New revenue procedure outlines electronic record retention rules and allows for destruction of originals.

• Author: Allen, Noelle

Taxpayers implementing electronic storage systems that meet the requirements of Rev. Proc. 97-22 will be permitted to destroy original hard copy books and records and delete original computerized records.

Sec. 6001 requires a taxpayer to keep records, render statements and make returns sufficient to show whether or not that person is liable for tax. Virtually all taxpayers are required to keep records sufficient to establish the amount of gross income, deductions, credits or any other relevant matters concerning their tax liability. The records required under this section must be kept available at all times for inspection by authorized IRS personnel (Regs. Sec. 1.6001 (e)).

In Rev. Proc. 97-22, issued Mar. 13, 1997, the Service provides guidance to taxpayers who maintain books and records by using an electronic storage system that either images their hard copy (paper) books and records, or transfers their books and records to an electronic storage media (such as an optical disk). Taxpayers who follow the provisions of the revenue procedure will be in compliance with the recordkeeping requirements of Sec. 6001.

Rev. Proc. 97-22 applies to taxpayers who maintain books and records using an "electronic storage system," defined as "a system to prepare, record, transfer, index, store, preserve, retrieve, and reproduce records by either: 1. electronically imaging hard copy documents to an electronic storage media; or 2. transferring computerized books and records to an electronic storage media using a technique such as `COLD' (computer output to laser disk), which allows books and records to be viewed or reproduced without the use of the original program."

The procedure's requirements apply to income, excise, employment, and estate and gift taxes, as well as employer plans and exempt organizations. The guidance consists of various requirements that must be met for electronic storage systems to comply with Sec. 6001. The general requirements are that an electronic storage system must ensure an accurate and complete transfer of the hard copy or computerized books and records to an electronic storage media, and the system must also index, store, preserve, retrieve and reproduce the electronically stored books and records.

Ensuring Accuracy

The revenue procedure delineates several attributes the system must possess to ensure accurate and complete transfer, including a...