Revenue Procedure 80-6

Revenue Procedure 80-6

Internal Revenue Service

1980-1 C.B. 586

26 CFR 601.203: Offers in compromise.

(Also Part I, Section 7122; 301.7122-1.)

Rev. Proc. 80-6

SECTION 1. PURPOSE

The purpose of this revenue proce-due is to set forth the jurisdictional changes pertaining to the considera-tion and disposition of offers in com-promise under Delegation Order No. 11 (Rev. 11) , 1979-2 C.B. 481; to outline general guidelines relating to the acceptability of an offer in com-promise; and also to supersede and restate in a current document the practices and procedures set forth in prior revenue procedures applicable to comparable positions and organi-zational components.

SEC. 2. DECENTRALIZED AREAS OF RESPONSIBILITY

.01 Certain functions of the Com-missioner of Internal Revenue with respect to the compromise of civil cases involving doubt as to liability or col-lectibility, incurred under the regu-latory provisions of the Internal Rev-enue Code and related statutes have been delegated under Order No. 11 (Rev. 11) as follows:

1 Assistant Commissioner (Compli-ance), for cases originating in the Office of International Operations, and Regional Commissioners.-Dele-gated authority to accept, under sec-tion 7122 of the Code, compromises of civil cases involving tax liabilities of $100,000 or more (including any interest, penalty, additional amount or addition to tax) based solely upon doubt as to liability. `This authority may not be redelegated.

2 Director, Collection Division and Regional Commissioners.-Delegated authority to accept, under section 7122, compromises of civil cases in-volving liabilities of $100,000 or more (including any interest, penalty, addi-tional amount or addition to tax) based on doubt as to collectibility or doubt as to both collectibility and liability and offers submitted under section 3469 of the Revised Statutes, as amended (31 U.S.C. 194) insofar as claims arising in the administra-tion of the Internal Revenue laws are concerned. This authority may not be redelegated.

3 District Directors, the Director of International Operations, Assistant District Directors and the Assistant Director of International Operations. -Delegated authority to accept, un-der section 7122, compromises of civil cases involving liabilities under $100,000 (including any interest, pen-alty, additional amount or addition to the tax), to accept offers involving specific penalties, and reject offers to compromise civil cases (subject to the appeal procedures prescribed by sec-tion 6 of this revenue procedure) re-gardless of the amount of the liability involved. This authority may not be redelegated except that the authority to reject offers may be redelegated, but not lower than to Division Chief. The District Director in a streamlined district may not redelegate this au-thority. In addition, those Service officials delegated rejection authority are authorized to close, regardless of the amount of the liability involved, by written notification to the offeror, all compromise cases where the offer has been withdrawn.

4 Regional Directors of Appeals, Chiefs and Associate Chiefs, Appeals Offices.-Delegated authority to ac-cept, under section 7122, compromises of civil cases involving liabilities under $100,000 (including any interest, penalty, additional amount or addi-tion to the tax), to accept offers in-volving specific penalties, and reject offers to compromise civil cases re-gardless of the amount of the liability involved. This authority may not be redelegated.

5 Service Center Directors and As-sistant Service Center Directors.-Delegated authority to accept, under section 7122, compromises of civil cases under $100,000 involving penalty liabilities based solely on doubt as to liability, and reject offers in com-promise, limited to penalties (subject to the appeal procedures prescribed by section 6 of this revenue proce-dure), regardless of the amount of the liability involved. This authority may be redelegated, but not lower than to Division Chief. In addition, those Service officials delegated rejection authority are authorized to close, re-gardless of the amount of the liability involved, by written notification to the offeror, all compromise cases where the offer has been withdrawn.

The above delegations are "limited" to the extent that the delegated au-thority must be exercised in accordance with the limitations prescribed by sec-tion 301.7122-1 of the Regulations on Procedure and Administration and with procedures established by the National Office. See section 3 with re-spect to offers excepted from this dele-gated authority.

.02 Appeals Offices.-The District Director, Director of International Operations or Service Center Director refers two types of offer in compro-mise cases for consideration by the appropriate Office of Regional Direc-tor of Appeals. The first type relates to offers in compromise based in whole or in part on doubt as to liability, which liability, irrespective of the amount involved, is pending before or was determined by an Appeals office. The second type involves consideration of a taxpayer's appeal from a rejection or proposed rejection by the District Director, Director of International Operations or Service Center Director. (The procedure governing appeals is applicable only to those offers with respect to which the Directors have processing jurisdiction and which re-late to a tax over which the Appeals office has authority to function. See section 3.01.) In considering either type of case referred to above, the Appeals office may call upon the originating office to conduct any in-vestigation considered necessary to reach a conclusion on the disposition of the offer. See section 6.02.

.03 Chief Counsel. -The Chief Counsel has delegated authority to review and dispose of offers in com-promise to the Director, General Liti-gation Division, for cases that are accepted or rejected at the National Office of the Commissioner, and to the Regional Counsel or delegate. C.C. Order 1030.113. The following legal functions are performed by these delegates

1 The Director, General Litigation Division, reviews cases recommended for acceptance by the Director of In-ternational Operations involving lia-bilities of $100,000 or more (including any interest, penalty, additional amount or addition to the tax) and any other cases referred to the Na-tional Office of the Commissioner, signs the legal opinion required under section 7122 (b) , and forwards the case to the appropriate delegated Service official for signature on the Abstract and Statement and issuance of the acceptance letter.

2 The Regional Counsel, for cases involving liabilities of $100,000 or more, and the District Counsel re-views

(a) Cases recommended for accept-ance prepared by the District Director which involve liabilities (including any interest, penalty, additional amount or addition to the tax) of $500 or more, those relating to specific penalties, and those submitted under section 3469 of the Revised Statutes, as amended (31 U.S.C. 194), insofar as claims Arising in the administration of the Internal Revenue laws are concerned; signs the legal opinion required under sec-tion 7122(b), and then forwards the case to the appropriate delegated Service official (depending upon the amount of the liability) for signature on the Abstract and Statement and issuance of the acceptance letter.

(b) Cases recommended for accept-ance prepared by Service Center Di-rectors which involve penalty liabilities of $500 or more, signs the legal opinion required under section 7122(b) of the Code, and then forwards the case to the appropriate delegated Service offi-cial (depending upon the amount of the liability) for signature on the Abstract and Statement and issuance of the acceptance letter; and

(1) Cases in which recommenda-tions for prosecution are pending in the Office of the Chief Counsel, the Department of justice, or Offices of United States Attorneys, including cases in which criminal proceedings have been instituted but not disposed of, and related cases in which offers in compromise have been submitted or are pending;

(2) Cases in which the taxpayer is in receivership or is involved in a pro-ceeding under any provision of the Bankruptcy Act;

(3) Cases in which the taxpayer is deceased; in joint liability cases, where either taxpayer is deceased;

(4) Cases involving proposals to discharge property from the effect of tax liens or to subordinate the lien or liens;

(5) Cases involving insolvent banks;

(6) Cases involving assignments for the benefit of creditors;

(7) Cases involving liquidation pro-ceedings; and

(8) Other cases in which court proceedings are pending, except cases pending before the Tax Court of the United States .

Where appropriate, Regional Coun-sel or District Counsel prepares the legal opinion required under section 7122(b), and forwards the case to the appropriate delegated Service official (depending upon the amount of the liability) for signature on Counsel's determination and issuance of the ap-propriate letter to the offeror.

3 The Regional Counsel, where appropriate, and the District Counsel furnishes legal advice in the form of an advisory opinion when the District Director or Service Center Director submits a specific request involving a question of law or regarding which, for any other reason in the judgment of the Director, Counsel's opinion should be obtained.

SEC. 3. LIMITATIONS ON DELEGATED AUTHORITY

.01 Regardless of the amount of the liability involved, the Assistant Com-missioner (Compliance), the Director, Collection Division, Regional Com-missioners, District Directors, the Di-rector of International Operations, Assistant District Directors, the Assist-ant Director of International Opera-tions, Service Center Directors, Assist-ant Service Center Directors, Regional Directors of Appeals, and Chiefs and Associate Chiefs, Appeals Offices have not been delegated authority to accept offers in compromise in the following classes:

1 Cases in which recommendations for prosecution are pending in the Department of justice or United States Attorneys' offices, including cases in which criminal proceedings have been instituted but not disposed of.

2 Cases in which recommendations for prosecution or defense are pending in the Office of the Chief Counsel, and in related cases in which offers in compromise have been submitted.

3 Cases in which the acceptance of an offer by the Internal Revenue Service is dependent upon the accept-ance of a related offer or a settlement under the jurisdiction of the Depart-ment of Justice.

4 Cases arising under laws relating to alcohol, tobacco and firearms taxes.

5 Cases involving liabilities "in suit," including those where the tax lien has been reduced to judgment.

SEC. 4. GENERAL GUIDELINES RE-LATING TO THE ACCEPTABILITY OF AN OFFER IN COMPROMISE

.01 The compromise of a tax lia-bility rests upon but one or both of two grounds-(1) doubt as to liability or (2) doubt as to collectibility. The doubt as to liability must be supported by evidence and the amount accept-able will depend upon the degree of doubt found in the particular case. Where doubt as to collectibility is involved, an acceptable offer must reflect all that can be collected from a taxpayer's income, present or pro-spective, after giving effect to all pri-orities granted to the Government. In any case involving a large liability and a nominal offer, or involving a crimi-nal violation under the Internal Rev-enue laws, additional consideration is usually required for the acceptance of offers based in whole or in part on inability to pay. The additional con-sideration required is dependent upon the facts in the particular case, but generally is provided for by the sub-mission of collateral agreements. The agreements most commonly employed pertain to payments from future in-come and, where applicable, to the relinquishment of certain present or potential tax benefits.

.02 A Statement of Financial Con-dition and Other Information, Form 433, signed by the taxpayer, is required in all offer in compromise cases based on the taxpayer's inability to pay the total amount due, regardless of the type of tax or amount of liability in-volved.

SEC. 5. FUNCTIONAL ALIGNMENT AND COORDINATION AMONG SERVICE CENTERS , DISTRICT OFFICES, REGIONAL OFFICES AND NATIONAL OFFICE

.01 Service Centers.

1 The service center is responsible for the initial processing of offers in compromise. When these processes are completed, the offers are then referred to the appropriate office for further disposition.

2 The service center Collection function has jurisdiction over the con-sideration of penalty offers based solely on doubt as to liability (except 100-percent penalties and those arising under laws relating to alcohol, tobacco and firearms) prior to the Service Center Director or Assistant Service Center Director exercising delegated authority to accept or reject the offer.

.02 District Offices and Office of International Operations.-Prior to the Director or Assistant Director ex-ercising delegated authority to accept or reject an offer in compromise rec-ommended for acceptance by District officials:

1 District Collection functions will have jurisdiction over:

(a) Investigating and processing offers in compromise based on doubt as to collectibility, in the following type cases

(1) Taxes of all classes, except al-cohol, tobacco, and firearms, including penalties and interest;

(2) Fraud, negligence, and delin-quency penalties, including interest;

(3) Penalties relating to declaration of estimated taxes;

(4) 100-percent penalties, as pro-vided by sections 6671 and 6672 of the Internal Revenue Code, based either on doubt as to liabiilty or doubt as to collectibility;

(5) Penalties relating to failure to pay;

(6) Offers submitted under section 3469 of the Revised Statutes, as amended (31 U.S.C. 194);

(7) Consideration of all offers in default, regardless of whether the offer was based on doubt as to liability or doubt as to collectibility; and

(8) Disposition of offer cases re-ferred from service center Collection functions.

(b) Investigative responsibility for Chief Counsel cases involving the types of offers in compromise enumerated above.

(c) Offers in compromise based on both doubt as to collectibility and doubt as to liability, but only as to the collectibility aspects of the offer. If a conclusion is reached that there is no doubt as to collectibility, the case will be transferred to the Examination function for investigation as a doubt as to liability case.

2 District Examination functions will have jurisdictional responsibility for consideration and disposition of offers in compromise based on doubt as to liability for taxes or for both taxes and statutory additions, except alcohol, tobacco, and firearms taxes, including investigative jurisdiction over such offers in compromise in Chief Counsel cases.

3 If the District Director recommends aceptance of an offer in com-promise of a liability of $100,000 or more, the complete compromise file will be forwarded to the appropriate Regional Office for consideration. If the Director of International Opera-tions recommends acceptance of an offer in compromise of a liability of $100,000 or more, the complete com-promise file will be forwarded to the National Office for consideration.

.03 Regional Offices.-Prior to the Regional Commissioner exercising the delegated authority to accept an offer in compromise recommended for ac-ceptance by district or service center officials the

1 Review of cases covering liabili-ties of $100,000 or more based upon doubt as to collectibility or doubt as to both collectibility and liability is vested in the Office of the Assistant Regional Commissioner (Collection).

2 Review of tax cases covering lia-bilities of $100,000 or more based upon doubt as to liability is vested in the Office of the Assistant Regional Commissioner (Examination).

.04 National Office.-

1 The Collection Division coordi-nates all compromise activities for the National Office. Liaison is maintained with the Office of the Chief Counsel, the Examination Division, the Appeals Division, and with the Department of justice in connection with the review of acceptance recommendations prior to approval.

2 The review of offers requiring the Assistant Commissioner's (Com-pliance) approval is vested in the Special Programs Branch, Special Examination Section, of the Exami-nation Division.

SEC. 6. APPEALS PROCEDURES

.01 Referring Office Procedures.-Upon request, either before or after rejection of an offer in compromise, and subject to the exceptions set forth in section 3.01, the taxpayer or pro-ponent-disagreeing with the recom-mendation of the examining officer -may request that the District Director, Service Center Director or Director of International Operations forward the case directly to the Office of Regional Director of Appeals. (If the offer per-tains to a case concurrently under con-sideration in the Appeals office or the proponent wishes to appeal to the Appeals office, no written protest will be required unless the tax and/or pro-posed addition to tax, penalty and assessed interest exceeds $2,500 for any taxable year, taxable period, or taxable event.)

.02 Appeals Procedures. - Upon receipt of a protested rejection from the originating office, the facts in the case are independently considered by an Appeals office, the taxpayer is granted a hearing and if necessary, a further investigative report is pro-cured. After consideration, the Ap-peals Office notifies the offeror of the disposition of the case in accordance with the conclusions reached at the Appeals level, subject to the require-ments for review and approval by Counsel, Regional Office or National Office. The case file will then be re-turned to the originating office for other necessary closing actions.

SEC. 7. PUBLIC INSPECTION OF AC-CEPTED OFFERS

.01 Authority.-Public inspection of any offer in compromise accepted under section 7122 of the Code is au-thorized by section 6103 (k) (1) .

.02 Procedure.-For a period of one year, a copy of the Abstract and State-ment for each accepted offer is made available for examination in the office of the District Director, Service Cen-ter Director, or the Director of Inter-national Operations which originally accepted or recommended acceptance of the offer. No lists are prepared and no releases are distributed by the In-ternal Revenue Service in connection with these cases.

SEC. 8. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 64-44, 1964-2 C.B. 974, and Rev. Proc. 66-53, 1966-2 C.B. 1266, are superseded.