§ 7122. — Compromises.
[Laws in effect as of January 7, 2003]
[Document not affected by Public Laws enacted between
January 7, 2003 and December 19, 2003]
[CITE: 26USC7122]
TITLE 26--INTERNAL REVENUE CODE
Subtitle F--Procedure and Administration
CHAPTER 74--CLOSING AGREEMENTS AND COMPROMISES
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) 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; and
(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.
(d) 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.
(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.)
Amendments
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.''
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.
