Action Recycling Inc. v. United States

This appeal raises the question of whether the Internal Revenue Service (“IRS”) permanently possesses all of the information contained in a taxpayer’s records once it has reviewed but not retained those records. We hold that an IRS Revenue Agent’s review of records does not automatically give the IRS permanent possession of all of the information in those records and that a later summons for the same records is permissible under the Supreme Court’s decision in United States v. Powell, 379 U.S. 48, 57-58 , 85 S.Ct. 248 , 13 L.Ed.2d 112 (1964).

Background

At the request of the IRS, Action Recycling Inc. (“Action Recycling”) made available its 2009 bank statements at the offices of its attorney. Revenue Agent Derik Hudson spent 85 hours auditing those statements and found approximately $100,000 in unexplained deposits. Hudson took notes and made a simple table of the total value of the deposits, transfers, and withdrawals for each month. He did not copy or retain any of the statements. Hudson then left the IRS, and the open investigation was transferred to a new Revenue Agent, Heather Blair. When Blair asked to further review the 2009 bank statements, Action Recycling…