In a memo dated 9 June 2015 and released on 17 July 2015, offering generic legal advice (Link), the IRS was asked to opine on the point in time when taxpayer information becomes protected from disclosure is it receipt of the information as a download from the exchange of information via International Data Exchange Service (IDES) or when the data is simply transmitted to IDES. The following highlights can be found in the memo:
“Briefly, information that is provided by the IRS to foreign tax administrations (outbound) through IDES already is return information under section 6103 in the hands of the IRS, so throughout the exchange process should be protected by section 6103. Furthermore, that information becomes treaty protected information in the hands of the foreign country when the information is exchanged pursuant to a tax convention or other international agreement on taxes.”
“Under the current facts and circumstances, we believe [redacted] that 6103 protection arises on the inbound transfer of information at the time that the information is uploaded to IDES. Furthermore, we believe section 6105 and treaty protections are likely to follow the conclusion under section 6103. We understand that the IRS will likely act as if the information were protected at upload and that business decision would be conservative and justified under the current state of the law.”
The full IRS Memorandum can be accessed through the link above.