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Part 11. Communications and Liaison

Chapter 3. Disclosure of Official Information

Section 25. Disclosure to Foreign Countries Pursuant to Tax Treaties

11.3.25  Disclosure to Foreign Countries Pursuant to Tax Treaties

11.3.25.1  (06-17-2005)
General

  1. Disclosures of information to, or received from, foreign tax authorities are governed by tax treaties, tax information exchange agreements (TIEAs), and most provisions of the Internal Revenue Code.

  2. Most tax treaties entered into by the United States include provisions to govern the exchange of information with the foreign treaty partner. The information may relate to income, estate and gift, excise, and other taxes, as provided by the terms of the particular treaty. TIEAs may also exist between the United States and other countries, to authorize the exchange of tax information.

  3. IRC 6103(k)(4) provides for disclosure of information with foreign countries. This IRM provides that:

    "A return or return information may be disclosed to a competent authority of a foreign government which has an income tax or gift and estate tax convention or other convention or bilateral agreement relating to the exchange of tax information with the United States but only to the extent provided in, and subject to the terms and conditions of, such convention or bilateral agreement. "

  4. IRC 6105 limits the disclosure of information received by IRS from a foreign country (and clarifies limitations imposed by the terms of the tax treaty or TIEA). It generally prohibits the disclosure of "tax convention information," except as otherwise provided by the terms of the treaty or TIEA, or as provided by the terms of IRC 6105 itself.

  5. Tax treaties generally provide for exchange of information between the IRS and foreign tax authorities. Individuals referred to as "Competent Authorities" are designated by each country to make written requests for information and to receive information.

  6. The U.S. "Competent Authority" is the Director, International (LMSB). See Delegation Order 4-12 (formerly DO 114). See Delegation Order 4-36 relative to the Director, International (LMSB) and delegated authority for tax coordination with U.S. Possessions. In the case of U.S. Possession agreements, the provisions of the convention agreements executed under IRC 6103(d) will control. However, information received by IRS under these agreements can only be disclosed in accordance with IRC 6105 and the applicable agreement.

  7. All FedState agreements (e.g., Tax Implementation Agreements, Tax Coordination Agreements MOUs) with the U.S. Possessions are considered to be Tax Conventions under IRC 6105. This is true even though the underlying disclosure authority is IRC 6103(d).

11.3.25.2  (06-17-2005)
Information Received from Foreign Tax Authorities

  1. If the IRS needs information from a country with which the United States has a tax treaty, a request is submitted in accordance with established procedures through channels for necessary action.

  2. IRS employees are to be guided by the provisions of IRM 4.60.1, International Procedures Handbook - Exchange of Information, in requesting information from foreign countries. Director, International (LMSB) staff or the Revenue Service Representative (RSR) generally reviews the request and, as appropriate, prepares a letter of request for the signature of the Director, International (LMSB) to be sent to the foreign tax authority.

  3. For Spontaneous Exchanges of Information, the Director International, (LMSB) or RSR, will forward information received from the treaty partner to the field office with jurisdiction over the taxpayer.

  4. Information which is received by the IRS from a foreign tax authority is subject to a treaty secrecy provision. The effectiveness of this provision is codified in IRC 6105(a) and (c)(1)(E). The treaty secrecy provision routinely sets forth two requirements.

    1. Information must be kept secret in the United States according to the provisions of domestic law (IRC 6103); and

    2. Information received by IRS cannot be disclosed to any persons other than those (including courts and administrative bodies) involved in the assessment, collection or administration of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes which are the subject of the particular tax treaty or TIEA. To the extent the information received by IRS relates to the liability or possible liability for tax of a United States taxpayer or otherwise falls within the definition of return information in IRC 6103(b)(2), it is return information subject to the restrictions on disclosure under requirement (a) above.

  5. Because of the treaty secrecy provision, tax treaty information may not ordinarily be disclosed to:

    • State tax agencies under IRC 6103(d);

    • Department of Justice; or

    • Other Federal agencies under IRC 6103(i) or under any other provision of IRC 6103 permitting disclosure for non-Federal tax administration purposes.

  6. There is an exception to the prohibition of disclosing tax treaty-obtained information to State tax agencies. This is found in the treaties between the United States and Mexico and Canada and applies to certain States that have relevant provisions in their Agreements on Coordination of Tax Administration (Basic Agreements).

    1. In these situations, States may be permitted access to tax treaty information received from a foreign tax authority.

    2. Information received by the Director, International (LMSB) or RSR from the foreign tax authority may be sent directly to the State tax agency.

      Note:

      This information is considered Federal tax information and its use is governed by the terms of the tax treaty and Basic Agreement.

  7. Disclosure Officers should ensure that information disclosed for non-Federal tax administration purposes is reviewed and tax treaty information is removed prior to disclosure.

    Note:

    Information obtained under a tax treaty is often stamped to indicate that it is tax treaty information.

  8. Generally, after coordinating with Headquarters, information obtained from a foreign tax authority pursuant to a tax treaty or exchange of information agreement may be disclosed to the United States taxpayer to whom it relates in accordance with IRC 6103(e). In this situation, the taxpayer is considered to be concerned with assessment, collection, enforcement or prosecution with respect to the taxes which are the subject of the tax treaty or exchange of information agreement.

    1. In a case that is not in litigation, the Director, International (LMSB) must be contacted prior to disclosure of this information.

    2. In a case in litigation, disclosure of such information must be coordinated with Branch 7, Associate Chief Counsel (International).

      Note:

      The Director, International (LMSB) has the final authority to approve disclosure of treaty or tax information exchange agreement information.

      Exception:

      Disclosure will not be made to the taxpayer if the IRS or the foreign tax authority providing the information objects to disclosure or if disclosure would seriously impair Federal tax administration. See IRC 6103(e)(7) and IRM 11.3.2.2(6).

  9. If a Freedom of Information Act request for tax treaty information is received, the procedure in IRM 11.3.13, Freedom of Information Act, should be followed.

11.3.25.3  (06-17-2005)
Disclosure of Information to Foreign Tax Authorities

  1. If information is needed by a foreign country with which the United States has a tax treaty, a request is submitted by the foreign competent authority to the U.S. competent authority, Director, International (LMSB).

  2. Disclosure of information by the IRS to foreign tax authorities must be authorized by the Director, International (LMSB).

  3. Certain automatic or "routine" exchanges (such as transmission of reports of taxes withheld from income paid to nonresident aliens) are handled through the Exchange of Information team in the National Office.

  4. The Director, International (LMSB) or RSR generally forwards requests for information to the appropriate IRS offices.

  5. When the requested information is received from the IRS offices, the Director, International (LMSB) staff or RSR prepares a document for the transmittal of the information to the foreign Competent Authority. For requests pertaining to the Simultaneous Criminal Investigation Program, the Director, International (LMSB) has the authority to authorize any disclosures.

  6. For treaty partner requests pertaining to the Simultaneous Examination Program or Industrywide Exchange of Information, the Director, International (LMSB), will:

    1. Forward the request to the International Territory Manager for action; and

    2. When the information is received, transmit it to the treaty partner competent authority.

  7. For Spontaneous Exchanges of Information, the Director, International (LMSB) or RSR, will transmit U.S.-based information to the treaty partner competent authority.

  8. Generally, returns are not furnished to foreign tax authorities pursuant to tax treaties.

  9. If it should become necessary to issue a summons to obtain the requested information, the summons will be prepared for the staff of the Director, International (LMSB) and forwarded to Branch 7, Associate Chief Counsel (International) for review prior to issuance.

  10. Return information which could identify or tend to identify a confidential informant, or otherwise seriously impair an IRS tax investigation is generally not disclosed to foreign tax authorities.

  11. Information which would reveal business or trade secrets is excepted from the exchange of information provisions of the treaties. See IRM 4.60.1.2.5.3, Trade Secrets, for further procedures.

  12. Disclosures to foreign tax authorities made pursuant to tax treaties must be accounted for in accordance with IRC 6103(p)(3) and the Privacy Act of 1974. See IRM 11.3.37, Recordkeeping and Accounting for Disclosures, for further information.

  13. Information disclosed to U.S. Possessions under FedState agreements enjoys the protection of IRC 6105 - but tax information disclosed under IRC 6103(d) is also subject to the administrative provisions of IRC 6103(p)(3) and 6103(p)(4) as well as being subject to the criminal sanctions of IRC 7213, 7213A, and 7431.

11.3.25.4  (06-17-2005)
Nontreaty Disclosures to Foreign Countries

  1. Although IRC 6103(k)(4) is generally the authority for disclosure of return information to foreign tax authorities, other provisions of IRC 6103 permit limited disclosures to foreign countries or individuals of foreign countries in certain situations. These disclosures can be made regardless of whether the United States has a tax treaty with the country. However, when a tax treaty is in effect, information must be exchanged under the treaty to the extent possible.

  2. Return information may be disclosed by IRS employees to individuals of foreign countries in accordance with IRC 6103(k)(6). See IRM 11.3.21, Investigative Disclosure.

  3. Returns and return information may also be disclosed to individuals of foreign countries designated in writing by a United States taxpayer to receive such information in accordance with IRC 6103(c) and (e).

    Example:

    Pursuant to a written taxpayer request and consent for disclosure, IRS may certify to a tax treaty country that taxes were paid in the United States to enable the taxpayer to receive a credit for the taxes on a foreign return.

11.3.25.5  (06-17-2005)
Disclosures to Foreign Countries in Collection Matters

  1. The United States and five of its treaty partners assist each other in the collection of taxes covered by their respective tax treaties. This program is referred to as the Mutual Assistance Collection Program (MCAP) and falls within the scope of the Mutual Assistance Article of the tax treaties in question. The five countries that participate in the MCAP with the U.S. are:

    • Canada

    • France

    • Denmark

    • Sweden

    • The Netherlands

  2. Under MCAP, a requested country will endeavor to collect taxes owed to the requesting country by a citizen of the requesting country who is residing in the requested country. Such data as name, address, identification number, type of tax, amount of tax and any other information deemed necessary to assist the collection process is exchanged with the participating treaty partner.

  3. The Director, International (LMSB) has re-delegated the authority to sign to the Manager, Overseas Operations on matters relating to MCAP. The same disclosure provisions apply to exchanges made pursuant to MCAP as apply to other exchanges made under the tax treaties

11.3.25.6  (06-17-2005)
MLAT Requests

  1. For a summary of the procedures for processing the requests for assistance (e.g., providing tax returns and tax return information) under the various Mutual Legal Assistance in Criminal Matters Treaties (MLATs), see IRM 11.3.28.3.2, Disclosures Based on a Mutual Legal Assistance Treaty (MLAT) Request.

11.3.25.7  (06-17-2005)
Accounting for Disclosures

  1. All tax disclosures to foreign governments must be accounted for under IRC 6103(p)(3) using the Form 5466-B. Generally, the Baltimore Disclosure Office begins this process by completing the taxpayer’s name, SSN and ADP source code. The partially completed form is then sent with the response to the Director, International for completion and forwarding to the Campus for input. Treaty disclosures made by the Philadelphia Campus are handled in accordance with other specific program procedures.


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