Tax Administration: Additional Time Needed to Complete Offshore Tax Evasion Examinations
Published: 2007-03-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Much offshore financial activity is not illegal, but numerous illegal offshore schemes have been devised to hide or disguise the true ownership of income streams and assets. IRS studies show lengthy development times for some offshore cases, which suggests that time or the lack thereof could be an impediment to effectively addressing offshore schemes. GAO was asked to (1) compare offshore and nonoffshore examination cases and determine whether the 3-year statute of limitations reduces offshore assessments, (2) compare enforcement problems posed by offshore cases to those where Congress has previously granted an exception to the statute, and (3) identify possible advantages and disadvantages of an exception to the statute for offshore cases. To address these objectives, GAO analyzed IRS data, reviewed examination files and other documents, and interviewed IRS officials and others in the tax practitioner and policy communities.
section_title: What GAO Found
paragraphs: Examinations involving offshore tax evasion take much more time to develop and complete than other examinations for reasons such as technical complexity and the difficulty of obtaining information from foreign sources. When examinations are completed, the resulting median assessment from an offshore examination is almost three times larger than from other types of examinations. However, due to the 3-year statute, the additional time needed to complete an offshore examination means that IRS sometimes has to prematurely end offshore examinations and sometimes chooses not to open one at all, despite evidence of likely noncompliance. Although data were not available to measure the effect of the statute on assessments, IRS agents and managers told GAO that overall assessments for offshore cases are lower than they would be if IRS had more time to work these cases. Some offshore examinations exhibit enforcement problems similar to those where Congress has granted a statute change or exception in the past. For example, Congress changed the statute for certain abusive tax shelters that involved technical complexity and dilatory tactics on the part of taxpayers. Through discussions with IRS officials and others in the tax practitioner and policy communities, GAO identified advantages and disadvantages to such an exception. Advantages included increased flexibility for IRS to direct enforcement resources to egregious cases of noncompliance and a possible deterrent to future noncompliance. Disadvantages included increased uncertainty and lack of closure for taxpayers. Our commenters also discussed design options to mitigate some of the disadvantages of a statute extension, such as making an exception apply to all taxpayers having offshore accounts/entities, and thereby, mitigating taxpayer uncertainty and lack of closure.

section_title: Letter
paragraphs: In recent years, the Internal Revenue Service (IRS) has observed a  significant increase in offshore activity among U.S. taxpayers. More and  more taxpayers have been observed attempting to “expatriate” their  income and assets. Making investments or doing business internationally  is legal, but numerous schemes have been devised in which the true  ownership of income streams and assets has been hidden or disguised  using offshore activity, which is not legal. Some schemes can be as simple  as taking unreported income and personally traveling to a tax haven  country and depositing the cash into a bank account. Other schemes are  more elaborate, involving numerous domestic and foreign trusts,  partnerships, nominees, foreign financial accounts, offshore credit/debit  cards, and multilayered transactions. Like all forms of noncompliance,  offshore schemes add to the tax gap—the difference between taxes owed  and taxes paid on time—and shifts more of the tax burden onto compliant  taxpayers. Such schemes also can fuel a perception that the tax system is  not equitable and can erode honest taxpayers’ faith in the voluntary  compliance system. When IRS discovers an offshore scheme, it has 3 years  from when the tax return was filed in which to work on uncovering the  scheme and assessing any additional tax. This is known as the 3-year  statute of limitations on assessments.
In recognizing the serious problem posed by offshore tax evasion, you  asked us to identify any impediments that may exist to better combating  these schemes. An IRS study shows lengthy examination times for some  offshore examinations, which suggests that time or the lack thereof could  be an impediment to effectively addressing offshore schemes. This report  focuses on this possible impediment. Our objectives were to (1) compare  the length of and recommended assessments yielded by offshore and  nonoffshore examinations and determine whether the 3-year statute of  limitations reduces recommended offshore assessments, (2) determine  whether or not enforcement problems posed by offshore examinations are  similar to enforcement problems that led Congress to grant exceptions to  the statute in other situations, and (3) identify possible advantages and  disadvantages of an exception to the statute for offshore examinations.
To do our work, we (1) analyzed IRS data, reports, publications, and other  documentation providing insight into the characteristics, complexity, and  size of the offshore tax evasion problem; (2) compared IRS data on the  amount of time required to complete examinations involving an offshore  component with those lacking such a component and the recommended  assessments from those examinations; (3) reviewed selected IRS files to  illustrate examinations of returns involving offshore components;   (4) researched the history of the federal statute of limitations for  assessments to include legislation proposed between 2003 and 2006 that  included references to either offshore tax evasion or the statute of  limitations; (5) interviewed representatives of California’s taxing authority,  the California Franchise Tax Board (FTB), and reviewed documents  related to a recent change in California’s statute related to certain abusive  tax shelters; (6) interviewed revenue agents and managers with expertise  in offshore cases to develop an understanding of IRS enforcement  activities; and (7) interviewed IRS officials and others in the tax  practitioner and policy communities about their views on extending the  examination period for returns involving offshore schemes. We assessed  the reliability of the IRS data that we used and found that it was  sufficiently reliable for our purposes. The universe of IRS examinations  with an offshore component included individual taxpayers, smaller and  larger corporations, and other taxable entities. The database of all  nonoffshore examinations we used for comparison similarly included a  full range of taxpayers. Details on our methodology can be found in  appendix I. We did our work from June 2005 through February 2007 in  accordance with generally accepted government auditing standards.
subsections: section_title: Background
paragraphs: It is perfectly legal for U.S. taxpayers to hold money offshore. It is illegal,  however, for a taxpayer to not disclose substantial offshore holdings, to  not report income earned in the United States and “hidden” through  offshore arrangements, and to not report income earned offshore to IRS  on the taxpayer’s tax return. If U.S. taxpayers own an offshore business  such as a foreign corporation, they are required to disclose that holding to  IRS on their tax return. When applied to abusive transactions, IRS  generally uses the term “offshore” to mean a country or jurisdiction that  offers financial secrecy laws in an effort to attract investment from outside  its borders. When referring to a financial institution, “offshore” refers to a  financial institution that primarily offers its services to persons domiciled  outside the jurisdiction of the country in which the financial institution is  organized.
Abusive offshore schemes are often accomplished through the use of  limited liability corporations (LLC), limited liability partnerships (LLP),  international business corporations (IBC), and trusts, foreign financial  accounts, debit or credit cards, and other similar instruments. According  to IRS, the schemes can be complex, often involving multiple layers and  multiple transactions used to hide the true nature and ownership of the  assets or income that the taxpayer is attempting to hide from IRS.
IRS has multiple programs and techniques used to select potentially  noncompliant tax returns for examination. One source is a computer  model designed to predict returns that, if audited, would be most likely to  result in additional taxes owed. Other sources that prompt an examination  include referrals from inside or outside IRS, information from third  parties, and indications of fraud or noncompliance from other audits.
Once IRS has identified a return for an examination, the classification  process begins. Classification is the process of determining whether a  return should be selected for examination, what issues should be  examined, and how the examination should be conducted. IRS guidance  on classification states that classification should be conducted by an  experienced examiner.
Examination is the accumulation of evidence for evaluating the accuracy  of the taxpayer’s tax return. Examiners gather facts to correctly determine  a taxpayer’s tax liability. Evidence can include the taxpayer’s testimony  and books and records as well as the examiner’s own observations and  documents from third parties. Methods for accumulation of evidence  include analytical tests, documentation, inquiry, inspection, observation,  and testing. IRS procedures call for examiners to pursue an examination  to the point where a reasonable determination of correct tax liability can  be made. In turn, examiners prepare audit reports, which should contain  all information necessary to ensure a clear understanding of the  adjustment, if any, and document how the tax liability was computed.  These reports serve as the basis for assessment actions. An assessment  records the taxpayer’s liability due.
IRS examinations are generally of one of three types—correspondence,  office, or field. The simplest examinations usually cover one to two tax  issues handled by a lower-graded examiner through correspondence. More  complex examinations are done by meeting with taxpayers or their  representatives in IRS offices. The most complex examinations are done  through revenue agent field visits to taxpayer locations. Only about 16  percent of all IRS examinations from 2002 through 2005 were conducted  through field examinations, but 98 percent of offshore examinations were  of this type. About three-fourths of nonoffshore examinations are handled  through correspondence.
IRS does not classify every return that is filed, nor does it examine every  case file that is classified, even if IRS determines that examining the tax  return would likely yield an assessment of additional taxes owed. Figure 1  provides a notional representation of the process of taking the over 130  million individual income tax returns that were filed in fiscal year 2004  through the steps that lead to audits of a much smaller number of those  returns.
In most cases, the law gives IRS 3 years from the date a taxpayer files a tax  return to complete an examination and make an assessment of any  additional tax. For example, if a taxpayer filed a tax return on April 15,  2000, IRS had until April 15, 2003, to finish any examination of that return  and make an assessment of additional taxes owed by the taxpayer. This  statute of limitations for assessments is in effect for all examinations with  exceptions allowing longer periods for certain taxpayer actions or  omissions such as fraud or substantial understatement of gross income (in  excess of 25 percent of the amount of gross income stated on the return).  Taxpayers may also waive the 3-year assessment limitation through  written consent.
section_title: Offshore Examinations Take Longer Than Other Examinations, so the 3-Year Statute Can Lead to Lower Assessments Than Would Otherwise Be Possible
paragraphs: In general, it takes longer for IRS to identify and examine tax returns  involving abusive offshore transactions than IRS needs in nonoffshore  cases because of the added complexity of examining offshore  transactions. Where IRS is able to complete examinations involving  abusive offshore transactions, they generally result in larger assessments  than other types of examinations. IRS has policies in place to avoid  violating the statute of limitations, and IRS enforcement personnel told us  that these policies, in conjunction with the longer time needed to complete  offshore examinations, mean some cases are never opened in the first  place while others are not fully worked because the time allowed under  the current statute is running out. As a result, they said, overall  assessments for offshore cases are lower than they would be if IRS had  more time to work these cases.
subsections: section_title: Offshore Cases Take Longer for IRS to Develop and Examine
paragraphs: IRS officials told us that cases involving offshore tax evasion present  special, time-consuming challenges that other types of cases do not. Tax  evasion, both domestic and offshore, often involves schemes with many  layers of deception. IRS officials told us that for domestic tax evasion,  revenue agents are able to issue summonses to domestic financial  institutions to uncover the layers of deception the taxpayer created to hide  the source and existence of the funds. In offshore cases, IRS generally  does not have summons power over offshore financial institutions, and is  often unable to determine the owner of an offshore account or business,  or determine the source of the funds. Even in cases where IRS is able to  determine information about offshore funds, an IRS manager told us that  this process of discovery is much more time consuming than for  nonoffshore cases.
Unlike much nonoffshore tax evasion, most possible offshore tax evasion  cases are not discovered through IRS’s computerized analysis of tax  returns, but rather through investigations of promoters of offshore  schemes. Officials told us that several divisions of IRS forward leads on  the promoters of offshore schemes they discover to revenue agents, who  develop the cases in order to discover the extent of the promoter’s use of  offshore schemes. This process takes far longer than computer analysis- based methods of identifying potential noncompliance.
After developing information that a promoter of offshore schemes illegally  sold schemes to help taxpayers avoid their tax liability, IRS can refer that  information to the Department of Justice, which can then file a complaint  in the United States District Court requesting the court to issue an  injunction against the promoter. In some cases, the injunction will compel  the promoter to disclose the clients who purchased the scheme. IRS  officials told us that it can take years to get a client list from a promoter  and, even with a client list, there is still much work that IRS needs to do  before the clients of the offshore schemes can be audited. For example,  IRS officials told us that they may only get limited information about the  clients of offshore promoters, and often that information is limited to a  name and perhaps the city and state where the client lives, so considerable  time may be spent finding the individuals listed by the promoter.
Time spent developing information on a return before putting it into the  queue for examination shortens the time available to close the  examination before the 3-year civil statute of limitations expires. Table 1  compares the median number of days spent in development for offshore  and nonoffshore examinations from 2002 to 2005. As shown in the table,  the median offshore case took 184 more calendar days than the median  nonoffshore case to move from filing to examination. Comparing just field  examinations, which constituted over 98 percent of offshore examinations  in fiscal years 2002 through 2005, the difference in median development  time was 96 days. Some examinations lead to additional examinations of  the same taxpayer’s returns, such as when a revenue agent identifies  noncompliance on one return and then reviews prior year returns looking  for the same problem, or when a taxpayer files a new return while an  examination is underway. To avoid overstating development time, this  comparison includes only the number of days between the start of the  examination and the filing date of the last return filed before the  examination began.
Once offshore cases are developed and moved into examination, the  examinations take longer than nonoffshore cases. Considering all types of  examinations together, the median offshore examination took 90 more  days than the median nonoffshore examination. Considering field  examinations alone, the median offshore field examination was 70 days  longer than the median nonoffshore field examination, as shown in table 2.  IRS officials told us that this is due to examination complexity and the  difficulty of identifying and obtaining information from foreign sources.
The total time that elapses between a return being filed and IRS’s closing  of the examination of that return is referred to as total cycle time and  provides another type of comparison between offshore and nonoffshore  cases. As shown in table 3, the median offshore examination took almost  500 more calendar days overall to close than the median nonoffshore  examination, a 126 percent difference. The median offshore case took 82  percent of the statute time versus 36 percent for nonoffshore cases.  Considering just field examinations, the median cycle times for offshore  and nonoffshore examinations were closer in length, but the median  offshore examination was still 194 days longer, a difference of 28 percent.
section_title: Completed Offshore Examinations Yield Larger Recommended Assessments Than Other Examinations
paragraphs: About half of all offshore examinations resulted in a recommended  assessment of additional taxes due compared to approximately 70 percent  of nonoffshore examinations. While less frequent, assessments from all  types of offshore examinations—correspondence, office and field—had a  median that was nearly 3 times larger than from nonoffshore  examinations. Considering just field examinations, recommended  assessments from offshore examinations also had a median that was much  larger than nonoffshore examinations, though by a smaller margin, as  shown in table 4.
While yielding larger assessments, the greater amount of time spent on  offshore examinations means that their yield per hour of direct  examination time is lower. Considering all types of examinations  together, including both those that resulted in an assessment and those  that did not, offshore examinations yielded less per hour of direct  examination time than nonoffshore examinations because the number of  hours spent on those examinations is nearly 4 times longer, on average.  From 2002 to 2005, IRS examiners spent an average of 46 hours on all  types of offshore examinations, compared to an average of only 12 hours  for all types of nonoffshore examinations. Considering only field  examinations, average hours per examination were 47 for offshore  examinations versus 62 for nonoffshore examinations, and the difference  in dollars per hour of direct examination time is greater.
section_title: To Prevent Violating the Statute of Limitations, IRS Does Not Pursue Some Likely Offshore Tax Evasion
paragraphs: IRS has strict policies to prevent examinations from going past the statute  of limitations because if an assessment is not made within 3 years, the  statute of limitations bars IRS from making any assessment at all. Such  instances mean the loss of revenue to IRS and inefficient use of IRS  examination resources. IRS policies specify that statute expiration dates  for all tax returns be properly determined, that all records be annotated  with these dates, and that the cases be closely monitored to prevent  accidentally running out of time. Revenue agents and managers told us  that IRS strongly emphasizes the importance of keeping track of these  dates and avoiding allowing an examination to go past the statute date.
While the 3-year statute of limitations applies in most cases, some  exceptions exist under current law. For example, an assessment may be  made after the 3-year point if the tax return is false or fraudulent or if  there is a sufficiently large omission of gross income. Taxpayers may also  agree to waive their statute rights.
In the rare cases where IRS personnel allow an examination to go past the  statute without meeting one of the current exceptions to the statute (a  “barred statute”), the responsible agent and his or her manager must  prepare a Barred Statute Report and face possible disciplinary action  because of the examination time spent with no possibility of making an  assessment. IRS data for fiscal years 2005 and 2006 showed 39 barred  statutes associated with examinations where a manager made an initial  determination to recommend a disciplinary action. As shown in table 6,  most of these barred statutes ultimately resulted in some type of  disciplinary action.
IRS has created guidance for continuing offshore examinations past the 3- year point. This guidance permits agents to request permission to carry on  the examination past the 3-year point based on their judgment that, given  additional time, they will be able to ultimately prove that the examination  meets one of the following three conditions:1.  The return is false or fraudulent. IRS defines false or fraudulent as the  preparation and filing of false income tax returns by claiming inflated  personal or business expenses, false deductions, unallowable credits,  or excessive exemptions.  2.  There is a sufficiently large omission of gross income (in excess of 25  percent of the amount of gross income stated on the return) under IRC  6501(e), in which case the tax may be assessed at any time within 6  years after the return is filed.  3.  The taxpayer failed to notify the Secretary of the Treasury of certain  foreign transfers under IRC 6501(c)(8), in which case the statute of  limitations is 3 years from the date IRS receives the required  information.
A conclusion to continue an examination beyond the statute must be  approved in writing by IRS managers, based on the revenue agent’s  documentation of the rationale and calculations to support this  conclusion. In addition, IRS must have made a timely and proper request  to the taxpayer to obtain a consent agreement to extend the statute. The  taxpayer’s refusal to extend the statute or lack of response must be  documented. If this guidance is followed, no disciplinary action will be  taken against the IRS managers and agents if the examination ultimately  does not prove to meet one of the three conditions for making an  assessment after 3 years.
The IRS guidance allowing some examinations to go past the normal  statute period based on the revenue agent’s judgment that an assessment  will be possible after the 3-year point recognizes the limited time available  to agents to finalize case-specific facts when the 3-year statute is about to  expire. The IRS guidance also notes that the Credit Card Summons project  examinations are generally likely to involve unreported income or fraud as  well as failure to file information returns reporting foreign transfers. The  guidance also states that other offshore examinations share many of the  same challenges as Credit Card Summons project examinations including  complex examinations and securing documents located outside the United  States.
IRS managers told us that this procedure for continuing examinations  beyond the statute is cumbersome, time-consuming, and some agents are  reluctant to use the procedure because of concerns about barred statutes.  Revenue agents told us that this reluctance stems from the culture of IRS  examiners where agents are instructed from the time they are hired to  never let an examination go past the statute of limitations for any reason.  Despite subsequent assurances from IRS guidance, however, revenue  agents told us that ingrained reluctance to letting the statute of limitations  pass is still paramount.
All of the examinations allowed to extend past the statute date under this  guidance represent a gamble on the part of IRS that the examination will  ultimately meet one of the exceptions to the statute and an assessment  will be allowed under the law. IRS records show that 1,942 offshore  examinations were taken past the 3-year statute period from fiscal years  2002 through 2005. IRS ultimately made assessments on 63 percent of  these examinations and these assessments were significantly higher than  assessments from all other types of examinations, with a median  assessment of about $17,500 versus about $5,800 from offshore  examinations that were closed within the 3-year statute of limitations and  $2,900 from all nonoffshore examinations closed within 3 years. IRS  databases do not allow systematic analysis of the approximately 700  examinations that did not result in an assessment, so we do not know if  these were accurate returns or if the discovered tax evasion just did not  rise to the level of fraud or substantial understatement of income.
For those examinations that closed with an assessment, longer   examinations did not change the median assessment amount significantly  for nonoffshore examinations. On the other hand, offshore examinations   produced much larger median assessments than both shorter offshore  examinations and all nonoffshore examinations when the examinations  themselves took 3 years or more, as shown in figure 2. A similar  relationship is found for field examinations alone, as shown in figure 3.
Similarly, our analysis of assessment dollars generated per hour of  examination time (including examinations both with and without  assessments) showed that the yield increased markedly for offshore  examinations that take more than 3 years. While average assessment  dollars per hour of direct offshore examination time are about half of the  average for nonoffshore examinations, the reverse is the case for  examinations that go over three years—$6,458 per hour for offshore  examinations compared to $3,432 per hour for nonoffshore examinations.  The comparison is nearly the same for field examinations alone—$6,465  per hour for offshore field examinations and $3,454 per hour for  nonoffshore field examinations.
Revenue agents and managers told us that some developed case files are  not opened for examination because insufficient time remains under the  statute to make the examination worthwhile. They said that managers and  agents have leeway in deciding which examinations to work because there  are usually more developed case files waiting for agents than there are  agents to work them. IRS wants agents to work examinations with a good  likelihood of leading to meaningful assessments; managers told us they  look for examinations that have both apparent noncompliance and  sufficient time remaining within the statute to fully develop the apparent  issues. Revenue agents and IRS managers told us that, in order to avoid  violating the statute, they will often choose case files to examine with  more time remaining under the 3-year statute of limitations over case files  with less time remaining but with more likely or more substantial possible  assessments. As a result, they explained that not all case files in the  unassigned inventory of case files developed for examination are selected  for examination and many case files are “surveyed,” or closed without  examination.
Two IRS policies could contribute to closing a developed offshore case  without an examination. One of these policies requires sorting the  unassigned inventory to identify the areas most in need of examination.  This policy includes statute year and statute date among the attributes  used in sorting unassigned inventory. A second policy requires that an  examiner not begin an examination or requisition any return for audit  without management approval if fewer than 12 months remain on the  statutory period for assessment. As described earlier, offshore  examinations typically require more time to develop than nonoffshore  examinations, and as a result, offshore examinations in the queue for  examination would typically be nearer the end of the assessment period  than nonoffshore examinations. IRS managers explained that this attribute  of offshore examinations can lead to leaving offshore cases in the queue  until the statute period ends and then closing the case without an  examination.
Agents and managers also said that they often choose to end an ongoing  examination nearing the end of the 3-year assessment period without  making a complete assessment rather than risk taking the examination  past the statute period, losing revenue, and facing disciplinary action. IRS  agents and managers told us that they face difficult choices as an  examination nears the end of the 3-year assessment period and the  examination is incomplete. On the one hand, the examination can be  discontinued. This choice is the safest for individual IRS agents and  managers because it avoids the possibility of a Barred Statute Report and  disciplinary actions. However, this choice also results in an assessment  that does not accurately reflect the extent of a taxpayer’s compliance or  noncompliance with tax laws because the examination is incomplete.  Continuing the examination can result in an accurate assessment, but only  if the examination demonstrates one or more of the exceptions to the  statute described earlier. If the examination does not ultimately  demonstrate fraud or another basis for an exception, IRS managers and  agents wasted IRS resources because they are barred from making an  assessment. Revenue agents told us that they believed that in some cases  there is “money being left on the table” in the form of unexamined issues  that could have led to assessments if there had been sufficient time to  examine them.
Even where there is sufficient time to work an examination, only a few  years where a taxpayer was using a particular scheme may be open to  examination and the early years of a scheme may be past their statute date  before the examination even begins. For example, if IRS is examining a  taxpayer’s 2005 tax return and discovers a significant understatement in  the income that the taxpayer reported, the agent can examine some of the  taxpayer’s previous returns, but unless the revenue agent and manager  suspect fraud, in which case there is not a statute of limitations, IRS must  abide by the 3-year statute of limitations on assessments and not examine  some prior years that taxpayers held money offshore illegally. A senior IRS  official told us that this is a particularly significant problem because it is  often in the first years of an offshore scheme where the taxpayer moves  the most money offshore and the most egregious tax evasion takes place,  so IRS is missing out on significant assessments by not being able to look  back at previous tax returns.
IRS revenue agents are not able to accurately estimate likely possible  assessments for case files or tax years that are unexamined. Similarly, in  cases where an examination is started and subsequently closed without  some issues being examined due to the statute of limitations, it is not  possible to estimate the likely assessment from unexamined issues.
As mentioned earlier, however, we found that 1,942 offshore examinations  were allowed, either by IRS decision or by a voluntary statute extension  signed by the taxpayer under examination, to exceed the 3-year statute of  limitations. Of those, more than 700 were closed without an additional tax  assessment. IRS officials told us that many of the offshore examinations  that go past the 3-year statute of limitations are very difficult to work due  to complex financial arrangements and that even with significantly more  time, some particularly complex and well-hidden offshore schemes would  remain very difficult to uncover. IRS data did not show the reasons that  the 700 offshore examinations that went past the 3-year statute of  limitations were closed without an assessment.
section_title: Some Offshore Examinations Present Enforcement Problems Similar to Those Where Congress Granted Changes to the Statute
paragraphs: Some offshore examinations exhibit compliance problems similar to those  where Congress granted a change or exception to the statute in the past.  Offshore examinations take longer than nonoffshore examinations for IRS  to develop and examine for reasons such as technical complexity and the  difficulty of obtaining information from foreign sources, and as a result,  IRS may not complete assessments of all taxes owed. These problems are  similar to problems giving rise to other changes and exceptions to the  statute at both the federal and state levels over the years. These changes  and exceptions provide precedent for changing the statute for offshore  examinations.
subsections: section_title: Offshore Enforcement Problems Are Similar to Those Justifying Past Changes to the Statute
paragraphs: Offshore examinations present IRS with various enforcement problems.  As discussed above, offshore examinations take longer to develop and  examine. IRS officials told us that this is due to the examinations’  complexity and difficulty in identifying and obtaining information from  foreign sources. Agents and managers also said that they often choose to  end an ongoing examination nearing the end of the 3-year assessment  period without making a complete assessment rather than risk taking the  examination past the statute period, losing revenue, and facing  disciplinary actions. Further, agents and managers explained that some  taxpayers or their representatives employ dilatory, uncooperative tactics  when dealing with IRS. In addition, we previously testified that the use of  offshore schemes can also pose a threat to the integrity and fairness of our  tax system by adversely affecting voluntary compliance if honest  taxpayers believe that significant numbers of individuals are not paying  their fair share of the tax burden.
We reviewed 12 IRS offshore case files and found examples of   (1) technical complexity, (2) difficulty in identifying and obtaining  information from foreign sources, and (3) taxpayers or their  representatives employing dilatory, uncooperative tactics when dealing  with IRS. We also found a wide variety of offshore examinations, from  very simple examinations to much more complex examinations that had  been under examination for years. In order to obtain illustrative examples  of offshore examinations, we reviewed examinations that took a shorter  than average number of days to complete, about an average number of  days, and a longer than average number of days. We reviewed case files in  two locations and our reviews included both completed examinations and  examinations still in progress. These examinations included some that had  no changes to the taxpayer. The two examinations described below  include one that took a relatively low number of days and one that took a  longer than average number of days.
In the first examination, the taxpayer was identified as holding an offshore  credit card in a country considered to be a tax haven. The taxpayer  maintained that he did not have an offshore credit card. IRS used a  summons to obtain records of a domestic rental car transaction that would  identify the holder of the offshore credit card. While the name shown on  the rental car records was similar to the taxpayer’s name, it was not the  taxpayer’s name. After reviewing the rental car records, the revenue agent  concluded that the taxpayer was not the holder of the offshore credit card.  The examination had no other issues and resulted in no change in the  amount of tax owed by the taxpayer. In conducting this examination, the  revenue agent    sent 4 pieces of correspondence to the taxpayer,    conducted 1 interview with taxpayer,    notified the taxpayer of third-party contact, and    used 1 summons to obtain domestic rental car records; the summons was  returned 33 days after it was issued.
In the second examination, the taxpayer had a number of businesses in the  United States and in other countries, including at least one business in a  tax haven country. It appeared that some of the taxpayer’s businesses paid  consulting fees to other businesses the taxpayer owned, and consulting  fees were paid into an offshore account in a tax haven country through  which the taxpayer received funds via a credit card.
IRS found it difficult to determine how much money was in the taxpayer’s  offshore tax haven business and how the money got there. The money in  that business, IRS told us, is the lynchpin of the entire examination, which  was still underway at the time of our review. During the 4 years that the  examination had been underway, IRS opened examinations on the  taxpayer’s spouse and on other businesses in other tax years. IRS has not  been able to find where some of the money is going, although officials are  confident that more is being hidden as the taxpayer had other businesses  that made payments to the business in the offshore tax haven country.  Over the 4 years of this examination, there have been at least    5 powers of attorney,    20 summonses,    39 contacts with the taxpayer’s power of attorney,    23 document requests,    5 missed appointments by taxpayer or taxpayer’s representative,    1 statute extension,    2 interview requests denied,    5 meetings with taxpayer’s representative,    4 postponed appointments,    4 third-party contacts, and    2 occasions on which the taxpayer refused to supply information.
The scheme began, as far as IRS can tell, in the late-1990s, but  examinations of some early years of the taxpayer’s scheme were  statutorily barred. This means that, when the examination eventually  closes, IRS will not be able to assess any additional taxes on at least some  tax years that IRS agents found the taxpayer was holding money offshore  unless they determine that fraud was committed.
Enforcement problems exhibited in the 12 cases we reviewed are similar  to enforcement problems justifying changes and exceptions to the statute  at both the federal and state levels over the years. For example, the statute  was recently changed at both the federal and state levels to address  specific compliance problems, such as dilatory tactics on the part of  taxpayers and the use of technically complex transactions. The following  details on legislative actions illustrate instances where changes and  exceptions to the statute were granted at both the federal and state levels  because of enforcement problems similar to those exhibited by offshore  examinations such as (1) time constraints on IRS; (2) taxpayers delaying  examinations through dilatory, uncooperative tactics on the part of  taxpayers; and (3) failure of taxpayers to provide required information.
subsections: section_title: Historical Changes and Exceptions
paragraphs: The Revenue Act of 1934 provided the current 3-year statute. In making  the change in 1934 from 2 to 3 years, the Senate Report noted that  experience showed that the 2-year period was “too short in a substantial  number of large cases, resulting oftentimes in hastily prepared  determinations, with the result that additional burdens are thrown upon  taxpayers in contesting ill-advised assessments. In other cases, revenue is  lost by reason of the fact that sufficient time is not allowed for disclosure  of all the facts.”
As discussed above, Congress has also provided exceptions to this 3-year  assessment period. For example, the exception for filing a false or  fraudulent return dates back to the Revenue Act of 1916. Where this  exception applies, the assessment can be made at any time. Similarly, the  exception for significant omissions of gross income dates back to the  Revenue Act of 1934. Where this exception applies, the tax may be  assessed at any time within 6 years after the return is filed. According to  the legislative history for the 1934 Act, this provision was added to enlarge  the scope of the existing exception allowed for false or fraudulent returns  while limiting the exception where a taxpayer may have made an honest  mistake and it would be unfair to keep the statute open indefinitely. The  exception to the statute of limitations for failure to report certain foreign  transactions dates back to the Taxpayer Relief Act of 1997. This  exception was included and grouped along with certain other changes  designed to simplify formation and operation of international joint  ventures.
section_title: Recent Federal Exception to the Statute
paragraphs: More recently, Congress changed the statute to provide IRS with  additional time to make assessments in the case of unreported listed  transactions. With the American Jobs Creation Act of 2004, Congress  extended the statute for unreported listed transactions for 1 year after the  earlier of (1) the date the information required to be reported is provided  or (2) a material advisor meets the requirements for providing a list of  investors in the listed transaction.
Listed transactions are complex transactions that manipulate parts of the  tax code or regulations and are typically buried among “legitimate”  transactions reported on tax returns. Because the transactions are often  composed of many pieces located in several parts of a complex tax return,  they are essentially hidden from plain sight, which contributes to the  difficulty of determining the scope of the abusive shelter problem. Often  lacking economic substance or a business purpose other than generating  tax benefits, abusive shelters are promoted by some tax professionals,  often in confidence, for significant fees, sometimes with the participation  of tax-indifferent parties, such as foreign or tax-exempt entities. They may  involve unnecessary steps and flow-through entities, such as partnerships,  which make detection of these transactions more difficult. The  transactions are marketed to wealthy individuals, large corporations, and  small business taxpayers. Section 6111 of the Internal Revenue Code  requires the promoter or other tax shelter organizer to report such  transactions with IRS. Further, Department of the Treasury regulations  require promoters to maintain lists of investors who have entered into the  transactions and investors to disclose the transactions into which they  have entered.
In a March 2006 report, for example, the Treasury Inspector General for  Tax Administration (TIGTA) described a type of listed transaction called  Son of Boss (Bond and Option Sales Strategies). According to TIGTA, this  transaction used flow-through entities, such as partnerships, and various  financial products to add steps and complexity to transactions that had  little or no relationship to the investor’s business or the asset sale creating  the sheltered gain. TIGTA further explained that the losses generated from  the transactions were often reported among “legitimate” items in several  parts of the tax return. TIGTA concluded that taken together, these  characteristics, especially the use of flow-through entities, made it very  difficult for IRS to detect the Son of Boss abusive tax shelter through its  traditional process of screening returns individually for questionable  items. TIGTA noted that examinations of abusive tax shelters can take  significant amounts of time even for the most experienced examiners  because such shelters often involve complex, technical transactions that  take on different variations and require examining multiple flow-through  entities to make a proper tax determination.
At the time of our review, IRS representatives stated that sufficient time  had not elapsed to determine to what extent, if any, the 1-year extension  for unreported listed transactions improved examination effectiveness. An  IRS analyst explained, however, that the 1-year extension resulted in  increased disclosures of previously undisclosed listed transactions. This  analyst stated that 35 taxpayers made 74 separate disclosures about  previously unreported listed transactions and that 8 of these 74 disclosures  were duplicates.
section_title: California Statute Change
paragraphs: At the state level, California recently extended its statute from 4 to 8 years  for taxpayers that invest in an abusive tax shelter (ATS) transaction. Such  transactions include IRS listed transactions and other schemes of  particular importance to California. According to the California Legislative  Analyst’s Office (LAO), the key feature of these transactions is that they  have no true economic purpose but exist solely for reasons of tax  avoidance. Among their characteristics is the use of (1) pass-through  entities such as partnerships, (2) third party facilitators, and (3) offshore  accounts or facilitators. The LAO further explained that ATS transactions  can be quite difficult to identify and often even harder to understand, even  for trained tax auditors.
As with IRS, California experienced increased disclosure as a result of  extending its assessment period from 4 to 8 years for taxpayers involved in  ATS transactions. A California FTB manager stated that the newly enacted  8-year statute had not been applied because most tax shelter examinations  are closed within the normal 4-year period or by requesting voluntary  waivers. It should be noted that California’s assessment period is 1 year  longer than the federal 3-year assessment period. The FTB manager also  cited two sources of examinations in which the normal 4-year statute had  expired but taxpayers were willing to work to resolve their tax shelter  issues. These sources were the Self Compliance Letters and the  California Tax Shelter Resolution Initiative. The California FTB used a  self compliance letter to solicit amended returns from taxpayers for at  least 1 year in which the 4-year statute had expired. This letter cited the 8- year statute. At the time of our review, 13 taxpayers filed amended returns,  which reported tax and interest of about $2.3 million. Additional penalties  may apply to these 13 taxpayers. Another 48 taxpayers agreed to file  amended returns with estimated taxes and penalties of about $7 million.  Under the California Resolution Initiative, the FTB was accepting  applications and drafting closing agreements with another 181 taxpayers  who had at least 1 tax year for which the 4-year statute had either expired  or was about to expire.
section_title: Legislative Reports Discuss Reasons for Change
paragraphs: The justification for extending the statute for unreported listed  transactions at the federal level and for ATS transactions in California  generally involved qualitative factors. A House of Representatives Report  accompanying the American Jobs Creation Act of 2004 states that “some  taxpayers and their advisors have been employing dilatory tactics and  failing to cooperate with IRS in an attempt to avoid liability because of the  expiration of the statute of limitations. The Committee accordingly  believes that it is appropriate to extend the statute of limitations for  unreported listed transactions.”
While not enacted, Senate bill 476 (CARE Act of 2003) included a provision  similar to the provision of the American Jobs Creation Act of 2004 that  extended the statute for unreported listed transactions. A Senate Report  accompanying Senate bill 476 states that “…extending the statute of  limitations if a taxpayer required to disclose a listed transaction fails to do  so will afford IRS additional time to discover the transaction if the  taxpayer does not disclose it.” Similarly, the California LAO stated that the  time extension for ATS transactions will allow the FTB to “more fully  develop cases that represent ATS activity and result in a greater  sustainment rate at the appeal level.”
In addition to affording more time for IRS to discover undisclosed  transactions, the Senate report accompanying Senate bill 476 also stated  that “extending the statute of limitations if a taxpayer required to disclose  a listed transaction fails to do so will encourage taxpayers to provide the  required disclosure….” In analyzing the legislation that extended the  California assessment period from 4 to 8 years, the California FTB noted  that “some taxpayers will continue to engage in tax avoidance transactions  until the risks and costs of engaging in the transactions are significantly  increased.”
More generally, tax evasion by some taxpayers can affect the perceptions  of other compliant taxpayers about the fairness and equity of our tax  system. In its report accompanying Senate bill 476, the Senate Committee  on Finance stated that the committee “is aware that individuals and  corporations are increasingly using sophisticated transactions to avoid or  evade Federal income tax. Such a phenomenon could pose a serious threat  to the efficacy of the tax system because of both the potential loss of  revenue and the potential threat to the integrity of the self-assessment  system.” Similarly, the California LAO concluded that tax avoidance “by  some taxpayers shifts the relative tax burden towards taxpayers already in  compliance. This principle of fairness has ramifications for the tax system  itself. A perception that the tax system is not equitable could result in  noncompliance and tax avoidance by an increasing proportion of  taxpayers.”
section_title: Precedent Exists for Changing the Statute for Offshore Examinations
paragraphs: The Supreme Court found that statutes of limitations find their  justification in necessity and convenience. According to a Supreme Court  opinion, statutes of limitations are practical and pragmatic devices to  spare the court from litigation of stale claims, and the citizen from being  put to his defense after memories have faded, witnesses have died or  disappeared, and evidence has been lost. The opinion goes on to say that  statutes of limitations are by definition arbitrary. Historically, the  assessment statute of limitations has varied in length. For example, the  Revenue Act of 1919 set the statute of limitations for tax assessments at 5  years. The statute was changed to 2 years in 1932. The current 3-year  statute stems from the Revenue Act of 1934. As described above,  Congress granted changes and exceptions to the statute over the years to  address various types of enforcement problems. Given the similarities  between the enforcement problems exhibited by offshore examinations  and the enforcement problems giving rise to past changes and exceptions  to the statute, precedent exists for changing the statute for offshore  examinations.
section_title: Changing the Statute Would Necessitate Weighing Advantages and Disadvantages
paragraphs: Changing the statute for offshore examinations would necessitate  weighing advantages and disadvantages. If Congress wishes to change the  statute for examinations where offshore compliance is the major issue,  certain design options, such as limiting any examination and possible  assessment to those issues attributable to offshore transactions or only  suspending the statute while IRS is waiting for taxpayer responses to IRS  data requests, might mitigate some of the disadvantages of the statute  extension.
subsections: section_title: Advantages and Disadvantages of Changing the Statute
paragraphs: Changing the statute for examinations in which offshore transactions are a  major enforcement problem will require weighing both advantages and  disadvantages. In addition to advantages, such as fairness or deterrence,  mentioned earlier as justification for extending the statute for unreported  listed transactions and ATS transactions, interested parties from various  organizations that represent taxpayers or work with tax issues mentioned  other advantages and disadvantages for an exception to the statute for  offshore examinations. For example, they mentioned the ability of IRS to  look back at several tax years once an offshore scheme is identified as an  advantage of such an exception. On the other hand, they mentioned that  such an exception would further complicate the tax code by adding  another provision that would most likely include complicated criteria  addressing offshore transactions. Table 7 summarizes their views on such  an exception in general.
In commenting on an exception to the statute for offshore examinations,  these interested parties also pointed out advantages and disadvantages for  various design options that could be used to implement such an exception.  These options relate to (1) the scope of an exception and (2) the way in  which IRS is afforded additional time to address the enforcement  problems presented by offshore examinations. Scope refers to (1) which  taxpayers will be subject to the exception and (2) the extent to which the  exception allows IRS to examine a tax return. The way in which IRS is  afforded additional time refers to (1) an extension to the statute, such as  for an additional 3 years from the filing date of a tax return or (2) a  suspension of the statute pending resolution of a compliance problem,  such as slow taxpayer response to IRS records requests. A suspension is  triggered by a specified event or action. Table 8 presents the views of  these interested parties on the advantages and disadvantages of these  design options.
If Congress wishes to change the statute for examinations where offshore  compliance is a compliance problem, several of the design options  mentioned by interested parties might mitigate some of the disadvantages  of a statute exception for such examinations. To help clarify their  suggestions, we also developed some hypothetical examples to illustrate  their points. Specific suggestions that we heard included the following:    Making an exception apply to all taxpayers having offshore  accounts/entities may mitigate concerns about taxpayer uncertainty and  lack of closure.
Limiting any examination and possible assessment only to those issues  attributable to offshore transactions might mitigate concerns about  unfairly exposing taxpayers to open-ended IRS examinations or “fishing  expeditions” that could result in assessments for issues unrelated to  offshore transactions. For example, an examination triggered by a  taxpayer possessing an offshore credit card could enable the IRS to  examine depreciation expense for the plant and equipment used in the  taxpayer’s domestic business, which the taxpayer might perceive as unfair.
Suspending the statute until a specific issue is resolved, such as taxpayers  not responding promptly to IRS requests for records, might mitigate  concerns about an across-the-board extension of the 3-year assessment  period.
Specifying a length of time for an initial extension, such as 1 year, and  requiring a court or review board’s approval for any subsequent  extensions might also mitigate taxpayer concerns about potential IRS  abuse of an exception to the statute for offshore examinations. This option  might allay concerns about unwarranted application by IRS of a case-by- case exception to the statute.
Establishing a materiality test might mitigate concerns that IRS would  focus on taxpayers having insignificant issues. This test could be, for  example, (1) any amount greater than a percentage of a specific amount  shown on a tax return such as 20 percent of total assets for taxpayers  operating a business or (2) any amount greater than an absolute dollar  amount such as any amount greater than $10,000. This option might allay  concerns about including all taxpayers, particularly those having  legitimate offshore transactions that are not substantial in value.
Limiting the exception to a case-by-case approach might mitigate concerns  about taxpayers being unfairly subjected to an extended assessment  period when they have legitimate offshore transactions. For example, an  exception to the statute could be limited to taxpayers identified on client  lists of known promoters of offshore schemes. This option might allay  concerns about including all taxpayers, particularly those having  legitimate reasons for offshore transactions.
Maintaining symmetry between the statute for assessments and the statute  for refunds by matching any exception to the statute for assessments with  the same exception to the statute for refunds might mitigate taxpayer  concerns about the unfairness or one-sidedness of an exception to the  statute for assessments. If the statute was suspended until taxpayers  respond to IRS request for records, for example, the statute for refunds  should also be suspended until the taxpayers respond to the request.
Assuring access to IRS appeals procedures and to the Tax Court might  mitigate taxpayers’ concerns about the potential for IRS abuse as well as  provide due process should they decide to challenge IRS’s use of such an  exception to the statute. For example, procedures requiring TIGTA to  investigate any taxpayer allegations of denial of due process could be  mandated.
section_title: Conclusions
paragraphs: As with all forms of tax evasion, it is important that IRS pursue offshore  tax evasion because it adds to the tax gap, increases the tax burden on  honest taxpayers, and poses a threat to the integrity and fairness of our tax  system by adversely affecting voluntary compliance when honest  taxpayers come to believe that other people are getting away with not  paying their fair share. Offshore tax evasion is special, though, in that the  examinations that IRS pursues typically take much longer to develop and  examine because of the inherent difficulty in identifying and obtaining  information from foreign sources, the often dilatory and uncooperative  tactics on the part of taxpayers and their representatives, and the technical  complexity of the examinations.
Nevertheless, the statute of limitations that applies to offshore  examinations is the same as applies to all returns. This leads to some  suspected tax evasion that IRS identifies going unexamined when revenue  agents and managers choose not to start work on offshore examinations  because there is too little time remaining under the statute or choose to  cut work off early in order to avoid a barred statute. There are exceptions  that permit IRS to continue examinations past the 3-year point and still  make assessments, but in many offshore examinations IRS has only 3  years to complete its work. Furthermore, taking an examination past the 3- year point in anticipation of finding fraud or one of the other exceptions  permitted under the statute represents a gamble by IRS that the  investment of additional examination resources will ultimately result in an  assessment being allowed under the law.
Past Congresses have recognized the need for statute exceptions in the  face of similar compliance and enforcement obstacles. In the case of the  statute exception for unreported listed transactions, Congress delegated to  IRS the responsibility for defining the specific circumstances triggering the  exception. A statute exception for offshore examinations that balances the  additional layers of difficulty for IRS in detecting and examining offshore  cases with fairness to taxpayers involved in legitimate offshore financial  activity would strengthen IRS’s efforts to combat offshore tax evasion.  Additional time to complete examinations would give IRS greater  flexibility in choosing which examinations to open and when to close  them. This would likely lead to fewer examinations where revenue agents  abandon the pursuit of apparent noncompliance simply because they are  running out of time.
section_title: Matter for Congressional Consideration
paragraphs: In order to provide IRS with additional flexibility in combating offshore  tax evasion schemes, Congress should make an exception to the 3-year  civil statute of limitations assessment period for taxpayers involved in  offshore financial activity. Similar to Congress’s approach to unreported  listed transactions, Congress may wish to establish a process wherein IRS  would identify the types of offshore activity to which a statute exception  would apply.
section_title: Agency Comments and Our Evaluation
paragraphs: We received e-mail and oral comments from IRS’s SB/SE division and the  IRS General Counsel’s office about a draft of this report. The officials  making comments noted that a longer statute for offshore examinations  makes sense and should enhance compliance. They also discussed how  the offshore-to-nonoffshore comparisons in the draft of this report were  typically made for all types of examinations, rather than only of field  examinations. They observed that field examinations are by far the most  common type of examination used for offshore tax evasion cases and  suggested that a comparison of just field examinations would also be  useful to the reader. We agreed and we changed our discussion of  offshore-to-nonoffshore examinations to include comparisons both of all  types of examinations collectively and field examinations alone. Also in  their comments, IRS officials clarified other technical and legal issues,  which we incorporated in this report where appropriate.
As agreed with your offices, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 30 days from its  issue date. At that time, we will send copies to the Chairman and Ranking  Member, House Committee on Ways and Means; the Secretary of the  Treasury; the Commissioner of Internal Revenue; and other interested  parties. Copies will be made available to others upon request. This report  will also be available at no charge on GAO’s Web site at  http://www.gao.gov.
If you or your staff have any questions, please contact me at (202) 512-9110  or brostekm@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  Key contributors to this report are listed in appendix II.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: The objectives of this report were to (1) compare the length of and  recommended assessments yielded by offshore and nonoffshore  examinations and determine the effect of the 3-year statute of limitations  on recommended offshore assessments, (2) determine whether or not  enforcement problems posed by offshore examinations are similar to  those where Congress has previously granted an exception to the statute,  and (3) identify possible advantages and disadvantages of an exception to  the statute for offshore examinations.
To compare the length of and recommended assessments yielded by  offshore and non-offshore examination cases and determine the effect of  the statute of limitations on offshore assessments, we examined the  Internal Revenue Service (IRS) Audit Information Management System  Reference (AIMS) database, which holds all IRS’s data about completed  examinations. The database included a variety of taxpayers, including  individuals, businesses, and corporations, including large corporations. We  analyzed fiscal years 2002 through 2005, the most recent years for which  IRS had data at the time of our evaluation. We grouped all examinations  maintained in the AIMS database by whether they were offshore  examinations (as determined by the project code under which all  examinations are categorized) or not offshore examinations. We found  that there were both offshore and nonoffshore examinations represented  among all of the types of taxpayers in AIMS with the exception of excise  tax examinations, which were only found in the nonoffshore subset. We  used the AIMS data to analyze the number of days cases spent in both  development and examination and the recommended assessments from  both offshore and nonoffshore examinations. We further subdivided the  data to compare only field examinations, because these were the most  common type of offshore examination. To assess the reliability of the  AIMS data, we reviewed AIMS documentation, and conducted electronic  testing of key variables. Based on this work, we determined that the AIMS  data were sufficiently reliable for our purposes.
We spoke with 17 IRS revenue agents and managers with expertise in the  offshore area about their experience in conducting and closing offshore  examinations. We also examined 12 offshore examination case files to gain  an understanding of the circumstances that IRS revenue agents face in  dealing with noncompliant taxpayers. We spoke with IRS representatives  to gain an understanding of how cases are identified for examination, and  to determine the process by which an offshore case is developed and  examined. In addition, we reviewed various IRS documents related to the  statute of limitations on assessments, including exceptions to the statute.
To determine whether or not enforcement problems posed by offshore  cases are similar to those where Congress granted an exception to the  statute in the past, we identified enforcement problems posed by offshore  examinations. To do so, we examined IRS’s AIMS database, examined case  files and spoke with IRS representatives. We also identified enforcement  problems where Congress granted an exception to the statute in the past.  To do so, we researched the history of the federal statute of limitations for  assessments. We also reviewed legislation proposed between 2003 and  2006 that included references to either offshore tax evasion or the statute  of limitations. This included the American Jobs Creation Act of 2006 and  other legislative proposals related to the statute. In addition, we reviewed  reports prepared by the Treasury Inspector General for Tax  Administration and California state agencies related to tax avoidance  issues and the statute. We supplemented these reviews with discussions  with representatives of the California Franchise Tax Board.
To identify advantages and disadvantages of granting an exception to the  statute for offshore examinations, we interviewed representatives of  various organizations to obtain views on mandating an exception to the  statute for offshore examinations. Such an exception would afford IRS  more time to develop and examine offshore examinations. These  organizations included the American Association of Attorney—Certified  Public Accountants, American Bar Association, American Institute of  Certified Public Accountants, National Association of Enrolled Agents,  National Association of Tax Professionals, National Society of  Accountants, and National Society of Tax Professionals. We also  interviewed representatives of various organizations within the  Department of the Treasury to obtain their views. These organizations  included the IRS Small Business/Self Employed division, the Taxpayer  Advocate Service, the IRS Office of Chief Counsel, and the Department of  the Treasury Office of Tax Policy.
section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: Acknowledgments
paragraphs: In addition to the contact named above, David Lewis, Assistant Director;  Perry Datwyler; Evan Gilman; Shirley Jones; John Mingus; and Jeff  Schmerling made key contributions to this report.