either orally or in writing,” and if written notice is given, it
may be given by mail, in person, by delivery to the
taxpayer’s address, or by confirming receipt by the taxpayer.
Id. § 301.7602-2(d)(i)–(iv). And, contrary to the IRS’s
position in this litigation, the regulations nowhere suggest
that the IRS satisfies its pre-contact notice requirement by
simply mailing Publication 1 to the taxpayer. See Thompson
v. United States, No. CIV.A. H-08-1277, 2008 WL 4279474,
at *6 (S.D. Tex. Sept. 11, 2008) (“These documents are
various methods of providing the ‘reasonable advance
notice’ required by Section 7602(c). No method is specified
in the Code.”).

Citing to out-of-circuit district court decisions, the IRS
nonetheless insists that the district court’s decision in this
case is an outlier because every court to have considered the
issue has held that “IRS Publication 1 satisfied the pre-
contact notice requirement.” But while courts have
generally approved of Publication 1, see, e.g., Gandrup v.
United States, No. MC 14-123-SLR, 2014 WL 5861719, at
*2 (D. Del. Nov. 12, 2014); Gangi v. United States, 2 F.
Supp. 3d 12, 21 (D. Mass. 2014), several courts have
recognized that § 7602(c)(1) requires a context-dependent
inquiry, and have upheld Publication 1 only after evaluating
the totality of the circumstances to determine whether the
taxpayer received reasonable notice, see, e.g., Clearwater
Consulting Concepts, LLLP v. United States, No. CV 2007-
33, 2010 WL 2392107, at *7 (D.V.I. Mar. 31, 2010);
Thompson, 2008 WL 4279474, at *5–8.

Nor does our decision conflict with the Second Circuit’s
unpublished summary order in Highland Capital
Management L.P. v. United States, 626 F. App’x 324 (2d
 J.B. V. UNITED STATES 21

Cir. 2015), representing the sole other instance of a circuit
court’s grappling with § 7602(c)(1)’s advance notice
requirement. Rather than endorse Publication 1, Highland
Capital embraces a “totality of the circumstances” approach
to determine whether the IRS has complied with all
administrative requirements. Id. at 327. The Second Circuit
reasoned, as we do, that § 7602(c)(1) does not require
separate notice before each third-party contact or advance
notice of the specific documents that will be requested, but
it does require “reasonable notice in advance,” and whether
notice was reasonable is factually dependent. Id. Moreover,
in Highland Capital, the IRS argued that it had satisfied
§ 7602(c)(1) in more than one way—by sending Publication
1 in addition to orally notifying the taxpayer during an in-
person meeting—so the Second Circuit expressly did not
pass judgment on the adequacy of Publication 1 as a stand-
alone adequate notification tool. Id. at 326–27 (“We
conclude, as the District Court did, that regardless of
whether Publication 1 satisfies § 7602(c)(1), the oral notice
provided to Highland Capital during the January 2014
meeting was sufficient to satisfy that statutory
requirement.”).

We understand that one result of adopting a context-
specific rule may be to make it more difficult for IRS
officers, and district courts, to determine whether
§ 7602(c)(1)’s advance notice requirement is satisfied in any
given case. But, to the extent such an administrability
problem develops, the responsibility lies with Congress, not
the courts. We cannot ignore the text of a statute that hinges
the adequacy of notice on a determination of reasonableness.
Nor can we ignore the congressional mandate to provide
taxpayers faced with a potential third-party summons with a
meaningful opportunity to respond with the relevant
information themselves so as to maintain their privacy and
22 J.B. V. UNITED STATES

avoid the potential embarrassment of IRS contact with third
parties, such as their employers.

We therefore hold that Publication 1 did not provide the
J.B. and P.B. with reasonable advance notice. 15 A
reasonable notice must provide the taxpayer with a
meaningful opportunity to volunteer records on his own, so
that third-party contacts may be avoided if the taxpayer
complies with the IRS’s demand.

III.

The district court concluded that the IRS had failed to
satisfy its “administrative duty” of giving J.B. and P.B. a
meaningful opportunity to respond before contacting the
California Supreme Court, as required by § 7602(c)(1). We
agree.

Drawing on our case law in this area, we conclude that
the IRS does not satisfy the pre-contact notice requirement,
§ 7602(c)(1), unless it provides notice reasonably calculated,
under all relevant circumstances, to apprise interested parties
of the possibility that the IRS may contact third parties, and
that affords interested parties a meaningful opportunity to
resolve issues and volunteer information before those third-
party contacts are made. See Jones, 547 U.S. at 226. This
standard requires a balancing of the “interest of the State” in

15
Although we limit our holding to the facts of this case, we are
doubtful that Publication 1 alone will ever suffice to provide reasonable
notice in advance to the taxpayer, as the statute requires. We think it
unlikely that the broad and colloquial language in the “Third-Party
Contacts” paragraph of Publication 1, which states that the IRS may
“sometimes talk with other persons,” gives the taxpayer reasonable
advance notice that the IRS intends to subpoena, under threat of penalty,
third-party documents.
 J.B. V. UNITED STATES 23

administering an effective auditing system against “the
individual interest” in receiving notice of the potential third-
party contact and an opportunity to respond. Mullane,
339 U.S. at 314. The government must consider “unique
information about an intended recipient regardless of
whether a statutory scheme is reasonably calculated to
provide notice in the ordinary case.” Jones, 547 U.S. at 230;
see also Robinson v. Hanrahan, 409 U.S. 38, 40 (1972) (per
curiam); Covey v. Town of Somers, 351 U.S. 141, 146–47
(1956). And if the government receives information that the
notice was not received, the government must take
additional reasonable steps to ensure that it provides notice.
Jones, 547 U.S. at 234.

In this case, the sole notice that the government provided
J.B. and P.B. that it might contact the California Supreme
Court is Publication 1. The IRS sent J.B. and P.B.
Publication 1 as part of its initial, introductory letter to the
couple explaining that they had been selected for an audit;
an audit the couple sought to stop. The Publication did not
accompany a specific request for documents, nor is there any
evidence that the IRS revisited the notice later in the audit
when it knew that J.B. and P.B. had requested an exemption
from the research audit and had not provided documents for
the audit. More than two years elapsed between when the
IRS sent Publication 1 to J.B. and P.B., and when the IRS
subpoenaed the billing records and invoices from the
California Supreme Court. We do not think that an agency
that actually desired to inform a taxpayer of an impending
third-party contact would consider Publication 1 adequate
notice in these circumstances.

Nothing about the audit required the government to
move quickly. The IRS issued the summons to the
California Supreme Court as part of its National Research
24 J.B. V. UNITED STATES

Program audit, not an audit in the normal course. The
research program is designed to help the IRS improve its tax
collection system, but unlike an audit in the normal course
where the subjects are selected because of red flags in their
tax returns, the subjects of a research program audit are
randomly selected, without any reason to believe that they
are deficient on their taxes. The IRS had no reason to believe
that J.B. and P.B. might evade its review, hide assets, or
abscond. Nor was the California Supreme Court going
anywhere soon.

Indeed, with a research audit, where the taxpayer is
offering information to help the United States in its tax
collection efforts, the IRS has every reason to proceed
cautiously, ensuring that the taxpayer has adequate notice
that the IRS may contact third parties and that the taxpayer’s
reputational interests are protected. The lack of urgency is
further reflected in the IRS’s willingness to wait two years
between requesting the documents from J.B. and P.B. in
September 2013 and issuing the summons to the California
Supreme Court in September 2015.

Moreover, the IRS should have known that it was
requesting information from a particularly sensitive source.
The IRS sent the summons to J.B.’s employer, not a remote
third party like a bank or financial institution. A taxpayer’s
reputational interests is heightened when the IRS requests
information from an employer, which knows the taxpayer
intimately and upon which the taxpayer relies for decisions
about hiring and firing, and promotion. And, the IRS did not
just request this information from any employer. The IRS
sought billing records and invoices for J.B.’s work
representing capital defendants for the state government.
The IRS should have known that these materials were
potentially covered by the attorney-client privilege and other
 J.B. V. UNITED STATES 25

litigation-related privileges, and could have revealed J.B.’s
litigation strategy representing persons on death row.
Issuing the summons without specifically notifying J.B. and
P.B. is rendered even more unnecessary because the billing
records and invoices that the IRS requested are exactly the
type of records that the IRS should have expected J.B. to
have in his possession, and to have readily been able to
provide once the dispute as to whether J.B. and P.B. should
have remained in the research audit was resolved. In fact,
federal law requires J.B. and P.B. to maintain exactly those
records. See I.R.C. § 6001 (requiring taxpayers to maintain
income records).

We think there were several reasonable additional steps
that the IRS could have taken to notify J.B. and P.B. before
turning to the California Supreme Court. See Jones,
547 U.S. at 234. The ongoing litigation between J.B. and
P.B., and the IRS, meant that IRS lawyers had opportunities
to notify the couple that, despite the litigation, it would begin
contacting third parties to collect information that J.B. and
P.B. continued to withhold. Another reasonable step would
have been for the IRS to, once again, renew its request for
documents, and tell J.B. and P.B. that, if the documents were
not provided, it would begin reaching out to third parties.
Because more than two years had elapsed between the date
the IRS sent Publication 1 to the couple, and the date the IRS
issued its summons to the California Supreme Court, it is not
unreasonable to expect the IRS to renew its request for
documents and to remind J.B. and P.B. that if they did not
comply, the IRS would begin contacting third parties. Other
reasonable notice measures, directed at the possibility that
J.B. and P.B. did not understand or remember the third-party
contacts notice in Publication 1, would have been to re-mail
Publication 1, call the taxpayer, or issue a more tailored letter
indicating that the IRS would begin contacting third parties.
26 J.B. V. UNITED STATES

But, because the IRS took no additional steps to notify
J.B. and P.B. that it would be sending a summons to the
California Supreme Court, we affirm the district court’s
conclusion that issuing Publication 1 two years before the
third-party contact did not satisfy I.R.C. § 7602(c)(1)’s
“reasonable notice in advance” requirement in this instance.

IV.

The IRS must comply with its statutory obligation to
provide reasonable notice in advance of contacting third
parties. Courts are not in the position to prescribe the exact
form of notice that is reasonable in every circumstance.
Under the circumstances here, however, reliance on
Publication 1 was plainly unreasonable, and there are no
doubt numerous other circumstances where the IRS needs to
take further steps to provide the reasonable and meaningful
notice Congress mandated. When the IRS seeks information
from an employer of a party with whom it is currently in
litigation and much of the information sought is covered by
common law and state-recognized privileges, additional
reasonable measures must be taken to provide meaningful
notice and an opportunity to respond, in order to avert the
potential third-party contact.

The district court’s order quashing the 2011 summons to
the California Supreme Court is therefore AFFIRMED.
J.B. V. UNITED STATES 27

APPENDIX A
28 J.B. V. UNITED STATES