Rev. Proc. 76-43

Section 1. Purpose.

.01 The purpose of this Revenue Procedure is to update Rev. Proc. 75-33, 1975-2 C.B. 559, which sets forth the conditions under which microfilm (including microfiche) reproduction of general books of account, such as cash books, journals, voucher registers, ledgers, etc., and supporting records of detail will be considered books and records within the meaning of section 6001 of the Internal Revenue Code of 1954.

.02 The following changes have been made to Rev. Proc. 75-33. Previous section 3.03 which permitted a data processing activity to pass along approval of its micrographic system to its taxpayer-users has been eliminated. Previous sections 3.04-6(e) and (f) relating to full size reproduction of documents and image reproduction have been eliminated. A general requirement for legibility and readability has been added in new section 4.01-1. New sections 4.01-2 and 4.01-7 contain revised requirements for archival quality replacing previous sections 3.04-1 and 3.04-2(d). A formula for determining minimum resolution for paper document filming in new section 4.01-5 replaces the requirement in previous section 3.04-2(c). A requirement that taxpayers establish a system of inspection and quality control has been added in new section 4.01-8. New section 4.01-9, replacing previous section 3.04-5, requires that taxpayers will make available upon request by the Service a reader-printer at the examination site.

Sec. 2. Background.

Rev. Rul. 75-265, 1975-2 C.B. 460, holds that the microfilm (including microfiche) reproduction of general books of account will be considered books and records within the meaning of section 6001 of the Code when such books and records are in accordance with Rev. Proc. 75-33.

Sec. 3. Procedure.

.01 Taxpayers having a micrographic system that includes the ability to produce records on microfilm directly on-line from the computer or off-line from magnetic tape and taxpayers having records photographed onto microfilm from original documents, "hard copy" printouts, etc., wishing to retain books and records on microfilm must meet the standards set forth in section 4 of this Procedure.

.02 Taxpayers wishing to microfilm general books of account (ledgers, journals, voucher registers, etc.) must submit in writing to their District Director a description of their micrographic system. The description of the micrographic system should include specific information as to how the system conforms with the requirements set forth in this Revenue Procedure.

.03 Permission to retain general books of account on microfilm will be granted only after the Service reviews the taxpayer's micrographic system.

.04 Microfilm may be used for supporting records of details, such as payroll records, cancelled checks, invoices, vouchers, etc., without permission, provided the system meets the requirements set forth in section 4 of this Procedure.

Sec. 4. Standards.

.01 The following standards shall apply to microfilm (including microfiche) submitted to the Service:

1. Microfilm when displayed on a microfilm reader (viewer) or reproduced on paper must exhibit a high degree of legibility and readability. For this purpose, legibility is defined as the quality of a letter or numeral which enables the observer to positively and quickly identify it to the exclusion of all other letters or numerals. Readability is defined as the quality of a group of letters or numerals of being recognizable as words or whole numbers.

2. Microfilm stock to be used for preservation of documents (as set forth in this Revenue Procedure) shall be safety-base permanent record film, as specified in American National Standard Institute (ANSI) PH Series: PH 1.25 "Specifications for safety Photographic Film."

(a) The required master record on microfilm shall be permanent record film as specified in ANSI PH 1.28 "Specifications for photographic film for archival records, Silver Gelatin-type, on Cellulose Ester Base" or PH 1.41 "Specifications for photographic film for archival records, Silver Gelatin-type, on Polyester Base."

(b) In addition to the master record the taxpayer may provide a working copy of the microfilm. The working copy may be silver, diazo or vesicular type on a safety-base of cellulose ester or polyester material.

3. On negative microfilm of paper documents, the background density shall be between 0.9 and 1.31. On negative microfilm produced by Computer Output Microfilm (COM), the background density shall be a minimum of 1.1. These requirements apply to both master microfilm and duplicates (copies).

4. On positive microfilm, both from paper documents and COM produced, the background density shall be between 0.04 and 0.40.

5. For paper document filming, the required resolution is to be based on the National Bureau of Standard's Microcopy Resolution Test Chart (Standard Reference Material 1010) using the equation:

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6. A detailed index of all microfilmed data shall be maintained and arranged in such a manner as to permit the immediate loctaion of any particular record.

7. Taxpayers will provide for appropriate processing, preservation and maintenance of microfilmed records, making them readily available for as long as the contents thereof may become material in the administration of any Internal Revenue law. Archival quality (as defined in ANSI PH 1.28, PH 1.41 and PH.4.8) is required for records requiring long term retention (greater than 10 years). Commercial permanence will be considered adequate for other records. Microfilmed records stored and maintained in accordance with ANSI PH 5.4 will be considered adequate.

8. Taxpayers shall establish a system of inspection and quality control sufficient to ensure that standards 1-7 above are consistently maintained.

9. Taxpayer will make available upon request by the Service a reader-printer at the examination site for the ready reading, location and reproduction of any record or records being maintained on microfilm.

10. The following standards shall apply to the reader-printers made available to the Service:

(a) The equipment shall be in a clean condition and in good working order.

(b) Maintenance of this equipment shall have been in accordance with the manufacturer's specifications.

(c) The equipment shall provide safety features in accordance with UL standards (UL approval not required) and have adequate heat and temperature controls to prevent the damaging of the microfilm being viewed.

(d) The equipment shall have the capability of displaying and printing an entire frame.

(e) This display device shall provide for right reading with the top of the material appearing at the top of the screen.

Sec. 5. Effect on Other Documents.

Microfilm books of account will add another class of records to those described in Rev. Proc. 64-12, 1964-1 (Part 1) C.B. 672. Retention of machine-sensible records under Rev. Rul. 71-20, 1971-1 C.B. 392, is still required (microfilm is not to be considered machine-sensible media). Rev. Proc. 64-12 is amplified. Rev. Proc. 75-33 is superseded.