8.23.2. Receipt and Control of Non-Collection Due Process (CDP) Offers

(1) An OIC is an agreement between a taxpayer and the government that settles a tax liability in exchange for payment of less than the full amount owed. Under 26 CFR 301.7122-1(f)(5), a taxpayer may administratively appeal a rejection of an offer to compromise to the IRS Independent Office of Appeals (Appeals) if, within the 30-day period commencing the day after the date on the letter of rejection, the taxpayer requests such an administrative review in the manner provided by the Secretary.

(1) Authorities that are related to the offer program are:

• IRC 7122 - Compromises

• IRM 1.2.44.2 - Delegation Order 5-1 (Rev. 4 and successors)

• IRM 5.8, Offer in Compromise

• Notice 2006-68

• Policy Statement P-5-97, Stay of Collection - Offer in Compromise Cases

• Policy Statement P-5-100, Offers Will be Accepted

• Revenue Procedure 26 CFR 300.3 - Offer to Compromise Fee

• Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA)

• 26 CFR 301.7122-1 - Compromises

(2) Additionally, all Appeals employees are responsible to be aware of the taxpayer’s rights as articulated in the Taxpayer Bill of Rights (TBOR). See IRC 7803(a)(3) , Execution of Duties in Accord with Taxpayer Rights. For additional information, about the TBOR, see Publication 5170 , Taxpayer Bill of Rights and TBOR link, https://www.irs.gov/taxpayer-bill-of-rights.

(1) The Director, Case and Operations Support (COS) is the executive responsible for designing, developing, delivering and monitoring short and long-range tax administration policies programs, strategies and objectives for the Appeals organization.

(2) The Director, Policy, is responsible for providing technical and procedural guidance to Appeals employees, establishing and maintaining policies and standard procedures for Appeals work streams.

(3) Policy is comprised of two teams of analysts: 1) Collection Appeals & Processing Policy, and 2) Examination Appeals Policy. The analyst(s) responsible for the Offer in Compromise program report to the manager for Collection Appeals Policy.

(1) If the taxpayer requests an in-person conference in response to Letter 5576 , grant the request, in accordance with IRM 8.6.1.5.1 .

(2) There is no separate Appeals policy for OIC cases and in-person hearings. OIC conferences are usually held by telephone or correspondence.

(3) A taxpayer or representative might request to have a case transferred to the Appeals office closest to the taxpayer for an in-person conference. Case transfer procedures are found in IRM 8.6.1.3 , Transfer Procedures. Accommodate a taxpayer’s or representative’s request for an in-person conference by following procedures in IRM 8.6.1.5.1 , Conference Practice and IRM 8.6.1.5.1.1 , Circuit Riding and IRM 8.6.1.5.5 , Virtual Service Delivery (VSD).

(4) When determining whether to transfer a case, the taxpayer and business addresses must be physical, and not a post office box or similar non-physical address.

(5) A taxpayer or representative who believes an adverse decision is likely or imminent might request to have a case transferred to the Appeals office closest to the taxpayer after engaging in substantive negotiations with you or after the conference has been held with you. It is important to point out to the taxpayer during an initial telephone contact that any request for an in-person conference must be made before meaningful negotiations begin subject to the in-person conference provisions of IRM 8.6.1, Conference and Issue Resolution. Transfer will not be accommodated once a conference has been held.

(6) IRM 8.6.1.5.1.1, Circuit Riding, and related subsections contain Appeals' circuit riding procedures. In certain cases, where the taxpayer has requested and been granted an in-person conference, Appeals will accommodate taxpayers by circuit riding. Such conferences will be held at the nearest Appeals office or other location, following the procedures noted above.

(7) One of the following three Sub-Action Codes must be used when the transfer request is denied for a face-to-face conference.

(8) The definitions for these codes are also available on the ACDS Utilities menu, under "CARATS Operational Definitions".

(1) Sometimes taxpayers have liabilities for multiple entities. For various reasons, it is also sometimes the case that these related offers are submitted by taxpayers after an initial offer is submitted for a different entity. During the course of the consideration of an offer by you, if you become aware that there is an open, related offer under consideration elsewhere in Appeals, then coordinate with whomever the related case is assigned to accept transfer of the related case, so that the cases may share a consolidated assignment, review and disposition.

(2) For purposes of this subsection, related cases will be those related to any joint or individual offer as follows:

1. Any additional offer involving the separate liabilities of one or both spouses (e.g. sole-proprietorship liabilities, trust fund recovery penalties, liabilities from a prior marriage).

Note: In a situation involving married taxpayers where two separate offers involving jointly owed liabilities are under consideration, the offers will be considered related only if the taxpayers are domiciled together.

2. Any additional offer involving one or more closely-held corporations or LLCs owned by one or both spouses in the joint or individual offer.

Note: Appeals will not accept immediate assignment from Collection of any related offer that appears in example (2)(b). Such cases are considered related only for purposes of consolidating assignment once in Appeals. There is no authority for Appeals to accept assignment of these cases from Collection unless the taxpayer has first undergone the administrative review and rejection process under IRC 7122(e).

(3) If an initial offer is already assigned to you, coordinate with Collection to immediately accept assignment of any related offer that fits example (2)(a) above. Any undeveloped information that is included with a related offer that is transferred to Appeals will be considered “new information” submitted to Appeals. If necessary, undeveloped information will be sent to Collection following the procedures in IRM 8.23.3.3.1.2, Request and Review of Supplemental Information - Collection Issue Offers.

(4) Per IRM 5.8.1.9 , Liabilities to be Compromised, and IRM 5.8.1.9.1, Definition of a Compromised Liability, all assessed taxpayer liabilities should be included in any offer acceptance. If related liabilities exist (as in example 2(a) above), an offer cannot be accepted that does not also include offer(s) for related liabilities. Therefore, if you are accepting an offer, secure the necessary forms and payments needed for the related offer, and forward the package to COIC for the necessary processing. COIC will generally determine processibility within 24 hours.

(5) If an initial offer is already assigned in Appeals, Appeals will not accept immediate assignment from Compliance of any related offer that appears in example (2)(b) and its associated Note. Such cases are considered related only for purposes of consolidating assignment once in Appeals. There is no authority for Appeals to accept assignment of these cases from Compliance unless the taxpayer has first undergone the administrative review and rejection process under IRC 7122(e).

(1) When you encounter a situation where a correction needs to be made to AOIC or IDRS, APS can input the correction. Submit your request via e-mail to the campus location that is responsible to process the closure of your case using one of the mailboxes below :

• *AP-COS-APS-West-FRS ACDS Update Request

• *AP-COS-APS-East-MEM ACDS Update Request

• *AP-COS-APS-East-HOL ACDS Update Request

(1) Non-CDP OIC receipts must be reviewed to make sure the appeal is timely. A taxpayer has 30 calendar days from the date of the rejection letter to request an administrative Appeals hearing. If the appeal was not timely, it must be returned as a premature referral because Appeals does not have the jurisdiction to consider the appeal.

(2) Occasionally, an appeal is received and the postmark, meter or fax transmission date is illegible or the envelope is missing. To determine timeliness if the postmark, meter or fax transmission date is illegible, or the envelope is missing:

1. Mailing: Ask the taxpayer when he or she mailed the request. If the taxpayer appears credible, use that date. If you can not reach the taxpayer or the taxpayer is not credible, subtract 3 days for regular mail and 7 days for overseas mail from the IRS received date.

2. Faxed: Use the date the Service received the request unless the taxpayer can show otherwise as in (a).

3. If there is no IRS received date, use the signature date.

4. If there is no IRS received date or signature date, consider timely if received in Appeals within 45 days of date required to be timely.

(3) Taxpayers occasionally submit a written appeal before the offer is rejected. IRC 7122(e) states there must be an independent administrative review of any rejection of an OIC before such rejection is communicated to the taxpayer and 26 CFR 301.7122-1(f)(1)provides that an offer in compromise has not been rejected until IRS issues a written notice to the taxpayer or his representative advising of:

1. The rejection,

2. The reason(s) for rejection, and

3. The right to an appeal.

If the taxpayer's written appeal pre-dates the actual rejection of the offer, it is not a valid appeal underIRC 7122 and its regulations. Before returning such an offer to Collection as a premature referral, check the case file, the AOIC eCase data and ICS histories to see if the taxpayer submitted a separate and timely written appeal within the prescribed time period. If the only written appeal pre-dates the actual rejection of the offer, the appeal is not timely and it must be returned as a premature referral.

(4) These less common instances identify cases that should be returned as a premature referral because Appeals lacks the jurisdictional authority to consider the protest:

1. If a timely appeal is signed by an unauthorized representative or other third party, and not signed by the taxpayer.

2. If a timely protest is received, but the rejection letter was signed by a lower level authority than what is required by Delegation Order 5-1(e.g. a Territory Manager’s signature is required but the Group Manager signs the rejection Letter).

3. If the tax liability is paid in full before direct or written contact with Appeals.

4. If under IRC 7122(f) and Notice 2006-68, the 24 month period has lapsed before the taxpayer withdrew the offer, or the IRS returned/rejected the offer. A Form 3999, Statute Expiration Report, or other statute reporting method is not needed in this instance.

5. If the taxpayer filed bankruptcy before the Collection offer examiner advised the taxpayer of the proposed rejection (documented either verbally or in writing), the offer should have been returned without appeal rights per IRM 5.8.10.2, Bankruptcy. See IRM 8.23.3.3.2.3, Bankruptcy Considerations, if the taxpayer filed bankruptcy after the offer was rejected.

6. A new offer is received by the Service after a Notice of Determination or Decision Letter was issued in a CDP or EH case. Such an offer would not be associated with the CDP case as the CDP is now considered closed.

7. A new offer is received by the Service after the issuance of a CDP closing letter with an executed Form 12257. Such an offer would not be associated with the CDP case as the CDP is now considered closed

8. A new offer is received by the Service after the issuance of a closing letter for a withdrawn CDP or EH case. Such an offer would not be associated with the CDP case as the CDP is now considered closed

9. A new offer is received after a related OIC was closed in any manner other than acceptance. See IRM 8.23.2.4.1, Assignment of Related Offers, for related offers. Such an offer would not be associated with the related offer as the related offer is now considered closed.

(1) Your initial case review may show that Collection did not sufficiently identify reasons why a case was referred to Appeals. Your feedback should specify why the referral was insufficient and include any IRM (or other) requirements that Collection overlooked or failed to follow in documenting the reason for referral to Appeals. A case will not be returned as a premature referral on the basis of your conclusion that Collection did not fully develop certain issues. In those situations you will make a decision after reviewing Collection’s development of the issue against the information and testimony provided by the taxpayer.

(2) In some cases, Collection may erroneously conclude that Appeals previously determined the tax liability and not address it. For example, this can occur if an earlier case was listed on the Appeals Centralized Database System (ACDS) as docketed and closed using closing code 21. This could mean the case was dismissed without addressing the liability. If you conclude the liability was not previously determined by Appeals, send the case back to the Brookhaven DATL unit alerting them that the case has an open TIPRA statute by using the Form 3210 entitled, “Appeals Returning DATL OIC (CC21)”, which is available on the Appeals OIC Web Page. If the liability was established by the Tax Court, you should also alert the DATL unit to that fact.

(3) If the case involves unpaid trust fund taxes, the assessment statute expiration date (ASED) is not suspended by the offer in compromise. For an OIC received by the Service after February 4, 2008, IRM 5.8.4.22.3(2), Offers from Operating Businesses, states:

1. either the trust fund portion of the taxes must be paid,

2. the TFRP must be assessed against all responsible persons,

3. the trust fund package was forwarded for assessment,
   

   Note: Do not return a case as a premature referral if Collection has clearly documented either a non-assertion determination or that the trust fund balance is below assessment requirements, or if the ASED has expired and no TFRP was assessed.

(4) Other non-jurisdictional premature referral situations include:

• If there is an unreversed TC 914 or TC 916 that posted to the account before the offer was rejected, Collection should have followed the procedures in IRM 5.8.4.19.1, Open Criminal Investigations. Return such a case as a premature referral. If the TC 914 or TC 916 posted to the account after the offer was rejected, retain the case in Appeals and follow IRM 8.23.3.3.1.5, Coordination with Other Functions.

• The Collection Fraud Technical Advisor agreed there is potential fraud and Compliance's fraud development investigation remains open. If this occurred before the offer was rejected, the offer may have been returned or rejected. The instructions for fraud development are in IRM 5.8.4.18, Potential Fraud Referrals. Consider the procedures that instruct Collection to return or to reject the offer without appeal rights, to see if a premature referral may be appropriate.

• The taxpayer submitted a claim for relief from joint and several liability (innocent spouse claim) as the requesting spouse and the claim was filed before the offer was rejected and the claim is still open. IRM 5.8.4.23.1, Claims for Relief from Joint and Several Liability under Section 6015 (Commonly Referred to as Innocent Spouse Claim) states that if the taxpayer refused to withdraw the OIC, Collection should have suspended the offer pending disposition of the claim, or returned it if still pending 18 months after the received date. If the claim was filed before the offer was rejected and is still open, return the case to Collection as a premature referral.

• The Partnership Investor Control File (PICF) code on AMDIS is '5', indicating at least one open TEFRA key case linkage exists. Collection should have returned the DATC offer without appeal rights per IRM 5.8.4.17, Pending Assessments, because of the unresolved TEFRA partnership issue. Return the offer to Collection as a premature referral.

(5) If a new Form 656 is received for a related offer and COIC determines that the offer is not processible, close the work unit as a premature referral. If it is determined that the case is ready for Appeals' consideration, see IRM 8.23.2.4, Initial Case Review and Statute Controls.

(6) Collection will occasionally receive an appeal of a joint offer that is signed only by one individual. If Collection did not take appropriate action to perfect the appeal request, do not return the case as a premature referral. Initiate a request to APS to take corrective action. See IRM 8.23.2.4.

(1) When a collectibility OIC is considered and rejected by Collection, the disposition of the case as a rejection indicates that the taxpayer was in current compliance at the time of rejection. If not, Collection should have closed the case to the taxpayer as a “return” with no appeal right. Therefore, you will consider the taxpayer as being in verified tax compliance whenever a rejected case is received, and will not request estimated tax payments or withholdings, even if those appear to have been delinquent or miscalculated prior to the rejection of the case.

(2) You will not return a case as a premature referral to Collection to address issues indicated in (1) above.

(3) You will not monitor a taxpayer's ongoing tax compliance while a rejected offer is under consideration, except as specified in IRM 8.23.2.6, Taxpayer Compliance Issues, and its related subsections.

(1) Because of the risk of rapid and substantial losses to the government due to the failure to make Federal Tax Deposit (FTD) payments, you should generally follow IRM 5.8.7, Offer in Compromise, Return, Terminate, Withdraw, and Reject Processing, with respect to verification of FTD compliance, and In-Business Trust Fund (IBTF) return filing compliance, but with some noted exceptions.

(2) As explained in IRM 8.23.2.5.1, Premature Referral - Jurisdictional Issues, above, when a collectibility issue OIC is considered and rejected by Collection, the disposition of the case as a rejection indicates that the taxpayer was in current FTD and filing compliance at the time of the rejection. If not, Collection should have closed the case to the taxpayer as a “return” with no appeal right. Therefore, you will consider the taxpayer as being in verified FTD compliance whenever a rejected case is received, and will not demand federal tax deposits to be made even if those appear to have been delinquent or miscalculated prior to the rejection (See also (4) below).

(3) You will not return a case to Collection as a premature referral to address issues indicated in (1) or (2) above.

(4) You will not monitor the taxpayer’s regular FTD schedule. However, if you recognize a new IBTF assessment while you are considering the offer, you should give the taxpayer 14 days to pay the entire liability (including penalties and interest) so that the consideration of the offer may continue. If the taxpayer does not pay the new liability in full, you should either sustain rejection of the offer or, in unique circumstances (left to Appeals’ sole discretion), determine to include the liability in the offer and proceed with consideration of the case. See also IRM 8.23.2.7, When a Taxpayer Does Not Remain in Compliance.

(5) If an IBTF tax return becomes delinquent while an OIC case is under your consideration, you should:

• Request that the taxpayer provide proof of the filing of the return (within 14 days)

• Sustain the rejection of the case if the return is not filed

(6) Tax returns secured by Appeals should be evaluated only for the taxpayer’s filing and payment compliance.

(1) The taxpayer must timely file returns that become due while an offer is under consideration. You will treat these situations as follows:

(2) You will not return a case as a premature referral to Collection to address issues indicated in (1) above.

(3) Tax returns secured by Appeals should be evaluated only for the taxpayer’s filing and payment compliance.

(1) A taxpayer submitting a Periodic Payment Offer is required to make the periodic installment payments proposed in such offer. If the taxpayer fails to make the periodic installment payments they proposed on Form 656 before the Collection offer examiner advised the taxpayer of the proposed rejection (either verbally or in writing), the case should be returned as a premature referral for Compliance to secure the necessary TIPRA payments.

(2) Review the periodic payment proposal carefully before making a determination whether the taxpayer failed to make required proposed periodic installment payments before the Collection offer investigator advised the taxpayer of the proposed rejection (documented either verbally or in writing).

(3) The following table provides instructions for determining whether Collection neglected to follow significant IRM requirements resulting in the premature referral of a Periodic Payment OIC case: