01.
Grounds for Settlement. The
Tax Commission may settle any taxes, penalties, or interest of a case if one
(1) or more of the following circumstances exist: (3-15-22)
a. Disputed liability, (3-15-22)
i. A disputed liability exists where there is
a reasonable disagreement as to the existence or amount of the correct tax
liability under the law. A disputed liability does not exist where the
liability has been established by a final court judgment concerning the
existence of the liability. (3-15-22)
ii. An offer to settle a disputed liability
generally will be considered acceptable if it reasonably reflects the
likelihood the Commission could expect to collect through litigation. This
analysis includes consideration of the hazards and costs of litigation that
would be involved if the liability were litigated. The evaluation of the
hazards and costs of litigation is not an exact science and is within the
discretion of the Commission. (3-15-22)
b. Doubt as to collectibility; (3-15-22)
i. Doubt as to collectibility exists in any
case where the taxpayer's assets and income may not satisfy the full amount of
the liability. (3-15-22)
ii. An
offer to settle based on doubt as to collectibility generally will be
considered acceptable if it is unlikely that the tax, penalty, and interest can
be collected in full and the offer reasonably reflects the amount the
Commission could collect through other means, including administrative and
judicial collection remedies. This amount is the reasonable collection
potential of a case. In determining the reasonable collection potential of a
case, the Commission will take into account the taxpayer's reasonable basic
living expenses. In some cases, the Commission may accept an offer of less than
the total reasonable collection potential of a case if there are special
circumstances. (3-15-22)
c. Economic hardship of the taxpayer.
(3-15-22)
i. The Commission may settle where
it determines that, although collection in full could be achieved, collection
of the full amount would cause the taxpayer economic hardship. Economic
hardship is defined as the inability to pay reasonable basic living expenses.
(3-15-22)
ii. An offer to settle
based on economic hardship generally will be considered acceptable when, even
though the tax, penalty, and interest could be collected in full, the amount
offered reflects the amount the Commission can collect without causing the
taxpayer economic hardship. The determination to accept a particular amount
will be based on the taxpayer's individual facts and circumstances.
(3-15-22)
d. Promotion of
effective tax administration. (3-15-22)
i. The
Commission may settle to promote effective tax administration where compelling
public policy or equity considerations identified by the taxpayer provide a
sufficient basis for settling the liability that is equitable under the
particular facts and circumstances of the case. Settlements pursuant to this
paragraph will be justified only where, due to exceptional circumstances,
collection of the full liability may undermine public confidence that the tax
laws are being administered in a fair and equitable manner. The taxpayer will
be expected to demonstrate circumstances that justify settlement even though a
similarly situated taxpayer may have paid his liability in full.
(3-15-22)
ii. The State Tax
Commission may decline a settlement for reasons promoting effective tax
administration if the settlement of the liability would undermine compliance by
taxpayers with the tax laws. (3-15-22)
02.
Agreement Final. A
settlement agreement relates to the issues agreed to for the tax periods in
question. The agreement is final and conclusive and neither the Tax Commission
nor the taxpayer will be permitted to open the case again except in the case of
changes to the federal return or a showing of fraud or malfeasance or
misrepresentation of a material fact or as provided in the agreement.
Recalculation of carryback or carryover items may not be construed as opening
the case and will not affect the tax liability of a closed period or closed
issue. (3-15-22)
03.
Form of
Settlement. The taxpayer must submit an offer to settle in writing. An
offer may not be considered accepted until the taxpayer is notified in writing.
Acceptance may be made only by a Tax Commissioner or an authorized delegate. If
the offer is rejected, the Tax Commission will promptly notify the taxpayer.
(3-15-22)
04.
Withdrawal of
Offer. A taxpayer may withdraw his offer to settle at any time prior to
its acceptance by the Tax Commission. (3-15-22)
