New Mandatory IDR Enforcement Procedures for LB&I Examinations

By John Keenan, J.D., Washington, D.C.; Lisa Keith, J.D., Boston; and Diana Hoshall, J.D., Washington, D.C.

Editor: Jon Almeras, J.D., LL.M.

The IRS’s Large Business and International Division (LB&I) has recently focused on implementing significant changes to its information-gathering process by changing procedures for information document requests (IDRs). On Nov. 4, LB&I released the internal directive LB&I-04-1113-009 (the November directive), which provides guidance on the new IDR enforcement process that was effective Jan. 2, 2014. The November directive supplements the earlier LB&I guidance issued on June 18 (LB&I-04-0613-004, the June directive), which announced a new IDR drafting policy.

Taxpayers should be aware that all LB&I examinations are to be conducted in accordance with the policies in these directives.

The June Directive

The June directive announced LB&I’s new policy for IDRs issued after June 30, 2013. The stated purpose of the new policy is to increase the efficiency of the IDR process by ultimately decreasing the need to use summonses to gather information during an examination. The June directive instructs LB&I examiners and specialists to follow the IDR practices, as set forth in the directive, when gathering information during an examination. Specifically, it requires LB&I examiners to (1) draft issue-focused IDRs, wherein the examiner must identify and state the issue that has led the examiner to request the information included in the IDR; (2) discuss the underlying issue and content with the taxpayer before issuance; and (3) discuss with the taxpayer the appropriate deadline for responding to the IDR.

The policies set forth in the June directive apply to all IDRs issued after June 30, 2013. Furthermore, existing IDR memorandums of understanding between the IRS and a taxpayer that do not comply with the principles of the June directive were no longer effective. Finally, the directive stated that changes to the IDR enforcement process would be forthcoming once the IRS had implemented new policies for issuing IDRs. To ensure compliance with the June directive, all LB&I examiners and specialists were required to attend mandatory training intended to reinforce best practices for information gathering.

The November Directive

The November directive contains the enforcement process referenced in the June directive. The enforcement process requires LB&I examiners and specialists to follow a three-step process once an IDR response is determined to be delinquent. LB&I examiners must:

  1. Issue a delinquency notice that provides the taxpayer a specified period in which to provide the requested information;
  2. If the delinquency continues, issue a presummons letter granting the taxpayer an additional period of time (generally 10 days) to provide the requested information; and
  3. If a taxpayer does not provide an IDR response within the specified period in the presummons letter, initiate the process to issue a summons to the taxpayer.

The IRS has indicated that this enforcement process was implemented to give LB&I examiners the ability to manage the flow of information consistently and conduct examinations comprehensively with minimal delay.

New Enforcement Procedures

Under Sec. 7602, the IRS has the authority to examine any books, papers, records, or other data that are relevant to the matters required to be included in any return and to summons any person having this information. Rather than seek information by issuing summonses, the IRS usually requests information by issuing an IDR to the taxpayer. If the taxpayer fails to remit the requested information by the IDR’s due date, the IRS may seek to compel production of the requested documents by issuing a summons and pursuing enforcement of the summons in court. The IRS must file a petition in a U.S. district court to enforce a summons and to order the summonsed party to comply (see Sec. 7402, and, e.g., Gilleran, 992 F.2d 232 (9th Cir. 1993), and Samuels, Kramer & Co., 712 F.2d 1342 (9th Cir. 1983)).

Effective Jan. 2, 2014, the mandatory three-step enforcement process in the November directive applies if information requested in an IDR that was issued in accordance with the June and November directives is not received by the response deadline. The November directive provides that an IDR that does not meet the requirements of the directives must be reissued with a new response date. At that point, the new enforcement process will apply to the updated IDR. The new IDR enforcement process is a significant change in procedures in that it limits an LB&I examiner’s discretion to extend the deadline for responding to an IDR.

Delinquency Notice (Letter 5077)

The first step in the enforcement process is the issuance of a delinquency notice as soon as possible after an IDR response date has passed. Once an IDR is considered delinquent, the case manager and exam team must meet with the taxpayer’s main contact to discuss and document the reasons for the delay in providing the requested material. The IRS training provides that this meeting ideally should take place the day after the delinquency occurs; however, practically speaking, it should take place no more than 10 days later.

Regardless of when the meeting with the taxpayer takes place, a delinquency notice must be issued and delivered to the taxpayer within 10 calendar days following the IDR’s due date. The notice will be issued for any outstanding items requested in the IDR, regardless of the taxpayer’s explanations for the delinquent response or prior requests for additional time to respond to an IDR.

At the LB&I examiner’s discretion, the delinquency notice can provide the taxpayer with additional time to respond to the IDR, not to exceed 15 days. Any longer extension must be approved by the IRS territory manager. The exam team will consider prior taxpayer compliance when determining whether to grant additional time.

It should be emphasized that the IRS will issue a delinquency notice for IDRs that have been only partially completed. The enforcement process provides that if any part of the IDR is not completed by the due date, the IDR is considered delinquent. The delinquency notice must detail the information that is still required to be provided and reference the IDR number.

Presummons Letter (Letter 5078)

If the taxpayer does not provide the information sought in the IDR within the time frame provided by the delinquency notice, the IRS will issue a presummons letter. This is the final notice that a taxpayer will receive requesting a response to the IDR before a summons is issued.

According to the November directive, the LB&I examiner or specialist will discuss a taxpayer’s failure to comply with the delinquency notice with the team manager, specialist manager, the respective territory managers, and IRS counsel. The appropriate territory manager will then discuss the presummons letter with the taxpayer, explaining the next steps in the enforcement process if the information requested in the IDR is not provided by the response date.

The presummons letter must be issued within 14 calendar days after the taxpayer’s failure to comply with the delinquency notice’s response date. A response to the presummons letter will generally be required within 10 calendar days of its issuance. Only a director of Field Operations can approve a response date longer than 10 calendar days.

A significant point of the enforcement process is that the LB&I examiner or specialist will not issue the presummons letter to the taxpayer’s primary contact; instead, the letter will be issued to, and discussed with, the next level of the taxpayer’s management. According to the IRS, the reason for this procedure is to ensure that the IDR delinquency has come to the attention of the appropriate level of management within the corporate taxpayer.


If the taxpayer fails to timely respond to the presummons letter, or the response is considered incomplete, the IRS examiner will coordinate issuing a summons with IRS counsel. If the taxpayer fails to comply with the summons, the IRS will seek to enforce the summons in district court.


The new enforcement process represents a significant shift in the IDR process. Historically, the IDR process allowed more flexibility between the LB&I examiner and the taxpayer as to the flow of information during an examination. Previously, under Internal Revenue Manual Section, Delinquent Procedures, a series of meetings would commence once an IDR was 15 days delinquent. The examination team had discretion to grant taxpayers additional time to respond to an IDR. The manual provision stated that generally only when an IDR was 90 calendar days delinquent would the IRS consider issuing a summons.

The mandatory three-step enforcement process in the November directive removes an LB&I examiner’s discretion to extend the deadline after an IDR has been issued. On Nov. 22, LB&I Commissioner Heather Maloy further reinforced the rigidity of the new enforcement process, stating that, even if an unforeseen situation causes a taxpayer to miss an IDR deadline, the new enforcement procedures offer no alternative to the issuance of a delinquency notice (see Arora, “No Avoiding Delinquency Notice If IDR Deadline Missed, Maloy Says,” 2013 TNT 227-5 (Nov. 25, 2013)).

LB&I taxpayers and practitioners should be aware of the impact of this new policy and understand the emphasis on IDR due dates. Taxpayers should be advised of the nature of the enforcement process—the potential three steps and the requirements for taxpayers to provide timely responses. In light of the new enforcement process, taxpayers should consider actively participating in the IDR process by performing actions such as reviewing drafts of IDRs before the LB&I examiner issues them or setting IDR deadlines that take into account unforeseen contingencies that may affect response times.


Jon Almeras is a tax manager with Deloitte Tax LLP in Washington, D.C.

For additional information about these items, contact Mr. Almeras at 202-758-1437 202-758-1437 or

Unless otherwise noted, contributors are members of or associated with Deloitte Tax LLP.

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