Freedom of Information Act Requests and Tax Controversy

Freedom of Information Act Requests and Tax Controversy

Have you thought about making a Freedom of Information Act (FOIA) request in the context of tax controversy? Many professionals do not think about FOIA requests in this context, but this may be one of the most underrated tools in our arsenal.

FOIA requests can help determine if—and when—a penalty was approved by the immediate supervisor. This is becoming more and more important in the post-Graev era. With the Tax Court routinely providing nuance to the IRC § 6751(b) rule regarding penalty approval by the immediate supervisor, it is crucial for a taxpayer’s attorney to see exactly when and how the penalty was approved. In the correspondence exam context, it may be important to see if a taxpayer responded to the IRS 30-day letter. It could be that a taxpayer was responsive, but that the IRS failed to get immediate supervisory approval for the penalty in a CEAS case. Something that would help your client when challenging the validity of the penalty. In other cases, a practitioner may see IRS making a penalty determination early in the examination but not getting the required IRC § 6751(b) approval until after the IRS sent the taxpayer official communications containing the application of the penalty.

The process of making a FOIA requests can be surprisingly easy and inexpensive (assuming that the number of documents at issue are reasonable). A FOIA request letter should be sent to Disclosure Central Processing Unit. The letter must contain four main elements:

  • It should state that it is being made under the Freedom of Information Act.
  • It should identify the records that are being sought as specifically as possible.
  • It should include the name and address of the requester. Additional information may be required to prove the requestors identity to ensure that the IRS complies with the disclosure requirements of IRC § 6103.
  • It should contain a firm commitment to pay any fees which may apply.

After the IRS receives the FOIA request, it is required to determine within 20 days whether to comply. The IRS must provide the requester reasons if the request is denied in whole or in part. It is worth noting that there are additional extensions for time and exceptions specific to the IRS.

Overall, the process is generally quite simple for a taxpayer’s attorney. Given the wealth of information that can be gleaned through the FOIA request, it is more important than ever to consider whether making a FOIA request in your controversy cases is appropriate.

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