part5-159
- 5.21.2.1
Introduction - 5.21.2.2
Exchange of Information - 5.21.2.3
Consent Directives - 5.21.2.4
Letter of Request
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In recent years, as our economy becomes more global, more and more U.S. taxpayers are participating in offshore activities
for both legitimate and illegitimate purposes. -
Taxpayers who participate in offshore activities for illegitimate purposes seek to shelter financial resources in foreign
countries. Offshore accounts can be located in any country in the world. Useful records can be obtained from foreign countries
regarding theses taxpayers. -
International cases require methods not normally used in the domestic arena. Some of these methods are:
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Exchange of Information (EOI)
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Consent Directives
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Letters of Request
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The United States has tax treaties and tax information exchange agreements (TIEAs) with many countries that provide for the
exchange of information on tax matters.-
See IRM 5.1.8.7.7, Incoming Mutual Collection Assistance Requests regarding mutual collection assistance requests with the five treaty countries of Canada, Denmark, France, Netherlands and
Sweden.
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The information requested may contain items that are reported or omitted on a taxpayers return or regarding the whereabouts
of the taxpayer when the taxpayer no longer resides at the last known international address of record and in a delinquent
return investigation to determine income and credits of the taxpayer.Note:
Access a list of countries that have an income tax treaty and/or a TIEA with the United States at: http://www.irs.gov/pub/irs-apa/treaty.pdf
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All Exchange of Information requests with a foreign country are handled by the IRS Tax Attaché, Revenue Service Representative
(RSR) or Exchange of Information (EOI) group, as applicable, with the responsibility for handling request to the country where
the information is located.-
See IRM 4.60.1 , Exchange of Information for more information on Exchange of Information between the United States and foreign countries.
Note:
Tax Attachés and Deputy Tax Attachés serve in IRS overseas posts of duty and Revenue Service Representatives (RSRs) and Assistant
Revenue Service Representatives (ARSRs) serve in IRS domestic posts of duty. Tax Attaches and RSRs service all functions of
the IRS in tax administration matters within their respective post jurisdictions.Note:
The Exchange of Information Program administers the Exchange of Information provisions of U.S. tax treaties and tax information
exchange agreements (TIEAs). EOI helps IRS field personnel obtain information from foreign countries, works with IRS field
personnel to provide information to certain foreign countries, and coordinates the Mutual Collection Assistance provisions
of certain treaties. -
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All Exchange of Information requests with a U.S. Territory or State are handled by the Office of Governmental Liaison.
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The types of information that may be exchanged under an Exchange of Information include but are not limited to:
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Tax returns and return information such as verification of filing status, citizenship, residency, income, expenses and tax
liability, -
Third party information return filings,
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Bank records,
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Business records,
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Public records such as deeds, birth, death and marriage records, and
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Witness interviews.
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Exhaust all domestic sources for information before requesting information from a foreign country.
Note:
In general, if the information can be obtained domestically, then a tax treaty or TIEA request is normally not appropriate.
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Contact the IRS Tax Attaché, RSR or EOI group responsible for that foreign country prior to drafting a request.
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See IRM 4.30.3.3 , Post Jurisdiction , and IRM 4.30.4 , Post Contact Numbers , for more information on jurisdiction and for contact numbers for the RSRs.
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Go to: http://lmsb.irs.gov/international/dir_treaty/eoi_overseas/posts.asp for the current International Post Jurisdictions
and Tax Attaché contact information. -
Go to: http://lmsb.irs.gov/international/dir_treaty/eoi_overseas/eoi/index.asp for the current contact information on the
EOI group.
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All exchange of information requests must be transmitted via a member of the U.S. Competent Authoritys office (i.e., Tax
Attaché, RSR, EOI group)Caution:
Only the Competent Authoritys office is authorized to communicate directly with a foreign countrys tax office under a treaty
or TIEA.
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Prepare the Exchange of Information request in memorandum format in two parts:
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The first part is for internal IRS use,
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The second part will be attached to a Competent Authority letter requesting the information and forwarded to the foreign
tax administration. -
See IRM 4.60.1.2.4.3 , U.S. Initiated Request Procedures , for more information on how to request the information from the foreign country.
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Prepare the first part on the letterhead stationery and include, the following information:
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The name and address of the taxpayer under investigation,
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The name and phone of the revenue officer,
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The address and fax number where the reply should be mailed/faxed,
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Any background or administrative information that should not be provided to the foreign tax administration, and
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Any statute, court, or similar dates by which the information is needed.
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Secure approval of the memorandum from your Territory Manager through your Group Manager before sending it to the appropriate
IRS Tax Attaché, RSR or EOI group. -
Send the Exchange of Information request to the appropriate Tax Attaché, RSR or the EOI group.
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The type of information available for an Exchange of Information with a U.S. Territory (also referred to in the Code as a
U.S. Possession) is defined by the corresponding tax implementation or tax coordination agreement executed between the United
States and the U.S. Territory. These agreements with the U.S. territories are similar to the Federal-State agreements for
the exchange of information between the Internal Revenue Service and state tax agencies. -
The Office of Governmental Liaison is responsible for coordinating the Exchange of Information between the IRS and U.S. Territory.
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Request only information actually needed so as to minimize the burden on the U.S. Territory tax office.
Example:
Consider requesting a return transcript in lieu of a copy of the actual return.
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Contact the local Governmental Liaison at: http://mysbse.web.irs.gov//CLD/GLD/GL/Contacts/default.aspx to verify if the
information requested is available. -
Use Form 8796 , Request for Return information , to request tax return(s) or return information from the tax department of the U.S. Territory.
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Complete Section A, B, and C of Form 8796 ,
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Obtain approval/signature from the designated official Fed/State (U.S. Possession) Authorization list. The list can be obtained
from your local Governmental Liaison.-
Route Form 8796 to the Disclosure Officer of the tax department in possession of the information you are seeking.
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Route Form 8796 to International Disclosure at the following address if you cannot secure the authorized signature locally.
Internal Revenue Service
31 Hopkins Plaza, Room 1210
Baltimore, MD 21201
Note:
Disclosure will sign and route the request to the tax department in possession of the information.
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A Consent Directive, sometimes known as a Disclosure Directive, is a document authorizing the court to compel the taxpayer
or a third party to disclose certain foreign bank records belonging to or controlled by the taxpayer. -
Consent Directives can be obtained voluntarily directly from the taxpayer or by court order. When a Consent Directive is obtained
voluntarily, some foreign countries will view this favorably and comply with the Consent Directive. On the other hand, some
countries may not honor a Consent Directive that was compelled by court order. -
A Consent Directive is used as the last resort where the court is considering denying the enforcement of a summons on Fifth
Amendment grounds.Example:
A situation where a Consent Directive is useful is when the IRS summonses a U.S. branch of a foreign bank or a U.S. bank
with a foreign subsidiary. The bank will claim that it cannot produce records without violating the bank secrecy laws of the
foreign jurisdiction. The Consent Directive, when signed by the taxpayer, gives the bank assurance to comply with the summons
without violating their bank secrecy laws. -
Consult with Area Counsel prior to considering a Consent Directive. Area Counsel will coordinate as necessary with the Office
of Associate Chief Counsel (International).
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Issue Form 4564 , Information Document Request, or equivalent (such as a letter) to request from the taxpayer or third
party foreign bank records which the taxpayer or third party may control. -
If the taxpayer or third party does not adequately comply with the information document request, summons the taxpayer or third
party specifying the records that must be produced. Consult with Area Counsel prior to sending the summons to determine if
the summons will be enforced if the taxpayer or third party does not comply. Area Counsel will coordinate with the Office
of Associate Chief Counsel (International). -
If the taxpayer or third party does not adequately comply with the summons, refer to Area Counsel for enforcement of the summons.
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If the taxpayer or third party does not produce the foreign bank records in court, Office of Associate Chief Counsel (International)
may request that the court order the taxpayer or third party to sign one or more consent directives. Each consent directive
can then be mailed to a different foreign bank, authorizing the bank to disclose to the IRS records relating to accounts that
the taxpayer or third-party may control.
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A Letter of Request is mechanism for obtaining information from countries that have signed the Hague Evidence Convention.
The Hague Evidence Convention is an international treaty which provides various methods and standardized procedures for securing
evidence in civil and commercial matters. The Hague Evidence Convention may serve as a tool for discovery of foreign evidence,
and it can only be used when there is a judicial proceeding pending or imminent in the United States. -
A Letter of Request:
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is initiated by the IRS through the court,
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is worked by the Competent Authority in the receiving country, and
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in most cased, it bypasses foreign courts and diplomatic channels of the receiving country.
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The type of assistance from each country will be different even though that country is a signatory to the Hague Evidence Convention.
Most common law countries will provide assistance in civil tax cases pending in a court within the United States. However,
many civil law countries consider tax matters as “fiscal ”
matters (not civil matters) that are not within the scope of the Convention. In some of the present and former British
Commonwealth territories such laws are know as “Evidence Acts ”
that serve as independent tools for making requests for information. -
Consult Area Counsel, who will coordinate with the Office of Associate Chief Counsel (International), and where appropriate,
the U.S. Department of Justice to determine what may be expected from any given jurisdiction. -
Prepare an application for a Letter of Request with the assistance of Area Counsel.
