CCA 1137011: IRS may accept electronically signed certificates as a business decision

Plain-English summary

Chief Counsel Advice addressed whether certificates used in fuel transactions must bear original ink signatures or may use faxed, scanned, digital, or electronic signatures. The advice concluded that nothing legally prohibits the Service from accepting those forms of signatures, and that deciding whether to accept them is a business decision for the Service. It noted that recipients of certificates have an interest in authenticating signatures because the certificates may support tax benefits and false use can create liability. The advice recommended that the Service consider that business context when deciding whether to accept electronic signatures.

Ruling snapshot

• Question: Whether the Service may accept faxed, scanned, digital, or electronic signatures on certificates used in fuel transactions.
• Outcome: Advice given.
• Key authorities: IRC § 6061(b); Rev. Proc. 2005-39; Federal Rule of Evidence 901; IRM 21.3.4.14.5.

Full text (IRS public release)

       Office of Chief Counsel
       Internal Revenue Service
       memorandum
       Number: 201137011
       Release Date: 9/16/2011
       CC:PSI:B07:CLangley
       POSTN-121143-11

UILC: 6061.07-00

date: August 15, 2011

 to:   Holly McCann
       (Chief, Excise Tax Program)

from: Stephanie Bland
(Senior Technician Reviewer, CC:PSI:7)

subject: Electronic Signatures

       This responds to you request, dated May 12, 2011, for non-taxpayer specific legal
       advice regarding the acceptability of digital signatures for excise tax purposes. This
       advice may not be used or cited as precedent.

       BACKGROUND

       The Manufactures and Retailers Excise Tax Regulations and other published guidance
       require certain people to provide certificates, statements or reports (collectively
       “certificates”) in connection with various fuel transactions. See, e.g., Chapter 16 of IRS
       Publication 510. You have received inquiries as to whether the Internal Revenue
       Service (Service) requires certificates to be original with original signatures or whether
       electronic signatures, including scanned or faxed versions and versions with digital or
       electronic marks, are acceptable.

       LAW AND ANALYSIS

       There is nothing that legally prohibits the Service from accepting faxed, scanned,
       electronic, or digital signatures. Whether to accept signatures that are not original is a
       business decision for the Service. See I.R.C. § 6061(b) (authorizing the Service to
       develop procedures for the acceptance of signatures in digital or other electronic form)
       and Rev. Proc. 2005-39 (setting out circumstances where facsimile signatures may be
       used on certain forms). The Service may reject all documents that do not bear an
       original, ink signature; however, there is a hazard that a court may find sufficient
       evidence authenticating the document and reverse the Service’s rejection of the

POSTN-121143-11 2

document. See Federal Rule of Evidence 901. Or, the Service may generally accept
faxed, scanned, digital, and electronic signatures, and challenge authenticity only where
there is some other evidence raising suspicion about the authenticity of a document.
Then, at trial, the government may introduce such evidence to challenge authenticity.
With regard to faxes from taxpayers to the Service, the Service has already adopted the
following general policy, with various exceptions: if contact with the taxpayer has been
made, and documented, the Service may accept faxed signatures of the taxpayer as
legally sufficient. This policy decision is reflected IRM 21.3.4.14.5, Use of FAX for
Taxpayer Submissions, as well as in a June 24, 2003, Memorandum from the Deputy
Commissioner for Services and Enforcement to the division commissioners, the chief of
criminal investigation, the chief of appeals, and the national taxpayer advocate,
regarding the policy for use of fax and signature stamps in taxpayer submissions.

We further note that the certificates at issue here are not documents sent directly to the
Service by the person providing the certificate, but rather are certificates given to a
recipient for use in the recipient’s tax return. A certificate generally allows a tax benefit
to either the certificate provider or recipient. If the recipient knows the information in the
certificate is false, the recipient may be jointly and severally liable for tax or subject to
fines and criminal penalties for fraudulent use. Therefore, it is in the best interest of the
recipient to ensure that the recipient can authenticate the certificate provider’s
signature. If the recipient is willing to accept an electronic signature as a matter of its
own business decision, we recommend that the Service take that into consideration.

CONCLUSION

The Service may accept electronically signed certificates if it makes a business decision
to do so.

This writing may contain privileged information. Any unauthorized disclosure of this
writing may undermine our ability to protect the privileged information. If disclosure is
determined to be necessary, please contact this office for our views.

If you have any questions concerning this memorandum, please contact
Charles J. Langley, Jr. at (202) 622-3130.