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Direct Release Requests for Open Compliance Files

October 16, 2023

LB&I

Direct Release Requests for Open Compliance Files

Practice and Procedure

This is a collaborative document regarding LB&I direct release requests for open

compliance files. It reflects IRC §6103 compliance as well as IRM practices and

procedures.

Note: This is a list of the LB&I Business Units involved with the collaboration of this

document. Other than the ALL Team, the individuals listed are NOT points of contact.

LB&I Audit & Legislative Liaison (ALL)

Donnell Lewis, Manager

Patricia Hampton, Program Analyst, LB&I FOIA and Direct Release Coordinator

LB&I Commissioner’s Office

Mireille T. Khoury, Senior Advisor to the Commissioner

LB&I Policy & Governance

James V. Garrison, Senior Program Analyst

Privacy, Governmental Liaison and Disclosure (PGLD)

Chief Counsel, National Office, Procedure & Administrative (P&A)

A. Direct Release Request - Background and LB&I

Under IRC §6103(e), the IRS may disclose to taxpayers their own return information to

the extent that disclosure will not impair Federal tax administration.

The FOIA Obligations and Transparency Memo notes the IRS’s commitment to

openness in government and every employee’s responsibility to promote transparency

under the Freedom of Information Act (FOIA). The Memo also states that “open

compliance files” should be made available to taxpayers or their authorized

representatives without directing them to the FOIA. This is known as the “Direct

Release” of records by the IRS to the taxpayer.

LB&I is open and transparent in responding to Direct Release and FOIA requests.

LB&I employees must be careful not to read a request so narrowly that the requester

is denied information that the agency knows exists. For example, a taxpayer may

request “all the documents in my examination administrative file.” Many people would

look to the paper file that was closed to Technical Services or just look to the

documents in Integrated Management System (IMS) for an open examination. There’s

more to the examination administrative file than these documents and we discuss

them below under Requests Seeking Examination Administrative File.

B. Requests Seeking Examination Administrative File

The examination of a return and return information creates an examination

administrative file. IRC §6103(b)(1) and (2) define return and return information.

The examination administrative file consists of all documents received, gathered, or

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created during an examination conducted to determine a taxpayer’s tax liability, i.e.,

return, and return information.

Return information in the file includes all records received by, recorded by, prepared

by, furnished to, or collected by the Secretary 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 this title for any tax, penalty, interest, fine, forfeiture, or

other imposition, or offense. See IRC §6103(b)(2)(A).

Return information, whether received, created, or collected by LB&I employees are

agency records.

1. Examples of Return Information: Emails, Standard Audit Index Number (SAIN)

Lead Sheets, activity records, meeting notes, reports, schedules, memoranda,

appraisals, any agency record created or received on account of the IRS

examination of the taxpayer, regardless of the format (electronic, paper, thumb

drive, disc, etc.).

Records regarding penalties, assertion of penalties, etc., are return information, if

collected, received, secured, or created in the examination of the taxpayer and are

part of the examination administrative file.

2. Example of Documents that are Extraneous to the Examination

Administrative File: The Territory Manager receives a report via email on the

open examinations in his/her territory and forwards this information to the Director.

Emails and reports that are programmatic records are not responsive to a request

asking for examination administrative files (return information).

C. What is an Open Compliance File and Who Provides Records to the Taxpayer?

For purposes of a Direct Release request, the terms “compliance file,” “audit file,”

“examination file,” and “administrative file” have the same meaning. Taxpayers,

representatives, and IRS employees may have slightly different understandings of

what such a file includes. This document clarifies what LB&I considers is an “open

compliance file” and what documents LBI will provide to taxpayers and their

representatives in response to a Direct Release Request.

The Audit Inventory Management System (AIMS) categorizes examination cases by

status code. The status codes are divided between groups.

AIMS 09-19 – Examination Group

AIMS 20-29 – Technical Services Group

AIMS 30-39 – Technical Services – Suspense Group

AIMS 33-34 – Campus Group

AIMS 51-59 – Centralized Case Processing Group

AIMS 80-89 – Appeals Group

AIMS 90 – Closed Group

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LB&I considers an “open compliance file” (an open examination administrative

file) to be an examination file in AIMS Status Codes 09-89.

Once a return is placed in AIMS Status Code 90, the return is considered closed.

Taxpayers may not request copies of their tax return information directly from the

examination team if the return is under AIMS Status Code 90. Taxpayers may request

closed files through FOIA.

The examination team has the most complete examination administrative file

throughout the “open” AIMS Status 09-89 and is in the best position to respond to a

Direct Release Request for an “open compliance file,” and, as such, will respond to and

provide taxpayer with the requested return information.

D. Direct Release Request versus a FOIA Request

Direct Release requests differ from FOIA requests. FOIA has statutory time frames for

responses and provides for administrative appeals if documents are fully or partially

withheld. Taxpayers should not be encouraged to file a FOIA request to obtain copies

of their open administrative file since a Direct Release is generally the most efficient

method of providing these records.

While FOIA has a statutory timeline for the agency response, there are no prescribed

timeframes for responding to requests under a Direct Release request. We encourage

agents to respond within 60 days or less; however, if the timing of the request is in

close proximity to the timeframe for completion of the revenue agent’s report or other

time-sensitive activities, the compilation and release of the compliance file is to be

deferred until after the completion of those time-sensitive activities.

With a Direct Release Request, LB&I does not have to provide a “harm statement” on

withheld/redacted documents; documents, or portions of documents, may be

withheld/redacted under IRC §6103(e)(7). However, be advised that any determination

made through Direct Release still may be subject to FOIA and would require support

of a harm statement if implicated under FOIA.

For example, with a FOIA request, IRS employees provide their responsive

records to PGLD with release recommendations and harm statements (what

harm would the IRS incur if the document were released in full to the

requester?). Under 5 USC §552, PGLD determines which of the nine FOIA

exemptions or three FOIA exclusions may be asserted to withhold the redacted

material and responds to the requester. The requester has statutory

administrative appeal rights regarding the withholding of documents.

In a Direct Release request, IRC 6103(e)(7) provides the IRS employee may

release records or portions of records if the disclosure would not seriously

impair Federal tax administration. IRM 4.2.5.6(4) provides that any summoned

document and/or third-party contact information is return information and can be

withheld if the IRS determines that its release would jeopardize collection of any

tax, involve reprisal against any person, or jeopardize any pending criminal

investigation.

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Please note “Direct Release” is in-place to facilitate taxpayers’ access to their

record(s) in the most efficient manner possible and is not intended to be utilized

parallel to FOIA – i.e., for the same records. In the event the IRS identifies a

request has been submitted through both “Direct Release” and FOIA, for

essentially the same record(s), the IRS may not honor future “Direct Release”

requests from the requester, the requester’s firm or the taxpayer on whose

behalf the request is made for a period of 12 months.

E. Responding to a Direct Release Request – What to Provide to the Taxpayer

Use this link to see an example of a Direct Release Request.

1. Documents that will not be provided in response to a Direct Release Request:

a. Documents that the IRS provided, or will provide, to the taxpayer during the

examination and documents that the taxpayer submitted to the IRS will not be

provided to the taxpayer or representative in response to a Direct Release

Request. Examples of these documents are:

i.

Tax and information returns

ii.

Correspondence between the taxpayer and the IRS

iii.

Information Document Requests and the taxpayer’s responses

iv.

Revenue Agent Reports

v.

Examination Reports

vi.

Engineering Reports

vii.

60-Day Letters

viii.

Summary Reports

ix.

Notices of Proposed Adjustment, Notices of Proposed Partnership

Adjustment, Notices of Final Partnership Administrative Adjustment,

Notices of Final Partnership Adjustment, and similar documents

containing proposed adjustment by the IRS

x.

Any appraisals, reports, analyses, studies, or similar materials relating to

the real or personal property held by the taxpayer that the IRS provided

to the taxpayer during the examination or that the taxpayer provided to

the IRS

b. Documents that are internal communications that reflect pre-decisional,

deliberative documents will not be provided to the taxpayer or representative

in response to a Direct Release Request if their disclosure could impair Federal

tax administration under IRC §6103(e)(7). Examples of these documents are:

i.

Drafts of documents -- review to determine if the entire document or

only portions require redaction. See Item F.

ii.

Certain communications between IRS employees and/or Counsel -review to determine if the entire document or only portions require

redaction. See Item F.

iii.

IDRS documents with DIF terms and other IRS-related official use

only information.

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2. The examination team generally will provide the following records from the

administrative file in response to a Direct Release Request:

a. Standard Audit Index Number (SAIN) Lead Sheets

b. Activity records

c. Workpaper Index

d. Employee workpapers

e. Notes of meetings

f. Notes of interviews

g. Internal communications (emails or texts) not meeting the pre-decisional,

deliberative process privilege, the attorney-client privilege, or that would not

impair tax administration if disclosed (See E.1.b. above)

h. Other written documents that would not impair tax administration if disclosed

Note -- The LB&I employee must review each of these documents and redact the

portions of the documents that should not be disclosed to the taxpayer.

The portions redacted are those that are privileged, or if disclosed to the

taxpayer, would impair Federal tax administration, involve reprisal against any

person, or impair any pending investigation. See IRC §6103(e)(7) and IRM 4.2.5.6.

One specific item that may impair tax administration or cause reprisal against another

is third-party contact information and related documentation (interview notes for

example) under IRC §7602. The LB&I employee must review the records and

determine if the taxpayer is aware of the third-party contact information, if there is any

possible reprisal to the third party or if any other impairment to tax administration

would exist, if released to the taxpayer.

Please contact the LB&I FOIA and Direct Release Coordinator if there are any

whistleblower or grand jury investigation records. These documents are not released

to the taxpayer.

See IRM 4.2.5.6, Requests for File and Workpapers, and this Quick Guide, which is

designed to assist you in making disclosure decisions when responding to requests for

administrative files. Whether a request is a Direct Release Request or a FOIA

Request, certain records are subject to disclosure restrictions and should only be

released following those guidelines.

F. Review and Redact

As long as the examination case is “open” (AIMS Status 09-89), LB&I employees are

most familiar with the records received, gathered, or created in their cases. They are in

the best position to determine what records should be released/disclosed and which

information should not.

The original documents must remain intact and unchanged in the Examination

File. Therefore, employees will make a copy of the document(s) requiring

redactions and make any redactions on the copy and not on the original. The

redacted copy is provided to the taxpayer. The reason(s) for any redactions will be

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provided on the cover letter to the taxpayer. (LB&I has a Cover Letter Template for

your use.) Be sure that redactions on the copy you release to the taxpayer are

truly opaque and non-removable.

G. Keep Your Files Clean

1. Delete unused, duplicate records or files.

2. Delete draft documents, if not needed.

3. Identify documents that would need release recommendations in the event of a

Direct Release or a FOIA Request.

a. Identify the documents on your hard drive.

b. Identify the documents in IMS.

Note – Agents will follow proper file maintenance procedures. However, consistent

with the disclosure requirements of FOIA, once a FOIA request is received, responsive

documents that are otherwise eligible for deletion must be included in the materials

provided to PGLD for responding to the FOIA request.

H. LB&I Steps for Responding to a Direct Release Request

1. Identify a Lead LB&I employee who will act as the single point of contact

(POC) for responding to the Direct Release Request.

2. The POC will:

a. Determine the person requesting access to the examination file has legal

authorization for access to the information.

b. Inform the LB&I Direct Release Coordinator of the request via email.

i. Provide the taxpayer’s name, EIN, and examination year.

ii. Provide a copy of the request.

c. Identify all LB&I employees with responsive records.

i. See E. 2 for record examples.

ii. Contact LB&I employees for their responsive records.

d. Create a SAIN “001-01 - Direct Release Request” in IMS, if the case is

open in IMS.

e. Create a Direct Release Index (Taxpayer does NOT receive a copy of this

Index):

i.

Identify the records provided to the requester in response to the

Direct Release Request, as discussed in Item E. 2. (Workpaper

Index, SAIN Lead Sheets, employees’ workpapers, meeting notes,

employees’ activity records, and other similar documents, which

should be identified.)

ii.

Identify the redacted records provided to the requester in response to

the Direct Release Request, as discussed in Item F. (Employees will

make a copy of the document before redacting any portions so that

the original document stays unchanged.)

Note -- A copy of the original document and the copy produced

to the taxpayer will be maintained in a separate file, in the event

the taxpayer makes another request for the administrative file.

See saving/storage in Item 8 below.

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3. Employees will be responsible for the review and redaction of their own records

and provide them to the POC.

4. Employees may contact assigned Counsel for assistance with redactions. If

Counsel is not assigned to the case, local Counsel may be contacted.

5. For general disclosure guidance, employees may contact the Disclosure Help Desk

at x-xxx-xxx-xxxx or xxxxxxxxxxxxxxxxxx. Do not include returns or return

information in a submission to the Help Desk. The Disclosure Office will not

address functional policy questions.

6. The POC will complete the Direct Release Request Cover Letter and submit it to

their supervisor for review.

7. After receiving approval from the supervisor, the POC will send the Cover Letter to

the requester with the passcode-protected enclosure containing the responsive

records. Under separate cover, the POC will provide the requester with the

passcode.

8. The POC will save and store the Cover Letter, Direct Release Index and the

original and its redacted version documents (Items H. 2.e. above) in IMS, SAIN

“001-01 – Direct Release Request.” See Time Reporting in Item I.1. below.

Note – documents not redacted in whole or in part are not saved in SAIN 00101; only a document (the original) and its redacted version are saved in SAIN

001-01.

a. The mandatory naming standardized conventions (MNSC) do not have to be

used for any documents uploaded to SAIN 001-01 – Direct Release

Request.

b. Adding documents to a closed case:

Look in Closed Case Inventory for case, then Case Menu drop down for

Issues. From " Issues" window, click on "Summary" link that corresponds to

the SAIN for which you want to add a workpaper. Toward the bottom of the

"Issue Detail” screen, you will see "Upload Workpaper” with option to

"Browse" and "Upload."

If SAIN 001-01 – Direct Release Request was not created (Item H.2.d.),

the documents (Cover Letter, Direct Release Index and the originals and

their respective redacted copies) should be stored in SAIN 007. The

mandatory naming standardized conventions (MNSC) do not have to be

used for documents uploaded to SAIN 007 in response to a Direct Release

Request.

9. Email the Direct Release Coordinator a copy of the Cover Letter sent to the

requester.

I. Time Reporting

1. If the case is open in your inventory on IMS, charge the time to the case under

“SAIN 000 Issue Does Not Exist” under “001-01 – Direct Release Request” to

properly track Direct Release Request time.

2. If the case is closed in your inventory on IMS, charge the time to the below-the-line

Activity Code 616 to properly track the Direct Release Request time. The code

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description will be changed from “Reserved” to “Direct Release Request” on

8/30/2021.

J. LB&I Resources – Direct Release and FOIA

1. LB&I’s Point of Contact (POC) for Direct Release and FOIA is Patricia (Patty)

Hampton, LB&I FOIA and Direct Release Coordinator, Program Analyst from Audit

Legislative & Liaison (ALL). Her manager is Donnell Lewis. Patty is the POC for

Disclosure and LB&I.

2. LB&I Practice Area’s POC. There is a POC in each LB&I Practice Area who

works with the ALL Analyst and FOIA/Direct Release Coordinator.

3. Use Counsel assigned to the case for assistance with redactions.

4. IRC §6103, Confidentiality and Disclosure of Returns and Return Information

5. IRM 4.2.5.6, Requests for File and Workpapers

6. IRM 11.3.13, Freedom of Information Act

7. IRM 1.2.2.12.2, Delegation Order 11-2 (Rev. 4), Authority to Permit Disclosure of

Tax Information and to Permit Testimony or the Production of Documents

K. Final Note

Sometimes taxpayers verbally request a copy of the administrative file, citing FOIA, with

or without citing IRC 6103(e). Such requests may be processed by LB&I under IRC

6103(e). This could be a significant resource saver for the IRS while serving the best

interest of the taxpayer who can quickly and efficiently receive what is requested with a

minimum of formality.

If the taxpayer submits a written FOIA request directly to exam, please coordinate with the

LB&I FOIA and Direct Release Coordinator. Only Disclosure employees may respond to

written FOIA requests. Exam should not respond to the written FOIA request until they

receive instructions from the LB&I FOIA Coordinator.

LB&I employees should not insist a requester go through the FOIA process, if the

information is available informally, consistent with Delegation Order (DO) 11-2 (Rev. 4),

found in IRM 1.2.2.12.2.

Please direct any issues, comments or questions on Direct Release or FOIA Requests to

the LB&I FOIA and Direct Release Coordinator, ALL Program Analyst, Patricia (Patty)

Hampton.

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