Court Opinion

ID: 8915415
Source: CourtListenerOpinion
Date Created: 2022-11-27 04:49:25.78361+00
Date Added: 2024-06-11T17:08:56.089270
License: Public Domain

NEWMAN, Circuit Judge,
concurring:
Congress could have enacted a taxpayer notification statute covering any records of a summoned person that concern a taxpayer. It did not do so. Instead it passed a statute covering a summons issued to only designated categories of entities for only a designated category of records. Among the *320categories of covered entities is “any person extending credit through the use of credit cards or similar devices.” 26 U.S.C. § 7609(a)(3)(C) (1976). Since the telephone company issues credit cards, it is plainly eligible to be included in this category. Whether it is actually within the statute’s coverage, however, cannot be decided before determining whether the company’s records fall within the category of records to which the statute applies: “records made or kept of the business transactions or affairs of any person (other than the person summoned).” § 7609(a)(1)(B).
Were the slate clean, I would have thought that Congress’s description of covered records excludes any vendor’s records of its own sales of products or services to its customers. Such records reflect transactions “of” the person summoned. Of course, they simultaneously reflect transactions of the taxpayer-purchaser, but they remain records of a transaction of the seller, “the person summoned.” They are therefore beyond the coverage of a statute that applies to records only of a transaction of a person “other than the person summoned.”
By covering only records that reflect the taxpayer’s transactions and not the record-keeper’s transactions, Congress must have had in mind transactions different from typical two-party vendor-buyer dealings. That this is so becomes evident when one examines the types of entities within the categories of covered recordkeepers, which the statute significantly calls “third-party” recordkeepers. Though anxious to assure some added procedural protection against unwarranted invasions of privacy, Congress covered lawyers, § 7609(a)(3)(E), but not doctors, banks, § 7609(a)(3)(A), but not insurance companies. Though all of these entities maintain records with significant privacy interests, only the entities covered by the statute keep records of transactions that can realistically be thought of as transactions of the taxpayer and not of the re-cordkeeper. The Senate Report underscores this point by noting that “a third party recordkeeper is generally to be a person engaged in making or keeping the records involving transactions of other persons.” S.Rep.No.94-938, 94th Cong., 2d Sess. 369, reprinted in [1976] U.S.Code Cong. & Ad.News 3439, 3798.
The entities covered by the statute are those that can be expected to have records of third-party transactions. The attorney has a record of the taxpayer’s legal transactions with a third party; the bank has a record of the taxpayer’s payments to or receipts from a third party. Some entities that extend credit through the use of credit cards also have records of third-party transactions that can be said to be transactions of a person other than the person summoned. This occurs when the credit card issuer is an entity like Visa or Master-charge, which has records of the taxpayer’s transactions with third parties. In my view the statute has no application to records of two-party transactions between a credit card issuer like the telephone company and its own customers. Though the telephone company is an issuer of credit cards, and therefore eligible to be within the terms of § 7609(a)(3), it is not subject to the statute because in fact it is not a third-party re-cordkeeper, i.e., it does not maintain records of third-party transactions.
Limitation of § 7609 to the third-party transactions of credit card issuers not only is indicated by the statutory description of covered records but also reflects the interpretation most consistent with a rational Congressional purpose. If the statute were read to cover records of two-party transactions, it is difficult to think of any rational reason why Congress would have required notification to taxpayers when records of their purchases were summoned from sellers who extended credit by means of a credit card, but not from sellers who extended credit by normal end-of-the-month billing. Indeed, no apparent reason exists for distinguishing sellers who sold for cash. Nothing in the legislative history suggests that Congress was distinguishing among sellers, depending upon whether or not they sold by means of credit cards.
*321What Congress seems to have been trying to accomplish is to afford taxpayers notice of those instances when the Internal Revenue Service seeks a set of records that can be expected to obtain a wide variety of personal information about the taxpayer. Records of any sale of goods or services reveal something about the person who made the purchase, but Congress would not likely have thought that a purchaser should get notice only when he makes a purchase by using a credit card. However, in the interest of permitting objection to wholesale requests for revealing documents, it does make sense for Congress to have required notice whenever a summons is issued to an entity that customarily keeps records of a taxpayer’s transactions with others. That purpose led Congress to identify entities like lawyers and stockbrokers that customarily have records of a person’s third-party transactions. A credit card issuer exemplifies a likely source of such records when it is Visa or Mastercharge, but not when it is a corner liquor store that happened to make some sales by means of its own credit card as an alternative to monthly billing.1
Toll call records, potentially revealing a wide range of a person’s activity, may well be the sort of records that should occasion notice to a taxpayer when the IRS inspects them. But the statutory scheme Congress selected to afford notice of IRS inspection *322of revealing records consists of including only records of transactions that are not those of the person summoned and then identifying those entities likely to have such records. The telephone company, as a seller of service to a customer, has records of its own transactions and therefore does not fall within the coverage of § 7609.
However, as Judge Pierce notes, this Court’s decision in United States v. New York Telephone Company, 644 F.2d 953 (2d Cir. 1981), extended coverage of the statute to records of the two-party transactions of the telephone company with its customers.2 Despite my disagreement with that decision,3 I am obliged to accept it and therefore face the issue of whether the records of a credit card issuer are within the statute only when they reflect credit card transactions or whenever they reflect any credit transactions. That issue is problematical for me because there is no sure basis for determining where Congress intended to draw the line once the statute has been extended beyond what I consider to be its intended scope of coverage. On balance, I agree with Judge Pierce that, once an entity is covered by the statute in some of its credit card transactions with its own customers, it makes little sense to exclude coverage of records of a customer who has not used his credit card for a particular credit transaction or even a credit customer who does not have a credit card. I think we were in error in New York Telephone, but if that decision correctly divined what Congress had in mind, then I agree that Congress would not have wanted this case decided differently. I therefore concur in Judge Pierce’s opinion for the Court.

. The legislative history of this portion of the statute supports the view of a rather narrow Congressional purpose focused on third-party summonses that significantly implicate privacy interests because they seek particularly confidential material or are particularly comprehensive in scope. The original House bill, which did not use the term “third-party recordkeeper,” described a broad class comprising “any person” who has records relating to the business of transactions of another specified party; if any such records were sought, notice to the other party was required. H.R. 10612, 94th Cong., 2d Sess. § 1211 (1976), U.S.Code Cong. & Admin.News 1976, p. 3202. The Senate amended the bill, however, to provide for notice only if the summons was served on “any person whose business consists, in whole or in part, of making or keeping records of the business transactions or affairs of other persons.” H.R. 10612, as amended, 94th Cong., 2d Sess. § 1205 (1976), U.S.Code Cong. & Admin.News 1976, p. 3798. The accompanying Senate Report noted that “a third party recordkeeper is generally to be a person engaged in making or keeping records involving transactions of other persons. For example, an administrative summons served on a partnership, with respect to records of the partnership’s own transactions, would not be subject to these rules.” S.Rep. No.938, 94th Cong., 2d Sess. 369, reprinted in [1976] U.S.Code Cong. & Ad.News 3439, 3798. The language of the Senate amendment did not indicate who might come within the description of a “person whose business consists ... of making or keeping records of the business transactions or affairs of other persons,” but the Senate Report mentioned “a bank, brokerage house, accountant, attorney, or other third-party record keeper,” id., plainly viewing such entities as illustrative of the class that the committee had in mind. These entities were then listed in the version of the bill that emerged from conference, which became the present statute.
The Conference Report explains the new version as follows:
The conference agreement follows the Senate amendment. In addition, the agreement clarifies the definition of a third-party record keeper, limiting this category to attorneys, accountants, banks, trust companies, credit unions, savings and loan institutions, credit reporting agencies, issuers of credit cards, and brokers in stock or other securities.
H.R.Conf.Rep.No.1515, 94th Cong., 2d Sess. 486, reprinted in [1976] U.S.Code Cong. & Ad. News 4118, 4190 (emphasis added). The Senate amendment, with its specification of those in the “business ... of making or keeping records,” is said to be followed, but it is clarified by the addition of more detail to the Senate Report’s enumeration of likely third-party re-cordkeepers. Here is the first mention of credit card issuers, part of a “clarification” of the definition of third-party recordkeeper as those whose business consists of keeping records of the transactions of other persons and included among a group of other institutions having in common a role as repositories of potentially sensitive information. This evolution of the language describing covered entities, coupled with the language describing covered records, reinforces the view that “issuers of credit cards” in the Conference Report and “person extending credit through the use of credit cards or similar devices” in the statute should be interpreted consistently with the class of entities Congress was covering. That class, as the Senate Report states, does not include “partnership[s that keep] records of the partnership’s own transactions,” S.Rep.No.938, supra, and should not include telephone companies that keep records of their own transactions with customers.

. The opinion in New York Telephone explicitly reckoned with and rejected the Government’s argument that the telephone company “is not within the intended scope of § 7609 because it keeps records of its own transactions with the taxpayer rather than the taxpayer’s transactions with others.” 644 F.2d at 958 n.9. Though the argument was rejected in a footnote, the resulting extension of § 7609 to records of transactions between the telephone company and its customers was central to the Court’s holding.

. A limited interpretation of § 7609 to exclude telephone company records of transactions with its own customers was rejected in New York Telephone because of the “plain terms” of the statute and because toll call records reflect customers’ “dealings” with others. 644 F.2d at 958 n.9. In my view, neither reason is persuasive. The plain terms of the statute preclude coverage of toll call records since these records reflect transactions of the telephone company and are therefore not records of transactions of a person “other than the person summoned.” Nor do the transactions cease to be the transactions “of’ the telephone company simply because the service the telephone company sells to the taxpayer permits him to deal with a third party (or as the company prefers to say, to “reach out and touch someone”). If the category of covered records were to include any records of a customer that reflect “dealings” with a third party, it would cover records of a department store customer’s purchases sent to friends, a travel agency customer’s trips to hotels, and numerous other instances where the product or service sold by use of a credit card places the customer in some form of contact with a third person. There is no reason to believe that Congress intended that records of all such transactions should be covered whenever the goods or services were sold by an issuer of credit cards. On the contrary, Congress included credit card issuers within the category of third-party record-keepers because some of those entities, like Visa and Mastercharge, typically collect records of the sort covered by the statute, records that are not transactions “of” the recordkeeper. It is the statutory definition of covered records that limits its scope to true third-party record-keepers like Visa and Mastercharge and precludes coverage of credit card issuers like the telephone company that sell goods and services to their customers in two-party transactions that are not transactions “of any person (other than the person summoned)” (emphasis added).