SECTION 5. DRAFTING

INFORMATION

The principal author of this notice is J. David Varley of the Office of Associate Chief Counsel (International). For further information regarding this notice, contact Mr. Varley at (202) 435–5262 (not a toll-free call).

April 16, 2007 971 2007–16 I.R.B.

ATTACHMENT TO NOTICE 2007–31

WORKING ARRANGEMENT BETWEEN

INTERNAL REVENUE SERVICE DEPUTY COMMISSIONER (INTERNATIONAL), LMSB

AND BUREAU OF INTERNAL REVENUE

UNITED STATES VIRGIN ISLANDS CONCERNING ROUTINE (AUTOMATIC) EXCHANGE OF INFORMATION

I. Introduction

This Working Arrangement between the competent authorities of the United States and the U.S. Virgin Islands (the “parties”) sets forth the agreement of the parties with respect to an initiative to facilitate information sharing for tax administration purposes in conjunction with Internal Revenue Service (IRS) Notices 2007–19 and 2007–31.

II. Authority

The authority for this Working Arrangement is the Tax Implementation Agreement between the United States of America and the Virgin Islands dated February 24, 1987 (the “Implementation Agreement”). Pursuant to Article 4(2)(c) of the Implementation Agreement, this Working Arrangement expands the information to be routinely (automatically) exchanged by the U.S. Virgin Islands to the IRS under Article 4(2)(b) of the Implementation Agreement.

III. Purpose

This Working Arrangement serves to carry out the purposes of Notices 2007–19 and 2007–31, by establishing a new routine exchange of information program between the IRS and the U.S. Virgin Islands Bureau of Internal Revenue (BIR) concerning income tax information of certain taxpayers who file an income tax return with U.S. Virgin Islands under section 932(c)(2) of the Internal Revenue Code of 1986, as amended (the “Code”). The IRS will use the information to identify and examine such taxpayers and to encourage those taxpayers to comply with U.S. federal income tax laws and regulations. This Working Arrangement and any requests for information or information exchanged pursuant to it and the Implementation Agreement constitute tax convention information under Code section 6105.

IV. Procedures and Requirements

Unless otherwise agreed to by the parties or specified in the request for information, the parties agree as follows:

A. The IRS will specify the information to be provided by the BIR in a written request for information to the BIR.

B. The BIR will provide electronic files of the requested information, including all income tax returns with schedules, statements, and attachments. The electronic files will be saved, indexed, and transmitted by the BIR to the IRS in accordance with instructions provided in the request for information.

C. All income tax returns will be date stamped by the BIR in a clearly legible manner that does not obstruct any taxpayer information on the return.

D. The BIR will provide all requested information in accordance with the following schedule:

1. With respect to all income tax returns that are timely filed with the BIR, within 90 days after the original due date or, to the extent the taxpayer timely files pursuant to a valid extension, within 90 days after the extended due date.

2. With respect to all delinquent returns, amended returns, and any other requested information filed with the BIR and not covered by paragraph D.1. (above), within 90 days after the end of the calendar-year quarter during which the requested information was received by the BIR.

V. Disclosure, Safeguards, and Recordkeeping Requirements

A. All information obtained under this Working Arrangement must be safeguarded in accordance with the Implementation Agreement as well as the safeguards described in IRS Publication 1075, Tax Information Security Guidelines for Federal, State, and Local Agencies .

B. Nothing in this Working Arrangement will cause the IRS or BIR to disclose information that is normally protected by governmental, attorney/client, or attorney work product privileges consistent with applicable laws, or any other information that is prohibited from disclosure. See IRM Section 11.3.32.17, Restrictions on Disclosure of Returns and Return Information .

C. Neither the IRS nor the BIR will disclose return information that would identify a confidential informant or seriously impair any civil or criminal tax investigation.

2007–16 I.R.B. 972 April 16, 2007

D. To the extent the BIR withholds a tax return and/or return information pursuant to paragraphs B. or C. (above), the BIR will provide the IRS with a privilege log that explains in sufficient detail the reason(s) for withholding the information.

VI. Costs

Pursuant to Article 5(3) of the Implementation Agreement, the IRS and the BIR agree not to charge each other for the costs of reproduction of information routinely exchanged. Further, prior to making any claim for reimbursement of extraordinary costs incurred in providing assistance, the BIR will consult with and provide an estimate of such costs to the IRS.

VII. Third Party Rights

This Working Arrangement does not confer any rights or benefits on any third party.

VIII. Taxable Periods

This Working Arrangement applies to income tax returns and other information filed with the USVI for taxable years ending on or after December 31, 2006.

IX. Amendment or Termination

This Working Arrangement will become effective on the date of the last signature below and will remain in force until terminated. This Working Arrangement will terminate on the first of the following to occur:

A. Termination of the Implementation Agreement, in which event this Working Arrangement will automatically terminate on the date on which termination of the Implementation Agreement becomes effective pursuant to Article 9 of the Implementation Agreement; or

B. Mailing or other delivery of written notice of termination by the IRS or the BIR to the other party. However, not less than 30 days prior to delivering such written notice, the terminating party must advise the other party in writing of its reasons for wishing to terminate this Working Arrangement. A notice of termination will be effective with respect to taxable years ending on or after December 31 ^st of the following year. For example, if the BIR provides written notice to the IRS on August 31, 2009, that it is exercising its rights under this termination clause, then the BIR will be relieved of its responsibilities under this Working Arrangement with respect to taxable years ending on or after December 31, 2010.

X. Limitations

The terms of this Working Arrangement are not intended to alter, amend, or rescind any provisions of U.S. federal law. Any provision of this Working Arrangement that conflicts with U.S. federal law will be null and void. Nor are the terms of this Working Arrangement intended to alter, amend, or rescind any provisions of the Implementation Agreement now in effect. In any situation where a conflict arises between the provisions of this Working Arrangement and the Implementation Agreement, the provisions of the latter will govern.

XI. Approvals

For the Virgin Islands Bureau of Internal Revenue:

By: Gizette L. Thomas Acting Director U.S. Virgin Islands Bureau of Internal Revenue Signed at , this day of , 2007.

For the Internal Revenue Service:

By: Frank Y. Ng Deputy Commissioner (International), LMSB Internal Revenue Service Signed at Washington, DC this day of , 2007.

April 16, 2007 973 2007–16 I.R.B.

was present in, a foreign country, if the individual left the country during a period for which the Secretary of the Treasury, after consultation with the Secretary of State, determines that individuals were required to leave because of war, civil unrest, or similar adverse conditions that precluded the normal conduct of business. An individual must establish that but for those conditions the individual could reasonably have been expected to meet the eligibility requirements.

.04 For 2006, the Secretary of the Treasury, in consultation with the Secretary of State, has determined that war, civil unrest, or similar adverse conditions precluded the normal conduct of business in the following countries beginning on the specified date:

26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement; determination of correct tax liability. (Also: Part I, § 911, 1.911–1.)

Rev. Proc. 2007–28