CCA 9941003: Foreign tax authority's information cannot be disclosed without consent

Plain-English summary

A taxpayer in a Tax Court case requested information that the IRS had received from a foreign taxing authority. The IRS sought that authority's permission to disclose it, but permission was refused. Chief Counsel advised that the IRS could not give the information to the taxpayer in response to the discovery request. The memorandum noted that the treaty allowed disclosure to courts and administrative bodies, but said disclosure without the foreign authority's consent could impair future information exchanges. The public text does not identify the foreign country or treaty article number.

Ruling snapshot

• Question: May the IRS disclose information received from a foreign taxing authority after that authority refused permission?
• Outcome: Advice given: do not disclose the requested information.
• Key authorities: The U.S.-Country A income tax treaty's exchange of information article (number redacted).

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
I N T E R N AL R E V E N U E S E R V I C E WASHINGTON, D.C. 20224

Number: 199941003
Release Date: 10/15/1999
UILC: 9114.03-42
March 29, 1999

INTERNAL REVENUE SERVICE NATIONAL OFFICE FIELD SERVICE ADVICE

MEMORANDUM FOR

FROM: W. Edward Williams
Senior Technical Reviewer CC:INTL:BR.1

SUBJECT:

LEGEND:

Country A:
Date Z:
Month Q:

This is in reply to your memo dated December 31, 1998, regarding a discovery request from the petitioner’s counsel in the above-mentioned case for certain information furnished by the Country A taxing authorities to the Commissioner. Field Service Advice is not binding on Examination or Appeals and is not a final case determination. This document is not to be used or cited as precedent.

ISSUE:

Whether the Commissioner may, in response to the petitioner’s informal discovery request, disclose information received from the taxing authorities of Country A.

CONCLUSION:

Since the taxing authorities of Country A will not permit us to disclose the requested information, the Service may not disclose it to the petitioner.

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FACTS:

The petitioner has filed a petition with the U.S. Tax Court for redetermination of certain deficiencies in taxes and the case is set for trial in in Month Q. As part of informal discovery, the petitioner’s counsel has requested production of certain information furnished by the taxing authorities of Country A. We sought the permission of the Country A Competent Authority for disclosing the information to the petitioner.

LAW AND ANALYSIS

Although Article of the United States-Country A Income Tax Treaty requires the information exchanged under the treaty to be treated as secret, it allows disclosure to courts and administrative bodies. But we believe that such disclosure without express consent of the Country A taxing authorities would likely cause them to be less cooperative in responding to our future requests for exchanges of information.

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W. EDWARD WILLIAMS
Senior Technical Reviewer

Attachment: Copy of Country A taxing authority’s Date Z letter.