Revised Procedures in the Issuance of Letters of Authority for Business Tax Investigation

June 21, 1985 REVENUE MEMORANDUM ORDER NO. 21-85 SUBJECT : Revised Procedures in the Issuance of Letters of Authority for Business Tax Investigation TO : All Internal Revenue Officers and Others Concerned 1. SCOPE AND PURPOSE. This Order delineates the power to issue letters of authority (LA) between the National and Regional Offices in the audit investigation of business tax returns (BTRs); prescribes the guidelines on the custody, preparation and issuance of LAs; and specifies the accountable officers of blank LA forms; in order to insure systematic management of, and fix responsibility for, LAs. 2. LETTER OF AUTHORITY. Coverage The LA shall be issued to cover only one current fiscal/calendar semester return. However, if the authority register shows that the prior semesters of the taxpayer have not yet been verified, the LA shall be worded accordingly to cover such unverified semesters, as an exception to paragraph 4.9 hereof. For expediency, the audit investigation shall not only cover business taxes, but also documentary stamp tax, if any. For example: "business taxes and documentary stamp tax for the 1st fiscal/calendar semester of 1985 and prior unverified semesters. 3. ISSUANCE OF LETTERS OF AUTHORITY. 3.1 Responsibility and Authority 3.1.1 National Office Cases CIR issues and signs LAs on special cases such as but not limited to: 1. Affiliated companies or interrelated taxpayers including their key officials or stockholders 2. Taxpayers engaged in multiple lines of industry or business 3. Cases involving national security 4. Re-investigation of SOO cases 5. Tax Fraud Division cases DCIR issues and signs LAs for SOO cases 3.1.2 Regional Cases 1. Regional Director issues and signs LAs for field audit cases 2. Assistant Director issues and signs LAs for office audit cases 3.2 Custodian of LA Blank Forms 3.2.1 Division Chiefs 3.2.2 Revenue District Officers 3.2.3 Assessment Branch Chiefs 4. GUIDELINES AND PROCEDURES. 4.1 LAs shall be carefully prepared, erasures avoided, particularly with respect to the following: 4.1.1 Name of Taxpayer 4.1.2 Period Covered 4.1.3 Name of Examiner 4.1.4 Kind of Tax Erasures on any of these information shall be initialed by the issuing officer. 4.2 A duly accomplished examination card shall be attached to the prepared LA prior to the signature of the issuing officials. A permanent file of these cards shall be maintained by the audit investigating offices concerned. 4.3 Pending the availability of the revised authority books, authority register shall be used with some revisions of column captions, as follows: 4.3.1 "Date of Release of Demand" to be changed to "Assessment Number" 4.3.2 "Subsequent Action" to be changed to "Period/Year Covered" 4.3.3 "Date of Release of Authority" to be changed to "Kind of Tax" "Deficiency Tax" shall reflect only the basic amount. The penalties, interest and surcharges shall be shown under "Remarks". 4.4 Posting of data to LA register book shall be done upon issuance of LA to examiner and after submission of approved report of investigation by: 4.4.1 Audit Division for SOO cases 4.4.2 Revenue District Office for district cases. 4.4.3 Assessment Branch for office audit cases. 4.5 LAs whether issued, cancelled or spoiled shall be entered sequentially in the authority register. The NAO and SOO shall conduct periodic audit to insure compliance. 4.6 Disposition of the copies of LA shall be as follows: 4.6.1 Original taxpayer 4.6.2 Duplicate attach to report 4.6.3 Triplicate Service Chief/Regional Director/Assistant Regional Director 4.6.4 Quadruplicate Division Chief/Revenue District Officer/Chief of Office Audit 4.6.5 Quintuplicate DCIR (SOO cases only) 4.7 No LA shall be issued without the duplicate copy of the Business Tax Return except in the following cases: 4.7.1 where it is shown that no return is filed; 4.7.2 where the Assessment Branch concerned certifies that the return is not on file; 4.8 For the purpose of delineating the jurisdiction of the Sector Operations Office (SOO) and Regional Offices to audit and investigate business tax returns (BTRs), an alphabetical list of taxpayers falling within the authority of the former shall be made. The list shall be prepared and submitted to the Commissioner of Internal Revenue for approval prior to the beginning of the succeeding taxable year. It shall be prepared by the Chief of Sector Operations Office in consultation with the Chief of the National Assessment Office. Copies of such listing shall be furnished to all regional Directors, chiefs of assessment Branches and Revenue District Officers not later than March 15. Before the issuance of a new listing, Memorandum Order No. 31-83 shall govern the jurisdictional authority for 1984 and 1985 returns. 4.9 No LA shall be issued to an examiner to investigate the same taxpayer for two consecutive semesters. 5. REPEALING CLAUSE. All orders, circulars and issuances or portions thereof relative to the issuance of letters of authority on business taxes, which are inconsistent herewith are hereby revoked or amended accordingly. 6. EFFECTIVITY. This Order shall take effect immediately upon approval. (SGD.) RUBEN B. ANCHETA Acting Commissioner