Issuance of a Separate Letter of Authority to Investigate Business Tax Liabilities

August 5, 1977 REVENUE MEMORANDUM ORDER NO. 35-77 SUBJECT : Issuance of a Separate Letter of Authority to Investigate Business Tax Liabilities. TO : All Internal Revenue Officers and Others Concerned. In order that business taxes may be adequately covered and given proper attention in tax investigations, the following procedures shall be followed in the issuance of Letters of Authority: 1. Except in office audit cases, all investigations of business tax liabilities shall be covered by a Letter of Authority separate from that issued for the income and other tax aspect of the case. However, in order that the issuance of a Letter of Authority will not violate the "package adit" policy adopted by the Bureau in pursuance of the provisions of the Tax Code, a Letter of Authority shall bear, whenever applicable, a cross-reference expressly stating that the investigation of the business tax liability shall bin in conjunction and simultaneous with the investigation of the income or other tax aspect of the case, which shall also be covered by another Letter of Authority and shall, likewise, bear a similar cross-reference. Under no circumstance shall such investigation contravene the requirement of "package audit." 2. The duplicate of the income tax return of a taxpayer subject to business taxes shall be a sufficient basis for the issuance of a Letter of Authority to investigate the business tax aspect thereof but the corresponding percentage tax returns should be requisitioned immediately and shall be part of the audit report to be submitted. Chiefs of Assessment Branches should, therefore, see to it that these returns are immediately available. 3. The authority to investigate business taxes shall include the verification of graduated fixed taxes while verification of payments of the Real Estate Dealer's tax shall be part of the income tax investigation. 4. As required in Revenue Memorandum Order No. 57-75, dated October 15, 1975, any discrepancy or discrepancies discovered by the examiner conducting the business tax investigation which may affect the income tax liability of the taxpayer should be communicated to the examiner undertaking the income tax investigation of the case; conversely, any findings by the latter which may affect the business tax liability of the taxpayer should be communicated to the former. That this requirement has been complied with should be stated by the examiner in his report of investigation and should be verified by the Group Supervisor, Revenue District Officer or Chief of Division, as the case may be. 5. In the issuance of Letters of Authority, an equitable balance should be observed, not only in the number but also in the assessment potential of the cases to be assigned. Accordingly, each examiner will be assigned both business and income tax cases to work on, distributed in an equitable manner so that all examiners will have the same chance for better performance. The procedures prescribed in Revenue Memorandum Order No. 57-75 and other circulars and orders on the issuance of Letters of Authority insofar as they are inconsistent herewith, are hereby modified accordingly. aisa dc This Order shall take effect immediately. EFREN I. PLANA Acting Commissioner of Internal Revenue TAN P4519-F2828-A-8