Appendix A

APPENDIX A LIMITATIONS ON DISCLOSURE OF TAX INFORMATION

SECTION 1. Definitions

For purposes of this appendix, the following definitions apply:

1.1 Hacienda. The term “Hacienda” means the Department of the Treasury of the Commonwealth of Puerto Rico.

1.2 IRS. The term “IRS” means the Internal Revenue Service U.S. Department of Treasury.

1.3 Possession Audit Agency. The term “Possession Audit Agency” means the agency, body or commission which is charged under the laws of the Commonwealth of Puerto Rico with the responsibility of auditing Possession revenues and programs.

1.4 Possession. The term “Possession” means the Commonwealth of Puerto Rico of the United States.

1.5 Hacienda Representative. The term “Hacienda Representative” means a Hacienda officer or employee designated in writing by the head of Hacienda, to the Assistant Commissioner (International) at Washington, D.C. and the Services Center Director at Philadelphia, PA, as an individual who is to inspect or receive Federal returns or Federal return information on behalf of the Hacienda as provided by section 6103(d) of the Code, but only so long as the duties and employment of such officer or employee require access to Federal returns and Federal return information for purpose of Possession tax administration.

1.6 IRS Representative. The term “IRS Representative” means an officer or employee of the IRS who has been designated in writing to the head of the Hacienda by the Assistant Commissioner (International) at Washington, D. C., or the Service Center Director at Philadelphia, PA, as an individual who is to inspect or receive Possession returns or Possession return information on behalf of the IRS, but only so long as the duties and employment of such officer or employee required access to Possession returns and return information for the purpose of Federal tax administration.

1.7 Federal return. The term “Federal Return” is defined in the same manner as provided in section 6103(b)(1) of the Code.

1.8 Federal Return Information. The term “Federal Return” is defined in the same manner as provided in section 6103(b)(2) of the Code. However, “Federal Return Information” does not include information in the hands of the Possessions which it obtained wholly from sources independent from the IRS.

1.9 Possession Return. The term “Possession Return” is defined in the same manner as provided in section 6103(b)(1) of the Code as it applies in the Commonwealth of Puerto Rico.

1.10 Possession Return Information. The term “Possession Return Information” means a taxpayer’s identity, the nature, source, or amount of his/her income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments, or tax payments, whether the taxpayer’s Possessions return was, is being, or will be examined or subject to other investigation or processing, or any other data received by, recorded by, prepared by, furnished to, or collected by the Hacienda with respect to a Possession return or with respect to determination of the existence, or possible existence, of liability (or the amount thereof) of any person under the internal revenue laws, or related statutes, of the Possession, for any tax, penalty, interest, fine, forfeiture, or other imposition, or offense.

1.11 Inspection. The term “Inspection” means any examination of a return or return information.

1.12 Disclosure. The term “Disclosure” means the making known to any person in any manner whatever a return or return information.

1.13 Possession Tax Administration. The term “Possession Tax Administration”

a) means

i. the administration, management, conduct, direction, and supervision of the execution and application of the revenue laws, or related statutes of the Possession, and

ii. the development and formulation of Possession tax policy relating to existing or proposed internal revenue laws, or related statutes, of the Possession; and

b) includes assessment, collection, enforcement, litigation, publication, and statistical-gathering functions under such laws or statutes.

1.14 Code. The term “Code” means the Internal Revenue Code of 1986, as amended, and any predecessor or successor statutes.

SECTION 2. Disclosure of Federal Returns and Federal Return Information Information

2.1 Pursuant to the laws of the Possession, the Hacienda is charged with the responsibility for the administration of Possession taxes imposed on income, inheritance, gifts, real property and excise taxes on imports used in the conduct of a trade or business. Federal returns, and Federal return information (whether originals, paper copy, photocopy, microfilm, magnetic media, or any other form) received from the IRS will be used for the purpose of, and only to the extent necessary in, Possession tax administration.

2.2 This Agreement and Appendix constitute the requisite authorization pursuant to section 6103(d)(1) of the Code for the IRS to disclose to, and permit inspection by, a Hacienda Representative of Federal returns and Federal return information relating to taxes imposed by chapters one, two, six, eleven, twelve, twenty-one, twenty-three, twenty-four, thirty-one, thirty-two, forty-four, forty-five, fifty-one, fifty-two, and subchapter D of chapter thirty-six of the Code.

2.3 Upon the occurrence of any change in employment, duties, or other relevant matters affecting a Hacienda Representative’s right to access Federal returns and Federal return information or status as a Hacienda Representative, the head of the Hacienda shall promptly advise in writing the Assistant Commissioner (International) at Washington, D.C. and the Service Center Director at Philadelphia, PA, that such individual is no longer a Hacienda Representative.

2.4 A Hacienda Representative to whom Federal return or Federal return information has been disclosed may thereafter disclose such return information:

a) to another employee of the Hacienda for the purpose of and only to the extent necessary in the administration of the Possession tax laws for which the Hacienda is responsible;

b) to a person described in section 6103(n) of the Code or to any officer or employee of such person, solely for the purpose of Possession tax Administration and in manner consistent with applicable regulations, published rules or procedures, or written communications;

c) to a legal representative of the Hacienda personally and directly engaged in, and solely for use in, preparation for a civil or criminal proceeding (or investigation which may result in a proceeding) before a Possession administration body, grand jury, or court in a matter involving Possession tax administration, if the returns and return information satisfy one or more of the criteria established in section 6103(h)(4)(A), (B) or (C); and

d) to an officer or employee of the Possession audit agency for the purpose of and only to the extent necessary in making an audit of the Hacienda.

2.5 A Federal return or Federal return information may be disclosed in a judicial or administrative proceeding pertaining to Possession tax administration, but only if the criteria established in section 6103(h)(4)(A), (B) or (C) of the Code are met.

2.6 Notwithstanding any other provision of this section, the IRS will not disclose Federal return or Federal return information under this section if such disclosure would identify a confidential informant or seriously impair a Federal civil or criminal tax investigation. The Hacienda agrees that neither it nor its legal representatives will make any further use or disclosure of a Federal return or Federal return information disclosed to a Hacienda Representative by the IRS if the IRS notifies the head of the Hacienda in writing that such further use or disclosure would identify a confidential informant or seriously impair a Federal civil or criminal tax investigation. The Hacienda further agrees that prior to the disclosure of any Federal return of Federal return information in a Possession judicial proceeding or to any party other than the taxpayer or his/her designee in a Possession administrative proceeding if the return or return information satisfies one or more of the criteria established in section 6103(h)(4)(A), (B) or (C) of the Code, the head or legal representative of the Hacienda will notify in writing the Service Center Director of Assistant Commissioner (International), from whom the return or return information was received, of the intention to make such disclosure. No officer, employee or legal representative shall disclose a Federal return or Federal return information in a Possession judicial or administrative proceeding if the Service Center Director or Assistant Commissioner (International) or their delegate, within 30 days following receipt of such written notice, informs the head or legal representative of the Hacienda that such disclosure would identify a confidential informant or seriously impair a Federal civil or criminal tax investigation.

2.7 Additionally, the Hacienda agrees that it will notify the Assistant Commissioner (International) when, during an audit of the Hacienda by the Possession Audit Agency, Federal returns and Federal return information are disclosed to the Possession Audit Agency and such information is made part of the Possession Audit Agency’s workpapers.

SECTION 3. Disclosure of Possession Returns and Possession Return Information

3.1 This Agreement and Appendix constitute the requisite authorization for the Hacienda to disclose to, and permit inspection by, IRS Representative of Possession returns and Possession return information for the purpose of, and only to the extent necessary in the administration of the internal revenue laws, or related statutes, of the United States.

Any Possession returns and Possession return information so disclosed to, or inspected by, an IRS Representative become, in the hands of the IRS, “taxpayer return information” as defined by section 6103(b)(3) of the Code and may be redisclosed by the IRS only in accordance with provisions of the Code or an applicable treaty.

SECTION 4. Safeguards and Other Requirements

4.1 As an express condition for the inspection and disclosure of Federal returns and Federal return information, the Hacienda agrees to comply with the safeguards and requirements prescribed by section 6103(p)(4) of the Code and any implementation of such safeguards and requirements as may be provided by regulations and published procedures including:

a) furnishing an annual report to the IRS describing the procedures established and utilized by the Hacienda for ensuring ‘the confidentiality of such returns and return information;

b) permitting the IRS to review the extent to which the Hacienda is complying with the requirements of this paragraph; and

c) informing in writing all Hacienda Representatives and other persons to or by whom disclosure or inspection of Federal return or Federal return information is authorized of the criminal penalties and civil liability provided by sections 7213 and 7431 of the Code for a disclosure of such returns and return information which is unauthorized by the Code.

4.2 As an express condition for the inspection and disclosure of Possession returns and Possession return information, the IRS agrees to comply with the safeguards and requirements prescribed by section 6103(p)(4) of the Code and any implementation of such safeguards and requirements as may be provided by regulations and published procedures.

4.3 Processing of Federal returns and Federal return information received by the Hacienda from the IRS in the form of microfilms, photo-impressions, magnetic media or other format (including reformatting or reproduction, or conversion to magnetic media, punch cards, or hard copy printout) and transmission and storage of such Federal returns or Federal return information by or on behalf of the Hacienda may be performed by Hacienda owned and/or operate computer facilities, facilities shared by the Hacienda with other Possession agencies, or by any other person described in section 6103(n) of the Code, the Hacienda will insure the confidentiality of the Federal returns and Federal return information provided to such shared facility or person. As part of this responsibility, the terms of any contract or agreement between the Hacienda and a shared computer facility or other person to whom Federal returns or Federal return information is or may be disclosed for a purpose described in this subsection, will provide, or will be amended to provide, that such person, and officers and employees of the person, will comply with the applicable safeguard conditions contained in regulations, published rules and procedures, or written communications.

4.4 Because some taxpayers may be unaware that Hacienda tax officials are authorized under Federal law to obtain Federal returns and Federal return information for Possessions tax administration purposes, the Hacienda will publicize, in a manner satisfactory to the IRS, that such returns or return information were obtained pursuant to specific authority granted by the Code. Similar publicity will be provided by the IRS for Possession tax information furnished to the IRS pursuant to Possession law.

SECTION 5. Limitations

5.1 Pursuant to the provisions of section 6103(p)(2) of the Code, and of Possession law, if any, charges for furnishing returns and return information shall be governed by Article 5, paragraph 3 of the Agreement.

5.2 Under no circumstances will the Hacienda permit any Federal return or Federal return information to be inspected by, or disclosed to an individual who is the chief executive officer of the Possession or any person other than one described in section 2 of this Appendix.

5.3 Notwithstanding any other provision of this Appendix, the IRS will not disclose or make known in any manner whatever to any person other than one described in Section 2 of this Appendix

a) any original, copy, or abstract of any return, payment, or registration made pursuant to chapter 35 of the Code (relating to taxes on wagering);

b) any record required for making any such return, payment, or registration made or required pursuant to chapter 35 which the IRS is permitted by the taxpayer to examine or which is produced pursuant to section 7602 of the Code (relating to the examination of books and witnesses); or

c) any information obtained by the exploitation of any such return, payment, registration, or record made or required pursuant to chapter 35.

5.4 Notwithstanding any other provision of this Agreement or Appendix, the Internal Revenue Service will disclose or make known in any manner to any person described in section 2 of this Appendix taxpayer information which was obtained pursuant to a tax convention or exchange of information agreement between the United States and a foreign government only if such disclosure is authorized by both the relevant convention or agreement and the Code.

SECTION 6. Officials to Contact for Obtaining Information

6.1 Requests by the Hacienda for Federal returns and Federal returns information should be made to the officials named below:

a) Requests by the Hacienda for Federal return information in magnetic media should be made to the Assistance Commissioner (International), Attn: Disclosure Officer, who will be responsible for coordinating the requests with the IRS National Office;

b) Requests for physical inspection or copying of Federal returns, or requests for audit abstracts and reports pertaining to such returns, showing addresses within the possession should be made to the Director, Internal Revenue Service Center, Philadelphia, PA. Attn: Disclosure Officer, who will be responsible for making the proper arrangements for inspection or copying; and

c) Request by the head of the Hacienda for Federal returns of taxpayers or Federal return information relating to taxpayers showing addresses outside the possession should be made to the Assistant Commissioner (International), Attn: Disclosure Officer.

6.2 Requests by authorized officers and employees of the IRS for inspection or copying of Possession returns and Possession return information should be made to the Assistant Secretary for Internal Revenues and Collections.