Internal Revenue Code:Sec. 7122. Compromises
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle F - Procedure and Administration
CHAPTER 74 - CLOSING AGREEMENTS AND COMPROMISES
Statute
Sec. 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 Attorney
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 Secretary 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 therefor, with a statement of -
(1) The amount of tax assessed,
(2) The amount of interest, additional amount, addition to the
tax, or assessable penalty, 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
(including any interest, additional amount, addition to the tax, or
assessable penalty) is less than $50,000. However, such compromise
shall be subject to continuing quality review by the Secretary.
(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-compromise.
(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 respect to such tax which is the subject of an
offer-in-compromise to which this subsection 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 paragraph
(1) in a manner consistent with the practices
established in accordance with the requirements under
subsection (d)(3).
(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-compromise 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 Service shall determine, on the basis of
the facts and circumstances of each taxpayer, whether 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 adequate means to
provide for basic living expenses.
(3) Special rules relating to treatment of offers
The guidelines under paragraph (1) shall provide 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 -
(i) such offer shall not be rejected solely because the
Secretary is unable to locate the taxpayer's return or return
information 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 subsection (c)(1) may be returned to
the taxpayer as unprocessable.
(e) Administrative review
The Secretary shall establish procedures -
(1) for an independent administrative review of any rejection
of a proposed offer-in-compromise or installment agreement made
by a taxpayer under this section or section 6159 before such
rejection is communicated to the taxpayer; and
(2) which allow a taxpayer to appeal any rejection of such
offer or agreement to the Internal Revenue Service Office of
Appeals.
(f) Deemed Acceptance of Offer Not Rejected Within 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
period 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.
(f) Frivolous Submissions, etc.--Notwithstanding any other
provision of this section, if the Secretary determines that any portion
of an application for an offer-in-compromise or installment agreement
submitted under this section or section 6159 meets the requirement 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 administrative or judicial review.
Sources
(Aug. 16, 1954, ch. 736, 68A Stat. 849; Pub. L. 94-455, title XIX,
Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 104-168,
title V, Sec. 503(a), July 30, 1996, 110 Stat. 1461; Pub. L.
105-206, title III, Sec. 3462(a), (c)(1), July 22, 1998, 112 Stat.
764, 766.)
Miscellaneous
AMENDMENTS
2006 - Tax Relief and Health Care Act of 2006 (P.L. 109-432)
Section 407(d) Treatment of Frivolous Applications for Offers-in-Compromise and
Installment Agreements.--Section 7122 is amended by adding at the end
the following new subsection:
``(f) Frivolous Submissions, etc.--Notwithstanding any other
provision of this section, if the Secretary determines that any portion
of an application for an offer-in-compromise or installment agreement
submitted under this section or section 6159 meets the requirement 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 administrative or judicial review.''.
2006 - P.L. 109-222
SEC. 509. PARTIAL PAYMENTS REQUIRED WITH SUBMISSION OF OFFERS-IN-
COMPROMISE.
(a) In General.--Section 7122 (relating to compromises) is amended
by redesignating subsections (c) and (d) as subsections (d) and (e),
respectively, and by inserting after subsection (b) the following new
subsection:
``(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-compromise.
``(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 respect to such tax which is the subject of an
offer-in-compromise to which this subsection 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 paragraph
(1) in a manner consistent with the practices
established in accordance with the requirements under
subsection (d)(3).''.
(b) Additional Rules Relating to Treatment of Offers.--
(1) Unprocessable offer if payment requirements are not
met.--Paragraph (3) of <<NOTE: 26 USC 7122.>> section 7122(d)
(relating to standards for evaluation of offers), as
redesignated by subsection (a), is amended by striking ``; and''
at the end of subparagraph (A) and inserting a comma, by
striking the period at the end of subparagraph (B) and inserting
``, and'', and by adding at the end the following new
subparagraph:
``(C) any offer-in-compromise which does not meet
the requirements of subparagraph (A)(i) or (B)(i), as
the case may be, of subsection (c)(1) may be returned to
the taxpayer as unprocessable.''.
(2) Deemed acceptance of offer not rejected within certain
period.--Section 7122, as amended by subsection (a), is amended
by adding at the end the following new subsection:
``(f) Deemed Acceptance of Offer Not Rejected Within 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
period 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.''.
1998 - Subsec. (c). Pub. L. 105-206, Sec. 3462(a), added subsec.
(c).
Subsec. (d). Pub. L. 105-206, Sec. 3462(c)(1), added subsec. (d).
1996 - Subsec. (b). Pub. L. 104-168 substituted ''$50,000.
However, such compromise shall be subject to continuing quality
review by the Secretary.'' for ''$500.''
1976 - Subsecs. (a), (b). Pub. L. 94-455 struck out ''or his
delegate'' after ''Secretary''.
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by Pub. L. 105-206 applicable to proposed
offers-in-compromise and installment agreements submitted 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
Section 503(b) of Pub. L. 104-168 provided that: ''The amendment
made by this section (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, Sec. 3462(d), July 22, 1998, 112
Stat. 766, provided that: ''The Secretary of the Treasury shall
prepare a statement which sets forth in simple, nontechnical terms
the rights of a taxpayer and the obligations of the Internal
Revenue Service relating to offers-in-compromise. Such statement
shall -
''(1) advise taxpayers who have entered into a compromise 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 Service 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 taxpayer may
appeal the rejection of an offer-in-compromise to the Internal
Revenue Service Office of Appeals.''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 63, 473, 1311, 6013,
6015, 6103, 6159, 6325, 6331, 6511, 6521, 7123, 7206, 7809 of this
title.
