Revision of IRS record retention procedures.

On July 15, 1993, Tax Executives Institute filed the following comments with the Internal Revenue Service concerning the IRS's record retention procedures Specifically, the Institute wrote to Margaret M. Richardson, Commissioner of Internal Revenue, about the need to revise Rev. Proc. 91-59, relating to the basic retention requirements under section 6001 of the Code where all or part of a taxpayer's accounting or financial records are maintained within an automated data processing (ADP) system. The Institute's letter to the Commissioner was accompanied by a draft revision of the revenue procedure.

TEI's comments and draft revenue procedure were prepared under the aegis of its IRS Administrative Affairs Committee, whose chair is W. Remi Taylor of Duke Power Co. Robert D. Adams of the Halliburton Company, vice chair of the committee, and Robert Evans of MCI Communications Inc. contributed materially to the development of the proposed revenue procedure. In addition, members of several TEI chapters submitted comments on the procedure that were incorporated into the final product.

On behalf of Tax Executives Institute, I am pleased to enclose a proposed revision of Rev. Proc. 91-59, relating to the basic record retention requirements under section 6001 of the Internal Revenue Code where all or part of a taxpayer's accounting or financial records are maintained within an automatic data processing (ADP) system. The Institute's revision is intended to clarify a number of technical and procedural issues that have arisen concerning the revenue procedure, to safeguard the Internal Revenue Service's authority regarding ADP (or machine-sensible) records, and to assuage taxpayers concerns about the heavy administrative and compliance burdens engendered by Rev. Proc. 91-59 (either on its face or as interpreted by taxpayers or IRS Computer Audit Specialists). This letter provides background on the Institute's record retention project and summarizes our principal areas of interest.

Background

In October 1991, the Internal Revenue Service issued Rev. Proc. 91-59, relating to the basic record retention requirements where all or part of a taxpayer's accounting or financial records are maintained within an automatic data processing (ADP) system. The 1991 procedure superseded Rev. Proc. 86-19, and was intended not only to clarify provisions of the 1986 rules but also to keep pace with ADP developments. In particular, Rev. Proc. 91-59 was intended to address the application of section 6001 of the Internal Revenue Code and the pertinent regulations to electronic data interchange (EDI) technology.

Tax Executives Institute has long been involved in the development and refinement of the IRS's record retention rules in respect of machine-sensible records. Our representatives met with IRS officials during the development of the 1986 procedure, and in 1990 and 1991 held similar meetings on how a revised procedure - which became Rev. Proc. 91-59 - should address not only issues such as EDI and the application of section 6001 to records created on personal (micro) computers, but more fundamental questions such as the availability of record retention agreements between taxpayers and the IRS, the requirements that taxpayers provide computer resources to the IRS to process machine-sensible records, and whether a record evaluation by a CAS constituted an examination for purposes of section 7605(b) of the Internal Revenue Code.

Our involvement in the IRS's record retention policies and procedures has continued since the issuance of Rev. Proc. 91-59. Shortly after the issuance of the procedure, Marvin Burton of the IRS's Computer Audit...