The opinion of the court was delivered by: TENNEY
Petitioner, the United States of America, has moved this Court by order to show cause for an order, pursuant to 26 U.S.C. § 7604(a), enforcing two Internal Revenue Service ("IRS") summonses issued upon respondents, The First National City Bank ("Citibank") and The Bank of New York. Respondents oppose the motion on the ground that each of the summonses is defective as a matter of law. For the reasons set out infra, the motion is granted.
Although the issues presented by the petition are purely matters of law, a brief summary of the factual background is in order. Sometime in 1970, the shareholders of the common stock of the Hartford Fire Insurance Company ("Hartford") exchanged their Hartford common stock for preferred shares of stock of International Telephone and Telegraph Corporation. At that time, the IRS had ruled that the exchange would be a tax-free transaction. Recently, however, the IRS has reversed that ruling and is presently seeking to ascertain the income tax liability, if any, due and owing from each of the former Hartford shareholders with respect to their 1970 exchange of stock.
Although the IRS possesses a list of the "record" shareholders of Hartford who participated in the exchange, in some instances the "record" shareholders are indicated as nominee accounts maintained at banks and financial institutions including the respondents. The summonses in issue seek to obtain from the respondents certain information with respect to the actual shareholders, including their names, addresses, social security numbers and the number of shares held.
The first summons was issued and served upon the respondent Citibank on March 13, 1974. The second summons was issued and served upon the respondent Bank of New York on March 25, 1974. Each of those summonses was executed by an IRS employee holding the job title of "Estate Tax Attorney" and therein lies the "rub". It is respondents' contention that on the date each of the summonses was issued IRS Estate Tax Attorneys were not authorized to issue such summons; that from December 18, 1973 to the present date only the Secretary of Treasury ("Secretary") or the Commissioner of Internal Revenue ("Commissioner") was empowered by law to issue summonses. Thus, as all parties agree, the only question before the Court is whether, from December 18, 1973 to the present date, an Estate Tax Attorney employed by the IRS has the authority to issue a summons.
The authority to issue summonses in connection with tax matters is vested in § 7602 of the Internal Revenue Code of 1954. That section provides, in pertinent part:
"For the purpose of . . . determining the liability of any person for any internal revenue tax . . . or collecting any such liability, the Secretary or his delegate is authorized --
"(1) To examine any books, papers, records, or other data which may be relevant or material to such inquiry;
"(2) To summon . . . any person having possession, custody, or care of books of account containing entries relating to the business of the person liable for tax . . . to appear before the Secretary or his delegate at a time and place named in the summons and to produce such books, papers, records, or other data, and to give such testimony, under oath, as may be relevant or material to such inquiry . . . ." 26 U.S.C. § 7602.
Thus, by statute, the Secretary of the Treasury, or his delegate, is empowered to issue a summons in connection with an investigation into any tax liability. Section 7701(a) (12) (A) further defines the phrase "Secretary or his delegate":
"The term 'Secretary or his delegate' means the Secretary of the Treasury, or any officer, employee, or agency of the Treasury Department duly authorized by the Secretary (directly, or indirectly by one or more redelegations of authority) to perform the function mentioned or described in the context, and the term 'or his delegate' when used in connection with any other official of the United States shall be similarly construed." 26 U.S.C. § 7701(a) (12) (A).
Pursuant to the authority vested in him by 26 U.S.C. § 7602, the Secretary issued a Treasury regulation delegating the power to issue summonses in connection with tax matters to certain named IRS employees. 26 C.F.R. § 301.7602-1. Among those employees named were Estate Tax Examiners. 26 C.F.R. § 301.7602-1(c) (5) and (7).
Respondents contend that the power of Estate Tax Examiners to issue summonses was terminated on December 18, 1973 by Treasury Decision 7297, 38 F.R. 34803 (Dec. 19, 1973). ...