26 U.S.C. § 7122 — Compromises

Page 3847 TITLE 26—INTERNAL REVENUE CODE § 7122 § 7122. Compromises (a) Authorization The Secretary may compromise any civil or criminal case arising under the internal revenue laws prior to reference to the Department of Justice for prosecution or defense; and the At- torney General or his delegate may compromise any such case after reference to the Department of Justice for prosecution or defense. (b) Record Whenever a compromise is made by the Sec- retary in any case, there shall be placed on file in the office of the Secretary the opinion of the General Counsel for the Department of the Treasury or his delegate, with his reasons there- for, with a statement of— (1) The amount of tax assessed, (2) The amount of interest, additional amount, addition to the tax, or assessable pen- alty, imposed by law on the person against whom the tax is assessed, and (3) The amount actually paid in accordance with the terms of the compromise. Notwithstanding the foregoing provisions of this subsection, no such opinion shall be required with respect to the compromise of any civil case in which the unpaid amount of tax assessed (in- cluding any interest, additional amount, addi- tion to the tax, or assessable penalty) is less than $50,000. However, such compromise shall be subject to continuing quality review by the Sec- retary. (c) Rules for submission of offers-in-compromise (1) Partial payment required with submission (A) Lump-sum offers (i) In general The submission of any lump-sum offer- in-compromise shall be accompanied by the payment of 20 percent of the amount of such offer. (ii) Lump-sum offer-in-compromise For purposes of this section, the term ‘‘lump-sum offer-in-compromise’’ means any offer of payments made in 5 or fewer installments. (B) Periodic payment offers (i) In general The submission of any periodic payment offer-in-compromise shall be accompanied by the payment of the amount of the first proposed installment. (ii) Failure to make installment during pendency of offer Any failure to make an installment (other than the first installment) due under such offer-in-compromise during the period such offer is being evaluated by the Secretary may be treated by the Secretary as a withdrawal of such offer-in-com- promise. (2) Rules of application (A) Use of payment The application of any payment made under this subsection to the assessed tax or other amounts imposed under this title with respect to such tax may be specified by the taxpayer. (B) Application of user fee In the case of any assessed tax or other amounts imposed under this title with re- spect to such tax which is the subject of an offer-in-compromise to which this sub- section applies, such tax or other amounts shall be reduced by any user fee imposed under this title with respect to such offer-in- compromise. (C) Waiver authority The Secretary may issue regulations waiving any payment required under para- graph (1) in a manner consistent with the practices established in accordance with the requirements under subsection (d)(3). (3) Exception for low-income taxpayers Paragraph (1), and any user fee otherwise re- quired in connection with the submission of an offer-in-compromise, shall not apply to any offer-in-compromise with respect to a tax- payer who is an individual with adjusted gross income, as determined for the most recent taxable year for which such information is available, which does not exceed 250 percent of the applicable poverty level (as determined by the Secretary). (d) Standards for evaluation of offers (1) In general The Secretary shall prescribe guidelines for officers and employees of the Internal Revenue Service to determine whether an offer-in-com- promise is adequate and should be accepted to resolve a dispute. (2) Allowances for basic living expenses (A) In general In prescribing guidelines under paragraph (1), the Secretary shall develop and publish schedules of national and local allowances designed to provide that taxpayers entering into a compromise have an adequate means to provide for basic living expenses. (B) Use of schedules The guidelines shall provide that officers and employees of the Internal Revenue Serv- ice shall determine, on the basis of the facts and circumstances of each taxpayer, wheth- er the use of the schedules published under subparagraph (A) is appropriate and shall not use the schedules to the extent such use would result in the taxpayer not having ade- quate means to provide for basic living ex- penses. (3) Special rules relating to treatment of offers The guidelines under paragraph (1) shall pro- vide that— (A) an officer or employee of the Internal Revenue Service shall not reject an offer-in- compromise from a low-income taxpayer solely on the basis of the amount of the offer, (B) in the case of an offer-in-compromise which relates only to issues of liability of the taxpayer— Page 3848 TITLE 26—INTERNAL REVENUE CODE § 7122 (i) such offer shall not be rejected solely because the Secretary is unable to locate the taxpayer’s return or return informa- tion for verification of such liability; and (ii) the taxpayer shall not be required to provide a financial statement, and (C) any offer-in-compromise which does not meet the requirements of subparagraph (A)(i) or (B)(i), as the case may be, of sub- section (c)(1) may be returned to the tax- payer as unprocessable. (e) Administrative review The Secretary shall establish procedures— (1) for an independent administrative review of any rejection of a proposed offer-in-com- promise or installment agreement made by a taxpayer under this section or section 6159 be- fore such rejection is communicated to the taxpayer; and (2) which allow a taxpayer to appeal any re- jection of such offer or agreement to the Inter- nal Revenue Service Independent Office of Ap- peals. (f) Deemed acceptance of offer not rejected with- in certain period Any offer-in-compromise submitted under this section shall be deemed to be accepted by the Secretary if such offer is not rejected by the Secretary before the date which is 24 months after the date of the submission of such offer. For purposes of the preceding sentence, any pe- riod during which any tax liability which is the subject of such offer-in-compromise is in dispute in any judicial proceeding shall not be taken into account in determining the expiration of the 24-month period. (g) Frivolous submissions, etc. Notwithstanding any other provision of this section, if the Secretary determines that any portion of an application for an offer-in-com- promise or installment agreement submitted under this section or section 6159 meets the re- quirement of clause (i) or (ii) of section 6702(b)(2)(A), then the Secretary may treat such portion as if it were never submitted and such portion shall not be subject to any further ad- ministrative or judicial review. (Aug. 16, 1954, ch. 736, 68A Stat. 849; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 104–168, title V, § 503(a), July 30, 1996, 110 Stat. 1461; Pub. L. 105–206, title III, § 3462(a), (c)(1), July 22, 1998, 112 Stat. 764, 766; Pub. L. 109–222, title V, § 509(a), (b), May 17, 2006, 120 Stat. 362, 363; Pub. L. 109–432, div. A, title IV, § 407(d), Dec. 20, 2006, 120 Stat. 2962; Pub. L. 113–295, div. A, title II, § 220(y), Dec. 19, 2014, 128 Stat. 4036; Pub. L. 116–25, title I, §§ 1001(b)(1)(F), 1102(a), July 1, 2019, 133 Stat. 985, 986.) Editorial Notes AMENDMENTS 2019—Subsec. (c)(3). Pub. L. 116–25, § 1102(a), added par. (3). Subsec. (e)(2). Pub. L. 116–25, § 1001(b)(1)(F), sub- stituted ‘‘Internal Revenue Service Independent Office of Appeals’’ for ‘‘Internal Revenue Service Office of Ap- peals’’. 2014—Subsecs. (f), (g). Pub. L. 113–295 redesignated subsec. (f) relating to frivolous submissions as (g). 2006—Subsec. (c). Pub. L. 109–222, § 509(a), added sub- sec. (c). Former subsec. (c) redesignated (d). Subsec. (d). Pub. L. 109–222, § 509(a), redesignated sub- sec. (c) as (d). Former subsec. (d) redesignated (e). Subsec. (d)(3)(C). Pub. L. 109–222, § 509(b)(1), added sub- par. (C). Subsec. (e). Pub. L. 109–222, § 509(a), redesignated sub- sec. (d) as (e). Subsec. (f). Pub. L. 109–432 added subsec. (f) relating to frivolous submissions. Pub. L. 109–222, § 509(b)(2), added subsec. (f) relating to deemed acceptance of offer not rejected within certain period. 1998—Subsec. (c). Pub. L. 105–206, § 3462(a), added sub- sec. (c). Subsec. (d). Pub. L. 105–206, § 3462(c)(1), added subsec. (d). 1996—Subsec. (b). Pub. L. 104–168 substituted ‘‘$50,000. However, such compromise shall be subject to con- tinuing quality review by the Secretary.’’ for ‘‘$500.’’ 1976—Subsecs. (a), (b). Pub. L. 94–455 struck out ‘‘or his delegate’’ after ‘‘Secretary’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2019 AMENDMENT Pub. L. 116–25, title I, § 1102(b), July 1, 2019, 133 Stat. 986, provided that: ‘‘The amendment made by this sec- tion [amending this section] shall apply to offers-in- compromise submitted after the date of the enactment of this Act [July 1, 2019].’’ EFFECTIVE DATE OF 2006 AMENDMENT Amendment by Pub. L. 109–432 applicable to submis- sions made and issues raised after the date on which the Secretary first prescribes a list under section 6702(c) of this title, see section 407(f) of Pub. L. 109–432, set out as a note under section 6320 of this title. Amendment by Pub. L. 109–222 applicable to offers-in- compromise submitted on and after the date which is 60 days after May 17, 2006, see section 509(d) of Pub. L. 109–222, set out as a note under section 6159 of this title. EFFECTIVE DATE OF 1998 AMENDMENT Amendment by Pub. L. 105–206 applicable to proposed offers-in-compromise and installment agreements sub- mitted after July 22, 1998, see section 3462(e)(1) of Pub. L. 105–206, set out as a note under section 6331 of this title. EFFECTIVE DATE OF 1996 AMENDMENT Pub. L. 104–168, title V, § 503(b), July 30, 1996, 110 Stat. 1461, provided that: ‘‘The amendment made by this sec- tion [amending this section] shall take effect on the date of the enactment of this Act [July 30, 1996].’’ PREPARATION OF STATEMENT RELATING TO OFFERS-IN- COMPROMISE Pub. L. 105–206, title III, § 3462(d), July 22, 1998, 112 Stat. 766, provided that: ‘‘The Secretary of the Treas- ury shall prepare a statement which sets forth in sim- ple, nontechnical terms the rights of a taxpayer and the obligations of the Internal Revenue Service relat- ing to offers-in-compromise. Such statement shall— ‘‘(1) advise taxpayers who have entered into a com- promise of the advantages of promptly notifying the Internal Revenue Service of any change of address or marital status; ‘‘(2) provide notice to taxpayers that in the case of a compromise terminated due to the actions of one spouse or former spouse, the Internal Revenue Serv- ice will, upon application, reinstate such compromise with the spouse or former spouse who remains in compliance with such compromise; and ‘‘(3) provide notice to the taxpayer that the tax- payer may appeal the rejection of an offer-in-com- promise to the Internal Revenue Service Office of Ap- peals [now Internal Revenue Service Independent Of- fice of Appeals].’’ Page 3849 TITLE 26—INTERNAL REVENUE CODE § 7124 1 Section numbers editorially supplied. § 7123. Appeals dispute resolution procedures (a) Early referral to appeals procedures The Secretary shall prescribe procedures by which any taxpayer may request early referral of 1 or more unresolved issues from the exam- ination or collection division to the Internal Revenue Service Independent Office of Appeals. (b) Alternative dispute resolution procedures (1) Mediation The Secretary shall prescribe procedures under which a taxpayer or the Internal Rev- enue Service Independent Office of Appeals may request non-binding mediation on any issue unresolved at the conclusion of— (A) appeals procedures; or (B) unsuccessful attempts to enter into a closing agreement under section 7121 or a compromise under section 7122. (2) Arbitration The Secretary shall establish a pilot pro- gram under which a taxpayer and the Internal Revenue Service Independent Office of Appeals may jointly request binding arbitration on any issue unresolved at the conclusion of— (A) appeals procedures; or (B) unsuccessful attempts to enter into a closing agreement under section 7121 or a compromise under section 7122. (c) Administrative appeal relating to adverse de- termination of tax-exempt status of certain organizations (1) In general The Secretary shall prescribe procedures under which an organization which claims to be described in section 501(c) may request an administrative appeal (including a conference relating to such appeal if requested by the or- ganization) to the Internal Revenue Service Independent Office of Appeals of an adverse de- termination described in paragraph (2). (2) Adverse determinations For purposes of paragraph (1), an adverse de- termination is described in this paragraph if such determination is adverse to an organiza- tion with respect to— (A) the initial qualification or continuing qualification of the organization as exempt from tax under section 501(a) or as an orga- nization described in section 170(c)(2), (B) the initial classification or continuing classification of the organization as a pri- vate foundation under section 509(a), or (C) the initial classification or continuing classification of the organization as a pri- vate operating foundation under section 4942(j)(3). (Added Pub. L. 105–206, title III, § 3465(a)(1), July 22, 1998, 112 Stat. 768; amended Pub. L. 114–113, div. Q, title IV, § 404(a), Dec. 18, 2015, 129 Stat. 3118; Pub. L. 116–25, title I, § 1001(b)(1)(G), July 1, 2019, 133 Stat. 985.) Editorial Notes PRIOR PROVISIONS A prior section 7123 was renumbered section 7124 of this title. AMENDMENTS 2019—Pub. L. 116–25 substituted ‘‘Internal Revenue Service Independent Office of Appeals’’ for ‘‘Internal Revenue Service Office of Appeals’’ wherever appear- ing. 2015—Subsec. (c). Pub. L. 114–113 added subsec. (c). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2015 AMENDMENT Pub. L. 114–113, div. Q, title IV, § 404(b), Dec. 18, 2015, 129 Stat. 3118, provided that: ‘‘The amendment made by subsection (a) [amending this section] shall apply to determinations made on or after May 19, 2014.’’ § 7124. Cross references For criminal penalties for concealment of prop- erty, false statement, or falsifying and destroying records, in connection with any closing agreement, compromise, or offer of compromise, see section 7206. (Aug. 16, 1954, ch. 736, 68A Stat. 850, § 7123; Pub. L. 97–258, § 3(f)(12), Sept. 13, 1982, 96 Stat. 1065; re- numbered § 7124, Pub. L. 105–206, title III, § 3465(a)(1), July 22, 1998, 112 Stat. 767.) Editorial Notes AMENDMENTS 1998—Pub. L. 105–206 renumbered section 7123 of this title as this section. 1982—Subsec. (a). Pub. L. 97–258, § 3(f)(12)(A), struck out heading ‘‘Criminal penalties’’. Subsec. (b). Pub. L. 97–258, § 3(f)(12)(B), struck out subsec. (b) which set forth cross reference to R.S. 3469 (31 U.S.C. 194) relating to compromises after judgment. CHAPTER 75—CRIMES, OTHER OFFENSES, AND FORFEITURES Subchapter Sec.1 A. Crimes ................................................... 7201 B. Other offenses ........................................ 7261 C. Forfeitures ............................................ 7301 D. Miscellaneous penalty and forfeiture provisions ........................................... 7341 Subchapter A—Crimes Part I. General provisions. II. Penalties applicable to certain taxes. PART I—GENERAL PROVISIONS Sec. 7201. Attempt to evade or defeat tax. 7202. Willful failure to collect or pay over tax. 7203. Willful failure to file return, supply informa- tion, or pay tax. 7204. Fraudulent statement or failure to make statement to employees. 7205. Fraudulent withholding exemption certificate or failure to supply information. 7206. Fraud and false statements. 7207. Fraudulent returns, statements, or other doc- uments. 7208. Offenses relating to stamps. 7209. Unauthorized use or sale of stamps. 7210. Failure to obey summons. 7211. False statements to purchasers or lessees re- lating to tax. 7212. Attempts to interfere with administration of internal revenue laws. 7213. Unauthorized disclosure of information.