number release date june gl-129779-01 cc pa cbs b2 uil bulletin no collection bankruptcy and summonses bulletin department of the treasury office_of_chief_counsel internal_revenue_service appeals officer may rely on literal transcripts stanifird v wilcox aftr2d d az date is the first collection_due_process case to be decided on a motion for summary_judgment and the first to hold that a literal transcript may be relied on by the appeals officer in making his decision the taxpayer sought judicial review of an unfavorable notice_of_determination arguing that the service did not follow proper procedures in assessing frivolous_return penalties against him granting the service’s motion for summary_judgment in a brief opinion the court held that the appeals officer did not abuse his discretion by relying on computer transcripts literal transcripts in determining that the proposed enforcement actions described in the notice_of_intent_to_levy should be allowed to proceed collection_due_process june bulletin no cases bankruptcy code cases allowance of administrative expenses penalties in re chris-marine inc aftr2d bankr m d fla date - the taxpayer brought suit to quash several formal document requests issued by the service under sec_982 for failure to respond to the service’s document requests during discovery the court imposed continuing monetary contempt sanctions against the taxpayer who responded by filing chapter bankruptcy the total fines to date were scheduled as unsecured debts but the plan made no provision for the continuing fines as an administrative expense the court found that the post-petition accruing punitive penalties did not benefit the estate nor did they resulted from continuing violations ordinarily incident to the debtor’s continuing business the per_diem fines thus were not administrative expenses under b c sec_503 bankruptcy code cases chapter secured taxes in re berry bankr lexis bankr e d tenn date - taxpayer had a qualified_retirement_plan under sec_401 at the time he filed for chapter bankruptcy although the service had a filed tax_lien which predated the bankruptcy the debtor listed the service’s claim as unsecured the court found that although the retirement_plan was subject_to an anti-alienation clause that state-law restriction was unenforceable against the service’s tax_lien under sec_6321 based on this finding the court held that the service had a secured claim in the debtor’s pension_plan which was not property of the estate as regards the debtor’s other creditors bankruptcy code cases determination of secured status ryan v homecomings financial network u s app lexis 4th cir date - real_estate was subject_to first deed_of_trust which exceeded the property’s equity and a wholly unsecured second deed_of_trust the chapter debtors moved to strip off the junior lien under b c sec_506 arguing that the supreme court’s decision in 502_us_410 prohibits only the strip down of a junior lien not the complete removal of a wholly unsecured lien the fourth circuit disagreed holding that liens pass through bankruptcy unaffected and that to strip off the junior lien would deny a secured creditor any benefit of an increase in the property’s equity the court also found 508_us_324 which dealt with bifurcation of a secured claim inapplicable to sec_506 the court concluded that a chapter debtor may not use sec_506 to strip off a wholly unsecured consensual junior lien from real_property bankruptcy code cases responsible_officer june bulletin no hartung v state p 3d alaska - taxpayer was cfo of a corporation that accrued unpaid state employment_taxes for the first quarter of in april the corporation filed for chapter bankruptcy and under the cash collateral order the corporation could not disburse funds to pay taxes without the lender’s permission which was refused the state determined that the taxpayer was a responsible_officer liable for the taxes but the court disagreed finding that after the bankruptcy filing the taxpayer no longer had control_over the corporation’s finances or to compel the corporation to pay its tax_liability the court held the taxpayer was not personally liable for the employer’s share of the taxes the court also found that the employee’s share under state law was not a asset of the bankruptcy_estate and so remanded for a determination of whether the taxpayer still had the authority to make these tax_payments the dissent noted that the taxpayer could have paid the taxes in the time between the date the taxes accrued and the date the corporation filed for bankruptcy and disagreed with the majority that subsequent events the bankruptcy should relieve the taxpayer of liability damages suits for against u s unauthorized collection kugler executrix v united_states u s app lexis 3d cir date unpublished - widow sued service over her husband’s suicide following the service’s sale of their residence for unpaid taxes the widow argued that the revenue_agent recklessly or intentionally disregarded sec_301_6325-1 by not recommending subordination of the service’s tax_lien which would have permitted the taxpayers to obtain a second mortgage and not lose their home and so the service was liable for damages under sec_7433 the court found the regulation provided only that the taxpayer could make a request for subordination not that the service had a legal duty to subordinate its lien and so the service was not liable for damages under sec_7433 levy wrongful scoville v united_states 250_f3d_1138 8th cir - service levied on insurance proceeds payable to wife under the theory that she was the taxpayer’s nominee the wife brought a wrongful_levy suit under sec_7426 arguing that her husband had no interest in the policy which covered a farm titled solely in her name the eighth circuit affirmed the district_court finding that the taxpayer retained an interest in the farm even though as a self-styled tax protestor he took steps to remove his name from the property although the taxpayer transferred the property to his wife as part of a divorce settlement they later remarried he continued to live on and use the property and paid for its upkeep further he dealt with the insurance adjustors and was a beneficiary on the policy the court found sufficient badges_of_fraud to conclude the taxpayer retained a beneficial_interest in the property which provided sufficient nexus for the federal_tax_lien to attach to the insurance proceeds liens subrogation june bulletin no banker’s trust co v united_states kan app lexis kan ct app date - service filed tax_lien in reducing that lien to judgment in which was recorded in the land records in the taxpayer transferred the property to his wife who satisfied an existing mortgage by taking out a new mortgage the new mortgage company obtained title insurance which showed the united state’s tax_lien of record in a subsequent foreclosure suit the mortgage company argued that under the doctrine_of equitable subordination the proceeds of its loan were used to pay off the existing loan therefore the mortgage company’s lien should replace the earlier mortgage lien at the same priority ahead of the united_states the court reversing the trial_court disagreed the court held that the doctrine_of equitable subordination may not be applied to relieve a party who negligently takes a lien or an interest in property which is subject_to prior liens of record of which that party had either actual or constructive notice june bulletin no the following material was released previously under sec_6110 portions may be redacted from the original advice chief_counsel_advice offer-in-compromise third party deposit cc pa cbs br2 gl-107905-00 u i l date memorandum for robert c longford chief return delinquency district_office support section from subject kathryn a zuba chief branch collection bankruptcy summonses advisory opinion-refund of third-party deposits upon rejections of offers in compromise this memorandum responds to a request for advice from vicki l o’hara by e-mail on date concerning refunds of deposits when the service rejects an offer_in_compromise particularly when a third party has provided the deposit you have asked us to consider the following question when a third party has provided the deposit for a taxpayer’s offer_in_compromise is the service required or authorized to refund the deposit to the third party upon rejection and if not should the service disclose this prior to taking the deposit for the reasons which follow we would advise that all deposits be returned to the taxpayer discussion the code the regulations and form_656 state in varying language that deposits should be returned to the taxpayer the internal_revenue_code states that on rejection of an offer_in_compromise the service shall refund the deposit to the maker of the offer sec_7809 language on form_656 also states the assumption that deposits will be returned to the taxpayer the irs will return any amount_paid with the offer although sec_301_7122-1t states only that the deposit will be refunded in the event of rejection it does give only the taxpayer the authority to authorize the service to apply the deposit to tax_liabilities further the internal_revenue_manual in its provisions relating to deposits clearly contemplates refunding the deposit to the taxpayer for instance i r m states that the service should request the taxpayer to sign form_3040 authorizing them to apply the deposit to outstanding liabilities in the event the offer is not accepted however it further provides if the taxpayer does not authorize application of the deposit the deposit must be refunded to the taxpayer emphasis in original further i r m relating june bulletin no to the disposition of deposits received with unprocessable offers in compromise provides d eposits received with offers that are not processable must be returned to the taxpayer and that the employee making the determination is responsible for sending the deposit back to the taxpayer none of these sources however directly addresses the return of deposits made by third parties on behalf of the taxpayer as a general_rule the service would want to return funds received for the payment of tax_liabilities to the taxpayer this rule relieves the service from becoming embroiled in debates over the ownership of funds submitted for the payment of taxes this is illustrated by 340_f2d_663 cl_ct cert_denied 381_us_950 here a third party advanced deposit money through an escrow agent along with written statements that the taxpayer had borrowed the deposit money that the offer expired on a certain date and that the service should return the deposit to the escrow agents if it did not accept the offer by that date before the service acted on the offer the third party asked to withdraw it and demanded return of the deposit the service refused and later accepted the offer_in_compromise the third party then brought suit seeking a refund of the deposit id pincite at the time of this decision sec_301_7122-1 provided a n offer_in_compromise may be withdrawn by the proponent at any time prior to its acceptance thus the court’s analysis turned on the question whether a nonparty who had provided the deposit could be considered a proponent of the offer with the power to withdraw it the court took a narrow view of the word proponent and held that ‘proponent ’ does not go beyond an offeror and more especially does not impose any duty on the government to determine the real owner of the funds accompanying the offer id pincite although the court in ralston did not consider the precise issue of whether the service may refund a deposit to a third party its analysis is instructive in its reluctance to impose a duty on the service to determine the owner of deposit funds or to refund them to anyone besides the actual taxpayer in dynamic service inc v granquist u s t c d or the court considered a deposit made by a third party to be a payment made by the taxpayer and stated that the dollar_figure in dispute was for purposes of this case taxpayer’s money the court dismissed the case holding that the third party did not have standing to bring suit to recover the deposit from the language of the code the regulations and the irm we presume that the service has made a policy decision to return any funds submitted for the payment of taxes to the taxpayer rather than to a third party source of the funds the courts that have considered similar cases have agreed that third parties cannot compel the service to return funds to them that they may have provided to taxpayers who have made offers in compromise thus unless the taxpayer has signed a form_3040 authorizing application of the deposit to tax_liabilities the service should refund the deposit to the taxpayer upon rejection of the offer_in_compromise advising third parties that any funds they provide will be returned to june bulletin no the taxpayer may prevent later misunderstandings with third parties but the service has no legal_obligation to do so third party contacts limited_liability companies date cc pa cbs br3 tl-n-214-00 u i l - memorandum for associate area_counsel financial services healthcare lmsb area brooklyn from lawrence schattner chief branch collection bankruptcy summonses subject application of sec_7602 to limited_liability companies - definition of person other than the taxpayer this field_service_advice responds to your memorandum dated date field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be used or cited as precedent disclosure statement field_service_advice is chief_counsel_advice and is open to public inspection pursuant to the provisions of sec_6110 the provisions of sec_6110 require the service to remove taxpayer identifying information and provide the taxpayer with notice of intention to disclose before it is made available for public inspection sec_6110 and i sec_6110 also authorizes the service to delete information from field_service_advice that is protected from disclosure under u s c sec_552 and c before the document is provided to the taxpayer with notice of intention to disclose only the national_office function issuing the field_service_advice is authorized to make such deletions and to make the redacted document available for public inspection accordingly the examination appeals or counsel recipient of the document may not provide a copy of this unredacted document to the taxpayer or their representative the recipient of this document may share the unredacted documentation with those persons whose official tax_administration duties with respect to the case and the issues discussed in the document require inspection or disclosure of the field_service_advice legend company x company y june bulletin no company z member member member member member date date year year year issue whether company z should be treated as a person other than the taxpayer for purposes of the advance notification requirements of sec_7602 conclusion company z should not be treated as a person other than the taxpayer for purposes of the advance notification requirements of sec_7602 facts during the course of the examination of the consolidated_returns filed by company y the examiners discovered a lease_stripping transaction involving airplanes owned by company z a subsidiary of company y and a member of its consolidated_group as part of an investment structuring plan company z contributed fully-depreciated leased airplanes to member a corporation that is owned by company z and also a member of the consolidated_group on date an llc now known as company x was formed by member and two other corporations that are owned by company z member and member shortly thereafter the composition of the llc was changed by withdrawal of member and the addition of two new members the two new members were member and member consequently at this stage of the transaction the aircraft were being held by an llc which was made up of four members two of the members of company x member and member are owned by company z and are members of the company y consolidated_group pursuant to the terms of company x’s operating_agreement none of its members were to have any say in the management or control of the company or to be able to act for or bind the company instead management of company x was vested in a group of three managers who were elected by company x’s class b members the class a members member sec_4 and had no voting power or voting rights but did have the power to cause june bulletin no company x to be liquidated if it failed to make distributions of certain amounts in the years year through year the company x operating_agreement also provided that capital accounts would be maintained for member sec_1 and member sec_4 and are also referred to as the equity investors pursuant to the agreement the capital accounts were to be increased for property contributed by each member and the book income allocated to the member and decreased for distributions to each member and book losses allocated to each member on liquidation the equity investors were to receive cash payments equal to the values of their capital accounts plus equity investor guaranteed payments company x filed u s partnership returns for year through year in which it designated member as its tax_matters_partner as noted earlier member is the entity to which the airplanes were contributed is owned by company z and is a member of the consolidated_group on date member sec_4 and sold their interests in company x to two corporations that are subsidiaries of company z consequently after the sale all of the members of company x are subsidiaries of company z because the transaction allocated income from the leased airplanes to a party other than the party that claimed the depreciation relating to them company z’s transportation industrial unit the transaction is a lease_stripping transaction in connection with the examination of the returns of company x the lmsb examination team proposes to summons information from company z company z has been controlling the examination of company x and the tax director of company z has been the team’s point_of_contact throughout the company x examination the examination team has had no contact with company x through officers of member or the managers of company x law and analysis under sec_7602 an officer_or_employee of the service may not contact any person other than the taxpayer with respect to the determination or collection of the tax_liability of such taxpayer without providing reasonable notice in advance to the taxpayer the statute also requires the service to provide the taxpayer with a record of persons contacted both periodically and upon the taxpayer’s request sec_7602 the congressional intent behind these requirements is to provide taxpayers with the opportunity to come forward with information before third parties are contacted and the means to address any business or reputational concerns arising from such contacts without impeding the ability of the service to make those contacts that are necessary to enforce the internal revenue laws with this intent in mind an interpretative approach to sec_7602 has been adopted that balances taxpayers’ business and reputational interests with third parties’ privacy interests and the service’s responsibility to administer the internal revenue laws effectively june bulletin no for purposes of complying with the advance notice and recordkeeping requirements of the statute a service employee must determine whether a person other than the taxpayer will be contacted with respect to the determination or collection of the tax_liability of such taxpayer accordingly in order to determine whether the notice and recordkeeping requirements of the statute apply in a given situation a service employee must determine who is the taxpayer with respect to whose tax_liability a contact is being made as stated in the facts section of this memorandum in the instant case the service is considering issuing a summons in connection with its examination of the returns of company x an llc since company x elected to be classified as a partnership for federal_income_tax purposes at least for taxable years ending on or before date company x is subject_to the tefra partnership provisions the audit of tefra partnerships is conducted at the partnership entity level pursuant to sec_6221 through but any resulting liability is ultimately assessed against the individual partners the tax_matters_partner tmp is responsible for certain administrative duties during the course of the examination including keeping the other partners informed to the extent and in the manner provided by regulations see sec_6223 additionally under sec_6223 each partner whose name and address is furnished to the service is entitled to receive notice of the beginning of an administrative procedure at the partnership level with respect to a partnership_item and the final_partnership_administrative_adjustment from any such proceeding in a tefra partnership proceeding the tax treatment of partnership items is at issue although the respective tax_liabilities of the partners may be affected by the results of the partnership-level proceeding and thus they are parties to the proceeding a third party contact relating to the tax treatment of partnership items is not with respect to the determination of the specific tax_liability of any of the partners hence the partnership should generally be viewed as the taxpayer for purposes of giving notice under sec_7602 notice should be given to the tmp because the tmp is the statutory representative of the partnership and the partners applying the above to the facts in the instant case the llc company x should be treated as the taxpayer for purposes of sec_7602 and the required notices should be provided to member as the designated tmp of company x a related question is whether contacts with members of an llc are sec_7602 contacts notwithstanding that we have concluded that the partnership llc rather than the partners members should generally be viewed as the taxpayer for purposes of giving as part of the taxpayer_relief_act_of_1997 certain changes were made to the tefra partnership provisions such as the expansion of the small_partnership_exception which potentially could effect whether company x remains subject_to those provisions for taxable years ending after the effective date for those changes date june bulletin no notice under sec_7602 it does not necessarily follow that the partners members are persons other than the taxpayer in fact for the reasons discussed below we have concluded that they are not proposed_regulations regarding sec_7602 were issued by the service on date in defining the phrase person other than the taxpayer the proposed_regulations exclude a current employee officer or fiduciary of a taxpayer when acting within the scope of his or her employment relationship with the taxpayer the rationale for this position is explained in the preamble to the proposed_regulations as follows the meaning of person other than the taxpayer when contacting business entities sec_7602 applies to contacts with any person other than the taxpayer the person contacted may be a business_entity rather than an individual irs employees must often contact employees of business entities these contacts arise in two situations first irs employees examining a business taxpayer generally must communicate with employees of the taxpayer second in the course of determining or collecting any taxpayer’s liability an irs employee may need to contact employees of a third-party business_entity for example when an irs employee contacts a bank or other business the irs employee actually communicates with an employee of the bank or business with respect to the first situation when an irs employee contacts an employee of a taxpayer under examination the proposed_regulations provide that a taxpayer’s employee is not a person other than the taxpayer when acting within the scope of his or her employment several rationales underlie this position first corporations may speak and act only through individuals moreover state law generally provides that employers are responsible for their employees regardless of the form under which the employer does business when the employees are acting within the scope of their employment it seems reasonable therefore to treat employees who are acting within the scope of their employment as being part of the business taxpayer under examination second this approach is consistent with how employees are treated elsewhere in the internal_revenue_code see sec_7609 summons issued to any person who is the taxpayer under investigation or any officer_or_employee of such person not considered a summons issued to a third party from an administrative standpoint irs employees examining a business generally rely on certain individuals designated by the taxpayer to provide information and direct the irs to whichever employees can best provide that information the regulations will not affect this current examination practice and business taxpayers will continue to be informed about contacts with their employees pursuant to current procedures prop sec_301_7602-2 sec_66 fed reg date june bulletin no consistent with the above rationale contacts made with the partners of a tefra partnership are not treated as contacts with persons other than the taxpayer since a partnership is not a natural_person it can only speak or act through authorized agents or representatives similarly contacts with a partnership generally must be through a natural_person ie an individual by virtue of their owning a partnership_interest the partners are afforded certain rights and charged with certain responsibilities relating to the partnership by state laws such as the uniform_partnership_act and the uniform_limited_partnership_act as well as under the partnership_agreement that they entered into with respect to the specific partnership of which they are a partner in addition in tefra partnerships each partner has the right to participate in any administrative_proceeding relating to the determination of the proper tax treatment of partnership items at the partnership level i r c a hence the partners may be viewed as being in privity with the partnership at least for purposes of the administrative tax proceeding consequently a contact made with any partner of a tefra partnership should be treated as a contact of the partnership rather than as a third party contact likewise applying the same rationale and noting that under the uniform limited_liability_company act members of an llc generally have rights and obligations comparable to those of partners in a partnership a contact with a member of an llc that is subject_to the tefra partnership provisions should be treated as a contact of the llc rather than as a third party contact consequently if for example the service contacted member or member the contact would be treated as tantamount to contacting company x and thus would not be a third party contact the analysis does not stop here however because in the instant case the service is contemplating contacting company z which is the parent of member and member but is not itself a direct member of company x in determining whether contacting company z would constitute a sec_7602 contact we once again look to the tefra partnership provisions for guidance under sec_6231 the term partner means not only a partner in the partnership but also includes any other person whose income_tax_liability is determined in whole or in part by taking into account directly or indirectly partnership items of the partnership sec_6231 in the instant case company z member and member are all members of a consolidated_group the common parent of which is company y pursuant to sec_1_1502-6 the common parent and each subsidiary that was a member of a consolidated_group during any part of the consolidated_return_year is severally liable for the tax for that year thus by virtue of being a member of a consolidated_group that also includes member and member the tax_liability of company z is determined in part by taking into account indirectly partnership items of company x the llc therefore company z is treated as a partner member of the partnership llc for purposes of the tefra partnership provisions accordingly since we determined above that contacting a member is treated as the equivalent of contacting the llc rather than contacting a third party contacting company z would not be a sec_7602 contact case development hazards and other considerations this material was redacted june bulletin no offer_in_compromise tax_shelters exceptional circumstances date cc pa cbs br2 gl-804160-00 uilc memorandum for associate area_counsel sb_se area seattle from kathryn a zuba chief branch collection bankruptcy summonses subject offer_in_compromise - this memorandum responds to your request for advice dated date this document is not to be cited as precedent you have asked our advice as to whether the above referenced taxpayer’s tax shelter-related liabilities could be compromised under the commissioner’s new authority to compromise based on the promotion of effective tax_administration we conclude this case does not present exceptional circumstances such that collection of the full tax_liability would be detrimental to voluntary compliance by taxpayers legend x y date a b background in the taxpayer learned of the opportunity to invest in x a partnership which was itself a partner in several of the nationally marketed y partnerships the tax attorney who told him of the investment assured him that the general partners were credible and that the investment was real and substantive as opposed to merely a tax_shelter the taxpayer states that he also sought the advice of his accountant and hired an independent tax attorney to review the materials and that both advised him that the investment was sound from both a tax and profit potential standpoint the taxpayer signed on as a limited_partner and immediately realized investment tax_credits which significantly reduced or eliminated his tax_liabilities for and in the taxpayer learned that the y partnerships were under investigation by the service and that the investment tax_credits would be disallowed in an attempt to remove the partnership-related items from his return the taxpayer filed amended returns for the june bulletin no years through the service_center did not process the returns concluding that the statute_of_limitations for assessment had run for those years in the taxpayer accepted the service’s settlement offer with respect to the proposed adjustments to the partnership items on his returns consistent with this settlement tax_motivated_transaction interest under former sec_6621 was assessed against the taxpayer in the taxpayer received a letter outlining the service’s settlement proposal with respect to overvaluation substantial_underpayment and negligence penalties partners accepting the settlement would be assessed only a sec_6659 overvaluation penalty for partners who declined to settle the letter explained that the service’s litigation position would be that they were liable for both substantial_underpayment and negligence penalties the taxpayer apparently declined to settle and statutory notices of deficiency were issued shortly thereafter the taxpayer defaulted on the notices and penalties were assessed in late as of date the tax_liability totaled more than dollar_figurea the taxpayer has offered to compromise with the service on terms more favorable than those he declined to accept in he proposes to pay just over dollar_figureb in full satisfaction of his liabilities relating to investment in the tax_shelter the collection information statements in the file reveal that this offer represents less than of the current value of his assets without taking current and prospective income into account in fact it is undisputed that the assessed tax_liability including all interest accruals could be collected in full without causing the taxpayer economic hardship as defined under treasury regulations the taxpayer’s offer is premised not on any hardship or collectibility grounds but on the theory that holding him liable for full payment would be unfair and would therefore be detrimental to voluntary compliance the taxpayer raises two principal arguments in support of his contention that equity and fairness warrant the acceptance by the service of less than the previously determined and assessed tax first the taxpayer argues that he should not be held liable for penalties or tax-motivated transaction interest because he performed due diligence prior to investing in the partnership and signed on as a partner with a legitimate expectation of future profits second the taxpayer argues that the service erred by failing to process the amended returns he submitted in december of in addition to these specific allegations the offer and the supporting documentation imply that the service should compromise with the taxpayer because he was defrauded by the tax_shelter promoters in sum the taxpayer argues that acceptance by the service of his proposed compromise would promote effective tax_administration because collecting the tax in full would be detrimental to voluntary compliance by taxpayers your draft memorandum to the offer group concludes that compromise of the taxpayer’s tax shelter-related liabilities would not promote effective tax_administration as is explained more fully below we agree with your conclusion discussion june bulletin no the secretary may compromise any civil or criminal case arising under the internal revenue laws prior to referral to the department of justice for prosecution or defense sec_7122 permissible bases for compromise are established by treasury regulations temporary regulations issued date expanded the service’s authority to compromise beyond the traditional bases of doubt as to collectibility or doubt as to liability see temp sec_301_7122-1t where there are no grounds for compromise on collectibility or liability grounds a compromise may be entered into to promote effective tax_administration where collection of the full liability would create economic hardship within the meaning of sec_301_6343-1 of the treasury regulations or exceptional circumstances exist such that collection of the full liability would be detrimental to voluntary compliance by taxpayers temp sec_301_7122-1t b no such compromise may be entered into where it would undermine future compliance with the tax laws id the taxpayer has proposed compromise of this case based on a determination that it would promote effective tax_administration under the standards articulated in the regulations the taxpayer argues that even though as is noted above the tax_liability at issue could be collected in full without causing economic hardship collection of the full tax_liability would be detrimental to voluntary compliance by taxpayers where this basis can be established compromise is authorized regardless of the taxpayer’s financial circumstances see temp sec_301_7122-1t b ii the regulations do not give a more exact standard or list factors to be considered but illustrate this basis through two examples see temp sec_301_7122-1t b iv e the procedures implementing this basis for compromise show that the service anticipates compromising when collection of the full liability would be unfair or inequitable see irm form_656 offer_in_compromise rev instructions pincite the taxpayer maintains that his due diligence in investigating the partnership before investing demonstrates that his decision to invest was motivated by profit potential however his personal profit_motive is not relevant to determination of the tax_motivated_transaction interest he seeks to avoid whether a partnership transaction is entered into for profit is determined by the intent of the partnership based on the intent of the general partners entering into the transaction see 820_f2d_321 9th cir brannen v commissioner 78_tc_741 aff'd 722_f2d_695 11th cir see also 75_tc_424 aff'd without published opinion 691_f2d_490 3d cir 78_tc_659 acq 1984_2_cb_1 and acq 1984_2_cb_2 as a partnership_item profit motivation is determined in a partnership level proceeding sec_301_6231_a_3_-1 sec_6221 similarly the valuation of partnership assets for purposes of the overvaluation penalty under former sec_6659 and sec_6662 is determined at the partnership level smith v commissioner tcmemo_1990_510 such an overvaluation makes tax motivated interest apply under former sec_6621 june bulletin no a partner is bound with respect to affected items based on the determination of partnership items affected items are items that are affected by partnership items sec_6231 affected items include penalties temp sec_301 a -1t tax motivated interest under former sec_6621 is an affected_item 95_tc_209 if a transaction is determined to be a sham at the partnership level because the partnership did not enter into the transaction for profit tax motivated interest under former sec_6621 applies irrespective of an individual partner’s personal motive for investing in the partnership see thomas v united state sec_83 aftr2d par 6th cir sec_6621 applies because the transactions were shams regardless of the individual partner’s profit_motive see also 79_f3d_726 8th cir cert_denied 117_sct_85 62_f3d_1266 10th cir 933_f2d_1124 2d cir 924_f2d_1018 11th cir kozlowski v commissioner 66_tcm_754 aff'd 70_f3d_1279 9th cir klieger v commissioner 64_tcm_1624 the taxpayer’s offer makes no effort to dispute any of the foregoing his offer maintains that these rules are unfair and that his personal profit_motive should be taken into account he is essentially maintaining that congress has enacted an unfair statutory scheme and that the service should use its compromise power to rewrite the rules regarding the determination of partnership liabilities we cannot agree that the authority to compromise under sec_7122 is so broad as to allow the service to disregard or override the considered judgments of congress the service’s procedures for compromise based on the promotion of effective tax_administration recognize that the policy choices made elsewhere in the code must be given due consideration see irm handbook exam offer_in_compromise sec_3_4 where as here congress has enacted an express and comprehensive scheme which dictates a certain result a decision to categorically disregard that scheme would be beyond the service’s authority as is mentioned above the taxpayer attempted to amend his returns to remove most of the investment tax_credits related to his investment in the subject partnership upon receipt of the amendments the service_center concluded that the statute_of_limitations prevented amendment of the returns in question the taxpayer and the offer examiner an analogy to bankruptcy law may help illustrate this point congress has granted bankruptcy courts the power to issue any order process or judgment that is necessary or appropriate to carry out the provisions of the bankruptcy code u s c sec_105 however the supreme court has held that even this broad grant of power does not exist in a vacuum and cannot be used to disregard or circumvent specific bankruptcy code provisions see 485_us_197 stating that a bankruptcy court’s equitable powers must and can only be exercised within the confines of the bankruptcy code it is logical to conclude that the secretary’s discretionary compromise authority is similarly constrained june bulletin no have correctly pointed out that the statute_of_limitations for assessment of the items the taxpayer sought to amend was held open by the on-going partnership level proceeding however it does not follow from this conclusion regarding the statute_of_limitations that the amended returns should have been processed the code requires that all partnership items on an individual partner’s return be treated in a manner consistent with the position taken on the partnership return see sec_6222 a partner who wishes to amend partnership items can request to do so by filing an administrative_adjustment_request with the service within three years of the filing of the partnership return and prior to the issuance of a final_partnership_administrative_adjustment fpaa to the tax_matters_partner see sec_6227 d after the time for filing an administrative_adjustment_request has expired an individual partner can make a deposit to stop the accrual of interest but only in the manner specified by announcement 1986_47_irb_46 because the taxpayer did not file an administrative_adjustment_request form with his return and did not comply with the deposit procedures of announcement the amended returns should not have been processed finally we address the claim that the fraudulent acts of the tax shelter’s general partners create a basis for compromise of this case we cannot agree with this premise in directing the service to consider additional bases for compromise in order to promote effective tax_administration congress gave no indication that it intended that the service would adopt a standard under which the government would act as an insurer or would relieve taxpayers of those risks attendant to business and financial transactions the regulations expanding the commissioner’s compromise authority are also inconsistent with this idea they give two examples of potential compromises based on the conclusion that collection would be detrimental to voluntary compliance by taxpayers in the first a taxpayer is incapacitated and unable to comply with the tax laws upon regaining his ability to do so the taxpayer immediately attends to his tax obligations in the second the taxpayer incurs a liability when he relies on erroneous advice by the service and it is clear that he could have and would have avoided the liability had the advice been correct see temp sec_301_7122-1t b iv e compromise due to the acts of third parties beyond the control of the service particularly acts by a taxpayer’s partners employees or other fiduciaries is a departure from these examples in both of the examples in the regulations the implicit assumption is that the taxpayer would have complied but for some occurrence over which he had no control that is not so in this case here the taxpayer’s liability arose out of sham transactions in which he chose to participate as a partner regardless of whether the taxpayer knew or had reason to know that the general partners were making misrepresentations or would later fail to perform on their obligations as promised the taxpayer was the individual in the best position to evaluate those risks it is our understanding that the payment made at the time the taxpayer submitted the amended returns has since been applied as the taxpayer initially instructed and that interest accruals have been adjusted accordingly june bulletin no under these circumstances we do not agree that collection would be detrimental to voluntary compliance by taxpayers to the contrary compromise on the basis of the general partners’ fraud would place the government in the role of an insurer against poor business decisions by taxpayers reducing the incentive for taxpayers to thoroughly investigate the consequences of transactions for the service to play that role would be particularly inappropriate when the transaction at issue is participation in a tax_shelter reducing the risks of participating in tax_shelters would encourage more taxpayers to run those risks thus undermining rather than enhancing compliance with the tax laws see temp sec_301_7122-1t b ii no compromise based on the promotion of effective tax_administration may be entered into where it would undermine compliance with the tax laws compromise in this case could also seriously undermine the service’s ongoing efforts to settle large tax_shelter litigation on a consistent basis see i r c c requiring that consistent settlements be offered to all partners for these reasons compromise under these circumstances could not be said to promote effective tax_administration invalid credit frivolous refund uil date cc pa cbs tl-n-2075-01wli2 memorandum for associate area_counsel sb_se area salt lake city attn mark h howard cc sb slc from robert a miller senior technician reviewer branch collection bankruptcy summonses subject significant service_center advice this responds to your request for significant service_center advice dated date in connection with a question from the frivolous_return unit in the ogden compliance center issue with respect to a frivolous refund claim based on a claim of entitlement to an invalid nonexistent credit such as for black reparations you ask can the service and if so by what procedures or remedies refuse to post the credit to the account reverse a frivolous credit posted to the account stop fms from processing a refund voucher whether for a check or an electronic_fund_transfer eft intercept a mailed check or eft recover the check from the hands of the taxpayer or the bank prior to final processing of the check recover deposited treasury check or eft proceeds before or after the proceeds become available for withdrawal or recover treasury check proceeds withdrawn from the bank account by the taxpayer june conclusions if the frivolous claimed credit is discovered bulletin no during processing and prior to posting the credit to the master_file mf account and action is taken to deny the credit as not existing do not post the credit to the account after posting the credit to the mf account but before an electronic refund voucher is sent to financial management services fms reverse the credit on the mf account for the reason that it does not exist immediately after an electronic refund voucher has been processed to fms but before the voucher has been processed by fms reverse the credit on the mf account and send an electronic order to fms directing that fms stop processing the voucher and as applicable restore funds to the irs’ treasury account immediately after a voucher has been processed by fms and before the check or eft has gone out that is before the check is put in the hands of the united_states postal service usps or before the eft is transmitted to a correspondent bank reverse the credit on the mf account and request that as applicable fms secure and cancel the check or cancel the eft and in either case restore the funds to the irs’ treasury account shortly after a check is put in the hands of usps reverse the credit on the mf account and submit an expedited request to the local and regional usps offices which have initial jurisdiction over the refund checks issued by fms asking for return to the irs as sender of the envelope containing the treasury check shortly after an electronic funds transfer has been sent by fms to a correspondent bank reverse the credit on the mf account and ask that a stop payment be electronically issued by fms while a check is being held by the taxpayer revenue officers should converse with the taxpayer face to face inform the taxpayer that the check was obtained by misrepresentation of a material fact request that the taxpayer turnover the check to the irs and inform the taxpayer that assessment and collection action will be taken if the request is not honored after taxpayer presents the check for negotiation to a depositary bank but while the check is still in the possession of the bank and before the bank makes funds available for withdrawal the bank can be requested to withhold processing of the check under c f_r b f h in that circumstance one or more revenue officers should converse with the taxpayer face to face inform the taxpayer that the check was obtained by misrepresentation of a material fact request that the taxpayer consent to the bank turning june bulletin no the check over to the irs and inform the taxpayer that assessment and collection action will be taken if the request is not honored after the depositary bank has deposited proceeds of the check in the taxpayer’s account but before the funds are available for withdrawal a one or more revenue officers should converse with the taxpayer face to face inform the taxpayer that the check was obtained by misrepresentation of a material fact request that the taxpayer voluntarily return the amount of the erroneous refund and inform the taxpayer that failure to do so will result in assessment and collection action b if the taxpayer will not voluntarily turn over the funds to the irs after meeting with one or more revenue officers the irs should make an sec_6201 assessment after the funds have been withdrawn from the bank account by the taxpayer the irs should make a sec_6201 assessment facts a number of taxpayers have filed claims for refund based on a claim of entitlement to an invalid nonexistent credit such as for black reparations the irs has centralized in the ogden compliance center the processing of frivolous_return claims under sec_6702 frivolous_return penalty and particularly the black reparations claims for the entire united_states it was discovered that some offices of the irs have erroneously processed returns and allowed some black reparations claims to proceed to an approved refund status however the irs has often discovered this error either before the check is mailed to the taxpayer or before the check has cleared the banking process discussion with respect to a frivolous refund claim based on a claim of entitlement to an invalid nonexistent credit such as for black reparations you ask can the service and if so by what procedures or remedies refuse to post the credit to the account reverse a frivolous credit posted to the account stop fms from processing a refund voucher whether for a check or an eft intercept a mailed check or eft recover the check from the hands of the taxpayer or the bank prior to final processing of the check recover funds after the check or eft has been deposited in the taxpayer’s bank account and before or after the funds became available for withdrawal or recover treasury check proceeds withdrawn from the bank account by the taxpayer generally we conclude that if the service acts quickly enough there are pre-assessment administrative procedures for recovery at each step of the process a check or eft follows and if those are unavailing there are assessment collection and erroneous refund remedies our positions explained in more detail below is drawn from a number of prior advisories and other authorities which we take this opportunity to collect and update june bulletin no if the frivolous claimed credit is discovered during processing and action is taken to deny the credit as not existing prior to posting the credit to the master_file mf account do not post the credit to the account our position is implied from our prior significant service_center advice wta-n-110702-00 dated date which concludes that a frivolous claim to an invalid nonexistent credit black reparations credit in that instance can be reversed if the frivolous invalid nonexistent credit is discovered after posting the credit to the mf account but before an electronic refund voucher is sent to financial management services fms reverse the credit for the reason that it does not exist see our prior significant service_center advice wta-n-110702-00 dated date which concludes that a frivolous claim of an invalid nonexistent credit black reparations credit in that instance can be reversed if the frivolous claimed credit is discovered immediately after an electronic refund voucher has been processed to fms but before the voucher has been processed by fms send an electronic order to fms directing that fms stop processing of the voucher and as applicable restore funds to the irs’ treasury account see our prior significant service_center advice sca tl-n-5968-97 dated date we note in this regard that we have been advised by fms that their processing time for a check is ten days and their processing time for an eft is three days both measured from the date that fms receives the electronic voucher if the frivolous claimed credit is discovered immediately after a voucher has been processed by fms and before the check or eft has gone out that is before the check is put in the hands of the usps or before the eft is transmitted to a correspondent bank request that as applicable fms secure and cancel the check or cancel the eft and in either case restore the funds to the irs’ treasury account fms has informally acknowledged that fms is able to do this we note in this regard that we have been advised by fms that their processing time for a check is ten days and their processing time for an eft is three days both measured from the date that fms receives the electronic voucher if the frivolous claimed credit is discovered shortly after a check is put in the hands of usps immediately submit an expedited request to any usps post office identifying the mailpiece and the treasury_department irs as the sender this procedure is provided in usps domestic mail manual issue plus postal bulletin changes through pb22047 d030 which states a federal_agency may recall any mailpiece sent as official mail by submitting to any post office a mailgram or an express mail letter identifying the piece the usps treats the irs as the sender of all irs refund checks if the frivolous claimed credit is discovered shortly after an electronic funds transfer has been sent by fms to a bank ask that a stop payment be issued by fms electronically to the correspondent bank and the depositary bank we mention the correspondent bank june bulletin no because efts while designed to be a transmittal that occurs quickly sometimes incur delay between receipt and retransmittal by a correspondent bank the regulations providing for funds availability as the result of clearance of efts and providing procedures for the issuer of the funds to stop the clearance are contained in c f_r an eft is cleared received when the receiving bank has received the payment in actually and finally collected funds and information on the account to be credited see section b thus normally a treasury eft would be made available for withdrawal the business_day after the banking day on which the eft is finally received by the depositary bank see section b however if the irs acts quickly enough and if the bank is still in possession of the funds including if they are in the taxpayer’s bank account it may still be possible for the eft transaction to be reversed if the frivolous claimed credit is discovered while a check is being held by the taxpayer one or more revenue officers should converse with the taxpayer face to face inform the taxpayer that the check was obtained by misrepresentation of a material fact request that the taxpayer turnover the check to the irs and inform the taxpayer that failure to do so will result in assessment and collection action if the frivolous claimed credit is discovered after taxpayer has presented the check to a depositary bank but before the financial_institution has given funds to the taxpayer or released deposited funds for withdrawal the bank can be requested to withhold processing of the check section c i provides in the case of funds derived from a treasury check deposited in an account of the payee of the check that a depositary bank shall make the deposited funds available for withdrawal not later than the business_day after the banking day on which the funds are deposited next day availability however two exceptions are provided in section the first exception section b provides that section c does not apply to deposits in excess of dollar_figure on any one banking day the second exception section f provides that section c does not apply to funds deposited by check in a depositary bank in the case of an emergency condition beyond the control of the depositary bank for purposes of both exceptions section h provides that the depositary bank may extend the next day availability time period established by section c by a reasonable period section h defines reasonable period as normally an extension of up to six business days for checks described in section c however that provision notes that a longer period may be reasonable but the bank bears the burden of so establishing in our view one or more revenue officers should converse with the taxpayer face to face inform the taxpayer that the check was obtained by misrepresentation of a material fact request that the taxpayer consent to the bank turning the check over to the irs and inform the taxpayer that failure to do so will result in assessment imposition of interest and collection action if the frivolous claimed credit is discovered after the proceeds of the check have been deposited by the depositary bank to the taxpayer’s account and the funds have been made available for withdrawal june bulletin no a one or more revenue officers should converse with the taxpayer face to face inform the taxpayer that the check was obtained by misrepresentation of a material fact request that the taxpayer voluntarily return the amount of the erroneous refund and inform the taxpayer that failure to do so will result in assessment imposition of interest and collection action b if the taxpayer will not voluntarily turn over the funds to the irs after meeting with one or more revenue officers the irs should make a sec_6201 assessment if the frivolous claimed credit is discovered after the check has been negotiated and funds have been withdrawn from the bank account by the taxpayer the irs should make a sec_6201 assessment other considerations if the irs makes a sec_6201 assessment the irs then has available the full range of administrative and judicial collection authority in this regard the irs generally has ten years from the date of the assessment to administratively collect including by levy if use of the levy authority cannot recover some part of the refund a collection suit to reduce the assessment to judgement can be brought at any time within the ten year period alternatively as you mention an erroneous refund_suit under sec_7405 is an available remedy for obtaining a judgement the period for bringing an erroneous suit in respect of a refund premised on an invalid nonexistent credit is the sec_6532 five year period that applies to misrepresentations of material fact see our chief_counsel_advice ct- dated date jeopardy_levy may be an appropriate remedy in many of these instances see chief_counsel_advice ct-104674-99 dated date in determining whether jeopardy exists local counsel will review the jeopardy proposal and determine whether jeopardy_levy is appropriate in the circumstances in this regard we refer you to the discussion of jeopardy in our prior chief_counsel_advice ct-104674-99 we suggest that among other factors local counsel consider whether the relative level of the taxpayer’s reported income is low in respect to the size of the erroneous refund here dollar_figure or dollar_figure thereby suggesting a likelihood that if withdrawn a significant amount may not be recovered and whether upon being contacted by one or more revenue officers in a face to face conversation as described above the taxpayer refused to voluntarily return or to consent to the bank’s return of the check or funds if the refund of the frivolous credit cannot be recovered the refund constitutes income to the taxpayer in the year in which the taxpayer received the refund see chief_counsel_advice field_service_advice tl-n-8392-93 tnt dated date the normal deficiency procedures are used to impose income_tax in respect of this income june bulletin no you posed an additional question relating to the holding in 922_f2d_573 10th cir but informally indicated that few of the taxpayers involved with the invalid nonexistent credits are located within the tenth circuit because of the limited application of the question to the facts you present and because the neece question has been addressed in prior advisories there is no need for us to address it here erroneous refunds repayment cc pa cbs br3 wta-n-122554-00wli7 uil memorandum for associate area_counsel small_business self- employed area brooklyn cc sb brk attn pareiegger from subject robert a miller acting chief branch collection bankruptcy summonses ability of irs to retain erroneous refunds repaid more than two years after erroneous refunds made your ref cc sb brk tl-5479-00 this is in response to your memorandum dated date in which you requested significant service_center advice under ccdm et seq the memorandum deals with two scenarios in which the service made erroneous refunds for which more than two years after the refunds were made it requested and received repayment the primary concern of the service_center is whether it is permissible for the service to keep the repayments because of the refund aspects of your inquiry this office coordinated with administrative provisions and judicial practice apjp after discussions with your office and apjp because of the uncertainty of the facts in the inquiry which facts probably were not discoverable we reclassified this case from a significant service_center advice to a chief_counsel advisory issues scenario do the facts as developed or could reasonably be developed within a short time frame sufficiently support bringing an erroneous refund_suit against an individual more than two years after such refund was made where the individual submitted a check noted with a partnership ein which resulted in the check being posted to a partnership account and the amount thereof refunded to the partnership but for which upon his request he was credit with a payment in the amount of the check with the portion exceeding his outstanding liabilities refunded to him with interest june bulletin no do the facts as developed or could reasonably be developed within a short time frame sufficiently support the position that the service is not required to repay funds to a third party where the funds were received from the third party in response to a request for repayment of an erroneous refund made to a partnership and where the service’s request for repayment and the repayment were made more than two years after the erroneous refund was made where the erroneous refund repayment requested of the partnership was apparently made by a third party without interest do the facts as developed or could reasonably be developed within a short time frame sufficiently support seeking recovery_of the interest by an erroneous refund_suit against the third party scenario do the facts as developed or could reasonably be developed within a short time frame sufficiently support the position that the service is required to repay funds received in response to a request for repayment of an erroneous refund made to an individual where the request for repayment and the repayment were made more than two years but less than five years after the erroneous refund was made conclusions scenario the facts as developed or could reasonably be developed within a short time frame do not appear to sufficiently support bringing an erroneous refund action against the individual the facts as developed or could reasonably be developed within a short time frame do not appear to sufficiently support the position that the service is required to return the funds the facts as developed or could reasonably be developed within a short time frame do not appear to sufficiently support bringing an erroneous refund action against the third party to recover interest scenario the amount received in response to a request for repayment of an erroneous refund is an overpayment where the request and repayment were made more than two years but less than five years after the erroneous refund was made and the facts do not suggest that the five year period is applicable thus since the period for taxpayer to claim a refund has not expired the service should either notify the taxpayer of the overpayment and request instructions as to disposition or the service could on its own initiative refund the overpayment with interest june facts scenario bulletin no a remittance in the form of a check from an individual was received by a service_center on the check was noted the employee identification_number ein of a tefra partnership the remittance was posted to a tax_year of the partnership that was undergoing a tefra_audit the posting was made using a tc640 code to show a remittance in the nature of a cash bond at the conclusion of the tefra partnership case a tc300 subsequent assessment by examination for was input to that partnership account indicating that the case had been concluded at the partnership level the tc300 released the freeze holding the remittance in the tax account and a refund of the deposit was issued to the partnership without interest one week later another service_center at the request of the individual transferred the remittance to the individual’s account for the same year as that of the partnership the service_center treated the remittance as a payment as of the date received by the service which satisfied the individual’s outstanding liability and resulted in a refund for the difference plus interest at some point one of the service centers realized that the service had twice applied funds in connection with the same remittance that service_center determined that the partnership rather than the individual was erroneously returned the deposit more than two years after return of the deposit to the payee partnership the service_center sent a request for repayment to the partnership at the address on its final return and indicated that interest would be waived if repayment was made within a stated period somewhat later than the stated period repayment was made in the amount of the returned deposit by another partnership which requested that interest be waived the continuing winding up status under state law of the partnership which was the payee on the refund check is unclear the partnership filed its final return prior to the erroneous return of the deposit the individual who is now deceased and whose date of death can be ascertained from state records was a partner the refund check was negotiated by a stamp of the name of the partnership without the signature of a signatory however the account to which it was deposited particularly whether it was an account of someone other than the payee partnership can be ascertained scenario a payment check was received by a service_center on the check was noted the tax_year form_1040 and an ssan which contained a misstatement in the ssan the service_center posted the payment to the individual income_tax account for the tax_year of the taxpayer whose ssan was noted on the check shortly thereafter a check was received from the taxpayer to whose account the first check was misapplied in full payment of the liability reported on his return upon posting of the second check to the taxpayer’s account a refund was generated in the amount of june bulletin no the first check plus interest thereafter the service received notice that the first check was dishonored the service_center determined that the first check was sent by a third party and that the ssan noted on the first check contained an error the first check should not have been deposited to the account of the taxpayer to whom the noted ssan belongs therefore the service_center transferred the entries regarding posting of the check and the dishonoring of the check out of the account of the taxpayer to which it was misapplied and over to the tax account of the person who wrote the check more than two years but less than five years after making the erroneous refund the service_center billed the taxpayer to whose account the check had been misapplied for a tax in the amount of the erroneous refund the taxpayer paid the bill within the five year erroneous refund period discussion scenario the issue is whether the facts sufficiently support bringing an erroneous refund_suit against an individual more than two years after such refund was made the individual submitted a check noted with a partnership ein which resulted in the check being posted to a partnership account however upon his request he was credit with a payment in the amount of the check as of the date of the service’s receipt of the check with the portion exceeding his outstanding liabilities refunded to him with interest because the individual wrote the check on a personal account the service accepted as correct the individual’s claim that the remittance was made as a payment of his individual tax_liability the individual is now deceased and it appears that no facts can be developed to contradict his claim that the remittance was made in connection with his own liability accordingly the facts as developed or could reasonably be developed within a short time frame do not appear to sufficiently support bringing an erroneous refund action against the individual the issue is whether the facts sufficiently support a position that the service is required to repay funds to a third party an amount received from an individual but noted with the ein of the payee partnership was posted to an account of the payee partnership as a deposit the partnership did not pay the money in and did not have any right to the deposit thus the funds were never more than a deposit and were not received nor treatable as received from the partnership as a collection of tax following posting of a tc code to the account the deposit was released and a check in the amount of the deposit without interest was issued to the payee partnership june bulletin no funds in repayment were received from a third party partnership in response to a request for repayment made to the payee partnership the service’s request for repayment and the repayment were made more than two years after the deposit was refunded if a period longer than two years is applicable to the service’s recovery_of the deposit the repayment by the third party was timely received and the service is not required to return the repayment to the third party we conclude that a sufficiently long period is available to the government what was paid_by the treasury check was the return of a deposit a deposit is not a payment of tax 323_us_658 thus the recovery_of an erroneous return of a deposit would not be subject_to the remedies and limitations of the internal_revenue_code in comparison we point out that in recovering a deposit a taxpayer it is not subject_to internal_revenue_code procedures such as regarding refunds and the statute_of_limitations applicable to recovery_of refunds the taxpayer’s action is in the form of an action on an implied contract and is in the nature of an action for unjust enrichment see rosenman supra note that the action was brought within six years of the notice of several periods appear available a six year period is provided by u s c a for recovery on an implied contract if the exception of section h does not apply that exception provides that section does not apply to actions brought under the internal_revenue_code or incidental to the collection_of_taxes the supreme court in rosenman supra held that a deposit is not subject_to the internal_revenue_code procedures thus recovery_of an erroneous return of a deposit would also be outside the internal_revenue_code the erroneous refund check was negotiated after the payee partnership filed its final return and negotiation was by use of a name stamp of the payee partnership without an authorized signatory’s signature it can likely be determined whose account the refund was deposited to whether anyone retained signatory authority over the payee partnership’s account and who had signatory authority over the account to which the check was deposited a six year period is provided by the false claims act u s c et seq to recover damages for presentation of a false claim which includes negotiation of a government check if the exception of section e does not apply that exception provides that section does not apply to claims records or statements under the internal_revenue_code the recovery_of the proceeds of a treasury check from someone other than the payee does not relate to a claim record or statement under the internal_revenue_code by the person who wrongly negotiated the check alternatively the sec_1396 cause of action could be brought within the section period a voluntary repayment can be made to the service within any of these periods june bulletin no application jurisdiction is given to the district courts and the court of federal claims by u s c a the six year period of u s c applies to an action on an implied contract and begins upon the accrual of the cause of action we also point out that taxpayers recover overpayment interest by use of an action under sec_1396 that is subject_to the six year period of section rather than subject_to the refund procedures and limitations see 454_f2d_1379 ct_cl 137_fsupp_716 ct_cl 78_fsupp_236 sd ca 58_f2d_499 ct_cl revrul_56_506 1956_2_cb_959 revrul_56_574 1956_2_cb_959 revrul_57_242 1957_1_cb_452 revproc_99_19 1999_1_cb_842 revproc_99_43 1999_2_cb_579 revproc_2000_26 2000_1_cb_1257 we further point out that the government has been allowed to use periods outside the internal_revenue_code in regard to recovery on collateral see golub v united_states ct_cl in view of the foregoing we conclude that recovery_of an erroneously returned deposit is not a tax and is not governed by a remedy and a limitations_period outside the internal_revenue_code we further conclude that the period had not expired when the service received the repayment accordingly the facts as developed or could reasonably be developed within a short time frame do not sufficiently support the position that the service is required to return the funds where the repayment requested of the payee partnership was made without interest by a third party partnership do the facts as developed or could reasonably be developed within a short time frame sufficiently support seeking recovery_of interest for the period of time that the funds were outside of the government’s possession by an erroneous refund_suit against the third party the letter sent to the payee partnership specifically indicates that if repayment is made no interest would be charged the repayment was made by the third party partnership with reference to the interest term of the letter and a stated request that the interest be abated the service received the repayment and has not returned the repayment the above facts provide at least an appealing equitable argument that the service’s acceptance of the repayment was acceptance of the service’s offer thus the facts as developed or could reasonably be developed within a short time frame do not appear to sufficiently support bringing an erroneous refund action against the third party to recover interest scenario do the facts as developed or could reasonably be developed within a short time frame sufficiently support the position that the service is required to repay funds received in june bulletin no response to a request for repayment of an erroneous refund made to an individual where the request for repayment and the repayment were made more than two years but less than five years after the erroneous refund was made the refund was not in any way induced by the individual thus the five year period of sec_6532 does not apply under sec_6401 t he term overpayment includes that part of the amount of the payment of any internal revenue tax which is assessed or collected after the expiration of the period of limitation properly applicable thereto since the facts do not suggest that the five year period is applicable the amount received more than two years after the erroneous refund was made is an overpayment accordingly the facts as developed or could reasonably be developed within a short time frame sufficiently support the position that since the period for taxpayer to claim a refund has not expired the service should either notify the taxpayer of the overpayment and request instructions as to disposition or the service should on its own initiative refund the overpayment with interest offer_in_compromise basis for acceptance cc pa cbs br2 gl-131739-00 uilc memorandum for michael w bitner associate area_counsel sb_se from kathryn a zuba chief branch collection bankruptcy summonses subject advisory opinion-offers in compromise this memorandum responds to a request for advice received from your office on date in accordance with sec_6110 this chief_counsel_advice should not be cited as precedent this writing may contain privileged information any unauthorized disclosure of this writing may have an adverse affect on privileges such as the attorney client privilege if disclosure becomes necessary please contact this office for our views you have asked us to consider whether it is necessary to amend form_656 when a taxpayer submits an offer_in_compromise on the basis of doubt as to collectability and after investigation the service decides to accept the offer due to effective tax_administration issue june bulletin no whether the service must request the taxpayer to amend form_656 when a taxpayer has submitted an offer_in_compromise checking the box indicating doubt as to collectability and the service has decided to accept the offer on the basis of effective tax_administration conclusion no the service need not obtain an amended form_656 from the taxpayer the reason underlying the service’s decision to accept or reject a taxpayer’s offer_in_compromise whether doubt as to collectability or affective tax_administration is not a material term of the compromise_agreement between the taxpayer and the service thus when a taxpayer makes an offer based upon doubt as to collectability and the service accepts that offer on the basis of effective tax_administration the service is not required to ask the taxpayer to amend form_656 to reflect the change background your correspondence with us indicates concern arising out of language in irm which sets out the basic procedures for the offer_in_compromise program sec_5 of the irm provides that offers can be based on doubt as to collectability doubt as to liability and effective tax_administration and irm provides that taxpayers may submit an offer based upon any one or combination of these three reasons the taxpayer indicates this choice by checking any of the three boxes on line of form_656 the manual states that during the offer investigation the service will consider all bases the taxpayer indicates but will determine only one basis for accepting the offer see irm the manual then states that collection is to first evaluate the offer on the grounds of doubt as to collectability and that if while working the calculations for doubt as to collectability they determine that reasonable collection potential is greater than the amount due but special circumstances exist they are to consider the offer to compromise on the basis of effective tax_administration irm irm it then states that it is not necessary to amend form_656 to show effective tax_administration your concern is that by attempting to accept the offer on a basis different than the taxpayer has indicated the service has actually made a counteroffer and thus no enforceable contract results or that the contract may not be enforceable because there has been no meeting of the minds you therefore believe this language should be changed to require the taxpayer to amend form_656 discussion the secretary’s authority to enter into offers in compromise with taxpayers comes from sec_7122 which provides 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 the secretary has delegated this authority to the june bulletin no commissioner who has then delegated it to various officials throughout the service see delegation_order no treasury regulations pertaining to sec_7122 likewise set out the permissible bases for offers in compromise including doubt as to liability doubt as to collectability and to promote effective tax_administration the regulations further provide that a taxpayer’s offer is not accepted until the irs issues a written notification of acceptance to the taxpayer sec_301_7122-1t d sec_301_7122-1t d provides that acceptance of an offer will conclusively settle the taxpayer’s liability and that neither the taxpayer nor the government will be permitted to reopen the case except where the taxpayer has supplied false information or documents the taxpayer has concealed assets or a mutual mistake of material fact sufficient to cause the offer agreement to be reformed or set_aside is discovered when interpreting agreements to compromise federal tax_liabilities under sec_7122 courts have applied generally accepted contract principles see 372_f2d_352 3d cir 303_f2d_1 5th cir in recognition of this concern the service requires the taxpayer to submit a form_656 setting forth the essential terms of payment including the tax_liabilities covered and the taxpayer’s obligations including the amount and the time in which the taxpayer has to pay form_656 asks the taxpayer to indicate a basis for the compromise the stated basis provides the authority for the service to accept the offer it is not a term of the agreement the taxpayer has offered to pay a stated amount to resolve the outstanding liability the service’s acceptance of the offer binds the taxpayer to that payment obligation regardless of the legal basis for the compromise in the scenario you present the only difference between the taxpayer’s offer and the service’s acceptance would be the grounds underlying the service’s decision to accept the offer ie the box the taxpayer checked on line six of form_656 the underlying basis for the compromise relates only to the service’s authority to compromise changing it from doubt as to collectability to effective tax_administration results in no material_change to the taxpayer’s rights or obligations under the compromise_agreement it changes neither the payment amount nor the timing the payments come due or any other obligations of the taxpayer accordingly it is not a material term of the contract thus when the service decides to accept the offer on the basis of effective tax_administration rather than doubt as to collectability this acceptance does not constitute a counteroffer further compromises serve the goals of obtaining the amount potentially collectable at the earliest possible time and at the least cost to the government see policy statement p-5-100 irm so long as the service accepts the offer on the same payment terms neither the service nor the taxpayer would benefit from a requirement to file an amended form_656 simply to check another box the result would only be further delay to the process accepting the offer on the basis of effective tax_administration without requiring the taxpayer to amend form_656 benefits both the june bulletin no taxpayer and the service because the process is more expeditious because the irm in its current form reflects these principles we do not believe revisions are necessary at this time collection_due_process tax_lien revocation of release cc pa cbs br1 gl-805109-00 uil date memorandum for associate area_counsel sbse - san francisco cc sb sf attn trmackinson from alan c levine chief branch collection bankruptcy summonses cc pa cbs br1 subject you have requested that we reconsider the conclusion in our date memorandum copy attached that are entitled to a cdp hearing on the filing of a new notice_of_federal_tax_lien after the previously-filed notices of federal_tax_lien were erroneously released you argue that the exception found in sec_301_6323_g_-1 requires a different conclusion sec_301_6323_g_-1 provides that a lien does not need to be refiled during the required_refiling_period if a suit to foreclose that lien has been commenced prior to the expiration of that refiling period based on this regulation you contend that the new notice_of_federal_tax_lien did not need to be filed to establish our priority because we did not lose our priority when the liens self-released as a result do not need to be given a cdp hearing on the lien filing we would agree with your analysis if the liens in this case had not self-released the self-releasing lien form has been adopted for notices of federal_tax_lien filed after date this form provides that unless notice of lien is refiled by the date specified this notice shall on the day following such date operate as certificate of release as defined in sec_6325 self-releasing liens operate the same as the filing of a certificate of release 114_f3d_99 7th cir reh’g denied u s app lexis 7th cir 59_f3d_1571 n 11th cir 205_br_668 bankr d mass moreover the self-releasing lien was not contemplated when sec_301_6323_g_-1 was adopted shortly after the passage of the federal_tax_lien act of accordingly it is our opinion that treas june bulletin no reg sec_301_6325-1 applies to the facts of this case not sec_301 g - a i in addition while we cannot find any case law specifically addressing the applicability of sec_301_6323_g_-1 where the subject lien has been released after commencement of the suit there are at least two district_court decisions applying sec_301_6325-1 under these circumstances 793_fsupp_994 d colo united_states v reid u s t c big_number u s dist lexis both cases held that pursuant to sec_301_6325-1 the revocation of the erroneous lien release reinstated the lien but not the notice_of_federal_tax_lien as such the priority of the federal_tax_lien dated from the date a new notice_of_federal_tax_lien was filed after the revocation id based on our conclusion that sec_301_6325-1 applies to the facts of this case a new notice_of_federal_tax_lien needed to be filed in order to establish priority as of the filing_date of our lien against a subsequent purchaser holder of security_interest in the property mechanic’s_lienor or judgment lien creditor this new filing of a notice_of_federal_tax_lien entitles the to a cdp hearing under sec_6320 offer_in_compromise release_of_levy date cc pa cbs br2 gl-106846-01 uilc memorandum for associate area_counsel sb_se area washington d c from joseph w clark senior technician reviewer branch collection bankruptcy summonses subject release_of_levy when an offer_in_compromise is pending this chief_counsel_advice responds to your memorandum dated date in accordance with sec_6110 this chief_counsel_advice should not be cited as precedent issues whether the internal_revenue_service is required pursuant to either sec_6331 of the internal_revenue_code or the commissioner’s policy on withholding collection while an offer_in_compromise is pending to release a levy on social_security retirement benefits which was made prior to the offer becoming pending with the service june bulletin no whether property levied prior to submission of an offer_in_compromise but received after the offer became pending must be returned to the taxpayer conclusions neither sec_6331 nor the service’s policies and procedures require release of a prior levy on social_security retirement benefits once an offer_in_compromise becomes pending the service is not required to return property levied prior to submission of an offer_in_compromise but received after the compromise became pending background you have asked that we pre-review a proposed memorandum from your office to an offer_in_compromise group in your area the offer group manager has requested advice on the following scenario in year the service levies upon the retirement survivors and disability insurance rsdi benefits of the taxpayer by serving a notice_of_levy on the social_security administration the levy is not contested and the majority of the taxpayer’s monthly benefits are sent to the service each month for the next several years in year the taxpayer submits an offer_in_compromise the compromise meets the minimal requirements for processing and is recognized as pending by the service the offer group has asked you to address whether the levy must be released under sec_6331 which prohibits the making of a levy while an offer_in_compromise is pending for thirty days after a rejection and during any appeal of such a rejection whether if sec_6331 is inapplicable the service’s policy on withholding collection while an offer is being considered requires release of the levy and whether levy payments received after the offer became pending must be returned to the taxpayer law analysis when any person liable for payment of tax neglects or refuses to pay the tax following notice_and_demand the service may levy upon all property and rights to property belonging to that person to secure payment of the tax see sec_6331 as a general_rule levy reaches only property or obligations in existence at the time of the levy see sec_6331 a levy does not reach property acquired after the levy has been made see sec_301_6331-1 and does not reach payments rsdi benefits are computed based on social_security_taxes paid during a person’s working years and are not exempt from levy see sec_6334 in contrast supplemental_security_income ssi payments are needs based and are exempt from levy see sec_6334 june bulletin no promised a taxpayer but contingent upon the performance of some future service see 115_f2d_983 2d cir property or rights to property are considered to be in existence and subject_to levy when they are fixed and determinable id this is so even if the taxpayer’s right to receive payment of an obligation is deferred until a later date see sec_301 a as long as the taxpayer’s right to receive future payment is fixed and determinable a levy will attach to the vested accrued right to receive money in the future see 821_fsupp_1438 w d okl revrul_55_210 1955_1_cb_544 thus under the facts you have given the single levy on the taxpayer’s social_security retirement benefits attached the taxpayer’s present right to receive future payments see irm notice_of_levy handbook section section b of the internal service restructuring and reform act of amended sec_6331 by adding a new subsection k which reads in part no levy may be made under subsection a on the property or rights to property of any person with respect to any unpaid tax- a during the period that an offer-in-compromise by such person under sec_7122 of such unpaid tax is pending with the secretary and b if such offer is rejected by the secretary during the days thereafter and if an appeal of such rejection is filed within such days during the period such appeal is pending for purposes of subparagraph a an offer is pending beginning on the date the secretary accepts such offer for processing sec_6331 the offer group has asked whether pursuant to this section it is required to release a levy on rsdi payments when a taxpayer submits an offer to compromise the tax_liabilities the levy is intended to collect sec_6331 by its plain language does not mandate release of a prior levy on rsdi payments the section states that no levy may be made while an offer is pending a levy is made by serving a notice_of_levy on the person in possession of the property or rights to property subject_to the levy see sec_301_6331-1 the facts supplied by the offer group state that levy was made several years before the sec_6331 contains a statutory exception to this general_rule pursuant to that section a single levy on salary or wages is effective from the date the levy is first made until the levy is released pursuant to sec_6343 this is true even though the taxpayer’s right to receive future payments will not have come into existence at the time the levy is made as the payments at issue here are not salary or wages that section is inapplicable june bulletin no offer was submitted that the levy remains in place and that additional payments are sent to the irs pursuant to the original notice_of_levy does not mean that the levy is made or re-made each time the taxpayer is entitled to an additional payment sub sec_6331 is therefore inapplicable to the levy at issue in this fact pattern any confusion regarding whether the section affects prior levies is cleared up by paragraph k that paragraph states that rules similar to those contained in several paragraphs of sub sec_6331 governing levy during the pendency of a proceeding for refund of a divisible_tax shall apply for purposes of the prohibition of levy while offers in compromise are pending one of the cross-referenced provisions specifically states this subsection shall not apply to any levy which was first made before the date that the applicable proceeding under this subsection commenced sec_6331 although this language is arguably superfluous given the plain language of paragraph k it provides further evidence that the prohibition of levy while an offer_in_compromise is pending was not intended to mandate release of levies made prior to the date the offer became pending the offer group has suggested however that the service’s policy with respect to withholding collection while an offer_in_compromise is being considered may be broader than the statutory prohibition of levy the service’s policy states stay of collection - offer_in_compromise cases submission of an offer_in_compromise does not automatically stay collection of an account if there is any indication that the filing of an offer_in_compromise was solely for the purpose of delaying collection of the liability or that delay would jeopardize the government’s interest immediate steps should be taken to collect the unpaid liability however if it is determined that the government’s interests would not be jeopardized by delay collection action will be withheld pending consideration of the offer_in_compromise policy statement p-5-97 approved date although this statement’s references to collection action could be read as broader than the statutory reference to levy the policy states that the service will withhold action not take steps to reverse or undo actions already taken the offer_in_compromise handbook states that collection will be withheld but does not direct offer specialists to release levies or return property see irm likewise the internal_revenue_manual in effect prior to the addition of sec_6331 expressed the policy of withholding collection in a prospective manner only no mention is made of releasing prior levies or returning property previously levied upon see irm although submission of an offer_in_compromise will not itself require release_of_levy in these circumstances we agree with your suggestion that release_of_levy will sometimes be mandated based on other factors the service is required to release a levy when it determines that the levy is causing economic hardship due to the financial condition of the taxpayer see sec_6343 this condition exists if the levy will cause the june bulletin no taxpayer to be unable to pay his or her reasonable basic living_expenses see sec_301_6343-1 this determination must be made individually based on a taxpayer’s unique circumstances id if a taxpayer who has submitted an offer_in_compromise and the necessary collection information statements requests release_of_levy on these grounds the financial information provided by the taxpayer should enable the service to determine whether a levy should be released similarly although neither law nor policy require the return of property levied upon under these facts levied property may be returned to taxpayers if return is authorized under sec_6343 lien foreclosure_property liquidation specialist marshal date cc pa cbs br1 gl-128613-01 uil memorandum for associate area_counsel sb_se area attn jeanne gramling from subject alan c levine chief branch collection bankruptcy summonses foreclosure of federal tax_liens - sale of property by property appraisal and liquidation specialists this chief_counsel_advice responds to your memorandum dated date in accordance with sec_6110 this chief_counsel_advice should not be cited as precedent you requested our views on whether it is legally permissible for a property appraisal and liquidation specialist pals rather than the united_states marshals service u s marshal to conduct a lien foreclosure sale we understand that the service believes that the local pals is better equipped to sell property where the federal_tax_lien has been foreclosed issue whether the pals can sell real_property in a lien foreclosure action either upon the court’s order or after appointment by the u s marshal conclusion there is no legal impediment to the pals’ conducting foreclosure sales however the determination of whether it is advisable for the pals or the u s marshal to conduct the june bulletin no sale will be made by the department of justice which has responsibility for litigating lien foreclosure actions discussion sec_7403 of the internal_revenue_code the code provides that the district_court after determining the merits of the various claims on the property may decree a sale of such property by the proper officer of the court sec_7403 c we have found no case law under sec_7403 addressing who would be a proper officer of the court however the provisions for conducting lien foreclosure sales are found pincite u s c sec_2001 et seq sec_2001 provides any realty or interest therein sold under any order or decree of any court of the united_states shall be sold as a whole or in separate parcels at public sale at the courthouse of the county parish or city in which the greater part of the property is located or upon the premises or some parcel thereof located therein as the court directs such sale shall be upon such terms and conditions as the court directs u s c sec_2001 emphasis added 8section sets forth procedures for situations in which the u s marshal cannot complete the sale or execute the deed after the sale because of death removal from office or the expiration of the term of his commission this provision offers the only indication 9that the u s marshal is the only party permitted to conduct judicial sales because any hypothetical party appointed by the court to conduct a sale might become unable to complete the sale the reference only to the u s marshal might suggest that sales can be conducted only by the u s marshal however whatever inference might be drawn by the failure to refer to any party who might conduct sales other than the u s marshal notwithstanding we note that there is no statutory provision 10or case law which states that only the u s marshal is authorized to conduct sales under sec_2001 personal_property sold under court order is sold in the same manner as real_property under sec_2001 unless the court orders otherwise u s c while this may be the only provision which suggests that the u s marshal is the proper party to conduct sales we note that the u s marshal has typically conducted judicial sales see united_states v peters cl_ct the hallmark of a judicial sale is that it is ordered by a court and carried out by someone appointed by the court generally a u s marshal historically the u s marshal has always conducted sales in connection with foreclosed federal tax_liens 10not only is there nothing in u s c sec_2001 et seq that specifically precludes a party other than the u s marshal from selling property there is similarly nothing contained in the statutory provisions regarding the marshals service u s c sec_561 et seq june bulletin no to the contrary as noted above sec_2001 vests in the district courts the discretion to set the terms and conditions of judicial sales in addition case law though not addressing the specific question of who can conduct sales has held that courts have broad discretion regarding the manner of sale see eg 68_f2d_708 2d cir under u s c sec_847 sec_848 the predecessor to u s c sec_2001 the method of conducting a judicial sale rests within the discretion of the district_court 39_fsupp2d_1157 n d iowa in a tax_lien foreclosure action the district_court has broad discretion in setting the terms and conditions of the sale under u s c sec_2001 we believe that as a general matter a district_court can properly provide in the foreclosure order that the property be sold by the service 11rather than the u s marshal one caveat would be whether there is any local district_court rule which would prohibit the court from doing so we did not find anything in the local rules for the district_court for the western district of north carolina that would preclude the court from directing the service to sell the property we do not know the extent to which other courts in your area may have local rules which would bar the service from selling property in foreclosure actions although we believe that there may be no legal impediment to a district_court directing the service to sell the property ultimately in a lien foreclosure action litigated by the department of justice the department of justice determines the manner of disposing of the property which will be in the best interests of the united_states at best the service could make its services available to the department of justice finally from informal contacts with sb_se headquarters we believe that sb_se is amenable to the palss conducting foreclosure sales if this remains the case it would legally the property could be sold by a pals or a revenue_officer section of the restructuring and reform act of rra bars revenue officers from participating in sales under sec_6335 a foreclosure sale is not a sale under sec_6335 therefore revenue_officer participation would not be barred by the rra however as an administrative matter there appears to be a presumption that the palss will be conducting all sales-sales under sec_6335 as well as sales of perishable goods and acquired property we have no reason to believe that sb_se would treat foreclosure sales differently solely by way of example we note that a local rule for the district_court for the eastern district of california discusses in considerable detail the role of the u s marshal see local rule a-570 june bulletin no be advisable that the internal_revenue_manual be revised to reflect that the service may request that the department of justice ask the court to include in the foreclosure order a provision that the service will sell the property in addition the procedures for such sales should be set forth in the manual collection_due_process_hearing by mail date cc pa cbs b01 gl-129111-00 uil memorandum for associate area_counsel sb_se las vegas office attn wendy harris from alan c levine chief branch1 cc pa cbs b01 subject cdp procedures- hearings by mail you have asked for our review and comments with respect to a form hello letter that las vegas appeals intends to use in collection_due_process cdp cases in which only frivolous or constitutional arguments are raised you have indicated that the proposed letter will state that appeals no longer plans to offer face-to-face or telephone cdp conferences to taxpayers who indicate in their request for a cdp hearing that they are raising only frivolous or constitutional arguments to the proposed collection action las vegas appeals plans to send the form letter advising the taxpayers that unless they raise a relevant issue with days from the date of the hello letter the appeals officer will issue a notice_of_determination sustaining the proposed collection action for the reasons set forth below it is our view that the cdp hearing envisioned by this letter does not satisfy the statutory requirements of sec_6330 the form hello letter copy attached invites the taxpayer to present additional information that would be relevant to an issue upon which appeals can grant relief the letter states that if no further information is received the cdp hearing will consist of a review of the taxpayer’s correspondence and other information in appeals’ possession nowhere does the letter offer the taxpayer a face-to-face cdp hearing on relevant issues nor does it offer the taxpayer the alternative of a telephone conference sec_6330 provides that if a taxpayer timely requests a cdp hearing appeals must hold the hearing but neither the statute nor the treasury regulations explicitly define what a cdp hearing is however it was the consensus of the service in interpreting the statute and drafting the regulations that congress meant june bulletin no for cdp hearings to be held in appeals’ normal informal manner appeals has traditionally held hearings in person by telephone or by correspondence at a meeting with the department of justice appeals and chief_counsel it was decided that appeals would strive to grant at a minimum face-to-face conferences to all requesting taxpayers conferences by other means such as by telephone or correspondence are also acceptable provided the taxpayer has consented to this procedure has been offered the opportunity for a face-to-face conference and the basis for this type of conference is documented in the file konkel v commissioner aftr2d m d fla is instructive in konkel a taxpayer who explicitly stated that he wanted all communication with appeals regarding his cdp hearing to be by correspondence argued in his district_court complaint that he did not receive a face-to-face hearing at the suggestion of a magistrate judge during the course of the proceedings appeals offered the taxpayer a face-to-face hearing but the taxpayer did not respond the court granted the government’s motion for summary_judgment more importantly a taxpayer is entitled to a cdp hearing even if he will raise only frivolous or constitutional arguments because the appeals officer must cover the statutory requirements of sec_6330 and c of verification and balancing sec_6330 requires an appeals officer to obtain verification from the secretary that the requirements of any applicable law or administrative procedures have been met sec_6330 requires the appeals officer to balance the need efficient collection_of_taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary in order to create an adequate record for the court appeals should grant face-to-face cdp hearings to taxpayers who request them the appeals officer should inquire whether the taxpayer has any collection alternatives or other relevant issues the word relevant is the key sec_6330 permits the taxpayer to raise any relevant issues relating to the unpaid tax or the proposed levy this could include spousal defenses collection alternatives and challenges to the appropriateness of the collection actions frivolous arguments and worn constitutional arguments are not relevant issues in our view the appeals officer can conclude the cdp hearing if the taxpayer has no relevant issues to raise the appeals officer is not required to spend much time beyond the minimum outlined here we appreciate the need to expedite these cases and to conserve both administrative and judicial time and resources we suggest that appeals officers make use of the recent case of pierson v commissioner t c no filed date in that case the tax_court held that the taxpayer had instituted or maintained his frivolous and groundless case primarily if not exclusively as a protest against the federal_income_tax while the court declined to impose the penalty provided by sec_6673 because the tax court’s jurisdiction in cdp matters has been relatively short the court citing 72_tc_1126 warned that it was providing fair warning to those taxpayers who in june bulletin no the future institute or maintain a lien or levy action primarily for delay or whose position in such proceeding is frivolous or groundless the court has stated emphatically that it will henceforth impose sanctions pursuant to sec_6673 in cdp cases therefore we encourage appeals officers to inform taxpayers of the pierson case at the cdp hearing they may want to provide taxpayers with a copy of the opinion accordingly appeals must offer an opportunity for a face-to-face hearing to all taxpayers regardless of what arguments they raise taxpayers may choose a telephone or correspondence alternative appeals should rely strongly on the pierson case and those cases that will undoubtedly follow pierson to impress on taxpayers the importance of raising relevant issues in a cdp hearing we have met with appeals headquarters about this issue and they concur with our opinion your local appeals_office should tailor their hello letters to incorporate the advice given in this memorandum collection_due_process joint_return date cc pa cbs br1 gl-604125-99 memorandum for robert b nadler associate area_counsel nashville attn rebecca harris from alan c levine chief branch collection bankruptcy and summonses subject disclosure and copy of notice_of_federal_tax_lien you have requested our review of informal advice given to area_counsel on the following issue we have coordinated your request with disclosure privacy law in cc pa dpl and their advice is incorporated into this memorandum this document is not to be cited as precedent issue whether the internal_revenue_service service has violated sec_6103 by sending a duplicate collection_due_process cdp_notice for a joint_return liability to a spouse when the parties are separated or divorced the cdp_notice includes june bulletin no a copy of the filed notice_of_federal_tax_lien nftl that lists the address of the spouse with the primary taxpayer_identification_number tin conclusion it is not a violation of sec_6103 when the parties are divorced or separated to send a copy of the nftl with the address of the spouse who has the primary tin to the other spouse where the filed nftl includes the address of the primary taxpayer facts sec_6320 requires the service to send a cdp_notice offering a cdp hearing to a taxpayer after the service files a nftl when the service is aware that taxpayers who have filed a joint_return are divorced or separated they send a cdp_notice to the taxpayer with the primary taxpayer_identification_number tin and a duplicate cdp_notice to the divorced or separated spouse copies of the nftl are sent to both taxpayers the last_known_address of the primary taxpayer will appear on the copy of the nftl sent to the secondary taxpayer law analysis sec_6321 provides for a lien on all property and rights to property of a taxpayer after assessment notice_and_demand by the service the lien that arises continues until the liability is satisfied or becomes unenforceable due to lack of time sec_6322 to preserve its priority with respect to other creditors the service may file a nftl pursuant to sec_6323 sec_6320 requires the service to send a cdp_notice to a taxpayer not more than five days after filing the nftl the service is required to provide the amount of the unpaid tax notice of the right to request a hearing the administrative appeals available to the taxpayer and the provisions and procedures relating to release of a lien there is no requirement in the statute to send a copy of the nftl temp sec_301_6320-1t a q a-a10 similarly does not provide for sending a copy of the nftl rather the service has had a practice of sending the taxpayer a copy of the nftl for informational purposes after filing that predates the internal_revenue_service restructuring and reform act of rra98 sec_3201 of rra98 states that the secretary shall wherever practicable send any notice relating to a joint_return under sec_6013 joint returns of income_tax by husband and wife of the internal_revenue_code_of_1986 the primary taxpayer_identification_number is the first social_security_number listed on a joint federal_income_tax return june bulletin no separately to each individual filing the joint_return the service has determined that it was practicable to use the same practice for administrative convenience to send separate notices in the cdp situation therefore when the federal_tax_lien with respect to a joint_return is filed both taxpayers including those taxpayers who are still married receive the cdp_notice and accompanying copy of the nftl the general_rule is that returns and return_information including addresses are confidential unless there is an exception in sec_6103 or elsewhere in the internal_revenue_code authorizing disclosure sec_6103 sec_6323 provides for the public filing of a notice_of_federal_tax_lien sec_6323 and f sec_6103 provides in connection with official duties relating to among other things collection activity for the disclosure of return_information to the extent that disclosure is necessary in obtaining information not otherwise reasonably available with respect to among other things the collection of tax the regulations authorize the disclosure of return_information in order to properly accomplish among other things t o establish or verify the financial status or condition and location of the taxpayer against whom collection activity is or may be directed to locate assets in which the taxpayer has an interest to ascertain the amount of any liability described in subparagraph of this paragraph to be collected or otherwise to apply the provisions of the code relating to establishment of liens against such assets or levy on or seizure or sale of the assets to satisfy any such liability sec_301_6103_k_6_-1 chisum v united_states a f t r 2d ria d ariz aff’d u s app lexis 9th cir egbert v united_states 940_f2d_1539 10th cir cert_denied 502_us_1016 elias v united_states u s dist lexis c d cal date aff’d 974_f2d_1341 9th cir lake v atkins 71a s f t r 2d ria s d fla lovelace v united_states 71a a f t r 2d ria d tenn aff’d mem 956_f2d_269 6th cir lutz v united_states 919_f2d_738 6th cir 908_f2d_408 9th cir simpson v united_states 71a a f t r 2d ria n d fla with respect to a joint_return the nftl provides notice of a lien on property that may be used to satisfy the joint liability thus the nftl is the return_information of both spouses and is available to either sec_6103 and e further once the nftl is publicly filed it is the government’s position that the notice is not subject_to the confidentiality provided by sec_6103 76_f3d_796 6th cir thus the issue becomes whether the service is authorized to put the present address of the primary taxpayer on an nftl sec_6323 sets forth the provisions for filing a nftl sub sec_6323 requires filing a notice_of_federal_tax_lien against real_property in one office within the state as designated by sec_3201 was never codified into the internal_revenue_code june bulletin no state law in which the property subject_to the lien is located with regard to personal_property sub sec_6323 provides that the notice of lien should be filed in one office within the state as designated by the laws of such states in which the property subject_to the lien is situated sub sec_6323 states that the situs of personal_property is deemed to be at the residence of the taxpayer at the time the notice of lien is filed subsection f states that the form and content of the notice shall be prescribed by the secretary the treasury regulations prescribe the form of the nftl the treasury regulations do not specifically require the taxpayer’s address to appear on a nftl sec_301_6323_f_-1 provides for filing a nftl on form_668 notice_of_federal_tax_lien under internal revenue laws and subsection d states that a form_668 must identify the taxpayer therefore we conclude that the address is properly on the nftl because the regulations require proper identification of the taxpayer the taxpayer’s address must appear for practical reasons because it clearly identifies the delinquent taxpayer from a person with the same or a similar name for example john doe on elm street is differentiated by address from john doe on maple street further the purpose of the nftl is to put creditors on notice of the priority that the united_states is asserting it is important to correctly and specifically identify the taxpayer to preserve the priority afforded to the government by the filing of the nftl as the above example demonstrates the taxpayer’s mailing address provides the proper specificity to accomplish the goal of notice to competing creditors in addition form_668 presently form 668y has been used by the service for at least thirty-nine years the earliest available form_668 that we were able to locate is from and is virtually identical to the modern form both have a space for the residence of the taxpayer the form is annotated to show that the taxpayer’s address should be added to the space for residence the federal tax_liens handbook included in irm dollar_figure outlines notice preparation a current copy of the form 668y is included as exhibit copy attached while there is no statement in the internal_revenue_manual text that the taxpayer’s address should appear the exhibit shows the space for residence and directs that the street address city state and zip code of the taxpayer should be inserted we conclude from this that the secretary has authorized taxpayer’s address to appear on the nftl and also that it may be disclosed to either spouse to whom the joint tax_liability relates the copy of the form_668 from was made from microfiche and is very faint we are unable to reproduce it for attachment the copy is in the legal file