PROCEDURE FOR SHARING TAXPAYER

INFORMATION BETWEEN BORDER STATES CAUCUS

MEMBER STATES AND MEXICO

 

This tax procedure is intended to provide guidance for sharing taxpayer information between Border States Caucus member states and Mexico.

APPLICABLE LAW

The United States - Mexico Income Tax Treaty sets forth provisions for the sharing of information between U.S. states and Mexico.

The Basic Sharing Agreements between states and the U.S. Internal Revenue Service further elaborates on the sharing of information between the states and Mexico.

States that participate in this information sharing argument are presumed to have state statutory or regulatory authority to share information with Mexico.

  

DISCUSSION

  

The North American Free Trade Agreement was ratified by the signature countries to promote cross border trade.

The Border States Caucus provides a forum for tax administrators of U.S. border states, states that have trade ties to Mexico, Mexico, and the Internal Revenue Service to discuss cross border trade and tax administration issues. The goals are; promotion of cross border trade, where practical uniform tax administration and where practical the elimination of tax administration barriers to trade.

The sharing of taxpayer information is critical to the accomplishment of these goals.  With that in mind it was necessary to add protocols to the U.S. -Mexico Income Tax Treaty. With that accomplishment it was necessary to modify the Basic Sharing Agreements between the states and the IRS so that taxpayer information can flow back and forth between the states and Mexico.

 

Therefore, the procedures for sharing taxpayer information between the states and Mexico is as follows.

 

PROCEDURE

 

1.  Information that passes from states to Mexico and Mexico to the states must originate with the competent authority of the respective party or their appropriate designee.

 

2.  The information from the states to Mexico and from Mexico to the states must pass through the TAX ATTACHÉ in Mexico City.

 

3.  There are three types of tax information exchanges; spontaneous, specific, and routine.

 

a.  Spontaneous and specific information exchanged through this procedure has to have resulted from tax examination or investigation.

 

b. Routine information exchanges result from customary and often mechanically performed administrative duties not from an examination or investigation.

 

4.  Procedures for exchanging are laid out as followed:

 

a.  Spontaneous and Specific information requests are handled in the same manner. The transmittal memo should include the following information:

 

i.      Your name, title, and state.

 

ii.     Your telephone and fax numbers.

 

iii.  If the information is needed in an expedited manner, explain by when and the reason such as hearing, trial, statute, etc.

 

iv. There should also be a second memorandum to the foreign entity which will be working the request under The Exchange of Information Agreement (TEIA). It should be on a separate sheet of paper attached to your memo. It should be written in the third person with no mention of the initiator or their contact number.

 

v.  In most instances, the request should have a background section in which the initiator can provide as much information as possible to give the person working the investigation an idea of why the information is needed. The request should list each information item requested or question wanted answered separately.

 

vi. Additional information, if available, should be provided. For example:

 

·   The address, branch, and account number for financial or bank records.

 

·   The date of birth and mother’s maiden name or the subject to be interviewed or investigated.

 

·   The tax type and years under audit or investigation.

 

·   If known, the relationship between the U.S.A. taxpayer and the foreign entity.

 

·   If known, the foreign tax number of the entity or person to be contacted.

 

·   If requesting an appraisal of property, if you need other than a current appraisal.

 

·   Any other supporting documentation which the initiator feels would help the foreign authorities or TAX ATTACHÉ complete the investigation.

b. Routine requests which are bulk amounts of taxpayer information can be handled in a slightly different manner. A transmittal document describing the bulk information needs to accompany the data. If the data is sent on a disc or other magnetic media then a format description should be included to assist in electronic reading of the files. Two examples of routine correspondence are appendix items I and II at the end of this procedure.

c.  States should address the request to Fred Dulas, TAX ATTACHÉ, Internal Revenue Service, U.S. Embassy-Mexico City, P.O. Box 9000, Brownsville, TX 78520 or it can be faxed to him at 011-5255-5080-2494.

d. Mexico will deliver requests to Fred for transmittal to the states in the same manner they currently use.

EXPLANATORY NOTICE

The purpose of this procedure is to provide procedural guidance to disclosure personnel.