This section provides administrative review, closing and reporting procedures for OIC requests.

IRC Section 7122 (d) requires the Service to provide for independent administrative review of all proposed rejections of offers in compromise prior to the rejection being communicated to the taxpayer.

For Examination, this review should occur within the quality review function where one reviewer shall be designated as the Independent Administrative Reviewer (IAR). This person may be the Offer in Compromise coordinator; however, the IAR cannot be anyone who works on the case or is a part of the initial rejection or acceptance decision.

In areas without a quality review function, the Area Director can determine the placement of this independent review function.

The grade level of the IAR should be the same or greater than the individual making the initial rejection or acceptance decision.

The IAR should be independent, defined as "free from the influence, guidance, or control of others" . This indicates the review should be made by one who is not influenced by the maker of the original rejection decision, i.e. not an employee who reports to the reviewer. In instances where the IAR is the supervisor of the OIC coordinator, the supervisor must clearly make an independent judgment after a full review of the case. To the extent that an immediate supervisor may defer too much to the judgment of the OIC coordinator, the supervisor should not be appointed as the IAR. In instances where the OIC coordinator made the rejection recommendation, to avoid any possible question concerning independence, the area may want to consider appointing someone other than the OIC coordinator's immediate supervisor as the IAR.

The IAR will review all proposed rejections of offers in compromise prior to any indication or notification of such action being given to the taxpayer. The purpose of the review is to evaluate the case and determine if rejection was the correct decision.

The following review criteria will be considered (but not limited to) for evaluation of the case:

If the rejection is sustained, the IAR will:

If the IAR determines that the rejection is not appropriate, the case file will be returned to the examiner with an explanation on the activity record stating why the rejection was inappropriate. The IAR will allow 21 days for a response. If an agreement cannot be reached between the examiner and the IAR, the issue will be elevated to management levels as appropriate.

The Examination Offer in Compromise Coordinator is responsible for the forwarding, coordination and control of cases received in Examination. This includes unprocessable/returned offers and those sent to the field for further consideration.

After consideration of an OIC case is completed in the field, the file is forwarded to the Exam OIC coordinator for further action.

Independent Administrative Review is required for offers with a rejection recommendation.

Acceptance, withdrawal and rejection letters are forwarded with the case file for the appropriate approval and signatures on the rejection letter, Forms 1271 and 7249. The Technical Support Manager or Field Territory Manager may approve rejections & withdrawals, and the Field Territory Manager is required to approve acceptances. There will be no redelegation below this level.

Accepted and withdrawn offers are forwarded for processing and abatement.

The OIC coordinator should, at a minimum, maintain copies of Forms 1271, 7249, 2515, and 2848 if applicable. Current and prior calendar year closed offer files should be retained in the area office per IRM 1(15)59.22, Records Control Schedule for Examination. Records should be shipped to the Federal Record Center after this time.

For a period of one year, a copy of the appropriate Form 7249 (with a MFTRAX print) for each accepted offer will be made available for public inspection. After the 1 year period has ended, Form 7249 should be returned to the OIC coordinator for association with the retained office file.

Upon issuance of rejection letter, the administrative file is maintained for a period of not less than 30 days to allow the taxpayer sufficient opportunity to exercise his/her appeal rights. If an appeal request is received from the taxpayer, the file is forwarded to Appeals for consideration. If no request is received, the file is forwarded/closed for final processing.

Form 4778, Examination Annual Compromise Case Report, shows disposition of tax offers in compromise considered by Examination. This report includes only offers on which Examination prepares the Acceptance, Withdrawal and Rejection Memoranda and which the Area Director has been delegated authority to finally reject, finally accept, or recommend acceptance for the Commissioner's approval.

Form 4778 report is a fiscal year report and is submitted to the AC (Examination) by October 30 of each year.

The information needed for this report is obtained from Form 2515, Record of Offer in Compromise. One copy of each record card is detached from the offer when it is received in Examination. The cards are filed alphabetically under the various classifications so they may be available for preparing the report. The progress and disposition of the offer in compromise is promptly posted on the card so the current status and disposition of the offer may be readily determined.

Part I shows progress in disposing of doubt as to liability offers submitted to compromise tax liabilities, including penalties and interest. Column requirements for Part I follow:

Part II shows progress in disposing of effective tax administration offers submitted to compromise tax liabilities, including penalties and interest. Lines 1 through 9 of Part II are prepared similarly to Part I above. Items 10 and 11 should reconcile with the totals shown in Part II, 3(b) and 3(c) respectively. Additional data fields for effective tax administration offers are included for the purpose of monitoring the recent (1998) provisions.

Part III provides an overview of the currency and aging of OIC requests/inventory. Offers in Compromise should be held to the same inventory aging objectives as other Examination cases; however OICs should be considered and worked as priority inventory. Column requirements for Part III follow: