Compromises

DEPARTMENT OF THE TREASURY
Internal Revenue Service 26 CFR Part 301 [REG-116991-98] RIN 1545-
AW88

TITLE: Compromises

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to
temporary regulations.

SUMMARY: In the Rules and Regulations section of this issue of the
Federal Register, the IRS is issuing temporary regulations relating
to the compromise of tax liabilities.

These regulations provide additional guidance regarding the
compromise of internal revenue taxes. The temporary regulations
reflect changes to the law made by the Internal Revenue Service
Restructuring and Reform Act of 1998 and the Taxpayer bill of Rights
II. The text of the temporary regulations also serves as the text of
these proposed regulations.

DATE: Written or electronically generated comments and requests for
a public hearing must be received by October 19, 1999.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-116991-98), room
5226, Internal Revenue Service, POB 7604, Ben Franklin Station,
Washington, DC 20044.

Submissions may be hand delivered Monday through Friday between the
hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG-116991-98),
Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue,
NW., Washington, DC. Alternatively, taxpayers may submit comments
electronically via the Internet by selecting the "Tax Regs" option
on the IRS Home Page, or by submitting comments directly to the IRS
Internet site at http://www.irs.gov/prod/tax_regs/comments.html.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Carol
A.

Campbell, (202) 622-3620 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

Temporary regulations in the Rules and Regulations section of this
issue of the Federal Register amend the Procedure and Administration
Regulations (26 CFR part 301) under section 7122 of the Internal
Revenue Code. The temporary regulations reflect the amendment of
section 7122 by section 3462 of the Internal Revenue Service
Restructuring and Reform Act of 1998 ("RRA 1998") Public Law,
105-206, (112 Stat.

685, 764) and by section 503(a) of Taxpayer Bill of Rights II Public
Law 104-168, (110 Stat. 1452, 1461).

The text of the temporary regulations also serves as the text of
these proposed regulations. The preamble to the temporary
regulations explains the regulations.

Special Analyses

It has been determined that this notice of proposed rulemaking is
not a significant regulatory action as defined in EO 12866.
Therefore, a regulatory assessment is not required. It also has been
determined that section 553(b) of the Administrative Procedure Act
(5 U.S.C. chapter 5) does not apply to these regulations, and
because the regulation does not impose a collection of information
on small.3 entities, the Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Pursuant to section 7805 (f) of the
Internal Revenue Code, this notice of proposed rulemaking will be
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business.

Comments and Requests for a Public Hearing

Before these proposed regulations are adopted as final regulations,
consideration will be given to any written comments (a signed
original and eight (8) copies) or electronically generated comments
that are submitted timely to the IRS. The IRS generally requests any
comments on the clarity of the proposed rule and how it may be made
easier to understand.

Section 3462 of RRA 1998 and its legislative history provide for the
consideration of factors such as equity, hardship, and public policy
in the compromise of tax cases, if such consideration would promote
effective tax administration. The legislative history also states
that the IRS should use this new compromise authority "to resolve
longstanding cases by forgoing penalties and interest which have
accumulated as a result of delay in determining the taxpayer's
liability." H. Conf. Rep. 599, 105 th Cong., 2d Sess. 289 (1998).
The text of the temporary regulation provides the authority to
compromise cases involving issues of equity, hardship, and public
policy, if such a compromise would promote effective tax
administration. The temporary regulation provides factors to be
considered and examples of cases that could be compromised under
this authority when collection of the full amount of the tax
liability would create economic hardship. The temporary regulation
also provides limited.4 examples of cases that could be compromised
when the facts and circumstances presented indicate that collection
of the full tax liability would be detrimental to voluntary
compliance. The temporary regulation does not contain examples of
longstanding cases that could be compromised to promote effective
tax administration when penalties and interest have accumulated as
the result of delay by the Service in determining the tax liability.

The public is specifically encouraged to make comments or provide
examples regarding the particular types of cases or situations in
which the Secretary's authority to compromise should be used
because: (1) collection of the full amount of tax liability would be
detrimental to voluntary compliance or (2) IRS delay in determining
the tax liability has resulted in the accumulation of significant
interest and penalties. In formulating comments regarding delay in
interest and penalty cases, consideration should be given to the
possible interplay between cases compromised under this provision
and the relief accorded taxpayers under I.R.C. § 6404(e).

All comments will be available for public inspection and copying.

A public hearing may be scheduled if requested in writing by a
person that timely submits written comments. If a public hearing is
scheduled, notice of the date, time, and place for the hearing will
be published in the Federal Register.

Drafting Information

The principal author of these regulations is Carol A. Campbell,
Office of the Assistant Chief Counsel (General Litigation) CC:EL:GL,
IRS. However, other personnel from the IRS and Treasury Department
participated in their development.

List of Subjects in 26 CFR Part 301 Employment taxes, Estate taxes,
Excise taxes, Gift taxes, Income taxes, Penalties, Reporting and
recordkeeping requirements.

Proposed Amendments to the Regulations

Accordingly, 26 CFR Part 301 is proposed to be amended as follows:

PART 301- - PROCEDURE AND ADMINISTRATION

Paragraph 1. The authority citation for part 301 continues to read
in part as follows:

Authority: 26 U.S.C. 7805 ***

Paragraph 2. Section 301. 7122 - 1 is added to read as follows:

§ 301.7122-1 Compromises.

[The text of this proposed section is the same as the text of §
301.7122-IT published elsewhere in this issue of the Federal
Register.]

Charles O. Rossotti
Commissioner of Internal Revenue

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