Purpose. This IRM provides guidance to Field Collection employees for making third-party contacts in Abusive Tax Avoidance Transactions (ATAT) cases.

Audience. The audience is revenue officers in SB/SE Field Collection.

Policy Owner. Director, Collection Policy, SB/SE.

Program Owner. Collection Policy, SB/SE, Global Strategic Compliance, is the program owner of this IRM.

Primary Stakeholders. The primary stakeholders are SB/SE Field Collection and SB/SE Lead Development Center (LDC).

Program Goals. While it is the IRS’s practice to obtain information relating to a liability or collectibility determination directly from the taxpayer whenever possible, there are situations when IRS employees must contact third parties. By following the procedures in this IRM, employees will be able to balance the interests of taxpayers (reputation and business relationships) and third parties (privacy) with those of the IRS (effective and efficient tax administration).

Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 98) created IRC 7602(c), Notice of Contact of Third Parties, to require that before Service employees initiate contact with third parties for the determination or collection of a taxpayer's tax liability, the taxpayer must be given reasonable notice in advance that third parties may be contacted. IRC 7602(c) also requires the Service to make a record of persons contacted and provide that record to the taxpayer upon the taxpayer's request.

The provisions of IRC 7602(c) must be followed prior to making a third-party contact on an ATAT case. Refer to IRM 25.27.1, Third-Party Contact Program, for general service wide guidance and IRM 5.1.1.12, Third Party Contacts, for guidance specific to Collection casework.

The Taxpayer First Act amended IRC Section 7602(c)(1) and is effective for notices provided, and contacts of third parties made after August 15, 2019. Publication 1 will no longer satisfy the advance notice requirement of IRC Section 7602(c)(1). In all cases involving third-party contact notices provided after August 15, 2019, or in which contacts with third parties will occur after August 15, 2019, a notice meeting the new requirements must be provided. Employees may not contact a third party until the 46th day following the date of the notice. If the contact time period established by any notice issued after August 15, 2019 has expired, or is about to expire, and there continues to be an intent to contact third parties a new notice must be issued to update the time period, not to exceed one year, for which a third-party contact may be made. The new notice may be issued prior to the expiration of the contact period specified in the original notice.See IRM 25.27.1, Third-Party Contact Program, for further information.

There is no exception to IRC 7602(c) third-party contact requirements for ATAT cases. The only exceptions to IRC 7602(c) third-party contact requirements are those referred to in IRM 25.27.1.3.2, Exceptions to IRC 7602(c) Notification Requirements. A pending criminal investigation is one of the exceptions under IRC 7602(c)(3). If a criminal investigation is pending, the revenue officer should contact Criminal Investigation (CI) prior to sending out a third-party notice if the taxpayer has not received this notification through the IRS notice stream. Consult with Counsel to determine if the collection investigation is also excluded from third-party notice requirements because of the pending criminal investigation.

Revenue officers may conduct third-party contacts that require special consideration while working ATAT cases in conjunction with an Examination investigation. These can include:

When working a pre-assessment investigation where Examination has requested revenue officer assistance during the audit process, the revenue officer is generally working under a notice of potential third-party contacts issued by the examiner. There is no systemic identification of Examination third-party notice in IDRS. In cases where a revenue officer is working concurrently with an examiner and there is no assessed liability against the taxpayer, the revenue officer should verify that the examiner has issued the required notice of potential third-party contacts and verify that the notice period is still valid.

An ATAT pre-assessment investigation is subject to the same third-party contact regulations as any other case where a liability has not yet been assessed.

Prior to the assessment of any penalties, Examination may request revenue officer assistance during promoter/preparer investigations. IRC 7602(c) requires that a promoter/preparer receive notice before any third-party contacts are made. When conducting a promoter/preparer investigation, the examiner provides Letter 3164P, Third-Party Notification for IRC 6700/6701 Investigations, at the time the intent to make third-party contacts is determined. While Examination may have issued a Letter 3164E, Letter 3164N, or Letter 3164P at the onset of the investigation, revenue officers must recognize the limited scope of those letters. When a revenue officer is operating under the third-party notice issued by the examiner, he or she is only authorized to make contacts for the purpose identified in that notice. Once the purpose of the contact changes, for example promoter/preparer penalties are assessed and assigned, the revenue officer must ensure the taxpayer receives notice of third-party contacts specific to a collection investigation.

It is especially important for revenue officers to coordinate actions with Examination on promoter/preparer investigation cases. Promoter/preparer investigations may involve ongoing criminal investigations. IRC 7602(c)(3)(C) provides an exception to the third-party notice requirements with respect to a pending criminal investigation. This exception does not apply to any parallel civil investigation third-party contacts that CI has authorized regarding a promoter/preparer under investigation. See IRM 4.32.2.8.3.2, Third-Party Contacts, and IRM 4.32.2.8.3, Promoter Interviews, for additional information.

When the taxpayer is a trust, special consideration must be given to determine who is the taxpayer and who is a third party. If a determination has not yet been made, initial correspondence should be sent directly to the trust.

Any contact made with the grantor must be treated as a third-party contact unless the grantor is the trustee. The grantor is the person by whom a grant or gift is made. The creator of a trust is generally referred to as the grantor of the trust. Other common titles are settler, creator, and trustor.

Contacts made with trustees are not third-party contacts. The trustee is a person who is charged with the fiduciary duty of management and control of the trust property for the benefit of the beneficiaries. Review Form 1041, U.S. Income Tax Return for Estates & Trusts, to determine who is designated as the trustee. Form 56, Notice Concerning Fiduciary Relationship, may also be reviewed.

Treas. Reg. 601.503(d)(5) imposes requirements on trustees and authorizes Service officials to request certain information that establishes the trustee’s authority to act on behalf of the trust. The regulation states: