12. When a summons directs a U.S. based third-party witness to produce
documents or information concerning the involvement of its foreign parent,
foreign subsidiaries, or other foreign affiliates, what limiting language should be
inserted to clarify that the witness is not being asked to produce foreign-based
documents?
Limiting instructions may be added to the summons, such as: “In responding to
this summons, you are required to make a diligent search of the records and
documents that are in your possession, custody, or control within the United
States or that are accessible by you from the United States.” Otherwise, if the
summons clearly asks the witness to produce records of a specific foreign
affiliate (e.g., any records of your United Kingdom, Canadian, or Cayman Islands
branch or affiliate), then the pre-approval procedures, applying the “balancing
test” for a summons for foreign based records, need to be followed. This requires
referral of the summons to Branch 3 of Collection, Bankruptcy and Summonses,
which will coordinate with Branch 7 of International and often consult with the
Department of Justice.
13. If attaching a portion of a taxpayer’s return (e.g., showing the amount of the
tax refund sought by the taxpayer) to a third-party summons may facilitate more
truthful answers from a reluctant third-party witness, may the IRS attach that
portion of the return to a summons as a necessary disclosure for “investigative
purposes” under I.R.C. § 6103(k)(6)?
No. Investigative purpose disclosures permitted under section 6103(k)(6) may
include a taxpayer’s “return information,” under such conditions as Treasury
Regulations may prescribe, but do not include disclosures of any parts of the
taxpayer’s actual tax “return.”
14. Should a summons on its face imply or instruct that a witness may respond
to the summons by mailing responsive records to a specific IRS address?
While some cooperative third parties (e.g., an entirely neutral bank) may not
have a problem with responding to a summons drafted in this way, the power
described in I.R.C. § 7602(a)(2) is for the IRS “to summon [any person] … to
appear before the [IRS] at a time and place named in the summons and to
produce such books, papers, records, or other data, and to give such testimony
under oath, as may be relevant or material to such inquiry.” The IRS has not
issued any regulations under §§ 7602 or 7605 which address the issue of
requesting a witness to respond to a summons by mail. In situations where the
IRS would be satisfied with the witness simply mailing the responsive documents
to a specified IRS office, it is a best practice to inform the witness of this option in
a side letter that may accompany service of the summons, rather than within the
body of the summons itself. This is especially true, where the summoned party is
not expected to be cooperative or where there is no margin for error about the
present summons being enforceable (e.g., the IRS plans to rely on the validity of