A Formal Document Request is another method of gathering information from abroad administratively. Section 982 provides that if a taxpayer fails to comply with a formal document request arising out of the examination of the tax treatment of any item within 90 days after the mailing of the request by the Secretary, then the taxpayer shall be prohibited from introducing into evidence in a civil proceeding in which the tax treatment of the examined item is in issue any foreign-based documentation covered by the request.

The term foreign-based documentation means any documentation held outside the United States which may be relevant or material to the tax treatment of the examined item. The term includes documents held by a foreign entity whether or not controlled by the taxpayer and includes but is not limited to books and records. Thus, section 982 may be used to request a domestic subsidiary to produce documents that are in the possession of its foreign parent.

The taxpayer may bring a proceeding to quash the request within 90 days of its mailing. The government may seek compliance in the proceeding to quash.

Each Tax Attaché is stationed in a particular country and is responsible for a geographical area consisting of several countries. The Tax Attaché and other Service personnel attached to the foreign post are frequently able to gather needed information. Further, the Tax Attaché can be a resource with regard to the types of information and records maintained by specific agencies or courts of the various countries and whether such records are publicly available or privately maintained. Because the Tax Attaché is working outside the territorial jurisdiction of the United States, the procedures which the Tax Attaché uses in exploring a particular matter depends upon formal and informal understandings with the government of the country in which the Tax Attaché is operating. The freedom which the Tax Attaché could exercise might depend upon factors such as whether an American citizen is being interviewed as opposed to a citizen from the country involved or a citizen of a third country, and on whether the government investigation has criminal aspects. Sometimes the agents of the foreign taxing authorities will assist, collaborate or accompany the Tax Attaché on the investigation. In other cases the scope of permissible action of the Tax Attaché may be severely limited.

Tax Attachés are currently stationed in Paris, France; Frankfurt, Germany; London, England; Beijing, China; and Plantation, Florida. For a current listing of Tax Attaché assignments and a list of countries covered, refer to the Overseas Posts website under the International tab of the LB&I homepage. The Deputy Commissioner (International) (LB&I) is the contact point for making treaty requests to Canada and France.

In some cases, the field attorney or cooperating revenue agent may travel to a foreign country, either alone or with a representative from the Deputy Commissioner (International) (LB&I), for the purpose of obtaining desired information directly. Such foreign investigation would be carried out only after coordination with the Deputy Commissioner (International) (LB&I) and the Associate Chief Counsel (International), Branch 7. This might be appropriate, for example, in a complicated case where extensive knowledge of the case is required in order to interview a witness successfully.

The United States has negotiated bilateral income tax treaties with many foreign countries. Each treaty is unique, although the subjects covered by treaties are similar. Often the tax treaty will specify the procedures necessary to obtain information and documents from that country. Where the treaty is specific regarding procedures for receipt of foreign documents and information, the treaty provisions must be followed. The United States Competent Authority has exclusive authority for making and receiving exchange of information and administrative assistance requests under all tax treaties. Information and documents obtained pursuant to a tax treaty are privileged and secret and may not be divulged except as specified in the treaty or by written consent of the foreign government. In cases where Field Counsel has documents or other evidence that was received from a foreign country in its files that it plans to provide to the taxpayer or witness, or file with court pleadings or introduce at trial, such actions should first be discussed with the Associate Chief Counsel (International), Branch 7, and coordinated as appropriate, with Deputy Commissioner (International) (LB&I).

For a list of current income tax and other tax treaties to which the United States is a party, see the Post Jurisdictions page under the LB&I/International website.

The United States also has negotiated agreements with numerous foreign countries governing the exchange of tax information. These are Tax Information Exchange Agreements (TIEA). The purpose of each TIEA is to assist each country to assure the accurate assessment and collection of taxes, to prevent fiscal fraud and evasion, and to develop improved information sources for tax matters. TIEAs are separate from tax treaties, but do not supplant an existing treaty. One principal difference between tax treaties and TIEAs is the latter’s legal status in the United States is that of an executive agreement that is authorized to be negotiated by the Secretary of Treasury by I.R.C. § 274(h)(6) and other Internal Revenue Code provisions, as opposed to a tax treaty that is ratified by the Senate. Another difference is that TIEAs are designed principally for the implementation of exchange of information programs between the TIEA signatories, whereas tax treaties include numerous articles designed to alleviate double taxation, as indicated in CCDM 35.4.5.2.3.

Insofar as information exchange and administrative assistance in civil and criminal tax matters are concerned, TIEAs and tax treaties generally operate in substantially the same manner. The United States Competent Authority in all TIEAs is the Deputy Commissioner (International) (LB&I). As with tax treaties, the authority and obligation to exchange information under a TIEA extends to information with respect to persons who are not residents or nationals of one of the contracting states. The officials of each country have a duty not to disclose information obtained under a TIEA other than to those involved in the country’s tax administration, and any information exchanged is subject to strict confidentiality and use provisions.

A TIEA generally provides for the exchange of tax information pursuant to specific requests, as well as routine and spontaneous exchanges of information, including information necessary or appropriate to carry out and enforce the tax laws of the United States and the beneficiary country (whether criminal or civil proceedings). TIEAs have more detailed provisions than tax treaties, in part because many of the jurisdictions that have signed TIEAs with the U.S. did not have comprehensive procedures in their local law for obtaining information in tax matters. TIEAs thus provide that the U.S. Competent Authority may specifically request that information shall be furnished in the form of depositions of witnesses and authenticated copies of unedited original documents (including books, papers, statements, records, accounts, and writings) in a form admissible into evidence in the Courts of the requesting country. The U.S. Competent Authority may also request information that may otherwise be subject to nondisclosure provisions of the local law of the beneficiary country such as provisions respecting bank secrecy and bearer shares.

Under a TIEA, the requested country may:

Most federal courts are authorized under 28 U.S.C. § 1783 to issue judicial subpoenas to a United States national or resident who is abroad. Such subpoenas may be issued during civil or criminal litigation and in connection with grand jury investigations. The Tax Court, however, is not among the federal courts authorized to issue subpoenas in such cases. Consequently, the Tax Court subpoena power is generally limited to the boundaries of the United States. See CCDM 35.4.3.7, Subpoenas. Under section 7456, the Tax Court may, upon motion and notice by the Secretary and a showing of good cause, order any foreign corporation, a foreign trust or estate, or a non-resident alien individual, who has filed a petition with the Tax Court, to produce books, records, etc., wherever situated, which are in the possession, custody or control of the petitioner, or of any person directly or indirectly under his control or having control over him or subject to the same common control.

Letters rogatory are a formal written request by a court or judge to a court or judge in a foreign jurisdiction to summon and cause to be examined a specified witness within the jurisdiction and transmit his testimony for use in a pending action. Testimony of a witness in a foreign country can be obtained by letters rogatory. T.C. Rule 81(e). Obtaining information from abroad through letters rogatory can take a substantial amount of time.

The potential usefulness of letters rogatory also depends, to a large extent, on the foreign country involved and on the type of judicial assistance being requested. Although there is no limitation on the type of assistance in obtaining evidence which may be requested, the type of assistance which will be given is completely within the control of the foreign court involved. Thus, many countries will not honor requests which have been issued for pre-trial discovery purposes. Foreign courts might also refuse to cooperate because the request involves the enforcement of tax or fiscal matters, because bank secrecy laws are involved, or for other reasons relating to the policies of the foreign government. Similarly, most countries, including the United States, will not honor requests made by administrative bodies or from executive departments or agencies because such requests do not come from judicial authorities.

Use of letters rogatory frequently involves procedural difficulties. For example, if the court to receive the request is in a non-English speaking country it will be necessary to translate the request as well as any pertinent documents. Since the translations must be certified, this can be a time consuming process. Also, many countries require that letters rogatory be transmitted through the State Department and their own foreign ministry or foreign office rather than directly from court to court.

Notwithstanding the difficulties which may be encountered, the use of letters rogatory may provide the only possible means for obtaining evidence or for effecting service of process. Moreover, because each foreign country may have a different set of rules and priorities it may be possible to obtain assistance from the foreign court involved beyond that which might be expected. For examples see Exhibit 35.11.1–103, Obtaining Testimony of a Witness in a Foreign Country: Application for a Letter Rogatory, and Exhibit 35.11.1–104, Obtaining Testimony of a Witness in a Foreign Country: Letter Rogatory.

The Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, 23 U.S.T. 2555, T.I.A.S. No. 7444, July 27, 1970 [1972] (Hague Evidence Convention), is an international treaty designed to bridge the difference between the common law and civil law approaches to the taking of evidence in civil and commercial transnational disputes. Most common law countries will provide assistance under the Hague Evidence Convention in civil tax cases pending in a court within the United States. Many civil law countries, however, consider tax matters as "fiscal" matters that are not within the scope of the Convention. There are several foreign jurisdictions that have not signed the Hague Evidence Convention, but nonetheless have enacted laws that provide for similar assistance to a foreign applicant, e.g., the Bahamas Evidence (Proceedings in Other Jurisdictions) Act 2000 and the British Virgin Islands Evidence (Proceedings in Other Jurisdictions) Act (1991).

Branch 7 of the Associate Chief Counsel (International) provides assistance to Field Counsel offices in the preparation of requests under the Hague Evidence Convention as well as enabling statutes that provide for similar and often a broader scope of assistance. The form of the application to a court for letters requesting assistance under the Convention is similar to that of letters rogatory (Exhibit 35.11.1–103). Rather than requiring transmittal of the request through diplomatic channels, however, the Convention has a much more streamlined procedure for sending the letters of request directly to the Central Authority in the foreign jurisdiction, which is usually a designated official within the Ministry of Justice in the foreign country that will seek to enforce the request. The Central Authority for the United States is the Department of Justice, Office of Foreign Litigation.

Pursuant to Chapter I of the Hague Evidence Convention, a litigant may request the court where the action is pending to transmit a Letter of Request to the Central Authority in the foreign country where the evidence is located requesting such authority to obtain evidence or to perform some other judicial act. The Central Authority, selected by the foreign government, then transmits the request to the appropriate court or authority, which conducts the evidentiary proceeding. Upon request, the foreign court will conduct the evidentiary proceeding under the procedures designated by the requesting court, unless those procedures are incompatible with internal law of the requested state.

It is possible to use Tax Court discovery, including depositions, to obtain information and evidence from abroad. In Gerling International Insurance Company v. Commissioner, 86 T.C. 468 (1986) rev’d on other grounds, 839 F.2d 131 (3d Cir. 1988), the Tax Court ordered the taxpayer, a domestic corporation, to make available to the Service the books and records of a Swiss corporation that reflected the premiums, losses, and expenses at issue, which the taxpayer claimed arose out of a reinsurance agreement it had with the Swiss corporation. The Tax Court rejected the taxpayer’s contention that it could not produce such records because it lacked control over the Swiss corporation, noting that as a Delaware corporation, the taxpayer was required to, and did, report the information sought by the Service to the insurance regulatory authorities of Delaware. Although the Tax Court in Gerling ordered the taxpayer to produce the records, the court also stated that if the taxpayer failed to produce such records, then the taxpayer would be precluded from introducing the records, or any information derived from such records, into evidence.

There are four methods of taking depositions abroad: by stipulation of the parties, on notice, by commission, and pursuant to a letter rogatory. Each method has drawbacks and benefits, depending on the country and circumstances involved. These include convenience to the parties, the type of litigation involved, the identity of the witness and where the deposition is to be taken. Location of the deposition may be the most important because judicial and quasi-judicial actions are severely restricted in many foreign countries.

Deposition by Stipulation of the Parties. The Tax Court Rules provide for the taking of deposition pursuant to a stipulation. In the Tax Court the use of a stipulation obviates the need for obtaining leave of court to take a deposition to perpetuate testimony. The deposition must conform in all other respects to the requirements of the Tax Court rules. T.C. Rules 81(d), 74(f).

Deposition on Notice. Under this procedure, the party desiring to take a deposition serves a notice of the taking of the deposition upon the other party. The notice identifies the person before whom the deposition will be taken. Fed. R. Civ. P. 28(b)(1) provides for the taking of a deposition abroad on notice before a person authorized to administer oaths in the place in which the examination is held, either by the law thereof or by the law of the United States. T.C. Rule 81(e)(2) is to the same effect. Depositions on notice, like depositions by stipulation, do not require the intervention of either the United States or foreign courts. This procedure offers another simple and relatively fast method of obtaining testimony abroad for use in a United States court.

Deposition by Commission. A commission is an order issued by the court before which the action is pending, appointing an individual to take the deposition of witnesses who are beyond the jurisdiction of the court. Fed. R. Civ. P. 28(b)(2) provides that depositions may be taken abroad before a person commissioned by the court, and the person so commissioned shall have the power by virtue of his commission to administer any necessary oath and take testimony. To the same effect is T.C. Rule 81(e)(2). The commission may provide that the deposition be taken by oral examination, written interrogatories, or some variation of these methods. The commission procedure differs from the procedures described above primarily in that it requires the court to appoint the person before whom the testimony is to be taken. This may be crucial in countries where depositions on notice before consular officials are not permitted. Like the stipulation and notice procedures, an advantage of taking depositions under commission is that they will necessarily conform to the procedural requirements of the United States court. In addition, in some common-law countries compulsory process is made available to the service upon petitioning the foreign tribunal. In those countries which regard the taking of testimony as a sovereign function, however, the use of the commission is unavailable.

Letters Rogatory. Since many foreign countries place restrictions on the judicial and quasi-judicial actions which may be taken within their territory, these countries may not allow depositions by stipulation, notice or by commission. In this situation, it will generally be necessary to resort to the use of letters rogatory for foreign depositions. T.C. Rule 81(e)(2). See CCDM 35.4.5.3.2.

There are two methods of authenticating foreign public documents. One is the method set forth in the 1961 Hague Convention Abolishing the Requirement for Legalization of Foreign Public Documents. The second method must be used when documents are destined for or coming from a country which is not a party to the convention and is described in Fed. R. Evid. 902(3).

A foreign public document is one which was signed by an individual in their official capacity. Such documents include those from a judicial or other tribunal including the public prosecutor, clerk of court, or process server, administrative documents, notarial acts, or private documents bearing official certifications such as a certificate of registration on official authentication of a signature.

Hague Convention. The 1961 Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents simplifies the certification of documents originating in foreign countries to entitle them to recognition in the United States.

One of the problems most frequently encountered in handling tax cases involving international aspects is the authentication of foreign business records. Frequently, it is usually easier to obtain copies of the records or excerpts from the records than it is to obtain such copies in admissible form. A typical reason involves the inability of the United States to compel the custodian of the records to provide authenticating testimony. Where authentication of business records is necessary, there are several possible approaches.

U.S. authorities may obtain a foreign certification for foreign business records through a treaty or TIEA request, a letter rogatory, or a letter of request. An example of the form that may be used by U.S. authorities for making a request for certification to foreign countries is at as follows:

Commercial paper. Under Fed. R. Evid. 902(9) commercial paper and related documents are considered self-authenticating to the extent provided by general commercial law. For all practical purposes general commercial law can be found by reference to the Uniform Commercial Code (U.C.C.). Federal commercial law will apply where federal commercial paper (e.g., Treasury notes) is involved. Pertinent U.C.C. provisions are sections 1–202, 3–307, 3–510, and 8–105. Fed. R. Evid. 902(9) may prove useful and should be considered whenever originals or copies of negotiable instruments, securities, bills of lading, and other commercial paper and related documents are needed as evidence and authenticating testimony is not readily obtainable.

Affidavit. In United States v. Leal, 509 F.2d 122 (9th Cir. 1975), the court admitted certain business records into evidence under the Federal Business Records Act, 28 U.S.C. § 1732 (1970), where the foundation was laid, over the objections of the defendant, by an affidavit of the custodian of the records. Although the method followed in the Leal case would appear to provide an attractive alternative to the somewhat cumbersome process described in 18 U.S.C. § 3491, et seq., there are no cases outside of the Ninth Circuit in which such a procedure has been followed. The records in Leal were hotel registration records required to be maintained by the laws of the Crown Colony of Hong Kong. The court found that many of the guarantees of trustworthiness underlying the official documents and business records exceptions to the hearsay rule were inherent in the documents. Fed. R. Evid. 803(24) was prescribed since Leal was decided. This exception may be appropriate where documents in question are similar to those at issue in Leal . In United States v. Miller, 830 F.2d 1073, (9th Cir. Cal. 1987), the issue is whether the bank records here sought to be admitted under 18 U.S.C. § 3505 against the defendant bear the indicia of reliability. A statement made by the vice director of the bank certifies the authenticity and accuracy of the records and that they were kept in the ordinary course of business and prepared at or around the time the events occurred by a person familiar with those matters or on the basis of information given by such person. The court held that the records bear indicia of reliability, and that the admission of business records is a firmly rooted exception to the hearsay rule. See also United States v. Bernard S., 795 F.2d 749 (9th Cir. 1986). In Karme v. Comm’r, 73 T.C. 1163 (1980), aff’d, 673 F.2d 1062 (9th Cir. 1982), based on the particular facts of the case, the Tax Court held that records of a Netherlands Antilles Bank made available to an Internal Revenue Service special agent under the United States — Netherlands Income Tax Convention have circumstantial guarantees of trustworthiness and are admissible under the exception set forth in rule 803(24). See also United States v. Nivica, 887 F.2d 1110 (1st Cir. Mass. 1989) (based on testimony on chain of custody and the circumstances surrounding preparation of the records, the court held that the records were admissible); United States v. Pelullo, 964 F.2d 193 (3d Cir. Pa. 1992) (bank documents like other business records provide circumstantial guarantees of trustworthiness because the banks and their customers rely on their accuracy in the course of their business); United States v. Wilson, 249 F.3d 366 (5th Cir. Tex. 2001) (guarantees of trustworthiness of bank records extended to foreign bank records).

Authentication by Testimony from Foreign Government Official. If the foreign business records were obtained by operation of law by foreign officials, it may be possible to obtain the necessary authenticating testimony from a knowledgeable foreign official who is willing to testify in this country.

Letters Rogatory. If the authenticating witness declines to give his/her testimony or statement voluntarily, and if jurisdiction cannot be obtained by use of 28 U.S.C. § 1783, it may be possible to proceed by means of a of letter rogatory and have the requested court propound appropriate questions to the witness which will establish the authenticity of the business records. See CCDM 35.4.5.3.2.

Available sources of material on foreign law include local university and law libraries, as well as computerized legal research data bases such as LEXIS. The Library of Congress maintains the statutes of many countries and some case law and employs a staff of foreign law experts. The Martindale-Hubbell Law Directory, available online, contains a general discussion of the law of many countries. The Department of State, Office of Consular Services maintains lists of English speaking attorneys in different countries. In addition, foreign law experts may be identified by seeking the assistance of the Tax Attachés and through requests to treaty partners under the exchange of information provisions of the various tax conventions.

If difficulty is experienced in locating the foreign law or determining how it should be applied, then the Associate Chief Counsel (International), Branch 7 and the office of the Deputy Commissioner (International) (LB&I) may be contacted. They may provide assistance in locating the foreign law and source material as well as in identifying law experts in particular fields of law in particular countries. Field attorneys are requested to furnish copies of material developed by them involving foreign law issues so that this information may be passed on to other offices saving time and assuring that consistent positions are taken.

In addition to the sources mentioned above and the assistance which the Associate Chief Counsel (International) is able to provide, foreign law is subject to discovery under Tax Court Rules 70(b) and 146.

The request from Field Counsel for foreign evidence or factual information must be in memorandum form, addressed to the Deputy Commissioner (International) (LB&I) through the Associate Chief Counsel (International), Branch 7 setting forth the following matters:

Every effort should be made to forward requests for information located abroad as soon as it appears that such information will be required even before the case appears on a trial calendar. Field attorneys should be aware that where a foreign government is to provide information, the Service depends entirely on that country’s cooperation. Accordingly, timely responses to requests that are not made well in advance of any scheduled trial cannot be guaranteed. If time constraints are severe, the Associate Chief Counsel (International), Branch 7 may be contacted by telephone to determine whether arrangements can be made to meet deadlines.

The Associate Chief Counsel (International), Branch 7 serves as a repository of information on foreign law, both procedural and substantive, in order to maintain a base of source material for dissemination to Field Counsel desiring assistance.

Field Counsel should provide the Associate Chief Counsel (International), Branch 7, with copies of all materials developed by them (briefs, memoranda, advisory opinions and reports of experts, responses to discovery, etc.) involving foreign law issues (whether procedural or substantive).

When a summons or subpoena has been issued or a request made for production of documents which relate to evidence or factual information located abroad, the Associate Chief Counsel (International), Branch 7 should be told the success or failure of such measures.