Monday, January 12, 2009

Offers in Compromise - 2 Overlapping Subsections

We warn practitioners that some versions of the Internal Revenue Code may not pick up a Congressional snafu. There are now two subsections (f) to 7422. The two versions are shown at:

One version of 7122(f) is titled "Frivolous Submissions, etc." and the other is titled "Deemed Acceptance of Offer Not Rejected Within Certain Period."

As to the latter version, the Tax Court recently offered the following discussion (some portions omitted):

For OICs submitted after July 15, 2006, an implicit obligation to reject a formal OIC is reflected in a new subsection 7122(f), which provides: "Any offer-in-compromise submitted under this section shall be deemed to be accepted by the Secretary if such offer is not rejected by the Secretary" within 24 months. (Emphasis added.) This obligation to reject a formal OIC under section 7122(f) is effective only as to OICs submitted on and after the date which is sixty days after the date of enactment, May 17, 2006 (see Tax Increase Prevention and Reconciliation Act of 2005, Pub. L. 109-222, 120 Stat. 345). * * * * Furthermore, this obligation exists only as to an OIC "submitted under this section", and the IRS is entitled to insist on compliance with its regulation requiring that offers under section 7122 be submitted on "forms prescribed by the Internal Revenue Service", sec. 301.7122-1(d)(1), Proced. & Admin. Regs.

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