exchange of information Archives | TAX CONTROVERSY 360

When the IRS Says It’ll ‘Meet You in Paris’: Recent Trends & Developments in Outbound US Exchange-of-Information Techniques

by McDermott Will & Emery | Oct 3, 2019 | IRS Guidance, Uncategorized

The Internal Revenue Service is looking for your international tax data—that is, if the IRS doesn’t already have it. With the rollout of the Foreign Account Tax Compliance Act (FATCA) and other automatic exchange-of-information (EOI) procedures, the IRS is now receiving—and making use of—a large amount of international tax information about US taxpayers. In an article recently published in Tax Executive magazine, Laura Gavioli outlines the major ways the IRS is seeking international tax information, including treaty requests, MLATs, and letters of request. The article also offers a number of best practices in dealing with these requests and common defenses to them—all with the goal of making your next international tax information request go smoothly.

Read the full article.

IRS Is Underutilizing Exchange of Information Capabilities

by McDermott Will & Emery | Sep 21, 2017 | IRS Guidance, Uncategorized

According to the Treasury Inspector General for Tax Administration (TIGTA), the Internal Revenue Service (IRS) is underutilizing exchange of information (EOI) capabilities with foreign countries. On September 11, 2017, TIGTA issued a report summarizing its evaluation of the IRS’s current efforts to improve tax compliance by using information obtained from foreign countries through the Exchange of Information Program agreements.

TIGTA’s three main conclusions were: (1) the automatic exchange of information (AEOI) recordkeeping is inadequate and the usefulness of the information is unknown; (2) the Mutual Collection Assistance Request Program (MCAR) may not be used to its full potential; and (3) the spontaneous exchange of information program requires a multitude of enhancements.

TIGTA made several recommendations to the IRS to maximize the use of information received and collection assistance available from foreign countries. The recommendations included:

(1) Conduct an outreach to examination and collection field functions to alert them on the availability and potential usefulness of automatic data provided by treaty partners that can be gained by requesting and obtaining access to an easy search tool;

(2) Expand upon the AEOI Program section of the Internal Revenue Manual (§ 4.60.1) to add recordkeeping requirements to track the incoming and outgoing records;

(3) Create procedures for AEOI personnel that: a) allow AEOI personnel to accurately track the data and/or record counts received by country; b) track the data by country that contractors upload to the AEOI database; and c) monitor the difference in received and posted record counts by country to identify and resolve upload issues in a timely fashion;

(4) Reinforce the IRS’s 2016 international collection strategy related to the MCAR Program to address the importance of issuing MCARs when warranted as an additional collection tool, and prioritize the timely processing of outgoing MCAR requests;

(5) Enhance revenue officers’ awareness of tools to explore international asset identification;

(6) Coordinate with Treasury Department’s Office of Tax Policy to identify additional countries with whom the United States could benefit by adopting MCAR provisions in a treaty; and

(7) Establish criteria for withdrawing issued outbound MCARs when the taxpayer has not fully paid.

The IRS agreed with TIGTA’s recommendations and plans to address those issues by implementing several corrective actions by the summer of 2018.

The final report entitled “Exchange of Information Capabilities Are Underutilized by the Internal Revenue Service” and the IRS’s response to an earlier draft is available here.

Practice Point: The information exchanged among tax administrations has increased significantly since the implementation of the Foreign Account Tax Compliance Act (FATCA). The TIGTA report identified several areas in which the exchange of information is currently being underutilized by the IRS. The IRS is clued into these flaws and is focused on updates to maximize the value of the information. As we previously discussed, the IRS recently announced two new enforcement initiatives in the Criminal Investigation Division (CID) to use FATCA [...]

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LB&I Practice Units: Know Your EOI Programs

by McDermott Will & Emery | Feb 10, 2016 | Court Procedure Matters, IRS Audits, IRS Guidance, Transfer Pricing Resource, Uncategorized

On January 20, 2016, the Large Business and International (LB&I) Division released a Practice Unit entitled Overview of Exchange Information Programs and Types of EOI Exchanges, defining and describing the Internal Revenue Service (IRS) Exchange of Information (EOI) programs. These EOI Practice Units specify what types of exchanges are covered by EOI programs and what types of information the IRS can seek through each type of EOI exchange.

The IRS breaks down the avenues for international information exchange into several categories:

Specific Requests involve requests for information pertaining to a specific taxpayer under examination or investigation for a specific period.
Spontaneous Exchanges involve the transmission of taxpayer information by one member of an EOI agreement that is deemed potentially of interest to a foreign partner even though no specific requests have been initiated by the foreign partner.
Automatic Exchanges involve the transmission of taxpayer information that foreign partners have agreed to exchange on a regular and systematic basis without individualized specific requests. The most common example includes information relating to dividends, interest, rents, royalties, salaries and annuities earned in one partner country by residents of the other partner country.
Industry-Wide Exchanges involve the sharing of trends, policies and operating practices in a particular industry or economic sector and do not implicate specific taxpayer information.
The Simultaneous Examination Program coordinates strategies and the development of technical issues between the United States and a foreign partner if it is determined a common interest exists between the respective taxing authorities. These discussions are intended to facilitate the exchange of relevant taxpayer information with the foreign partner in furtherance of the separate independent examinations of a taxpayer by each jurisdiction.
Joint Audits take place when the United States and one or more of its foreign partners collaborate to conduct a single examination of a taxpayer or a related taxpayer within their jurisdictions.
The Simultaneous Criminal Investigation Program operates through the EOI provisions of bilateral tax agreements and fosters the coordination of separate criminal investigations conducted concurrently by the United States and the foreign partner.
The Mutual Legal Assistance Program relates to an agreement that authorizes a partner country to secure evidence for use by the requesting country in criminal judicial proceedings of the taxpayer.
The Mutual Collection Assistance Request Program is intended to utilize the collection assistance provisions of tax treaties, enabling one partner state to collect taxes covered by the treaty on behalf of the other contracting state. These collection provisions appear in a limited number of current United States treaties.

The Practice Units provide a short general overview of each method and—of particular usefulness—describe what government office or department is responsible for executing requests in each category. Thus, the Practice Units may be a good “first line of defense” for information-gathering when you believe the IRS is pursuing or has received an international EOI request related to your client.

In future posts, we will discuss how these tools are utilized in practice, [...]

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