4.60.6  International Referral Criteria and Procedures  (03-01-2007)
Referral Criteria and Procedures

  1. This section describes the features of tax returns that make an International referral necessary and the procedures to follow in making an International referral.  (03-01-2007)
Mandatory Referral Criteria

  1. Generally, all returns with international features meet the mandatory referral criteria and must be referred to an international examiner.

  2. A preliminary review of returns with international features will be made to determine if the case should be referred.

  3. International features include but are not limited to the following:

    1. Schedules and attachments of any of the following forms to the tax return:

      Form Form Title Referral Criteria
      926 Return by a U.S. Transferrer of Property to a Foreign Corporation All
      1116 Foreign Tax Credit (Individual, Estate or Trust) FTC > than $25,000
      1118 Foreign Tax Credit - Corporations FTC > than $25,000
      1120, Schedule C Dividends and Special Deductions An entry of $500,000 or more appears on any of the following lines: 3, 6, 7, 8, 12, 13
      1120, Schedule M-3 Net Income (Loss) Reconciliation for Corporations with Total Assets of $10 Million or More Part II, Col. (c), lines 2-5 and 10, if amounts on any one line are less than -100,000; Part III, Col. (c), lines 5-7, if amounts on any one line are greater than 100,000 and sum of columns (b+c), lines 9 and 23-25, if amounts (i.e. sum of (b+c) are greater than $1,000,000
      1120, Schedule N Foreign Operations of U.S. Corporations Yes to any question except 6 (foreign bank account)
      2555,   2555 EZ Foreign Earned Income All
      5471 Information Return of U.S. Persons With Respect To Certain Foreign Corporations All
      5472 Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business (under Sections 6038A and 6038C of the Internal Revenue Code) All
      5713 International Boycott Report Both questions in 7(f) are answered yes
      8621 Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund Part IV, 10a-11f has an entry that is $500,000 or more
      8832 Entity Classification Election Box 2(d), (e) or, (f) is checked
      8833 Treaty Based Return Position Disclosure Under Section 6114 or 7701(b) All
      8858 Information Return of U.S. Persons With Respect to Foreign Disregarded Entities All
      8865 Return of U.S. Persons With Respect to Certain Foreign Partnerships All
      8902 Alternative Tax on Qualifying Shipping Activities All

    2. The taxpayer is, or controls any of the following where the transaction exceeds $25,000:

      1. Has a foreign branch, subsidiary, disregarded entity, affiliate, partnership, trust, joint venture, or related entity in any form,

      2. Has possible Subpart F issues per the provisions of IRC section 951 et seq

      3. Has a subsidiary, affiliate, or related entity in any form in Puerto Rico,

      4. Is a shareholder, officer, director, partner, trustee, beneficiary, or has some other possible involvement in an entity in a tax haven country.

  4. A domestic agent may voluntarily submit an international referral requesting participation of an International Examiner (IE) in a case involving a complex and substantial domestic IRC section 482 issue. The referring agent is encouraged to attach to the documents sent to the International Referral Recipient (IRR), a memorandum setting forth the pertinent facts and the reasons for requesting participation of an IE.  (03-01-2007)
Specialist Referral System

  1. In the normal course of auditing tax returns, revenue agents and tax compliance officers may require the assistance of international subject matter experts (International Examiners (IEs)). A request for International assistance may be either a formal request for the assignment of an IE to the case, or an informal request that simply seeks a response to a specific question. In either case, the Specialist Referral System (SRS) shall be used to request International assistance. The SRS is on the IRS Intranet at: https://srs.web.irs.gov/Default.asp. All returns meeting the mandatory referral criteria in above will be referred utilizing the SRS format request.

  2. The SRS is also the platform that IEs use for requesting assistance from the following specialists: computer audit, economist, employee plan, excise tax, employment tax, engineers, exempt organization, federal state and local government, financial products, Indian tribal government, and tax exempt bond. SRS will not accommodate a "reverse referral." i.e., a request for domestic assistance from an IE controlling a case.

  3. SRS facilitates communication of the acceptance or rejection of referrals and enables management tracking. A key benefit of SRS is that it eliminates redundancy in generating the multiple referrals typically required on a coordinated industry case.

  4. The SRS is strictly a routing system of specialists' referrals. The SRS shall not be used as an inventory management system.

  5. Referral recipient access to the SRS requires an approved Form 5081.  (03-01-2007)
SRS Referral Process

  1. Manually Input Referrals

    1. The Specialist Referral System (SRS) is accessed through the IRS intranet and is available to all employees. The intranet address is: https://srs.web.irs.gov/Default.asp. A universal online form is used for requesting any of the listed specialists. Information entered onto the form is saved in a database. International referrals are forwarded to the International Referral Recipient (IRR) based on geographical and industry logic established by the International Territory Managers (ITM) and communicated to the International Business Compliance (IBC) analyst that maintains that listing. See IRM, Systems Maintenance, for contact information. Confirmation of the forwarding of a referral is e-mailed to both the requestor and the requestor’s manager.

    2. The IRR can view requests by accessing the system. If a LIN (LMSB Image Network) link is not provided, formal requests for the assignment of an IE require the requestor to mail copies of returns to the IRR or IE assigned. In most cases, other information that comprises the basis for making the referral will also be required from the requestor. Circumstances where supporting documentation is not required include formal referrals on CIC cases and requests for informal assistance. The IRR can accept the referral by assigning an IE to the case, transfer the referral to another manager, or reject the referral. Upon assignment, an IE will receive e-mail notification. Additionally, the requestor and the requestor’s manager will receive e-mail notification of the IRR’s action. The IE can then access the SRS and view the referral.

    3. When another year (subsequent/prior) is to be included, a new referral is needed to add the additional year to the referral.

    4. The requestor shall not make an International referral if there is already an auto referral for the same tax period.

  2. Auto Referrals

    1. On some returns, a referral will automatically be generated on the SRS when an International featured return is placed into status 10 either by the domestic team manager or the IE team manager. Strategy, Research & Program Planning (SRPP) shall provide the data set of these status 10 returns weekly to International Business Compliance(IBC). IBC uploads the data weekly into the SRS. All auto referral returns have LIN links. IBC also manages the auto referral process. All other referrals from SB/SE, TEGE, etc. must be completed using the manual SRS procedures.

    2. Auto referrals will be sent to the proper IRR via the SRS. Through the SRS the IRR or IE team manager can transfer the return to another team member for assessment. This evaluation of the return for its audit potential is important since a decision to accept or reject the return must be made timely and accurately.

    3. If the referral is accepted by International, it will be assigned to an IE in their team or transferred to the proper team for assignment. The assigned IE shall contact the domestic agent and arrange to receive a copy of the return and other related documentation. If the domestic team manager who placed the return into status 10 does not want to work the return, the IE team manager will have the option to request the return to be transferred to the international team. International will have the option to control and open the return to work the international issues.

    4. The IRR or IE team manager may also reject the referral. If the referral is rejected by International, the IRR, IE team manager or IE will notify the domestic team manager that the referral was rejected and that a manual SRS referral should not be made.  (03-01-2007)
Supporting Documentation

  1. Supporting documentation assists the International Referral Recipient (IRR) in evaluating a referral. Although generally required, an exception for CIC cases exists under the premise that those types of cases typically have extensive documentation and the timing of the engagement is frequently planned well in advance so that the submission of a referral is simply a formality. The IRR is therefore familiar with productivity in prior cycles and knows who will be assigning the case in the current cycle. In CIC cases where this is not the case, the IRR should contact the team manager of the referring agent and make arrangements to assess the audit potential of the referred case.

  2. The domestic agent will forward all applicable forms (including attachments) and documents from the following list to the IRR or IE assigned:

    1. Forms 1065 (with foreign partners), 1120-F and 1042. If related balance sheets and profit and loss statements are not included with the Form 5471, the domestic agent should secure them.

    2. A complete organizational chart, if available.

    3. Relevant product or product line profit and loss statements (See Treas. Reg. 1.6038A-3), if available.

    4. Any other pertinent information that the domestic agent feels would be helpful in making an evaluation of international issues.

  3. Copies of additional required forms based on the type of tax returns filed:

    Form Form Name To be Included
    1040 U.S. Individual Income Tax Return Pages 1 and 2
    1040-NR U.S. Nonresident Alien Income Tax Return Entire Return
    1065 U.S. Return of Partnership Income Entire Return
    1120 U.S. Corporation Income Tax Return Entire Return
    1120-F U.S. Income Tax Return of a Foreign Corporation Entire Return  (03-01-2007)
Management Reports

  1. The SRS is a data base of referral information and is capable of generating the following reports:

    Report Description
    Referral Analysis Provides number of referrals by customers and the disposition of the request.
    Response Time Provides average time to respond and range of time to respond (and by manager for territory level).
    Referral Transaction List of referral requests and relevant information for each request.
    Ad Hoc Ad hoc queries on data to identify trends and to answer specific questions.

  2. Management reports are accessible from the SRS home page. To access reports, click on "Managers" at the top of the screen and then select "View Reports" .  (03-01-2007)
Informal Assistance

  1. ) Questions limited to 100 words are submitted to the IRR through the SRS. Limited detailed information is required from the requestor. An IRR receives the question via e-mail. This ends the SRS’s involvement in the informal assistance request.

  2. The IRR reviews the question and assigns it to an IE by forwarding the e-mail. The International Examiner assigned an informal assistance request has the option of responding by phone or e-mail.  (03-01-2007)
System Maintenance

  1. Each specialty is required to maintain the routing logic on the SRS. The International Business Compliance analyst that maintains the Field Operations List (FOL) and IRR list is also responsible for and has administrative access over the routing within SRS. All IRR changes shall be communicated to the International Business Compliance analyst that maintains that listing. This analyst can be identified by going to the LMSB intranet website and locating the FOL under "Contacts" in the "International " section. The point of contact is listed at the bottom of the "Contacts" web page.

  2. ) An International team manager can edit and delete team members. International territory managers can change or delete managers in their territory. For temporary absences, a manager can assign an acting manager. To access the edit menu from the SRS home page, click on "Managers" and select "Edit Specialist Group/Team Information."

  3. The following actions require changes to SRS routing:

    1. New team manager enters the program

    2. Current team manager leaves the program

    3. Change in acting team managers

    4. Change in international territory managers

  4. The SRS will not properly route referrals or track activity when a personnel vacancy occurs. There must always be valid routing paths in place. When a vacancy occurs, someone must be designated the responsibility to assign referrals to IEs. Similarly, a vacancy at the team or territory level will impair the SRS’s managerial reporting function. Information about changes that can not be handled by the team or territory manager must be communicated to the International Business Compliance (IBC) analyst with administrative access over SRS.  (03-01-2007)

  1. A"Limited Scope" audit, by an IE, is an examination generally focused only on international issues. If material domestic issues are identified during a "limited scope" audit, a domestic agent may be assigned to the examination. The IE would retain administrative control of the return..

  2. The IE can take administrative control of an examination under circumstances when international issues represent majority of the material examination issues. Domestic agents can be assigned to the case and conduct a limited scope domestic issues on the same case as a team member.

  3. The auto referral process will submit the referral to the SRS within two weeks once the return reaches status 10. To avoid duplicate referrals, the IRR, IE team manager, or IE shall check the SRS for the auto referral before any attempt to manually input the referral to International. For all non-auto referrals, the IE will submit a manually input referral to International via the SRS.

  4. The IE charged with the return will assume all aspects of examination and case control responsibilities, including, but not limited to:

    1. Maintaining timely AIMS and MIS updates.

    2. Following all examination procedures and directives pursuant to IRM instructions.

    3. Preparing all relevant examination reports pursuant to IRM instructions.

    4. Preparing all relevant closing documents pursuant to IRM instructions.

  5. The IE charged with the return is responsible for maintaining statute controls and securing timely extensions of statutes when warranted.

  6. The Commissioner, LMSB and NTEU signed a Letter of Understanding (LOU) on September 5, 2002, that in part, stipulates: "The IE will be responsible for all elements of case control and statute control that are contained in the Internal Revenue Agent Standard Position Description and detailed in IRM 25.6.23," Examination Process - Assessment Statute of Limitation Control.  (03-01-2007)
APA/Treaty/EOI Referral Procedures

  1. The Advanced Pricing Agreement (APA) Program of the Office of the Associate Chief Counsel (International), the Office of Treaty Administration and Double Taxation (Treaty) and the Office of Exchange of Information (EOI) and Overseas Operations under the Deputy Commissioner (International), LMSB, who is the U.S. Competent Authority (CA), rely on the expertise of International Examiners (IEs) and Revenue Agents in the field for assistance with their programs.

    1. These offices are collectively referred to as the requesting office.

    2. The assistance provided by the International Examiners and Revenue Agents to the requesting office is referred to as field services.

  2. If the taxpayer is a LMSB taxpayer, the requesting office will use the listing of International Referral Recipients (IRR) in identifying who should receive a request for services. The IRR is a geographically based listing maintained on the LMSB website and can be accessed using the following link: http://lmsb.irs.gov/international/intl_programs/contact.asp .

  3. The IRR will forward the request for field services to the accountable office within five business days of receipt. The accountable office is the appropriate International Team Manager (TM) to handle a particular request.

    1. The identification of the appropriate TM shall be established by local agreement among all of the international teams servicing a particular geographic area with the concurrence of the respective International Territory Managers (ITMs) and Industry Directors (IDs).

    2. The IRR should exercise reasonable diligence in meeting the five-day requirement.

  4. If a Treaty Administration and Double Taxation request involves a taxpayer that meets the following criteria:

    1. individual taxpayer has foreign address;

    2. individual taxpayer has an APO or FPO address;

    3. a Form 2555, Foreign Earned Income, is attached to the tax return;

    4. Form 1120-F, U.S. Income Tax Return of Foreign Corporations ($10 Million and under);

    5. Form 1040-NR, U.S. Non-resident Alien Income Tax Return;

    then, the request will be forwarded directly to the Manager, Foreign Resident Compliance.

  5. The IRR will maintain a log of all requests received, noting the date of the request, the accountable office (or SB/SE Compliance Area Director), and the date forwarded.

  6. Upon receipt of a request for field services, the TM shall notify the requesting office that the request has been received and the name of the IE assigned. This communication should occur as soon as possible, but in no event later than five business days from the date that the request is received by the TM. The TM shall also notify their ITM and/or ID in accordance with procedures established by each Industry.

  7. The Office of Exchange of Information (EOI) and Overseas Operations is administered by headquarters EOI Program Analysts and LMSB Tax Attachs/Revenue Service Representatives. It will forward Foreign Initiated Specific Requests for Exchange of Information involving large case entities and/or complex international issues to LMSB, International Referral Recipients (IRRs) for assignment and control within LMSB. Foreign Initiated Specific Requests for Exchange of Information involving individuals and SB/SE entities will be forwarded to SB/SE, Examination Area Directors for assignment and control with SB/SE. Both LMSB and SB/SE will strive to conclude all fieldwork within 60 days upon receipt in the groups. The International Examiner or Revenue Agent will route the results back to the originating LMSB Tax Attach, Revenue Service Representative (RSR), or EOI Team Member. These procedures are in accordance with the September 2005 Memorandum of Understanding (MOU) between LMSB and SB/SE. Refer to http//sbse.web.irs.gov/Ref/MOU/SBReferenceSpecificCase.htm  (03-01-2007)
APA/Treaty/EOI Requests for Information

  1. The requesting office will transmit a request for field services to the IRR in a manner appropriate for the nature of the request. For example, APA prefers to speak with the IE assigned to the request for services prior to shipping voluminous documents and data. Requests for field services can be submitted in two forms:

    1. Notice

    2. Detailed Request

  2. Notices may be transmitted by phone, fax, e-mail or regular mail and shall contain the following: name and address of the taxpayer, nature of request, suspense date and the point of contact in the requesting office. Taxpayer information, which includes names and addresses, can only be transmitted by e-mail in an encrypted attachment.

  3. Detailed Requests are mailed to the IRR and contain all of the information needed to provide the field services.

  4. If a request is sent to an IRR in error (e.g., incorrect geographical area or industry), the IRR shall, as soon as practicable, establish communication with the requesting office and forward the request to the appropriate IRR.

  5. If a request is sent to a TM in error (e.g., not in accordance with the local agreement or Foreign Collateral with SB/SE issues), the TM shall, as soon as practicable, establish communication with the IRR and forward the request to the appropriate recipient. The IRR shall record in their log the date the request was sent to the correct accountable office.

  6. The requesting office will set a suspense date to reflect the period of time within which the requesting office would like the field service completed. The suspense date does not apply to APA teams, but does apply to review of APA annual reports. If additional time is needed to complete the field services, the responsible TM will coordinate with the requesting office in establishing a revised suspense date.

  7. The ITM, in the accountable office, should inform the requesting office when the IE has completed the request. Delivery of the completed report and/or provision of requested documents should be worked out on a case by case basis.

  8. The Office of Exchange of Information and Overseas Operations will forward Foreign Initiated Specific Requests for Exchange of Information for field services to the IRRs for LMSB cases and the appropriate Examination Area Director for SB/SE cases, by memorandum in accordance with the September 2005 Memorandum of Understanding (MOU) between LMSB and SB/SE. Refer to: http://sbse.web.irs.gov/Ref/MOU/SBReferenceSpecificCase.htm

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