Part 4. Examining Process

Chapter 63. Withholding and International Individual Compliance

Section 2. LB&I WIIC Practice Network Knowledge Management

4.63.2 LB&I WIIC Practice Network Knowledge Management

Manual Transmittal

January 18, 2018

Purpose

(1) This transmits the new IRM 4.63.2, Withholding and International Individual Compliance (WIIC), LB&I WIIC Practice Network Knowledge Management.

Material Changes

(1) This is a new IRM section that describes the purpose and function of the WIIC Practice Networks.

Effect on Other Documents

None

Audience

LB&I WIIC employees

Effective Date

(01-18-2018)

John V. Cardone
Director, Withholding and International Individual Compliance
Large Business and International Division

4.63.2.1 (01-18-2018)

Program Scope and Objectives

  1. Purpose: This IRM section describes the Practice Network (PN) structure, the members and their respective roles and responsibilities as part of the Withholding and International Individual Compliance (WIIC) Practice Area in the Large Business and International (LB&I) Division.

  2. Audience: The primary users of this IRM are employees, management and executives of the WIIC Practice Area in the LB&I division.

  3. Policy Owner: Director, WIIC Practice Area

  4. Program Owner: The program manager of the WIIC PN manages and administers the PN program.

  5. Program Goals: The goals of the PN program align with the LB&I strategic goal to apply the tax laws with integrity and fairness through a highly skilled and engaged workforce, in an environment of inclusion where each employee can make a maximum contribution to the mission of the team. Additionally, PN level goals are to:

    1. Serve as the engine for the LB&I international strategy, training and data management

    2. Facilitate collaboration and skills transfer related to case strategies and resolution

    3. Facilitate the development of content for the IRS Virtual Library, training and audit resources

  6. Contact Information: To recommend changes or to make any other suggestions to this IRM section, contact one of the individuals listed on the PN Contacts website at http://lmsb.irs.gov/pa/wii/IPN_WIIC/contact.asp.

4.63.2.1.1 (01-18-2018)

Background

  1. Using PNs, LB&I has developed a knowledge management network designed to provide examination teams the technical resources needed to manage their cases efficiently, consistently, and with a high degree of technical proficiency. PNs are designed to foster effective collaboration and the sharing of knowledge and expertise within the practice area, across LB&I Practice Areas and with other business operating divisions.

4.63.2.1.2 (01-18-2018)

Authority

  1. LB&I’s organizational structure provides each practice area the flexibility necessary to meet the needs related to its area of expertise. While all practice areas will have some common responsibilities and activities, they will not all be structured or operate the same way.

  2. The Hiring Incentives to Restore Employment (HIRE) Act contains legislation requiring U.S. persons to report their foreign financial accounts and foreign assets over a certain value. Under the Foreign Account Tax Compliance Act (FATCA), which is part of the HIRE Act, certain U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. PNs serve a role in the enforcement of this legislation.

  3. 31 USC 5314 directs the Secretary of the Treasury to require a U.S. person to keep records and/or file reports when making transactions or maintaining a relationship with a foreign financial agency. PNs serve a role in the enforcement of this legislation.

4.63.2.1.3 (01-18-2018)

Roles and Responsibilities

  1. The Director, WIIC Practice Area is the executive responsible for the WIIC PN program.

  2. The PN program manager provides high-level oversight and strategic direction for PN strategic issues, communicates broader LB&I strategies, and supervises frontline PN team managers.

  3. PN team managers supervise the technical specialists assigned to the PNs under their management.

  4. PN steering committees support their respective PN by serving as the primary "manager of knowledge" dedicated to the collection, organization, and sharing of the collective expertise of WIIC employees. Steering committees include the PN program manager, the PN team manager, the PN technical specialists, a team manager from the applicable field operation, SB/SE or LB&I Division Counsel, and Associate Chief Counsel International (ACCI).

4.63.2.1.4 (01-18-2018)

Program Management and Review

  1. Program Reports: The PN program manager prepares periodic briefing reports for Director, WIIC, focusing on:

    • Significant program accomplishments and opportunities for improvement

    • Emerging technical or procedural issues

    • Staffing and other key initiatives

    The PN team managers report progress on their projects to the PN program manager. Steering committee members, such as the field representative or Counsel, provide briefings to practice network steering committees on emerging issues, training needs and make recommendations for network events. Issue teams provide periodic reports on their progress with their assigned issues to their respective steering committees, PN team managers and the PN program manager.

  2. Program Effectiveness: Effectiveness of the PNs is measured through combined business results of the teams that comprise the PNs. The effectiveness of the program is measured by the timely delivery of relevant and technically correct products that include:

    1. Continuing professional education

    2. Practice units that are stored in the IRS Virtual Library

    3. Desk guides and other technical or procedural tools

    4. Network events

4.63.2.1.5 (01-18-2018)

Program Controls

  1. The director of the WIIC Practice Area reports to the LB&I executive management on a continuous basis via the director’s briefings.

  2. Director, WIIC, as the policy owner, monitors activities of PNs by:

    1. Overseeing the administration, procedures, and updates related to the practice networks

    2. Identifying goals and objectives to be achieved by the organization

    3. Compiling periodic reports from the PN program manager

  3. Steering Committee members review and approve content for inclusion in the IRS Virtual Library.

  4. Steering Committee members review and approve technical and procedural content of the PN products to ensure adherence to the current guidelines and policies.

  5. Privacy, Governmental Liaison and Disclosure (PGLD) reviews and clears all PN products to ensure legal compliance related to privacy and disclosure.

  6. Learning and Education (L&E) assists the PN in the planning, development, and delivery of training products.

  7. PNs adhere to established processes to assure that knowledge management products are consistent with template and formatting standards.

  8. PNs maintain an electronic copy of all PN products in one of the following locations:

    1. IRS Virtual Library

    2. Saba Meeting (formerly Centra)

    3. PN SharePoint sites

4.63.2.1.6 (01-18-2018)

Acronyms

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

    Acronym Definition
    ACCI Associate Chief Counsel International
    FATCA Foreign Account Tax Compliance Act
    HIRE Hiring Incentives to Restore Employment
    IRC Internal Revenue Code
    PN Practice Network
    USC United States Code
4.63.2.1.7 (01-18-2018)

Related Resources

  1. For information regarding the WIIC Practice Area withholding and international compliance strategies and program initiatives, refer to WIIC website: http://lmsb.irs.gov/pa/wii/.

  2. For additional information regarding the PN structure, members and their respective roles and responsibilities, visit PN SharePoint at:https://organization.ds.irsnet.gov/sites/LBIINTL/SitePages/default.aspx.

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

4.63.2.2 (01-18-2018)

Practice Networks (PNs) Overview

  1. PNs are communities of employees seeking to collaborate in areas of international tax compliance. The network events provide an opportunity for examiners to share their knowledge and experiences and for the PN to capture that knowledge and develop training and tools that can be distributed to the right person at the right time. The PN is designed to provide examination personnel the technical assistance they need to manage their cases more efficiently, consistently and with the highest degree of technical proficiency.

  2. PN goals are to:

    1. Serve as the engine for our international strategy, training and data management

    2. Provide opportunities to share the collective knowledge and experiences of the examiners auditing international issues and collaborate on case strategy and resolution

    3. Preserve the organizational knowledge through collaborative identification and development of practice units and audit resources.

  3. PNs align with their core technical areas of responsibility. The PNs are displayed in a matrix that is on the International Knowledge Base at https://portal.ds.irsnet.gov/sites/VL008/Pages/default.aspx. The PNs are structured to serve as the foundation for international strategy, training, networks and data management. PNs enhance collaboration and improve communication among employees.

  4. The PN data management roles are:

    1. Monitor knowledge management data

    2. Identify emerging issues

    3. Suggest changes to tax products, such as tax forms and publications, to improve taxpayer compliance

    4. Monitor employee feedback to improve effectiveness

    5. Participate in campaign development and execution

  5. Each PN is supported by a steering committee comprised of PN management, technical specialists, a field representative, Division Counsel and ACCI attorneys. Some steering committees may have members from specialized organizations or functions that contribute to the committee’s knowledge of their strategic issues. Steering committee members serve as primary "managers of knowledge" dedicated to the collection, organization, and sharing of the collective expertise of WIIC employees.

4.63.2.2.1 (01-18-2018)

WIIC Practice Networks (PNs)

  1. The PNs provide a forum for which issues, audit techniques and approaches can be shared and evaluated. They are intended to foster collaboration among all those interested including, but not limited to, Counsel, technical specialists, tax examiners, tax compliance officers, revenue agents and team managers. The PNs also manage the knowledge of the collective groups and coordinate with other PNs outside of WIIC on related or overlapping issues. As knowledge gaps are identified and new issues and techniques emerge, the PNs will consider IRS form and instruction changes, elevate the need for new guidance through legislation and regulations, develop and deliver training, and develop practice units for the IRS Virtual Library.

  2. PNs also assist with the development of campaigns related to their strategic priorities.

  3. All PNs maintain their own SharePoint sites, which address the PN strategic priorities and cumulatively act as a road map to allow examiners to locate the area of international tax of interest to them. Access to PN SharePoint sites is through the links on the International Knowledge Base at https://portal.ds.irsnet.gov/sites/VL008/Pages/default.aspx.

4.63.2.2.1.1 (01-18-2018)
Foreign Entities Practice Network

  1. The Foreign Entities PN’s activities focus on outbound investments in foreign partnerships, foreign trusts, disregarded entities, controlled foreign corporations (CFCs), passive foreign investment companies (PFICs), as well as filing and reporting requirements related to international information returns (Forms 5471, 8621, 3520, 3520-A, 8865 and 8858) and any associated penalties.

4.63.2.2.1.2 (01-18-2018)
Foreign Tax Credit Practice Network

  1. The Foreign Tax Credit (FTC) PN’s focus is on a U.S. taxpayer’s (U.S. citizens, resident aliens and in very rare cases nonresident aliens) claims for foreign tax credit on their U.S. individual income tax returns. The U.S. taxes its citizens and residents on a worldwide basis. To mitigate the potential for double taxation when a foreign country or U.S. possession also taxes the same income, a credit for foreign income taxes paid is generally allowed against the U.S. income tax liability.

  2. The FTC PN’s strategic priorities are the creditability of a foreign tax paid or accrued (sourcing of income and expenses, the definition of foreign income tax, methods of accounting for taxes and coordination with treaties) and the calculation of the amount of allowable FTC (allocation between baskets, adjustments that effect the FTC limitation, alternative minimum tax FTC, FTC carrybacks and carryovers, and deduction versus credit).

4.63.2.2.1.3 (01-18-2018)
Jurisdiction to Tax - Outbound

  1. The U.S. taxes its citizens and residents on worldwide income, without regard to its geographic source. Generally, nonresident aliens are only taxed on income that is effectively connected to a U.S. trade or business conducted within the United States, or which is U.S. source fixed, annual, determinable or periodic income. Consequently, the first issue the examiner will need to resolve is whether the United States has jurisdiction to tax. A determination of the tax status of the individual for U.S. purposes is required.

  2. The Jurisdiction to Tax (JTT) - Outbound PN’s strategic priorities are:

    1. Expatriation by U.S. citizens and long-term residents who relinquish U.S. citizenship or green card

    2. Foreign earned income exclusion and housing deduction

    3. Taxation of U.S. individuals living in the U.S. Territories

    4. Social Security/self-employment taxes for U.S. persons abroad

    5. The definition of resident alien and nonresident alien

4.63.2.2.1.4 (01-18-2018)
Offshore Arrangements Practice Network

  1. Offshore arrangements are sometimes used by U.S. taxpayers to avoid or evade payment of required U.S. taxes through nominee and other arrangements designed to hide ownership of income and assets. These types of arrangements pose a significant compliance risk and examiners must understand how these arrangements work and the tools available to address these transactions.

  2. The Offshore Arrangements (OA) PN’s strategic priorities are:

    1. Offshore banking activities

    2. Offshore merchant accounts

    3. Other arrangements involving the use of offshore accounts, foreign entities, financial structures, schemes and devices to hide the ownership of financial accounts and other assets owned by U.S. taxpayers

    The OA PN also addresses issues related to the reporting of foreign financial assets under Titles 26 and 31.

4.63.2.2.1.5 (01-18-2018)
U.S. Business Activities (USBA) Practice Network

  1. The U.S. Business Activities (USBA) PN considers the business activities of nonresident alien (NRA) individuals. NRAs come to the United States lawfully via working visas to engage in business activities in a variety of different capacities including as employees, independent contractors, sole proprietors and partners. NRAs with U.S. source income are generally subject to U.S. tax on their U.S. source income. The USBA PN focuses on identifying non-compliance and determining the source and character of an NRA’s income in computing tax liability.

  2. The USBA PN’s strategic priorities are:

    1. Identification of a U.S. trade or business or permanent establishment

    2. Effectively connected income

    3. Compensation from employment

    The USBA PN also shares foreign athletes and entertainers as a strategic priority with the Withholding PN.

4.63.2.2.1.6 (01-18-2018)
Withholding Practice Network

  1. The Withholding (WIT) PN considers situations where foreign persons engage in U.S. investment activities and the related U.S. withholding tax requirements on income from those investments. Any foreign persons with passive U.S. portfolio or real estate investments may be able to increase the net return on investment by minimizing or eliminating their U.S. tax expense. As a result, foreign persons may have an incentive to engage in aggressive tax planning in classifying the source and character as well as the amount of income earned.

  2. The U.S. uses withholding at source as a vehicle to encourage foreign persons’ voluntary compliance. The level of activities performed within the U.S. will determine the U.S. tax compliance and reporting required by foreign investors. Limited activities can result in the U.S. withholding tax being withheld and reported on Forms 1042-S and Form 1042. Any over-withheld tax may be claimed on the foreign person’s Form 1040-NR or Form 1120-F.

  3. The strategic priorities of the WIT PN are:

    1. Withholding agent liabilities under IRC 1441, 1445 and 1446 and the taxation of fixed, determinable, annual and periodical (FDAP) income

    2. Foreign Investment Real Property Tax Act (FIRPTA) income

    3. Effectively connected taxable income (ECI), including ECI received from partnerships and trusts, and foreign athletes and entertainers

4.63.2.3 (01-18-2018)

Practice Network Member Roles and Responsibilities

  1. PN members are individuals that share a common interest in an issue or areas of international tax law that is included in the strategic priorities of a PN. PN members include managers, examiners, technical specialists, Counsel attorneys or any other person with an interest in this area of tax law. Members of the PNs, regardless of their role, share similar responsibilities which include:

    1. Participation – PN members are responsible for sharing their experiences and knowledge at PN-sponsored events to enhance the technical knowledge of others.

    2. Collaboration– PN members collaborate with other PN members to identify emerging issues, provide strategic insights and contribute to the development of the resources that are developed to capture the collective knowledge of LB&I examiners.

  2. Practice network technical specialists have expertise in tax law associated with their practice network. Their responsibilities include:

    1. Coordination and facilitation of their PN steering committee meetings

    2. Development of practice units and related resources for the IRS Virtual Library,

    3. Facilitation of network events that encourage knowledge transfer

    4. Identification of emerging issues, compliance risks and/or improvement opportunities

    5. Sharing best practices with others

    6. Participation in campaign development activities

    7. Training development and delivery

    8. Review of legislative, regulatory and procedural proposals

    9. External stakeholder contacts/outreach activities

  3. Practice network team managers supervise the technical specialists assigned to their team. Their responsibilities include:

    1. Communicating and supporting the Servicewide Knowledge Management priorities and plans

    2. Leading the campaign development teams

    3. Participating in PN steering committee meetings as well as other collaborative meetings

    4. Ensuring completion of work assigned to their PNs

    5. Oversight of the practice unit development process for those units related to the strategic priorities of their PNs

  4. The PN senior manager provides high-level oversight and strategic direction for the strategic issues of the practice networks, communicates broader LB&I strategies and supervises the PN team managers. Other responsibilities include:

    1. Ensuring that WIIC PN priorities are consistent with the Servicewide Knowledge Management priorities and plans

    2. Elevating emerging and/or high risk issues to WIIC leaders, the International Steering Committee and the Compliance Integration Council, as appropriate

    3. Collaborating with the PNs in other practice areas to share best practices and ensure consistency

    4. Ensuring practice units are prioritized based on current needs

    5. Providing oversight for the campaign process within WIIC and collaborate with other practice areas with overlapping interests

    6. Briefing WIIC executives on PN activities as well as the status of the campaign development process within WIIC

    7. Serving as a model of collaboration among peers and throughout the organization

  5. The senior program specialists provide support to the PN program manager by monitoring, reviewing, analyzing and evaluating the full range of PN projects, strategies, and operations. They determine their effectiveness and impact on international taxpayers and employees, and the efficient use of IRS and PN resources.

4.63.2.4 (01-18-2018)

Practice Network Steering Committees

  1. Each WIIC PN has a steering committee that provides oversight and guidance to the PN. Steering Committees include:

    1. PN management

    2. PN technical specialists

    3. Liaisons from ACCI and field Counsel (SB/SE or LB&I)

    4. A field representative (a field examination team manager)

    Steering committees may add other members as needed to ensure that relevant expertise is available to the PN.

  2. PN steering committee members have the following responsibilities:

    1. Actively participate in steering committee meetings by providing input on the PN projects and priorities

    2. Identify emerging issues

    3. Identify skills gaps and/or training needs related to technical or procedural issues

    4. Recommend practice unit development and assist with developing and reviewing practice units

    5. Recommend elevation of issues to the Compliance Integration Counsel

    6. Review and approve content for inclusion in the IRS Virtual Library

    7. Participate in campaign development teams

    8. Recommend/comment on the need for guidance projects, review drafts and submit comments for consideration

    9. Encourage field participation in PN network events

4.63.2.5 (01-18-2018)

The IRS Virtual Library

  1. The IRS launched the IRS Virtual Library (also known as the Servicewide Virtual Library) at https://portal.ds.irsnet.gov/sites/km/pages/virtuallibraryhome.aspx on June 12, 2017 in an effort to consolidate all virtual libraries. The library is part of the overall IRS Knowledge Management strategy. All business operating divisions (BODs) will contribute content to the library. The library will expand as BODs across the Service provide additional content. The virtual library is evolving and LB&I will contribute additional content as it is developed. Employees should continue to refer to the PN and Industry SharePoint sites and other IRS/LB&I websites until the remaining content and knowledge bases are populated.

  2. The library contains a video tutorial titled "How to Use the Virtual Library" and FAQs to enable the user to better use this resource.

  3. LB&I created an International Knowledge Base in the library at: https://portal.ds.irsnet.gov/sites/VL008/Pages/default.aspx. This knowledge base has a section for hot topics, a calendar of knowledge base related events, an interactive display of the business and IIC PNs, links to the PN SharePoint sites, and a document repository. The practice unit content from the International Practice Service has been loaded into this International Knowledge Base. Employees should now use the virtual library's International Knowledge Base to access practice units. Employees can access this content by visiting the Tax Examination/Issues floor of the library. The migration of 6103 Protected Resource Information to the virtual library is pending.

  4. Practice units provide guidance on identifying, analyzing and addressing issues arising out of a transaction and provide an explanation of a general concept or a process covering multiple types of transactions, examinations or issues commonly encountered by international practitioners. The units capture and share knowledge and skills with others who have an interest in the issue. There are three practice unit templates:

    1. Concept Unit. A concept unit provides an overview of a general concept relevant to the application of multiple international tax rules. The purpose of a concept unit is to explain a general concept that can cover multiple types of transactions or examinations.

    2. Transaction Unit. A transaction unit provides information on a single transaction or fact pattern encountered in an examination. The purpose of a transaction unit is to guide an examiner through the evaluation and development of a position on a particular transaction and related issues.

    3. Process Unit. A process unit explains a substantive or procedural process applicable to multiple types of examinations. The purpose of a process unit is to guide an examiner through an audit procedure applicable to multiple types of transactions, such as conducting a functional analysis.