IRS Issues Third Directive Regarding the Issuance and Enforcement of Information Document Requests: Third Directive Clarifies and Supersedes Earlier Directive Regarding the Enforcement Process for Information Document Requests

Sullivan & Cromwell LLP - March 5, 2014

The Commissioner of the Internal Revenue Service (“IRS”) Large Business and International Division (“LBI”) issued a directive on February 28, 2014 (the “February Directive”), to revenue agents responsible for audits conducted by LBI. LBI oversees audits of corporations and partnerships with assets in excess of $10 million, as well as certain high-net-worth individuals.

The February Directive incorporates and supersedes earlier directives issued on June 18, 2013 (the “June Directive”) and November 4, 2013 (the “November Directive”). The June and November Directives set forth a number of requirements that a revenue agent must satisfy before issuing an information document request (“IDR”), including requiring that the IDR provide, and be limited to, a stated issue. The November Directive also sets forth a mandatory IDR enforcement process that would be triggered if a taxpayer fails to meet an IDR deadline. Originally, this new process was supposed to be effective starting January 2, 2014. This effective date was later extended to March 3, 2014, in order “to provide the clarification that is necessary to ensure that the procedures governing IDR issuance and enforcement are easily and clearly understood.”

The February Directive provides that clarification. Most significantly, the February Directive gives revenue agents limited discretion to extend an IDR deadline (and delay the application of the mandatory IDR enforcement process) by at most 15 business days if a taxpayer fails to respond, or provides an incomplete response, to an IDR.