
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[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.
