Rev. Proc. 64-44

SECTION 1. PURPOSE.

The purpose of this Revenue Procedure is to set forth the jurisdictional changes pertaining to the consideration and disposition of offers in compromise under Delegation Order No. 11 (Rev. 3), C.B. 1963-2, 732; to outline general guidelines relating to the acceptability of an offer in compromise; 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 organizational components.

SEC. 2. DECENTRALIZED AREAS OF RESPONSIBILITY.

.01 District Directors.--Certain functions of the Commissioner of Internal Revenue with respect to the compromise of civil cases involving liabilities under $100,000 and of specific penalties--incurred under the regulatory provisions of the Internal Revenue Codes of 1954 and 1939 and related statutes--have been delegated to District Directors of Internal Revenue under Delegation Order No. 11 (Rev. 3). This is a "limited" delegation to the extent that the delegated authority must be exercised in accordance with the limitations prescribed by section 301.7122-1 of the Regulations on Procedure and Administration and with procedures established by the National Office. See section 3 herein with respect to offers excepted from the District Directors' delegated authority.

.02 Appellate Offices.--The District Director refers two types of compromise cases for consideration by the appropriate Appellate office. 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 Appellate office or its predecessor organization. The second type involves consideration of a taxpayer's written appeal from a rejection or a proposed rejection by the District Director. (The procedure governing appeals is applicable only to those offers with respect to which the District Director has processing jurisdiction and which relate to a tax over which the Appellate Division has authority to function. See section 6.03 herein.) In considering either type of case referred to above, the Appellate office may call upon the District Director to conduct any investigation considered necessary to reach a conclusion on the acceptability of the offer, and to prepare the prescribed documentation for acceptance or rejection of the offer. The entire file will thereupon be returned to the District Director for processing in accordance with the conclusion reached by the Appellate office.

.03 Regional Counsel.--The following legal functions with respect to offers in compromise are performed by Regional Counsel:

(1) Furnishing legal advice in the form of an advisory opinion when the District Director submits a specific request involving a doubtful question of law or regarding which, for any other reason in the judgment of the District Director, Counsel's opinion should be obtained.

(2) Reviewing acceptance cases prepared by the District Director which involve liabilities (including any interest, additional amounts, additions to the tax, or assessable penalties) of $500 or more, but less than $100,000 and those relating to specific penalties; and signing the legal opinion required under section 7122(b) of the Code.

(3) Processing offers in compromise in Chief Counsel cases and, subject to the exceptions provided in section 3 herein, preparing and signing the legal opinion as directed by the Chief Counsel and preparing the prescribed documentation for final closing of cases involving liabilities (including any interest, additional amounts, additions to the tax, or assessable penalties) under $100,000. The Chief Counsel represents the Commissioner in the consideration of cases in which court proceedings are involved or criminal prosecution is pending. Specifically, Chief Counsel cases involve the compromise of tax liabilities in the following categories:

1. Cases in which recommendations for prosecution are pending in the Chief Counsel's office, 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 proceeding under any provision of the Bankruptcy Act;

3. Cases in which the taxpayer is deceased;

4. Cases involving proposals to discharge property from the effect of tax liens;

5. Cases involving insolvent banks;

6. Cases involving assignments for the benefit of creditors;

7. Cases involving liquidation proceedings; and

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

SEC. 3. LIMITATIONS ON DELEGATED AUTHORITY.

Regardless of the amount of liability involved, District Directors and Regional Counsel have not been delegated authority to accept offers in compromise in the following classes:

.01 All cases in which recommendations for prosecution are pending in the Intelligence Division of the District Director's office, in the Chief Counsel's office, the Department of Justice, or offices of United States Attorneys, including cases in which criminal proceedings have been instituted but not disposed of and also related cases in which offers in compromise have been submitted. See section 2.03(3)1 above.

.02 All cases in which the acceptance of an offer by the Internal Revenue Service is dependent upon the acceptance of a related offer or upon a settlement under the jurisdiction of the Department of Justice.

.03 All cases arising under laws relating to alcohol, tobacco and firearms taxes.

.04 Certain narcotic cases. See Rev. Rul. 55-153, C.B. 1955-1, 199.

SEC. 4. FUNCTIONAL ALIGNMENT IN DISTRICT OFFICES.

.01 District Audit Divisions have jurisdiction over the following types of offers to compromise:

(1) Taxes of all classes, except alcohol, tobacco and firearms, including ad valorem penalties and interest;

(2) Ad valorem fraud and negligence penalties, including interest;

(3) Penalties relating to declarations of estimated tax;

(4) 100 percent penalties, as provided by sections 6671 and 6672 of the Internal Revenue Code of 1954, and corresponding sections of the 1939 Code; and

(5) Ad valorem delinquency penalties except those relating to employment taxes under chapters 21 through 24 of Subtitle C of the Code.

District Audit Divisions also have investigative jurisdiction over all tax offers coming within the scope of this Revenue Procedure, including offers in Chief Counsel cases.

.02 District Collection Divisions have jurisdiction over:

(1) The filing, recording and payments relating to offers in compromise of all classes; and

(2) The processing, consideration, and disposition of (a) offers to compromise specific penalties, except those arising under laws relating to alcohol, tobacco, firearms, and certain narcotic offers; and (b) offers to compromise ad valorem delinquency penalties relating to employment taxes under chapters 21 through 24 of Subtitle C of the Code.

SEC. 5. DISTRICT DIRECTOR AUTHORIZED TO REJECT AND PROCESS WITHDRAWN OFFERS.

The District Director, regardless of the liability amount involved, is authorized to reject and, subject to the appeal procedure prescribed by section 6 of this Revenue Procedure and limitations set forth in this section, finally close--by written notification to the offeror--all compromise cases wherein the offers are not acceptable or have been withdrawn, except certain narcotic offers (see Rev. Rul. 55-153) and those arising under laws relating to alcohol, tobacco and firearms. With respect to Chief Counsel cases processed by Regional Counsel, the District Director's rejection authority is limited and consists of signing the rejection (or withdrawal) letter and memorandum prepared by Regional Counsel and the mailing of the letter to the offeror.

SEC. 6. CONFERENCE AND APPEAL PROCEDURES.

.01 Conference in District Office.--Upon written request, accompanied by a protest, either before or after rejection of an offer in compromise, and subject to the exceptions set forth in section 6.03 herein, the taxpayer or proponent--if he disagrees with the recommendation of the investigative agent--has the privilege of a district conference in the District Director's office. If the controversial issues cannot be resolved at the District level and if the offeror desires to appeal the rejection, he may, in writing, request the District Director to refer the case to the appropriate Appellate office for a hearing.

.02 Appellate procedure.--Upon receipt of a protested rejection from the District office, the facts in the case are independently considered by an Appellate office, the taxpayer is granted a hearing, and if necessary, a further investigative report is procured. After consideration, the Appellate office returns the case to the District Director for processing in accordance with the conclusions reached at the appeal level, subject to the requirements for review and approval by the Regional Counsel or National Office.

.03 Appellate procedure not applicable.--The procedure governing appeals to Appellate is not employed or available with respect to Chief Counsel cases processed by Regional Counsel or to offers involving certain delinquency penalties or to any excise tax, including interest and penalties, imposed by the following provisions of the Code (and the corresponding provisions of the 1939 Code): chapter 35 (relating to wagering); subchapter A of chapter 39 (relating to narcotic drugs and marihuana); subtitle E (relating to alcohol, tobacco, machine guns and certain other firearms); and subchapter D of chapter 78 (relating to certain import taxes) insofar as it relates to alcohol and tobacco.

SEC. 7. SCOPE OF DELEGATED ACCEPTANCE AUTHORITY.

.01 Liabilities under $500.--Except as provided in section 3 above, the District Director is delegated final authority to accept offers in cases under his processing jurisdiction wherein the unpaid amount of tax, including any interest, additional amount, additions to the tax or assessable penalty is less than $500. See also section 7.03 below. Under the provisions of section 7122(b) of the Code, no legal opinion is required in these cases.

.02 Liabilities of $500 or more but less than $100,000 and specific penalties.--Except as provided in sections 2.02 and 3 above, the District Director with the approval of Regional Counsel is delegated authority to accept an offer which involves a liability (including any interest, additional amounts, additions to the tax, or assessable penalties) of $500 or more, but less than $100,000, or is in compromise of a specific penalty. The documentation for acceptance is prepared by the District Director and the case is forwarded to Regional Counsel for the legal opinion required under section 7122(b) of the Code. If the Regional Counsel considers the offer acceptable, he is authorized to sign the appropriate document which constitutes the legal opinion. The file is returned to the District Director for his signature on the Abstract and Statement and issuance of the acceptance letter.

.03 Chief Counsel cases--liability under $100,000.--Subject to the exceptions provided in section 3 of this Revenue Procedure, when the Regional Counsel concludes that an offer in a Chief Counsel case (see section 2.03(3) above) should be accepted, and the case involves a liability (including any interest, additional amounts, additions to the tax, or assessable penalties) under $100,000, he is authorized to prepare and sign the legal opinion as directed by the Chief Counsel. The acceptance case is then referred to the District Director for signature and disposition.

.04 Liabilities $100,000 and over.--When the Appellate Division or the District Director concludes that an offer should be accepted and such offer involves a liability (including any interest, additional amounts, additions to the tax, or assessable penalties) of $100,000 or over or is among the classes described in section 3 herein, the appropriate recommendation for acceptance is prepared and the case forwarded to the Audit Division of the National Office for review. Also, when a Regional Counsel concludes that an offer in a Chief Counsel case should be accepted and such offer, under existing instructions, requires National Office approval, he prepares the appropriate documentation and forwards the case to the Chief Counsel for review. Compromise acceptance cases which are processed at District and Regional Counsel levels and which require National Office review are transmitted through channels for approval by the Commissioner of Internal Revenue.

SEC. 8. GENERAL GUIDELINES RELATING TO THE ACCEPTABILITY OF AN OFFER IN COMPROMISE.

The compromise of a tax liability rests upon but one or both of two grounds--(1) doubt as to liability and (2) doubt as to collectibility. The doubt as to liability must be supported by evidence and the amount acceptable will depend upon the degree of doubt found in the particular case. Where doubt as to collectibility is involved, the offer must reflect all that can be collected from a taxpayer's assets and his income, present or prospective, after giving effect to all priorities granted to the Government. The determination of the acceptability of such an offer, however, is dependent on many factors, and consideration must be given to all sources of collection open to the Government, and also to assets or income which are available to the taxpayer but beyond the reach of the Government. Where the liability sought to be compromised is substantial or fraud elements are involved, added consideration is usually required for the acceptance of offers based in whole or in part on inability to pay. The added consideration required is dependent upon the facts in the particular case, but generally is provided for by the submission of collateral agreements. The agreements most commonly employed pertain to payments from future income and, where applicable, to the relinquishment of certain present or potential tax benefits.

SEC. 9. NATIONAL OFFICE COORDINATION.

Management functions and the review of compromises requiring the Commissioner's approval are vested in the Post-Examination Branch of the Audit Division, National Office--except that Chief Counsel cases (see section 2.03(3) above) and cases coming within the jurisdiction of the Alcohol and Tobacco Tax Division (those arising under the laws relating to alcohol, tobacco and firearms taxes) are channelled through the respective offices prior to Audit Division review and approval by the Commissioner.

SEC. 10. PUBLIC INSPECTION OF ACCEPTED OFFERS.

.01 Authority.--Public inspection of certain offers in compromise under the Internal Revenue Code of 1939 was authorized by Executive Order No. 10386, C.B. 1952-2, 299, and Treasury Decision 5927, C.B. 1952-2, 298, and under the 1954 Code by Executive Order 10906 C. B. 1961-1, 681, and Treasury Decision 6543, C.B. 1961-1, 671. Pursuant to these authorities, inspection is limited to accepted offers in compromise involving income, excess-profits, declared value excess-profits, capital stock, estate and gift tax cases (other than offers covering penalties and interest only).

.02 Procedure.--For a period of one year, a copy of the Abstract and Statement for each accepted offer which is subject to public inspection under Executive Order No. 10386 or No. 10906 is made available for examination (1) in the Public Information Division of the National Office when the offer covers a liability of $5,000 and over; and (2) in the office of the appropriate District Director when the offer covers a liability of less than $5,000. The place designated for public inspection in each district is listed on an inspection roster maintained by the Public Information Division of the National Office. No lists are prepared and no releases are distributed by the Internal Revenue Service in connection with these cases.

SEC. 11. EFFECT ON OTHER DOCUMENTS.

Revenue Procedure 60-22, C.B. 1960-2, 992 and Revenue Procedure 62-19, C.B. 1962-2, 416, are hereby superseded.