IRS advice supports sharing return information between transactionally related audits

Plain-English summary

Chief Counsel agreed that a local revenue agent could communicate with a revenue agent in another office about their respective audits under IRC § 6103(h)(1) when the agents had a need to know the information. The advice treated the audits as transactionally related because a parent affiliate claimed deductions for insurance premiums paid to related entities, while those entities reported income from the premium payments. Chief Counsel also suggested discussing § 6103(h)(4), which addresses disclosure of third-party return information in an examination context.

Ruling snapshot

• Question: Could revenue agents in transactionally related audits share information under IRC § 6103(h)(1)?
• Outcome: Advice given
• Key authorities: IRC § 6103(h)(1) and (h)(4); Disclosure Handbook, Chapter 3; CCDM 33.1.3.3(4)(e)

Full text (IRS public release)

ID: CCA_2013111322410117
UILC: 6103.08-04
Number: 201409007
Release Date: 2/28/2014

From:
Sent: Wednesday, November 13, 2013 10:41:02 PM
To:
Cc:
Bcc:
Subject: RE: Disclosure Question

Hi ----------

I concur with your analysis and conclusions. I don’t see any concern about the (h)(1) disclosures. May I
suggest that the manager’s concern looks like a good opportunity to also discuss the disclosure
provisions of (h)(4) in the exam context and confirm that the local RA knows how those apply to
disclosure of third-party return information.

Hope that helps. If there are further questions, feel free to contact me.

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From: ---------------------------
Sent: Wednesday, November 13, 2013 9:23 PM
To: ----------------
Subject: Disclosure Question

I believe the local RA should be able to communicate with the RA in -------------- about their respective
audits pursuant to I.R.C. section 6103(h)(1) because the local RA has a “need to know” the
information. See Disclosure Handbook, Chapter 3, pp. 3-1 to 3-2; see also CCDM 33.1.3.3(4)(e)
(addresses issuance of legal advice but indicates that Service employees who are working on a case that
is “transactionally related” satisfy the “need to know” standard). The Parent Affiliate took deductions
based on insurance premiums paid to ----and -----reported income based on the premium payments; i.e
there is a transactional relationship. In order for the IRS to treat them consistently, I believe the RA’s
must communicate about their respective audits.