SECTION 5. RETAINING MACHINESENSIBLE RECORDS

.01 General.

(1) The taxpayer must retain machine-sensible records so long as their contents may become material to the administration of the internal revenue laws under § 1.6001–1(e). At a minimum, this materiality continues until the expiration of the period of limitation for assessment, including extensions, for each tax year. In certain situations, records should be kept for a longer period of time. For example, records that pertain to fixed assets, losses incurred under § 832(b)(5), and LIFO in

.01 Records.

(1) The requirements of this revenue procedure pertain to all matters under the jurisdiction of the Commissioner of Internal Revenue including, but not limited to, income, excise, employment, and estate and gift taxes, as well as employee plans and exempt organizations.

(2) The requirements of this revenue procedure are applicable to any sections of the Code that have unique or specific recordkeeping requirements. For example, machine-sensible records maintained by the taxpayer to meet the requirements of § 274(d) relating to the amount, time, place, and business purpose of a business expense must meet the requirements of this revenue procedure.

(3) Except as otherwise provided in this revenue procedure, all requirements of § 6001 that apply to hardcopy books and records apply as well to machine-sensible books and records that are maintained within an ADP system.

.02 Taxpayers.

(1) A taxpayer with assets of $10 million or more at the end of its taxable year must comply with the record retention requirements of Rev. Rul. 71–20 and the provisions of this revenue procedure. For purposes of this revenue procedure, a controlled group of corporations, as defined in § 1563, is considered to be one corporation and all assets of all members of the group are aggregated.

(2) A taxpayer with assets of less than $10 million at the end of its taxable year must comply with the record retention requirements of Rev. Rul. 71–20 and the provisions of this revenue procedure if any of the following conditions exists:

(a) all or part of the information required by § 6001 is not in the taxpayer’s hardcopy books and records, but is available in machine-sensible records;

(b) machine-sensible records were used for computations that cannot be reasonably verified or recomputed without using a computer ( e.g., Last-In, First-Out (LIFO) inventories); or

(c) the taxpayer is notified by the District Director that machine-sensible records must be retained to meet the requirements of § 6001.

(3) A Controlled Foreign Corporation (CFC), a domestic corporation that is 25 percent foreign-owned, and a foreign corporation engaged in a trade or business within the United States at any time during a taxable year that maintains machinesensible records within an ADP system must comply with the requirements of this revenue procedure to satisfy the recordkeeping requirements of §§ 964(c), 982(d), 6038A(c)(4), and 6038C (and the regulations thereunder).

(4) An insurance company that maintains machine-sensible records within an ADP system to determine losses incurred under § 832(b)(5) must comply with the requirements of this revenue procedure and Rev. Proc. 75–56, 1975–2 C.B. 596. For this purpose, the machine-sensible records for a particular taxable year include the records for that year and the seven preceding years, all of which must be retained so long as they may become material to the examination of an insurance company’s federal tax return.

(5) A taxpayer’s use of a third party (such as a service bureau, time-sharing service, value-added network, or other third party service) to provide services (e.g., custodial or management services) in respect of machine-sensible records does not relieve the taxpayer of its recordkeeping obligations and responsibilities under § 6001 and this revenue procedure.