IRS may disclose corrected taxpayer identifiers for FATCA compliance

Plain-English summary

Chief Counsel considered whether the IRS could provide corrected identifying information for account holders to a foreign tax authority when FATCA reports had incorrectly indicated that no U.S. taxpayer identification number was available. It concluded that section 6103(k)(4) is the primary authority when the disclosure goes through the foreign competent authority to address reporting errors under a Model 1 FATCA intergovernmental agreement. Section 6103(k)(6) also permits disclosure when necessary to obtain accurate information for tax administration and the disclosed information is limited to what is needed. The foreign authority may pass the information to the relevant foreign financial institution to correct reporting, subject to the agreement's confidentiality and use restrictions. The identifying information may include the account holder's name, U.S. TIN, date of birth, address, and other information needed to match the account.

Ruling snapshot

• Question: May the IRS disclose corrected account-holder identifiers to a foreign tax authority so FATCA reporting errors can be fixed?
• Outcome: Advice given, disclosure is authorized within the stated limits
• Key authorities: IRC §§ 6103(a), 6103(b)(2), 6103(k)(4), and 6103(k)(6); Treas. Reg. § 301.6103(k)(6)-1

Full text (IRS public release)

 ID:         CCA_2023082916483050
 UILC:       6103.00-00, 6103.11-00,
             6103.11-04, 6103.11-06
Number: 202346025
Release Date: 11/17/2023
From: -----------------
Sent: Tuesday, August 29, 2023 4:48:30 PM
To: -------------------------
Cc: ------------------------------------------------------------
Bcc:
Subject: RE: Advice Request (P&A )


Hi Nicole,

We’ve finalized our advice with ACCI regarding disclosures under (k)(4). I believe -------
plans to share the advice with Treasury. Please find it attached.

Please let us know if you have any questions.

Thanks,

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ATTACHMENT 1

Issue(s) Presented
For both Scenario 1 & 2, is the IRS permitted to disclose the name, U.S. TIN, DOB, address, and
other identifying information of account holders who were erroneously identified as not
having a U.S. TIN but for whom a U.S. TIN was subsequently identified to the HCTA under IRC
section 6103, specifically, sections 6103(k)(4) and/or 6103(k)(6)?

Conclusion
For both scenarios, the IRS is authorized to disclose to the HCTA the name, U.S. TIN, DOB,
address, and other identifying information (1) under section 6103(k)(4) to the extent the
disclosures are made through the foreign competent authority and so the HCTA can address
issues described in the compliance and enforcement provisions of the respective FATCA IGA
                                                   2

and (2) under section 6103(k)(6) to the extent the disclosures are necessary to ensure the IRS
receives from the HCTA accurate information to administer the IRS FATCA reporting program.
Section 6103(k)(4) should be viewed as the primary authority for making the disclosures
sought here.

Law and Analysis
Returns and return information are confidential except as authorized in the Internal Revenue
Code (IRC or Code). IRC § 6103(a). The definition of return information is broad and includes
all data that is collected, received, or generated by the IRS with respect to a return or with
respect to the determination of the existence, or possible existence, of liability (or the amount
thereof) of any person under the Code. IRC § 6103(b)(2). The identifying information (name,
U.S. TIN, DOB, address, etc.) of account holders that were erroneously identified as not having a
U.S. TIN, but for whom a U.S. TIN was subsequently identified by IRS, is the return information
of the account holders because the information about those account holders was originally
gathered by the IRS with respect to those account holders’ potential liability under the Code.

Section 6103 (k)(4)
The IRS is authorized to disclose return information to a competent authority of a foreign
government which has an income tax or gift and estate tax convention, or other convention or
bilateral agreement relating to the exchange of tax information, with the United States to the
extent provided in, and subject to the terms and conditions of, such convention or bilateral
agreement. IRC § 6103(k)(4). Upon a review of the template Model 1 IGA and a sampling of
Model 1 IGAs in effect, we found that the language in the compliance and enforcement articles
of these agreements would support reliance on IRC § 6103(k)(4) with respect to the
contemplated disclosures. The language pertaining to disclosure of information from the IRS to
the foreign competent authority under Model 1 IGAs authorizes the IRS to notify the foreign
competent authority when the U.S. Competent Authority has reason to believe that
administrative errors or other minor errors may have led to incorrect or incomplete
information reporting or resulted in other infringements of the IGA. As described in the IGA,
these notifications are intended to spur the foreign competent authority into action so the FFI
can provide corrected and/or complete information reporting. It follows that the terms of
Model 1 IGAs permit the IRS to make disclosures of return information to the foreign
competent authority so it, through the relevant FFI, can address those issues. 1 The alternative,
that the IGA does not permit the IRS to disclose return information in such a notification, would
significantly thwart the efforts of the foreign competent authority, and ultimately the relevant
FFI, to remedy the errors and therefore conflict with the general purpose of the compliance
provisions of the IGA. In both Scenario 1 and Scenario 2, the IRS would be providing the foreign
competent authority with notice of errors that may have led to incorrect or incomplete
information reporting and the disclosure of individuals’ names, TINs, and other identifying


1
 Other provisions of the IGA and other agreements relating to the exchange of tax information may
authorize disclosure pursuant to IRC § 6103(k)(4). For example, the standalone Model 1 IGAs generally
permit the IRS to make general inquires to the foreign competent authority pursuant to which the foreign
competent authority would obtain additional information with respect to the U.S. Reportable Account. See
Article 5(1).
                                                     3

information will allow the foreign competent authority, through the relevant FFI, to correct its
information reporting. Accordingly, section 6103(k)(4) does apply here given that the terms of
the Model 1 IGAs provide for the disclosures at issue.

The foreign competent authority may redisclose return information received from the IRS
pursuant to IRC section 6103(k)(4) to the relevant FFI, as the disclosure would be for the
purpose of carrying out the IGA and ensuring that the FATCA reporting provided is accurate and
complete. 2 However, the foreign competent authority must comply with the confidentiality
and other protections provided for in the applicable IGA between the two countries, including
the provisions limiting the use of the information exchanged.

Section 6103(k)(6)
The IRS is specifically authorized by IRC section 6103(k)(6) and Treas. Reg. § 301.6103(k)(6)-1, in
connection with official duties relating to any audit, collection activity, or civil or criminal tax
investigation, to disclose return information to the extent that disclosure is necessary in
obtaining information which is not otherwise reasonably available with respect to the correct
determination of tax, liability for tax, or the amount to be collected, or with respect to the
enforcement of any other provision of the Code. The Treasury Regulations further specify that
disclosures are authorized under section 6103(k)(6) to “accomplish properly any activity
connected with [] official duties” related to tax administration including to “establish[] or
verify[] the correctness or completeness of any return or return information” or to “establish[]
or verify[] the liability (or possible liability) of any person . . . . for any tax, penalty, interest, fine,
forfeiture, or other imposition or offense under the internal revenue laws or related statutes.”
Treas. Reg. § 301.6103(k)(6)-1(a)(1).

The necessary elements of investigative disclosures under IRC section 6103(k)(6) are:
        1. Information is sought for an official purpose.
        2. The information is not reasonably available without disclosing return information.
           In other words, it cannot otherwise reasonably be obtained in sufficiently accurate
           and probative form, or in a timely manner, and without impairing the proper
           performance of official duties, without making the disclosure.
        3. Disclosure is confined to only the return information that is necessary to obtain the
           information sought. This inquiry is not whether the information sought is
           necessary for the investigation or examination, the inquiry is whether the
           disclosure of each item of return information is necessary to obtain the particular
           information sought.

In both Scenario 1 and Scenario 2, the IRS would be disclosing individuals’ names, TINs, and
other identifying information to improve the accuracy and completeness of FATCA records
related to those individuals’ accounts. A more robust FATCA dataset will improve IRS
compliance activities by allowing it to identify additional U.S. individuals who failed to

2
  See, e.g., Article 5, Collaboration on Compliance and Enforcement, of the Model 1A IGA, which requires
the Competent Authority to apply its domestic law to address minor administrative errors and significant
non-compliance by an FFI.
                                                              4

accurately report their foreign assets and more accurately evaluate whether FFIs are fulfilling
their reporting obligations under the IGAs. These are official tax administration purposes. The
improved accuracy and completeness of FATCA reporting would not be received by the IRS
without making the disclosures at issue because the FFIs have been unable to associate a U.S.
TIN with the reportable accounts. The scope of return information disclosed is sufficiently
tailored for this purpose: in order for the FFI to connect the U.S. TIN to its account holder, it
would need to know both the TIN and the account holder’s identity. Under the terms of the
Model 1 IGA, the HCTA is the intermediary between the IRS and FFIs, and communication
channels between the two parties are established for FATCA activities, so the HCTA is well-
positioned to assist the IRS in accomplishing properly FATCA-related compliance activities. The
HCTA may redisclose information provided to it pursuant to IRC section 6103(k)(6), including
redisclosure to the relevant domestic financial institutions for the purpose of resolving
incomplete information reporting in the FATCA dataset.

Risks
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Please contact ------------------------------------------------------------------- with any questions regarding
IRC 6103(k)(6) and --------------------------------------- regarding IRC 6103(k)(4) and IGA
interpretation.

Thank you.