Section 7. Special Cases

(1) This transmits a revision of IRM 5.21.7, International and Insular Issues, Special Cases.

Material Changes

(1) IRM 5.21.7.1: Updated to include internal controls under Program Scope and Objectives.

(2) IRM 5.21.7.2(3): Updated Rev. Proc. to Rev. Proc. 2015-40.

(3) IRM 5.21.7.2(4): Updated Rev. Proc. to Rev. Proc. 2015-40.

(4) IRM 5.21.7.2(5): Updated to include Rev. Proc. 2006-23 and Rev. Proc. 2015-40 to contact and coordintate with the United States Competent Authority.

(5) IRM 5.21.7.2.1(2): Updated Rev. Proc. to Rev. Proc. 2015-40.

(6) IRM 5.21.7.3(1): Added Rev. Proc. 2017-15 to discuss Qualified Intermediary Agreements.

(7) IRM 5.21.7.3.1(6)(b): Note updated link.

(8) IRM 5.21.7.4(3): Clarified the type of tax covered by Denmark, France, the Netherlands, and Sweden, including Japan as the new treaty partner.

(9) IRM 5.21.7.4(4)(b): Deleted Western and added Northwest.

(10) IRM 5.21.7.4.1(1): Describes Inbound Mutual Collection Assistance Request.

(11) IRM 5.21.7.4.1(3): Clarified Inbound Mutual Collection Assistance Request.

(12) IRM 5.21.7.4.1(5)(e): Added reference to Foreign Collection Deadline.

(13) IRM 5.21.7.4.1(6): Added reference to the MCAR Database and relocated this subsection to IRM 5.21.7.4.1(9). Renumbered subsequent subsections.

(14) IRM 5.21.7.4.1(7): Restructured paragraph.

(15) IRM 5.21.7.4.1(8): Restructured paragraph.

(16) IRM 5.21.7.4.1(9): Restructured paragraph.

(17) IRM 5.21.7.4.1(10): Added references to the new Letter 6195, Letter 6196 and Letter 6197.

(18) IRM 5.21.7.4.1(10)(a): Explained Letter 6195.

(19) IRM 5.21.7.4.1(10)(b): Explained Letter 6196.

(20) IRM 5.21.7.4.1(10)(c): Explained Letter 6197.

(21) IRM 5.21.7.4.1(11)(b): Referenced new Letter 6077, MCAR Short Term Payment Plan.

(22) IRM 5.21.7.4.1(11)(c): Note clarified procedures when MCAR coordinator should report an update to United States Competent Authority.

(23) IRM 5.21.7.4.1(11)(d): Clarified procedures when U.S. Citizenship limits Mutual Collection Assistance Request collection.

(24) IRM 5.21.7.4.1(11)(f): Clarified proceed when TP files bankruptcy.

(25) IRm 5.21.7.4.1(11)(g): Clarified procedures relating to OIC.

(26) IRM 5.21.7.4.2: Inserted new paragraph and clarified procedures regarding closed MCAR case files.

(27) IRM 5.21.7.4.3: Relocated this section from IRM 5.21.7.4.11 and clarified procedures for processing payment for inbound MCAR cases.

(28) IRM 5.21.7.4.4(1): Added reference to check IDRS for inbound MCAR cases.

(29) IRM 5.21.7.4.7: Added reference to check IDRS for inbound MCAR cases.

(30) IRM 5.21.7.4.8(2): Added explanation relating to dual citizenship.

(31) IRM 5.21.7.4.8(11): Added reference to MCAR database.

(32) IRM 5.21.7.4.9(2): Added reference to Letter 6196.

(33) IRM 5.21.7.4.11: Inserted new subsection to incorporate Interim Guidance SBSE-05-0318-0009, Guidance for Withdrawing an Outbound Mutual Collection Assistance Request Case Referral.

(34) IRM 5.21.7.4.11.1: Restructured paragraph.

(35) IRM 5.21.7.4.11.13: Updated reference to IRM 11.3.26.

(36) Editorial changes have been made throughout this IRM.

Effect on Other Documents

IRM 5.21.7 supersedes IRM 5.21.7, dated 11/13/2015. This IRM also incorporates Interim Guidance SBSE 05-0318-009, Guidance for Withdrawing an Outbound Mutual Collection Assistance Request Case Referral.

Audience

Effective Date

Nikki C. Johnson
Director, Collection Policy
Small Business/Self Employed

Program Scope and Objectives

1. Purpose: This IRM provides instructions and guidelines for working cases which have unusual international aspects that must be considered. The procedures are written for international revenue officers but also apply to domestic revenue officers. Employees in SB/SE and employees in other functions may also refer to these procedures.
2. Audience: Revenue officers in Small Business/Self Employed (SB/SE) in Field Collection.
3. Policy Owner: Director, Collection Policy, SBSE.
4. Program Owner: Collection Policy, SBSE, Global Strategic Compliance (GSC).
5. Primary Stakeholder: SB/SE Collection and Large Business and International (LB&I).
6. Primary Goals: This IRM provides the fundamental knowledge and procedural guidance for working International cases

Background

1. This IRM section provides guidelines and procedures for working international cases that require special handling.

Authority

1. The authority for collection actions described in this Section is delegated from the Secretary of the Treasury. See IRM 1.2.2.6, Delegations of Authority for the Collecting Process, IRM 1.2.2.14, Delegations of Authority for Special Topics Activities, and IRM 1.2.65.3, SB/SE Functional Delegation Orders - Collection. These sections include:

• Delegation Order 5-3, Levy on Property in the Hands of a Third Party (not to include Levy Form 668-B)
• Delegation Order 5-4, Federal Tax Lien Certificates
• Delegation Order 25-1, Summonses, Oaths, Certifications, and Related Functions
• Other SB/SE specific delegation orders, such as SBSE 1-23-2, Authority to Sign and Issue Levy and Related Documents

Responsibilities

1. The Director, Collection Policy, is responsible for overseeing policy and procedures regarding the International Collection Program.
2. Field Collection territory managers and group managers are responsible for ensuring compliance with the guidance and procedures described in this IRM.
3. IRM authors are responsible for drafting IRM procedures consistent with the Internal Revenue Code, regulations, and other legal guidance. IRM authors also clear sections of the IRM through the affected offices.

Program Management and Review

1. Program Reports:

• Director, Field Collection Report - This monthly report encompasses all Field Collection including International and provides measures on the performance of Field Collection.
• International Territory Report - This monthly report provides measures on the performance of the International Territory.

• International program reviews are conducted on an ad hoc basis to verify compliance with IRM procedures and to address findings by the Treasury Inspector General for Tax Administration/U.S. Government Accountability Office.
• Operational reviews are conducted by the territory manager and area director annually to evaluate program delivery and conformance to administrative and compliance requirements.

Program Controls

1. Managerial approval of certain case actions by group managers, territory managers and area directors ensure compliance with procedural requirements.
2. International ROs use the Integrated Collection System (ICS) to manage their inventory and record their case activity.

Terms and Acronyms

1. This table lists commonly used acronyms and their definitions.

Related Resources

1. Additional resources can be found in:

• Rev. Proc. 2006-23
• Rev. Proc. 2015-40
• IRM 5.21.1, Overview
• IRM 5.21.2, Offshore Information Gathering Techniques
• IRM 5.21.3, Collection Tools for International Cases
• IRM 5.21.4, Payments Made in Foreign Currency
• IRM 21.8.1, IMF International Adjustments
• IRM 21.8.2, BMF International Adjustments
• IRM 21.8.4, United States Certification for Reduced Tax Rates in Tax Treaty Countries
• IRM 21.8.6, Exemptions From U.S. Withholding (Form 8233)
• Document 12990, IRS Records Control Schedules, RCS 28 for Tax Administration - Collection

• Pub 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad
• Pub 515, Withholding of Tax on Nonresident Aliens and Foreign Entities
• Pub 901, U.S. Tax Treaties

Cases Controlled by the United States Competent Authority Office

1. The U.S. Competent Authority (USCA) coordinates tax cases involving another country or a U.S. territory. A taxpayer can request the USCA assistance in cases involving treaty benefits claimed by the taxpayer and resolve cases of double taxation. See IRM 4.60.2, Mutual Agreement Procedures and Report Guidelines.
2. The Commissioner, LB&I, is the USCA and is charged with administering the provisions of tax treaties, interpreting and applying the tax treaties, and reaching mutual agreement in specific cases. The USCA conducts the competent authority process through two offices, the Advance Pricing and Mutual Agreement Program (APMA) and the Treaty Assistance and Interpretation Team (TAIT). APMA has primary responsibility for cases arising under the business profits and associated enterprises articles of U.S. tax treaties. TAIT has primary responsibility for cases arising under all other articles of U.S. tax treaties. TAIT also has primary responsibility for cases arising under U.S. tax treaties with respect to estate and gift taxes. APMA and TAIT each can consider cases arising under the permanent establishment articles of U.S. tax treaties, and both offices will coordinate and collaborate on such cases, and on any other cases, as appropriate.
3. Rev. Proc. 2015-40 contains the procedures that allow a U.S. taxpayer to request assistance from the USCA on issues arising under a tax treaty between the United States and a foreign country. Rev. Proc. 2006-23 provides procedures for requesting assistance from the USCA under the provisions of a tax coordination agreement between the United States and a U.S. Territory.
4. As per Rev. Proc. 2015-40 and Rev. Proc. 2006-23"the IRS will suspend further administrative action, including assessment and collection procedures, with respect to the issues under Competent Authority consideration unless and until USCA instructs otherwise. " Standard administrative procedures will continue to apply to issues over which the USCA has not assumed jurisdiction.
5. Sometimes the cases being worked by the USCA are also assigned to a Revenue Officer (RO) ineither status 26 or status 03. Contact and coordinate with the USCA prior to initiating collection actions in such cases to avoid violating the suspension guidelines in Rev. Proc. 2006-23 and Rev. Proc. 2015-40. Commencing collection action without prior coordination with the USCA could be counter-productive to the Service’s interest or unfair to the taxpayer. See Rev. Proc. 2006-23.

Procedures for Working United States Competent Authority Cases

1. The USCA analyst working the case will identify Field status via IDRS. The USCA analyst will send an encrypted e-mail to the SB/SE Collection Policy (CP), Global Strategic Compliance analyst who acts as the insular area liaison.
2. The USCA e-mail will be worded as follows:

COMPETENT AUTHORITY NOTE: Tax years ____ and ____ are currently under the jurisdiction of the USCA(SE:LB&I:IN). Pursuant to Rev. Proc. 2015-40, [or Rev. Proc. 2006-23, if applicable] the IRS will suspend further administrative action with respect to the issues under Competent Authority consideration, including assessment and collection procedures. Therefore, until negotiations are complete with the other taxing jurisdiction's Competent Authority, the RO should contact the U.S. Competent Authority to discuss any contemplated collection action for these years before proceeding with collection action. The U.S. Competent Authority analyst on this case is ______________ and can be reached at _____________. Please make contact with this analyst as soon as possible to discuss any proposed actions on the case. You will be notified when the case is completed and Competent Authority jurisdiction relinquished.

Qualified IntermediaryCases

1. Qualified intermediary (QI) cases involve foreign entities that enter into a qualified intermediary agreement with the IRS. Rev. Proc. 2017-15 discusses QI agreements.
2. QIs file Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons.
3. QIs are assigned a special QI Employer Identification Number (EIN) ranging from 98-023XXXX to 98-033XXXX.

Procedures for Working Qualified Intermediary Cases

1. Check IDRS command code AMDISA when there is a -L freeze on the account indicating open examination activity. If the case is assigned to a revenue agent, contact that agent before proceeding.
2. Determine if the liability is correct and not the result of an error by the QI or IRS. QIs can claim the withholding credits even though they are not assuming primary withholding responsibility.
3. Check Form 1042, line 67 to verify that the QI claimed the proper withholding credits. Also, verify the credits in IRS systems by checking IDRS command code IRPTRL and the Entellitrak (E-TRAK) system. The Accounts Management System (AMS) may also contain some of the information you need.
4. When ROs request the E-TRAK information, they must put something in the ICS history indicating that they sent the request to the group's E-TRAK resource person and include that person's name. GM approval is not required, and there is no need for the E-TRAK resource person to access the case to verify completion of the request.
5. Use internal sources such as IDRS to locate a telephone contact number for the QI or contact the QI team for assistance. If telephone contact is not successful, in order to meet your initial contact time requirement, you may send an appointment letter for a telephone meeting and enclose Publication 1,Your Rights as a Taxpayer.

Note:

The RO may also enclose Letter 1058, Notice of Intent to Levy and Notice of Your Right to a Hearing, with the appointment letter. However, the RO may not send L-1058 by itself on initial contact.

1. If the QI did not claim any credits, send L-1058 to the QI.
2. If the QI claimed the credits correctly on Form 1042, line 67, and the RO has verified on E-TRAK that the credits are there, but the credit was not properly credited on IDRS, contact the QI Technical Advisor Team Manager.

Note:

Information to contact the QI manager and a list of QI Technical Advisors is located at:https://www.irs.gov/businesses/corporations/qualified-intermediary-system.

Note:

Do not assess the trust fund recovery penalty against the Qualified Intermediaries since the QI agreement contains provisions that penalize the QI for nonpayment of withholding taxes.

Mutual Collection Assistance Requests (MCAR)

1. The United States has six bilateral tax treaties that contain broad provisions for mutual assistance in collection.

Note:

Many U.S. tax treaties contain separate collection assistance provisions intended to prevent improper use of the treaties. These limited collection assistance provisions focus on exemptions or reduced rates of tax granted under the treaty.

• Canada – All taxes including both individual and business
• Denmark – Income taxes and other specified taxes
• France – Income taxes and other specified taxes
• Japan - Income taxes and other specified taxes
• The Netherlands – Income taxes and other specified taxes
• Sweden – Income taxes and other specified taxes

1. The USCA is the coordinating authority with the foreign government. All inbound MCARs are received and processed through the USCA . All communications with a treaty partner must be transmitted through the USCA..
2. SB/SE International Field Collections, which is part of SB/SE Northwest Field Collection, assists the USCA. in carrying out all the collection activities for MCAR Designated Revenue Officer(s) in SB/SE. SB/SE International Field Collections, as the MCAR coordinator, processes and assigns inbound mutual collection assistance requests.

Note:

The name of the MCAR coordinators is available at:http://mysbse.web.irs.gov/Collection/international/mcar/contacts/20805.aspx

Inbound Mutual Collection Assistance Request

1. ) Each of the countries listed in IRM 5.21.7.4(3) may request assistance from the United States in collecting taxes owed to it. Such requests are called "Inbound MCARs." All inbound MCARs are sent to the USCA who is the only IRS official authorized to receive such request. When approved, the USCA will forward such inbound MCARs to SBSE for collection action.
2. The Service will not pursue collection on behalf of the treaty partner if the individual subject to collection is a citizen of the United States.

Exception:

For MCAR cases received from Canada and Denmark, this limitation applies to inbound MCARs relating to taxable periods during which the individual was a U.S. citizen.

Exception:

For cases received from Japan, this citizenship limitation does not apply to individuals who filed a fraudulent tax return or a fraudulent claim for refund, willfully failed to file to evade taxes, or transferred assets to U.S. to avoid collection.

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1. Name
2. Address
3. Type of tax and tax period(s)
4. Amount(s) due in the currency of the treaty partner
5. Date of Foreign Collection Deadline (FCD)

Note:

The FCD for each MCAR is provided by the treaty partner. The statute date is shown on the Foreign Tax Liability Certificates. No action is required by the Service to protect MCAR collection statutes.

Note:

If the FCD is set to pass within 12 months, the MCAR coordinator should request an updated FCD from the USCA. If the FCD has not been updated within 90 days after the request, the MCAR coordinator should follow-up with the USCA. If the FCD has passed, keep the case open and follow-up with the USCA to determine whether the treaty partner has extended the FCD prior to the expiration date.

• A case is also created on ICS as a Compliance Initiative Program (CIP) . ICS will be utilized to track inventory, maintain case histories, and charge time for the inbound MCAR cases. The grade of the inbound MCAR case will be determined based on the complexity of the case, using the same grading criteria as in domestic cases. See IRM 5.1.20.2.

Caution:

MCAR cases are foreign assessments, and therefore the assessment will not show on IDRS. Do not add assessments to IDRS. The MCAR coordinator will prepare a Foreign Tax Liability Certificate to record the liability.

• A U.S. Social Security number or Tax Identification number
• Taxpayer’s citizenship
• Taxpayer’s address and/or contact information
• The latest return filed
• Possible levy sources
• Any open U.S. tax liability

Note:

Priority should always be given to collecting taxes owed to the United States by the taxpayer before collecting the foreign taxes owed.

Note:

IRC 6201(a) authorizes the Service to make assessments of taxes imposed by the IRC. The bilateral treaties become part of US law and may be implemented through the IRC’s assessment and collection procedures for domestic taxes.

A Foreign Tax Liability Certificate is prepared by the MCAR coordinator utilizing the MCAR Database and includes the following:

1. If the foreign tax liability is listed in U.S. dollars, use that figure for the Foreign Tax Liability Certificate, otherwise convert the tax liability into U.S. dollars using the exchange rate on the date the Foreign Tax Liability Certificate is prepared.
2. A Taxpayer Control Number (TCN) is created automatically when the case is added to the MCAR database. The format for the TCN is 98-MCA-NNNNN. If this taxpayer also has an SSN, the SSN should also appear on the Foreign Tax Liability Certificate.

Note:

An inbound MCAR case has three different control numbers, one case number assigned by the treaty partner, another case number assigned by USCA, and the TCN. The TCN is used by Collections. The treaty partner and USCA do not use the TCN.

Note:

The date the MCAR was received by USCA is treated as the date of assessment for all enforcement actions taken by the Service in the United States, including for purposes of completing a Notice of Federal Tax Lien.

1. Letter 6195 informs the taxpayer that the Service is collecting the foreign tax liability on behalf of the treaty partner in accordance with the applicable treaty. The MCAR coordinator prepares and sends the Letter 6195 to the taxpayer. Include with the Letter 6195 the following:
   • Copy of the Foreign Tax Liability Certificate
   • Pub 594, The IRS Collection Process
   • Pub 1660, Collection Appeal Rights

Caution:

MCAR collection actions do not involve U.S. tax deficiencies. Accordingly, do not send IRS materials that imply the taxpayer is under IRS audit, such as a Pub 1, Your Rights as a Taxpayer, or a Letter 3164, Third Party Notice.

Caution:

A taxpayer identified in an inbound MCAR case is not entitled to a Collection Due Process (CDP) hearing because the tax liability at issue is a foreign tax liability. A taxpayer may request review under the Collection Appeals Program (CAP).The Appeals Office does not have the authority to adjust a foreign tax liability, but it does have the authority, for example, to advise the MCAR coordinator to withdraw the Notice of Federal Tax Lien if Appeals determines that one of the conditions in section 6323(j) exists. See IRM 8.24.1., Collection Appeals Program..

1. Full pay
   The taxpayer has the option to make payments by check or money order, made payable to the treaty partner in either the currency of the treaty partner or in U.S. dollars. Payment in the currency of the treaty partner is preferred. The MCAR coordinator will forward the payment directly to the treaty partner.
2. Short Term Payment Plan
   • Secure a complete Form 433-A, Collection Information Statement and verify all financial information in accordance with IRM 5.15.1, Financial Analysis, if the taxpayer cannot full pay the MCAR liability.
   • Complete Letter 6077, MCAR - Short Term Payment Plan, and mail to the taxpayer. Letter 6077 provides the taxpayer with instructions on how to make the payments, where to send the payments and who to contact if the taxpayer has questions.
   • All short term payment plans are approved and manually monitored by the MCAR coordinator for a period of 90 days. After the taxpayer has complied with the short term payment plan for 90 days, instruct the taxpayer to make further payments directly to the treaty partner.
3. Disputed Tax Liability
   • Taxpayer cannot dispute the MCAR tax liability with the IRS.. Direct the taxpayer to raise any dispute regarding the liability to with the treaty partner. The United States has no statutory authority to adjust a foreign tax liability.

Note:

Unless the treaty partner contacts USCA to cease collection action, the MCAR coordinator should continue with collection action. If the dispute is still unresolved after 90 days, the MCAR coordinator should request an update from USCA to determine resolution of the collection matter with the treaty partner.