## Facts

- The IRS investigated potential underreporting of taxable income and gains from convertible virtual currency transactions, treated as property for federal tax purposes.
- The IRS obtained authorization to serve a John Doe summons on Coinbase, a major virtual currency exchange and wallet provider, seeking information about U.S. users transacting from 2013–2015.
- The original summons requested broad categories of records for all U.S. customers with any virtual currency activity, including extensive identity verification materials, correspondence, and compliance/monitoring reports.
- Coinbase resisted compliance, arguing the summons was overbroad, unduly burdensome, and intrusive of customer privacy.
- In enforcement proceedings, the government narrowed the summons to U.S. persons with Coinbase accounts that bought, sold, sent, or received at least $20,000 of bitcoin in any single year from 2013–2015.
- Certain Coinbase users sought to intervene to oppose enforcement on privacy and related grounds; the court permitted limited intervention for an affected user.
- The court further narrowed the required production to certain identifying and transactional data and declined to require production of several more intrusive categories of records.

## Issues

1. Whether the government satisfied the requirements for enforcing an IRS summons under the Powell framework (legitimate purpose, potential relevance, lack of prior possession, and compliance with administrative steps).
2. Whether the narrowed John Doe summons was nevertheless overbroad or improperly intrusive such that enforcement would constitute an abuse of process.
3. Whether intervening Coinbase users could defeat enforcement based on privacy or similar objections once the government made a prima facie Powell showing.

## Decision

- The court granted the petition to enforce the summons in part and denied it in part.
- The court found the IRS established a prima facie case for enforcement under Powell and that opponents failed to rebut the showing or prove bad faith or abuse of process.
- The court enforced a narrowed summons limited to a subset of accounts meeting the $20,000 annual bitcoin transaction threshold during 2013–2015.
- The court ordered production of limited identifying information and transaction history sufficient to evaluate tax compliance.
- The court declined to enforce requests for certain categories the court found insufficiently relevant or unduly intrusive (including broad identity-document copies, internal monitoring/AML reports, and user correspondence).

## Legal Principles

- To enforce an IRS summons, the government must make a prima facie showing that (1) the investigation serves a legitimate purpose, (2) the sought material may be relevant, (3) the information is not already in the IRS’s possession, and (4) required administrative steps were followed.
- Once the government meets its burden, the summoned party or affected taxpayers must disprove a Powell factor or show abuse of process or improper purpose; generalized privacy objections are insufficient.
- The “may be relevant” standard is broad, but courts may narrow a summons to reduce unnecessary burden and intrusion and to limit production to information reasonably connected to the stated investigative purpose.
- John Doe summonses may be used to obtain third-party records to identify unknown taxpayers potentially failing to comply with federal tax law, including in virtual currency contexts.

## Conclusion

The court partially enforced the IRS’s John Doe summons to Coinbase after narrowing it to higher-value bitcoin transactions and limiting production to core identifying and transaction data, holding the government met the Powell enforcement standard and that opponents did not show overbreadth rising to abuse of process.


United States v. Coinbase, Inc., 120 A.F.T.R. 2d 2017-6671 (N.D. Cal. 2017)