Part 5. Collecting Process

Chapter 21. International and Insular Issues

Section 2. Offshore Information Gathering Techniques

5.21.2 Offshore Information Gathering Techniques

Manual Transmittal

April 06, 2018

Purpose

(1) This transmits a revision of IRM 5.21.2, Offshore Information Gathering Techniques.

Material Changes

(1) IRM 5.21.2 updated to include internal controls under Program Scope and Objectives.

(2) IRM 5.21.2.2 added to introduce types of offshore information gathering techniques.

(3) IRM 5.21.2.3(1) updated to correct IRM cites.

(4) IRM 5.21.2.3(2) updated to clarify information that can be secured through EOI and corrected link.

(5) IRM 5.21.2.3(3) updated to correct link and to remove references to IRS Tax Attaché and Revenue Service Representatives. The International Post Jurisdictions are closed.

(6) IRM 5.21.2.3(3)(a) removed the Note as it referenced IRS Tax Attachés and Revenue Service Representatives.

(7) IRM 5.21.2.3.2 updated to remove references to IRS Tax Attachés and Revenue Service Representatives.

(8) IRM 5.21.2.3.2(2) updated link to EOI contacts.

(9) IRM 5.21.2.3.2.1(1)(c) updated IRM cite.

(10) IRM 5.21.2.3.2.1(3) and (4) removed references to IRS Tax Attachés and Revenue Service Representatives.

(11) IRM 5.21.2.3.3(1) updated to provide clarity on exchange of information with U.S. territories.

(12) IRM 5.21.2.3.3.1(1) updated link for Governmental Liaison.

(13) IRM 5.21.2.3.3.1(4)(b) updated address to route Form 8796 to International Disclosure.

(14) IRM 5.21.2.4(1) updated to provide clarity on consent directives.

(15) IRM 5.21.2.4.1(5) added to provide additional guidance on issuing a summons prior to requesting a consent directive.

(16) IRM 5.21.2 is revised to make minor editorial and grammatical corrections throughout the IRM.

Effect on Other Documents

IRM 5.21.2 dated 12/17/2013 is superseded.

Audience

Revenue officers in SB/SE Field Collection (FC)

Effective Date

(04-06-2018)

Kristen E. Bailey
Director, Collection Policy

5.21.2.1 (04-06-2018)

Program Scope and Objectives

  1. Purpose. This IRM section provides guidance to revenue officers on offshore information gathering techniques.

  2. Audience. The audience is revenue officers in Small Business/Self-Employed (SB/SE) Field Collection.

  3. Policy Owner. The Director of Collection Policy is responsible for issuing policy for the International Program.

  4. Program Owner. The program owner is Collection Policy, Global Strategic Compliance, an organization within the SB/SE Division.

  5. Primary Stakeholders. The primary stakeholders are SB/SE Collection and Large Business & International.

  6. Program Goals. In working a Collection case revenue officers may find indications the taxpayer owns assets that are located outside the borders of the U.S. ("offshore" ). Gathering information about these assets can present unique challenges. The goal of this program is to enable revenue officers to effectively use law and treaty agreements to gather this information, when required.

5.21.2.1.1 (04-06-2018)

Background

  1. In recent years, as our economy becomes more global, more U.S. taxpayers are participating in offshore activities for both legitimate and illegitimate purposes.

  2. 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. This IRM provides guidance on the records that can be obtained for taxpayers whose assets are located in foreign countries.

5.21.2.1.2 (04-06-2018)

Authority

  1. Congress has delegated to the IRS the responsibility of administering the tax laws, known as the Internal Revenue Code, found in Title 26 of the United States Code. Congress enacts these tax laws, and the IRS enforces them.

  2. See IRM 5.21.2.3 for detail on tax treaties and tax information exchange agreements (TIEAs) which are relevant authorities for the work described in this IRM.

  3. See IRM 5.21.2.3.3 for detail on the tax implementation or tax coordination agreements between the U.S. and the U.S. territories which are relevant authorities for the work described in this IRM.

5.21.2.1.3 (04-06-2018)

Responsibilities

  1. The Director, Collection Policy is the executive responsible for the policy and procedures to be employed by Collection personnel.

  2. Field Collection Group Managers and Territory Managers are responsible for ensuring compliance with the guidance and procedures described in this IRM.

5.21.2.1.4 (04-06-2018)

Program Management and Review

  1. Program Reports:

    1. Director, Field Collection Report - This monthly report encompasses all Field Collection including International and provides measures on the performance of Field Collection.

    2. International Territory Report - This monthly report provides measures on the performance of the International Territory.

  2. Reviews:

    1. Collection Policy will conduct ad hoc International program reviews as necessary to verify compliance with IRM requirements and to address Treasury Inspector General for Tax Administration/U.S. Government Accountability Office findings.

    2. Case reviews are conducted by Group Managers to ensure compliance with this IRM.

    3. Operational reviews are conducted by the Territory Manager and Area Director annually to evaluate program delivery and conformance to administrative and compliance requirements.

5.21.2.1.5 (04-06-2018)

Program Controls

  1. Group Managers, as well as Territory Managers and Area Directors, are required to approve certain revenue officer case actions. The IRM outlines when approval is required and the level of approval necessary.

5.21.2.1.6 (04-06-2018)

Acronyms

  1. This table lists commonly used acronyms and their definitions:

    Acronym Definition
    EOI Exchange of Information
    SB/SE Small Business/Self-Employed
    TBOR Taxpayer Bill of Rights
    TIEA Tax Information Exchange Agreement
5.21.2.1.7 (04-06-2018)

Related Resources

  1. Additional information and guidance on international collection issues can be found in the following IRM sections:

    1. See IRM 5.21.1 through 5.21.8 for additional information on international collection issues.

    2. See IRM Part 5 for additional information on general collection issues such as initial contact, courtesy investigations, special rules on mailing correspondence, TECS (formerly known as the Treasury Enforcement Communication System) and international currently not collectible closing code 06.

  2. Additional information on Exchange of Information (EOI) can be found in IRM 4.60.1, Exchange of Information.

  3. The IRS adopted the Taxpayer Bill of Rights (TBOR) in June 2014. Employees are responsible for being familiar with and acting in accordance with taxpayer rights. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights. For additional information about the TBOR, see http://irweb.irs.gov/AboutIRS/tbor/default.aspx.

5.21.2.2 (04-06-2018)

Types of Offshore Information Gathering Techniques

  1. International cases require methods not normally used in the domestic arena. The offshore information gathering techniques discussed in this IRM section are as follows:

    1. EOI requests

    2. Consent directives

    3. Letters of Request

5.21.2.3 (04-06-2018)

Exchange of Information

  1. The United States has tax treaties and TIEAs with many countries that provide for the exchange of information on tax matters.

    1. See IRM 5.21.7.4.1, Inbound Mutual Collection Assistance Request, and IRM 5.21.7.4.7, Outbound Mutual Collection Assistance Request, regarding mutual collection assistance requests with the five treaty countries of Canada, Denmark, France, Netherlands and Sweden.

  2. In general any information relevant to the correct determination of a taxpayer's income tax liability, or the collection of that liability, can be requested under a U.S. tax treaty or TIEA. This includes the taxpayer's contact information, banking records and foreign tax returns. Information related to the determination and collectability of taxes other than income tax may also be available depending on the EOI provisions of the applicable treaty.

    Note:

    To access a list of countries that have an income tax treaty and/or a TIEA with the United States, go to the Treasury Department website at https://www.treasury.gov/resource-center/tax-policy/treaties/Pages/treaties.aspx.

  3. All EOI requests with a foreign country are handled by U.S. Competent Authority. A list of the EOI teams and their country assignments can be found at: http://lmsb.irs.gov/pa/ttp/EOI/EOIContacts.asp.

    1. See IRM 4.60.1, Exchange of Information, for more information on EOI requests between the United States and foreign countries.

    Note:

    U.S. Competent Authority administers all U.S. tax treaties and TIEAs, including the EOI and Mutual Collection Assistance programs. As the EOI Program Office, U.S. Competent Authority obtains foreign based information for IRS field personnel, and provides U.S. based information to treaty partners.

  4. All EOI requests with a U.S. Territory or state are handled by the Office of Governmental Liaison.

5.21.2.3.1 (02-17-2009)

Types of Exchange of Information

  1. The types of information that may be exchanged under an EOI request include but are not limited to:

    1. Tax returns and return information such as verification of filing status, citizenship, residency, income, expenses and tax liability,

    2. Third party information return filings,

    3. Bank records,

    4. Business records,

    5. Public records such as deeds, birth, death and marriage records, and

    6. Witness interviews.

5.21.2.3.2 (04-06-2018)

Exchange of Information Procedures - Foreign Country

  1. 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.

  2. Contact the EOI team responsible for that foreign country prior to drafting a request. EOI contact information can be found at: http://lmsb.irs.gov/pa/ttp/EOI/EOIContacts.asp.

  3. All EOI requests must be transmitted via a member of the EOI team assigned to the country receiving the EOI request.

    Caution:

    Only EOI team members are authorized to communicate directly with a foreign country regarding EOI requests.

5.21.2.3.2.1 (04-06-2018)
Exchange of Information - Request Memorandum

  1. Prepare the EOI request in memorandum format with two parts:

    1. The first part is for internal IRS use.

    2. The second part will be attached to a Competent Authority letter requesting the information and forwarded to the foreign tax administration.

    3. See IRM 4.60.1.2.1, United States - Initiated Specific Requests for Information, for more information on how to request the information from the foreign country.

  2. Prepare the first part on letterhead stationery and include the following information:

    1. The name and address of the taxpayer under investigation,

    2. The name and phone number of the revenue officer,

    3. The address and fax number where the reply should be mailed/faxed,

    4. Any background or administrative information that should not be provided to the foreign tax administration, and

    5. Any statute, court, or similar dates by which the information is needed.

  3. Secure approval of the memorandum from your Territory Manager through your Group Manager before sending it to the appropriate EOI group.

  4. Send the Exchange of Information request to the appropriate EOI group.

5.21.2.3.3 (04-06-2018)

Exchange of Information - U.S. Territories

  1. The type of information available from 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 agreements executed between the United States and each of the U.S. Territories (Puerto Rico, the U.S. Virgin Islands, Guam, the Commonwealth of the Northern Mariana Islands, and American Samoa). These agreements are similar to the agreements between the U.S. federal government and the states of the United States regarding EOI between the IRS and state tax agencies.

  2. The Office of Governmental Liaison is responsible for coordinating EOI between the IRS and each of the U.S. territories.

  3. Consider ways to minimize the administrative burden on the U.S. territory’s tax office.

    Example:

    Request transcripts in lieu of copies of filed returns if that is sufficient for your case.

5.21.2.3.3.1 (04-06-2018)
Exchange of Information Procedures - U.S. Territories

  1. Contact the local Governmental Liaison at: https://portal.ds.irsnet.gov/sites/vl003/lists/governmentalliaison/landingview.aspx to verify if the information requested is available.

  2. Use Form 8796, Request for Return Information, to request tax return(s) or return information from the tax department of the U.S. territory.

  3. Complete Sections A, B and C of Form 8796.

  4. Obtain approval/signature from the designated official Fed/State (U.S. possession) Authorization list. The list can be obtained from your local Governmental Liaison.

    1. Route Form 8796 to the Disclosure Officer of the tax department in possession of the information you are seeking.

    2. Route Form 8796 to International Disclosure at the following address if you cannot secure the authorized signature locally.
      Internal Revenue Service
      William Green Federal Building
      600 Arch Street, Room 7214
      Philadelphia, PA 19106

    Note:

    Disclosure will sign and route the request to the tax department in possession of the information.

5.21.2.4 (04-06-2018)

Consent Directives

  1. A consent directive, also known as a disclosure directive, is a document signed by the taxpayer that authorizes a third party to release to a U.S. court information regarding that taxpayer that is held by a foreign bank or a third party custodian. Consent directives are used when the law of the country in which the records are located prevents disclosure to persons other than the taxpayer unless the taxpayer consents to the disclosure.

  2. 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.

  3. 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.

  4. Consult with Area Counsel prior to considering a consent directive. Area Counsel will coordinate as necessary with the Office of Associate Chief Counsel (International).

5.21.2.4.1 (04-06-2018)

Summons Procedures Prior to Requesting Consent Directive

  1. Issue Form 4564, Information Document Request, or equivalent (such as a letter) to request foreign bank records from the taxpayer or other person with authority to access the records (such as the foreign bank).

  2. If the taxpayer or other person does not adequately comply with the information document request, confirm with Counsel that a summons is enforceable by a U.S. court.

  3. Issue a summons that specifies the records that must be produced.

  4. If the person does not comply adequately with the summons, refer to the local office of Chief Counsel for enforcement.

  5. If the summoned person does not produce the foreign bank records pursuant to the summons enforcement proceeding, Counsel may ask the Department of Justice to request that the court order the taxpayer or summoned 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. Should a consent directive be pursued, the IRS should ask that the taxpayer not be released from producing the records until the IRS has received the records from the foreign bank. Otherwise, if the foreign bank does not comply with the consent directive and the taxpayer is released from his obligation to produce the records, the IRS may not have an avenue to obtain the records in that proceeding.

5.21.2.5 (04-06-2018)

Letter of Request

  1. A Letter of Request is a 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.

  2. A Letter of Request:

    • is initiated by the IRS through the court,

    • is worked by a competent authority in the receiving country, and

    • in most cases, it bypasses foreign courts and diplomatic channels of the receiving country.

  3. 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, some civil law countries consider tax matters as "fiscal" matters (not civil matters) that are not within the scope of the Convention.

  4. 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.

  5. Prepare an application for a Letter of Request with the assistance of Area Counsel.