Rev. Proc. 56-26

SECTION 1. PURPOSE.

The purpose of this Revenue Procedure is to outline the Jurisdiction of District Directors and Regional Counsel and the procedure to be followed with respect to the processing and disposition of certain offers in compromise.

SEC. 2. BACKGROUND.

Revenue Ruling 117, C. B. 1953-1,498, and Revenue Ruling 55-153, C. B. 1955-1, 199, prescribe the jurisdictional lines over certain offers in compromise coming within the provisions of section 7122 of the Internal Revenue Code of 1954. These Revenue Rulings set forth the duties, functions, and responsibilities of District Directors and Regional Counsel with respect to the investigation, processing, and disposition of offers in compromise. The District Directors have authority to reject all offers irrespective of the amount of the liabilities involved and to finally accept offers involving liabilities of less than $500, in their jurisdictional area.

SEC. 3. SCOPE.

.01 Subject to the exceptions outlined in section 3.02, the jurisdictional and procedural provisions of this Revenue Procedure shall apply to acceptance cases involving:

1. Offers to compromise unpaid liabilities (including any interest, additional amounts, additions to the tax, or assessable penalties) of $500 or more, but less than $5,000; and

2. Offers to compromise specific penalties, except certain offers in the narcotic, smoking opium and marihuana field described in section 3.02. (Offers in the narcotic field, which relate to delinquency in registration or delinquency in payment of narcotics, smoking opium and marihuana taxes, are under the jurisdiction of the Internal Revenue Service and come within the scope of this subsection.)

.02 The following offers do not come within the scope of this Revenue Procedure--they shall be processed in accordance with existing instructions:

1 Offers involving unpaid liabilities (including any interest, additional amount, additions to the tax, or assessable penalties) under $500;

2 Offers involving unpaid liabilities (including any interest, additional amounts, additions to the tax, or assessable penalties) of $5,000 or more;

3 Offers arising under laws relating to alcohol, tobacco, and firearms;

4 Offers with respect to criminal liabilities under the narcotics, smoking opium, and marihuana laws, which, although filed with District Directors of Internal Revenue, arise out of negotiations by the District Supervisor of Narcotics. (Offers in this category should be routed to the Commissioner of Internal Revenue, Attention O:A:C, Washington 25, D.C., for transmittal to the Commissioner of Narcotics.)

5 Offers relating to narcotics, smoking opium, and marihuana made in compromise of civil liability compromisable by the Commissioner of Internal Revenue and of criminal liability compromisable by the Commissioner of Narcotics, which general offers are jointly accepted or rejected by both Commissioners. (These offers are also filed as the result of negotiations by the District Supervisor of Narcotics and should be routed to the Commissioner of Internal Revenue, Attention O:A:C, Washington 25, D.C.)

SEC. 4. ACCEPTANCE CASES PROCESSED BY DISTRICT DIRECTORS--UNPAID LIABILITIES OF $500 OR MORE, BUT LESS THAN $5,000, AND SPECIFIC PENALTIES.

.01 When the District Director concludes that the offer should be accepted, and such offer involves an unpaid liability (including any interest, additional amount, addition to the tax, or assessable penalty) of $500 or more, but less than $5,000, or is in compromise of a specific penalty coming within the scope of section 3.01, he will have prepared an appropriate abstract and statement (Form 7249-E, Form 7249-F, or Form 7249-M) and have it signed by the appropriate officials below the level of the District Director. The entire file will then be forwarded, by memorandum, to the appropriate Regional Counsel for review and attachment of the legal opinion. The abstract and statement must not be signed by the District Director until the required legal opinion is obtained from the Regional Counsel.

.02 In those cases where the Regional Counsel approves the recommendation for acceptance, he will prepare and sign, as directed by the Chief Counsel, the prescribed form which shall constitute the legal opinion required under section 7122(b) of the Internal Revenue Code of 1954. The case will then be returned to the District Director for completion of the processing action, including the signing of the abstract and statement (Form 7249-E, 7249-F, or 7249-M) by the District Director. A letter, notifying the proponent of the acceptance of the offer, will be prepared and mailed by the District Director. If Regional Counsel does not approve the recommendations for acceptance, he will return the case to the District Director with an appropriate memorandum.

SEC. 5. CONSIDERATION AND PROCESSING OF OFFERS IN COMPROMISE BY REGIONAL COUNSEL INCLUDING OFFERS IN COMPROMISE OF UNPAID LIABILITIES OF $500 OR MORE, BUT LESS THAN $5,000.

.01 The District Director records all offers in compromise coming within the purview of items (a) through (h) of paragraph 6 of Revenue Ruling 117, C. B. 1953-1, 498, in accordance with existing procedures, and forwards the offer and the Form 433 (Statement of Financial Condition and Other Information) to the appropriate Regional Counsel. The District Director retains the duplicate copy of the offer and financial statement for investigation, except that no investigation is made of offers coming within the purview of item (a) unless specifically requested by the office having jurisdiction of the criminal case.

.02 Regional Counsel, under existing procedures, are authorized to consider and process all offers in compromise submitted in cases described in items (b) through (h) of paragraph 6 of Revenue Ruling 117 with the exception of offers in compromise submitted in those cases being handled in the National Office.

.03 Where a Chief Counsel case is being handled in the National Office, each offer in compromise, together with Form 433 and the report of investigation by the District Director, is forwarded by Regional Counsel to the Chief Counsel (Attention:CC:C1) in Washington, D. C., for consideration and processing under existing procedures.

.04 Regional Counsel considers and processes all offers in his jurisdictional area referred to in section 5.01, except that acceptance cases involving unpaid liabilities (including any interest, additional amounts, additions to the tax, or assessable penalties) of $500 or more but less than $5,000, shall be processed as set forth in the following subsection.

.05 When the Regional Counsel concludes that any offer in the $500 to $5,000 category should be accepted, he will prepare the abstract and statement and the acceptance letter and forward them to the District Director for signature, together with the compromise file and the appropriate form signed as directed by the Chief Counsel. The District Director will mail the acceptance letter to the proponent; complete the closing of the case; and retain the compromise file in his office, unless otherwise directed by the Regional Counsel.

SEC. 6. ROUTING OF COPIES OF LETTERS AND MEMORANDA.

District Directors will forward copies of acceptance letters and copies of the abstracts and statements, including those prepared by Regional Counsel, together with copies of the prescribed forms which constitute the legal opinions, to the Commissioner of Internal Revenue, Attention O:A:C, Washington 25, D.C., for survey and filing in accordance with section 7122(b) of the Code.

SEC. 7. PUBLIC INSPECTION OF ACCEPTED OFFERS.

District Directors will permit public inspection of accepted offers involving liabilities of less than $5,000 in income, excess profits, declared value excess-profits, capital stock, estate, and gift tax cases.

SEC. 8. DELEGATION OF AUTHORITY.

The District Directors of Internal Revenue have been delegated authority, by Commissioner Delegation Order No. 11, C. B. 1956-1, 1010, to accept offers in compromise described herein. This authority, which is to be exercised in accordance with applicable regulations and procedures, is an extension of the authority delegated by Revenue Ruling 117.

SEC. 9. EFFECT ON OTHER DOCUMENT.

Revenue Ruling 117, C. B. 1953-1, 498, is hereby modified to the extent that it relates to the treatment and procedures of offers in compromise of unpaid liabilities of $500 or more but less than $5,000.