Retention of Tax Accounting Records Rules

Electronic storage systems used for preserving accounting records must ensure accurate and complete transfer of hardcopy images.
Must index, store, preserve, retrieve, and reproduce electronic images of books and accounting records.
Must have controls ensuring integrity, accuracy, and reliability preventing unauthorized alterations or deterioration.
Must include inspection and quality assurance through regular evaluations and periodic checks.
Must have a retrieval system with an indexing mechanism.
Must allow reproduction of legible and readable hardcopies.
"Legibility" requires letters and numbers to be easily and positively identifiable; "Readability" means words and numbers are recognizable as complete entities.
Taxpayers must maintain descriptions of the electronic system and indexing system, and make these available to the Bureau of Internal Revenue upon request.
An "indexing system" enables identification and retrieval of stored records, akin to a traditional filing system; separate databases for indexing are optional if equivalent functionality exists.
Controls are required to protect the indexing system from unauthorized changes.

The Revenue District Office may conduct periodic tests of taxpayers' electronic storage systems.
Tests may include evaluation of equipment, software, procedures, internal controls, security, and documentation.
Taxpayers must be informed of test results within three days after the test concludes.
Failure to inform results may result in administrative liability for the Revenue Officer.
Taxpayers may appeal adverse findings to the Regional Director within 10 days.
The Regional Director shall resolve appeals within 30 days.
Tests are distinct from formal examinations or inspections for tax liability determination.
Non-compliant electronic storage systems require taxpayers to retain original hardcopies.

Internal revenue issuances or rulings inconsistent with these regulations are amended or revoked.

These regulations will take effect 15 days after publication in at least two newspapers of general circulation.