[Federal Register Volume 64, Number 14 (Friday, January 22, 1999)]
[Rules and Regulations]
[Pages 3398-3405]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-1414]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[TD 8810]
RIN 1545-AW77


Notice and Opportunity for Hearing upon Filing of Notice of Lien

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations.

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SUMMARY: This document contains temporary regulations relating to the 
provision of notice to taxpayers of the filing of a notice of federal 
tax lien (NFTL). The regulations implement certain changes made by 
section 3401 of the Internal Revenue Service Restructuring and Reform 
Act of 1998. They affect taxpayers against whose property and rights to 
property the IRS files a NFTL. The text of these regulations also 
serves as the text of the proposed regulations set forth in the notice 
of proposed rulemaking on this subject in the Proposed Rules section of 
this issue of the Federal Register.

DATES: These regulations are effective January 19, 1999.

FOR FURTHER INFORMATION CONTACT: Jerome D. Sekula (202) 622-3610 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document contains amendments to the Procedure and 
Administration Regulations (26 CFR part 301) that reflect the addition 
of section 6320 to the Internal Revenue Code made by section 3401 of 
the Internal Revenue Service Restructuring and Reform Act of 1998 
(RRA).
    These temporary regulations implement the provisions of section 
6320 and thus set forth the procedures the IRS will follow regarding 
notice to taxpayers of the filing of a NFTL on or after January 19, 
1999, the right to a hearing before the IRS Office of Appeals (Appeals) 
with respect to the filing of a NFTL, the procedures that will be 
followed at those hearings, judicial review of the determinations 
reached at the hearings, and the suspensions of various periods of 
limitation as a result of a timely request for a hearing. The 
legislative history accompanying RRA also explains that Congress 
intended the IRS to grant an equivalent hearing to taxpayers who do not 
request a hearing under section 6320 within the 30-day period that 
commences the day after the five business day notification period. H. 
Conf. Rep. No. 599, 105th Cong., 2d Sess. 266 (1998). These temporary 
regulations set forth the procedural requirements and rules that will 
govern the conduct of such an equivalent hearing.

Explanation of Provisions

    The temporary regulations provide guidance to taxpayers for 
purposes of section 6320. Pursuant to section 6320, for NFTLs filed on 
or after January 19, 1999, the IRS must provide written notification of 
the filing of the NFTL to the taxpayer named in the NFTL. The 
notification under section 6320 may be given in person, left at the 
taxpayer's dwelling or usual place of business, or sent to the taxpayer 
by certified or registered mail to the taxpayer's last known address 
not more than five business days after the day the NFTL is filed. The 
notification must state the amount of unpaid tax, inform the taxpayer 
of the right to request a hearing during the 30-day period that 
commences the day after the end of the five business day notification 
period, inform the taxpayer of the administrative appeals available 
with respect to such lien and the procedures related to such appeals, 
and inform the taxpayer of the provisions and procedures relating to 
the release of liens. Unless the taxpayer withdraws the request that 
Appeals conduct a hearing when the taxpayer has made a timely request 
for a hearing, Appeals will hold one collection due process hearing 
(CDP hearing) with respect to the tax and tax period or periods 
specified in the CDP hearing notice (CDP Notice). The taxpayer is 
entitled to have a CDP hearing conducted by an Appeals officer who has 
had no prior involvement with the unpaid tax that is the subject of the 
hearing. This requirement, however, can be waived by the taxpayer in 
writing. The taxpayer may seek judicial review of an Appeals 
determination issued with respect to a CDP hearing. If a taxpayer 
timely requests a CDP hearing, the periods of limitation relating to 
collection after assessment, relating to criminal prosecutions, and 
relating to suits are suspended. If the taxpayer has a hearing with 
Appeals, the suspension of the applicable periods of limitation 
continues until the determination resulting from that hearing becomes 
final by expiration of the time for seeking review or reconsideration 
before the appropriate court. If the taxpayer has withdrawn the request 
for a hearing with Appeals, the suspension of the applicable periods of 
limitation ends as a result of that withdrawal.

[[Page 3399]]

    The temporary regulations discuss the procedures for CDP hearings 
under section 6320, including the requirement that the Appeals officer 
obtain verification that all legal and administrative requirements for 
the filing of the NFTL have been met. The temporary regulations further 
discuss the types of issues that may or may not be raised at the CDP 
hearing. The types of issues that may be raised at the CDP hearing 
include appropriate spousal defenses; challenges to the appropriateness 
of collection actions; collection alternatives; and challenges to the 
existence or amount of the liability specified in the CDP Notice. An 
issue may not be raised at the CDP hearing if the issue was raised and 
considered at a previous CDP hearing under section 6330 or any other 
previous administrative or judicial proceeding in which the taxpayer 
meaningfully participated. Challenges to the existence or amount of the 
tax liability specified in the CDP Notice may be raised only if the 
taxpayer did not receive a statutory notice of deficiency for such 
liability or did not otherwise have an opportunity to dispute such 
liability.
    Following the CDP hearing, the Appeals officer will issue a Notice 
of Determination, which can be appealed to the United States Tax Court 
or a district court of the United States by filing an appropriate 
pleading with the court that has jurisdiction over the type of tax 
involved within 30 days of the date of the determination. The temporary 
regulations discuss the content of the Notice of Determination and the 
rules for obtaining judicial review. The temporary regulations also 
provide guidance as to the extent to which the Appeals officer will 
retain jurisdiction with respect to the determination.
    Lastly, the temporary regulations provide rules and procedures with 
respect to the administrative hearing (referred to as an ``equivalent 
hearing'') the IRS will provide to taxpayers who do not timely request 
a hearing under section 6320.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It has also been 
determined that section 553 (b) of the Administrative Procedure Act (5 
U.S.C. chapter 5) does not apply to these regulations. For the 
applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6) 
refer to the Special Analyses section of the preamble to the cross 
reference notice of proposed rulemaking published in the Proposed Rules 
section of this issue of the Federal Register. Pursuant to section 7805 
(f) of the Internal Revenue Code, this temporary regulation will be 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on its impact on small business.

Drafting Information

    The principal author of this regulation is Jerome D. Sekula, Office 
of the Assistant Chief Counsel (General Litigation). However, other 
personnel from the IRS and Treasury Department participated in its 
development.

List of Subjects in 26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 301 is amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

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

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

    Par. 2. Section 301.6320-1T is added under the undesignated 
centerheading ``Lien for Taxes'' to read as follows:


Sec. 301.6320-1T  Notice and opportunity for hearing upon filing of 
notice of Federal tax lien (temporary).

    (a) Notification-- (1) In general. For a notice of federal tax lien 
(NFTL) filed on or after January 19, 1999, district directors, 
directors of service centers, and the Assistant Commissioner 
(International), or their successors, are required to notify the person 
described in section 6321 of the filing of a NFTL not more than five 
business days after the date of any such filing. The Collection Due 
Process Hearing Notice (CDP Notice) and other notices given under this 
section must be given in person, left at the dwelling or usual place of 
business of such person, or sent by certified or registered mail to 
such person's last known address, not more than five business days 
after the day the NFTL was filed.
    (2) Questions and answers. The questions and answers illustrate the 
provisions of this paragraph (a) as follows:
    Q-A1. Who is the ``person'' entitled to notice under section 6320?
    A-A1. Under section 6320(a)(1), notification of the filing of a 
NFTL on or after January 19, 1999, is only required to be given to the 
person described in section 6321 who is named on the NFTL that is 
filed. The person described in section 6321 is the person liable to pay 
the tax due after notice and demand who refuses or neglects to pay the 
tax due (hereinafter, referred to as the taxpayer).
    Q-A2. When will the IRS provide the notice required under section 
6320?
    A-A2. The IRS will provide this notice within five business days 
after the filing of the NFTL.
    Q-A3. Will the IRS give notification to the taxpayer for each tax 
period listed in a NFTL filed on or after January 19, 1999?
    A-A3. Yes. Under section 6323(f), a NFTL can be filed for more than 
one tax period. The notification of the filing of a NFTL will specify 
each tax and tax period listed in the NFTL.
    Q-A4. Will the IRS give notification to the taxpayer of any filing 
of a NFTL for the same tax period or periods at another place of 
filing?
    A-A4. Yes. The IRS will notify a taxpayer when a NFTL is filed on 
or after January 19, 1999, for a tax period or periods at any recording 
office.
    Q-A5. Will the IRS give notification to the taxpayer if a NFTL is 
filed on or after January 19, 1999, for a tax period or periods for 
which a NFTL was filed in another recording office prior to that date?
    A-A5. Yes. The IRS will notify a taxpayer when each NFTL is filed 
on or after January 19, 1999, for a tax period or periods, at any 
location.
    Q-A6. Will the IRS give notification to the taxpayer when a NFTL is 
refiled on or after January 19, 1999?
    A-A6. No. Section 6320(a)(1) does not require the IRS to notify the 
taxpayer of the refiling of a NFTL. A taxpayer may, however, seek 
reconsideration by the IRS office that is collecting the tax or filing 
the NFTL, an administrative hearing before Appeals, or assistance from 
the National Taxpayer Advocate.
    Q-A7. Will the IRS give notification to a known nominee of, or 
person holding property of, the taxpayer of the filing of the NFTL?
    A-A7. No. Such person is not the person described in section 6321 
and is, therefore, not entitled to notice, but such persons have other 
remedies. See A-B5 of paragraph (b) of this section.
    Q-A8. Will the IRS give notification to the taxpayer when a 
subsequent NFTL is filed for the same period or periods?
    A-A8. Yes. If the IRS files an additional NFTL with respect to the

[[Page 3400]]

same tax period or periods for which an original NFTL was filed, the 
IRS will notify the taxpayer when the subsequent NFTL is filed. Not all 
such notices will, however, give rise to a right to a CDP hearing (see 
paragraph (b) of this section).
    Q-A9. How will notification under section 6320 be accomplished?
    A-A9. The IRS will notify the taxpayer by letter. Included with 
this letter will be the additional information the IRS is required to 
provide taxpayers as well as, when appropriate, a Form 12153, Request 
for a Due Process Hearing. The IRS may effect delivery of the letter 
(and accompanying materials) in one of three ways: by delivering the 
notice personally to the taxpayer; by leaving the notice at the 
taxpayer's dwelling or usual place of business; or by mailing the 
notice to the taxpayer at his last known address by certified or 
registered mail.
    Q-A10. What must a CDP Notice given under section 6320 include?
    A-A10. These notices must include, in simple and nontechnical 
terms:
    (i) The amount of unpaid tax.
    (ii) A statement concerning the taxpayer's right to request a CDP 
hearing during the 30-day period that commences the day after the end 
of the five-day period described in section 6320(a)(2).
    (iii) The administrative appeals available to the taxpayer with 
respect to the NFTL and the procedures relating to such appeals.
    (iv) The statutory provisions and the procedures relating to the 
release of liens on property.
    Q-A11. What are the consequences if the taxpayer does not receive 
or accept a CDP Notice that is properly left at the taxpayer's dwelling 
or usual place of business, or sent by certified or registered mail to 
the taxpayer's last known address?
    A-A11. A CDP Notice properly sent by certified or registered mail 
to the taxpayer's last known address or left at the taxpayer's dwelling 
or usual place of business is sufficient to start the 30-day period 
that commences the day after the end of the five business day 
notification period within which the taxpayer may request a CDP 
hearing. Actual receipt is not a prerequisite to the validity of the 
notice.
    Q-A12. What if the taxpayer does not receive the CDP Notice because 
the IRS did not send that notice by certified or registered mail to the 
taxpayer's last known address, or failed to leave it at the dwelling or 
usual place of business of the taxpayer, and the taxpayer fails to 
request a CDP hearing with Appeals within the 30-day period commencing 
the day after the end of the five business day notification period?
    A-A12. A NFTL becomes effective upon filing. The validity and 
priority of a NFTL is not conditioned on notification to the taxpayer 
pursuant to section 6320. Therefore, the failure to notify the taxpayer 
concerning the filing of a NFTL does not affect the validity or 
priority of the NFTL. When the IRS determines that it failed properly 
to provide a taxpayer with a CDP Notice, it will promptly provide the 
taxpayer with a substitute CDP Notice and an opportunity to request a 
CDP hearing.
    (3) Examples. The following examples illustrate the principles of 
this paragraph (a):

    Example 1. H and W are jointly and severally liable with respect 
to a jointly filed income tax return for 1996. IRS files a NFTL with 
respect to H and W in County X on January 26, 1999. This is the 
first NFTL filed on or after January 19, 1999, for their 1996 
liability. H and W will each be notified of the filing of the NFTL.
    Example 2. Employment taxes for 1997 are assessed against ABC 
Corporation. A NFTL is filed against ABC Corporation for the 1997 
liability in County X on June 5, 1998. A NFTL is filed against ABC 
Corporation for the 1997 liability in County Y on June 17, 1999. The 
IRS will notify the ABC Corporation with respect to the filing of 
the NFTL in County Y.
    Example 3. Federal income tax liability for 1997 is assessed 
against individual D. D buys an asset and puts it in individual E's 
name. A NFTL is filed against D in County X on June 5, 1999, for D's 
federal income tax liability for 1997. On June 17, 1999, a NFTL for 
the same tax liability is filed in County Y against E, as nominee of 
D. The IRS will notify D of the filing of the NFTL in both County X 
and County Y. The IRS will not notify E of the NFTL filed in County 
X. The IRS is not required to notify E of the NFTL filed in County 
Y. Although E is named on the NFTL filed in County Y, E is not the 
person described in section 6321 (the taxpayer) who is named on the 
NFTL.

    (b) Entitlement to a Collection Due Process hearing (CDP hearing)--
(1) In general. A taxpayer is entitled to one CDP hearing with respect 
to the first filing of a NFTL (on or after January 19, 1999) for a 
given tax period or periods with respect to the amount of unpaid tax 
shown on the NFTL if the taxpayer timely requests such a hearing. The 
taxpayer must request such a hearing during the 30-day period that 
commences the day after the end of the five business day period within 
which the IRS is required to provide the taxpayer with notice of the 
filing of the NFTL.
    (2) Questions and answers. The questions and answers illustrate the 
provisions of this paragraph (b) as follows:
    Q-B1. Is a taxpayer entitled to a CDP hearing with respect to the 
filing of a NFTL for a tax and tax period previously subject to a CDP 
Notice in a different location?
    A-B1. No. Although the taxpayer will receive notice of each filing 
of the NFTL, under section 6320(b)(2), the taxpayer is entitled to only 
one CDP hearing under section 6320 for each tax period with respect to 
the first filing of a NFTL that occurs on or after January 19, 1999, 
with respect to an amount of unpaid tax. Accordingly, if the taxpayer 
does not timely request a CDP hearing with respect to the first filing 
of a NFTL on or after January 19, 1999, for a given tax period or 
periods with respect to an amount of unpaid tax, the taxpayer foregoes 
the right to a CDP hearing with Appeals and judicial review of 
Appeals's determination as to the NFTL. Under such circumstances, a 
taxpayer, however, may request an equivalent hearing as described in 
paragraph (i) of this section.
    Q-B2. Is the taxpayer entitled to a CDP hearing where a NFTL for a 
tax and tax period is filed on or after January 19, 1999, in one 
recording office and a NFTL was previously filed in another recording 
office prior to that date?
    A-B2. Yes. Under section 6320(b)(2), the taxpayer is entitled to a 
CDP hearing under section 6320 for each tax period with respect to the 
first filing of a NFTL on or after January 19, 1999, with respect to an 
amount of unpaid tax, whether or not a NFTL was filed prior to January 
19, 1999, for the same tax and tax period or periods.
    Q-B3. When the IRS provides the taxpayer with a substitute CDP 
Notice and the taxpayer timely requests a CDP hearing, is he entitled 
to a CDP hearing before Appeals?
    A-B3. Yes. Unless the taxpayer provides the IRS a written 
withdrawal of the request that Appeals conduct a CDP hearing, the 
taxpayer is entitled to a CDP hearing before Appeals. Following the 
hearing, Appeals will issue a Notice of Determination, and the taxpayer 
is entitled to seek judicial review of that Notice of Determination.
    Q-B4. If the IRS sends a second CDP Notice under section 6320 
(other than a substitute CDP Notice) for a tax period and with respect 
to an amount of unpaid tax for which a section 6320 CDP Notice was 
previously sent, is the taxpayer entitled to a second section 6320 CDP 
hearing?
    A-B4. No. The taxpayer is entitled to only one CDP hearing under 
section 6320 for a tax and tax period set forth in a NFTL with respect 
to the first filing of a NFTL that occurs on or after January 19, 1999.

[[Page 3401]]

    Q-B5. Is a nominee of, or a person holding property of, the 
taxpayer entitled to a CDP hearing or an equivalent hearing?
    A-B5. No. Such person is not the person described in section 6321 
and is, therefore, not entitled to a CDP hearing or an equivalent 
hearing (as discussed in paragraph (i) of this section). Such person, 
however, may seek reconsideration by the IRS office collecting the tax 
or filing the NFTL, an administrative hearing before Appeals under its 
Collection Appeals Program, or assistance from the National Taxpayer 
Advocate. However, any such administrative hearing would not be a CDP 
hearing under section 6320 and any determination or decision resulting 
from the hearing would not be subject to judicial review. Such person 
may also avail himself of the administrative procedure included in 
section 6325(b)(4) of the Internal Revenue Code or of any other 
procedures to which he is entitled.
    (3) Examples. The following examples illustrate the principles of 
this paragraph (b):

    Example 1. H and W are jointly and severally liable with respect 
to a jointly filed income tax return for 1996. The IRS files a NFTL 
with respect to H and W in County X on January 26, 1999. This is the 
first NFTL filed on or after January 19, 1999, for their 1996 
liability. H and W are each entitled to a CDP hearing with respect 
to the NFTL filed in County X.
    Example 2. Federal income tax liability for 1997 is assessed 
against individual D. D buys an asset and puts it in individual E's 
name. A NFTL is filed against D in County X on June 5, 1999, for D's 
federal income tax liability for 1997. On June 17, 1999, a NFTL for 
the same tax liability is filed in County Y against E, as nominee of 
D. The IRS will give D a CDP Notice with respect to the NFTL filed 
in County X. It will give D notification of the NFTL filed in County 
Y. The IRS will not notify E of the NFTL filed in County X. The IRS 
is not required to notify E of the filing of the NFTL in County Y. 
Although E is named on the NFTL filed in County Y, E is not the 
person described in section 6321 (the taxpayer) who is named on the 
NFTL.

    (c) Requesting a CDP hearing--(1) In general. Where a taxpayer is 
entitled to a CDP hearing under section 6320, such a hearing must be 
requested during the 30-day period that commences the day after the end 
of the five business day period within which the IRS is required to 
provide the taxpayer with a CDP notice with respect to the filing of 
the NFTL.
    (2) Questions and answers. The questions and answers illustrate the 
provisions of this paragraph (c) as follows:
    Q-C1. What must a taxpayer do to obtain a CDP hearing?
    A-C1. The taxpayer must make a request in writing for a CDP 
hearing. A written request in any form, which requests a CDP hearing, 
will be acceptable. The request must include the taxpayer's name, 
address, and daytime telephone number, and must be signed by the 
taxpayer or the taxpayer's authorized representative and dated. 
Included with the CDP Notice will be a Form 12153, Request for a 
Collection Due Process Hearing, that can be used by the taxpayer in 
requesting a CDP hearing. The Form 12153 requests the following 
information: the taxpayer's name, address, daytime telephone number, 
and taxpayer identification number (SSN or TIN); the type of tax 
involved; the tax period at issue; a statement that the taxpayer 
requests a hearing with Appeals concerning the filing of the NFTL; and 
the reason or reasons why the taxpayer disagrees with the filing of the 
NFTL. Taxpayers are encouraged to use a Form 12153 in requesting a CDP 
hearing so that such a request can be readily identified and forwarded 
to Appeals. Taxpayers may obtain a copy of Form 12153 by contacting the 
IRS office that issued the CDP Notice or by calling, toll free, 1-800-
829-3676.
    Q-C2. Must the request for the CDP hearing be in writing?
    A-C2. Yes. There are several reasons why the request for a CDP 
hearing must be in writing. First, the filing of a timely request for a 
CDP hearing is the first step in what may result in a court proceeding. 
A written request will provide proof that the CDP hearing was requested 
and thus permit the court to verify that it has jurisdiction over any 
subsequent appeal of the Notice of Determination issued by Appeals. In 
addition, the receipt of the written request will establish the date on 
which the periods of limitation under section 6502 (relating to 
collection after assessment), section 6531 (relating to criminal 
prosecutions), and section 6532 (relating to suits) are suspended as a 
result of the CDP hearing and any judicial appeal. Moreover, because 
the IRS anticipates that taxpayers will contact the IRS office that 
issued the CDP Notice for further information, for help in filling out 
Form 12153, or in an attempt to resolve their liabilities prior to 
going through the CDP hearing process, the requirement of a written 
request should help to prevent any misunderstanding as to whether a CDP 
hearing has been requested. If the information requested on Form 12153 
is furnished by the taxpayer, the written request will also help to 
establish the issues for which the taxpayer seeks a determination by 
Appeals.
    Q-C3. When must a taxpayer request a CDP hearing with respect to a 
CDP Notice issued under section 6320?
    A-C3. A taxpayer must submit a written request for a CDP hearing 
within the 30-day period that commences the day after the end of the 
five business day period following the filing of the NFTL. Any request 
filed during the five business day period (before the beginning of the 
30-day period) will be deemed to be filed on the first day of the 30-
day period. The period for submitting a written request for a CDP 
hearing with respect to a CDP Notice issued under section 6320 is 
slightly different from the period taxpayers are allowed for submitting 
a written request for a CDP hearing with respect to a CDP Notice issued 
under section 6330. For a CDP Notice issued under section 6330, the 
taxpayer must request a CDP hearing within the 30-day period commencing 
the day after the date of the CDP Notice.
    Q-C4. How will the timeliness of a taxpayer's written request for a 
CDP hearing be determined?
    A-C4. The rules under section 7502 and the regulations under that 
section and section 7503 and the regulations under that section will 
apply to determine the timeliness of the taxpayer's request for a CDP 
hearing, if properly transmitted and addressed as provided in A-C6 of 
this paragraph (c)(2).
    Q-C5. Is the 30-day period within which a taxpayer must make a 
request for a CDP hearing extended because the taxpayer resides outside 
the United States?
    A-C5. No. Section 6320 does not make provision for such a 
circumstance. Accordingly, all taxpayers who want a CDP hearing under 
section 6320 must request such a hearing within the 30-day period that 
commences the day after the end of the five business day notification 
period.
    Q-C6. Where should the written request for a CDP hearing be sent?
    A-C6. The written request for a CDP hearing should be filed with 
the IRS office that issued the CDP Notice at the address indicated on 
the CDP Notice. If the address of that office is not known, the request 
may be sent to the District Director serving the district of the 
taxpayer's residence or principal place of business. If the taxpayer 
does not have a residence or principal place of business in the United 
States, the request may be sent to the Director, Philadelphia Service 
Center.
    Q-C7. What will happen if the taxpayer does not request a section 
6320 CDP hearing in writing within the 30-day period that commences the 
day after

[[Page 3402]]

the end of the five business day notification period?
    A-C7. If the taxpayer does not request a CDP hearing in writing 
within the 30-day period that commences on the day after the end of the 
five business day notification period, the taxpayer will forego the 
right to a CDP hearing under section 6320 with respect to the tax and 
tax period or periods shown on the CDP Notice. The taxpayer may, 
however, request an equivalent hearing. See paragraph (i) of this 
section.
    Q-C8. When must a taxpayer request a CDP hearing with respect to a 
substitute CDP Notice?
    A-C8. A CDP hearing with respect to a substitute CDP Notice must be 
requested in writing by the taxpayer prior to the end of the 30-day 
period commencing the day after the date of the substitute CDP Notice.
    Q-C9. Can taxpayers attempt to resolve the matter of the NFTL with 
an officer or employee of the IRS office collecting the tax or filing 
the NFTL either before or after requesting a CDP hearing?
    A-C9. Yes. Taxpayers are encouraged to discuss their concerns with 
the IRS office collecting the tax or filing the NFTL, either before or 
after they request a CDP hearing. If such a discussion occurs before a 
request is made for a CDP hearing, the matter may be resolved without 
the need for Appeals consideration. However, these discussions do not 
suspend the running of the 30-day period that commences the day after 
the end of the five business day notification period within which the 
taxpayer is required to request a CDP hearing, nor do they extend that 
30-day period. If discussions occur after the request for a CDP hearing 
is filed and the taxpayer resolves the matter with the IRS office 
collecting the tax or filing the NFTL, the taxpayer may withdraw in 
writing the request that a CDP hearing be conducted by Appeals. The 
taxpayer can also waive in writing some or all of the requirements 
regarding the contents of the Notice of Determination.
    (3) Examples. The following examples illustrate the principles of 
this paragraph (c):

    Example 1. A NFTL for a 1997 income tax liability assessed 
against individual A is filed in County X on June 17, 1999. The IRS 
mails a CDP Notice to individual A's last known address on June 18, 
1999. Individual A has until July 26, 1999, a Monday, to request a 
CDP hearing. The five business day period within which the IRS is 
required to notify individual A of the filing of the NFTL in County 
X expires on June 24, 1999. The 30-day period within which 
individual A may request a CDP hearing begins on June 25, 1999. 
Because the 30-day period expires on July 24, 1999, a Saturday, 
individual A's written request for a CDP hearing will be considered 
timely if it is properly transmitted and addressed to the IRS in 
accordance with section 7502 and the regulations thereunder no later 
than July 26, 1999.
    Example 2. Same facts as in Example 1, except that individual A 
is on vacation, outside the United States, or otherwise does not 
receive or read the CDP Notice until July 19, 1999. As in (i), 
individual A has until July 26, 1999, to request a CDP hearing. If 
individual A does not request a CDP hearing, individual A may 
request an equivalent hearing as to the NFTL at a later time. The 
taxpayer should make a request for an equivalent hearing at the 
earliest possible time.
    Example 3. Same facts as in Example 2, except that individual A 
does not receive or read the CDP Notice until after July 26, 1999, 
and does not request a hearing by July 26, 1999. Individual A is not 
entitled to a CDP hearing. Individual A may request an equivalent 
hearing as to the NFTL at a later time.
    The taxpayer should make a request for an equivalent hearing at the 
earliest possible time.
    Example 4. Same facts as in Example 1, except the IRS determines 
that the CDP Notice mailed on June 18, 1999, was not mailed to 
individual A's last known address. As soon as practicable after 
making this determination, the IRS will mail a substitute CDP Notice 
to individual A at individual A's last known address, hand deliver 
the substitute CDP Notice to individual A, or leave the substitute 
CDP Notice at individual A's dwelling or usual place of business. 
Individual A will have 30 days commencing on the day after the date 
of the substitute CDP Notice within which to request a CDP hearing.

    (d) Conduct of CDP hearing--(1) In general. If a taxpayer requests 
a CDP hearing under section 6320(a)(3)(B) (and does not withdraw that 
request), the CDP hearing will be held with Appeals. The taxpayer is 
entitled to only one CDP hearing for a tax and tax period set forth in 
a NFTL under section 6320 with respect to the first filing of a NFTL on 
or after January 19, 1999. To the extent practicable, the CDP hearing 
requested under section 6320 will be held in conjunction with any CDP 
hearing the taxpayer requests under section 6330. A CDP hearing will be 
conducted by an employee or officer of Appeals who has had no 
involvement with respect to the tax for the tax period or periods 
covered by the hearing prior to the first CDP hearing under section 
6320 or section 6330, unless the taxpayer waives that requirement.
    (2) Questions and answers. The questions and answers illustrate the 
provisions of this paragraph (d) as follows:
    Q-D1. Under what circumstances can a taxpayer receive more than one 
CDP hearing with respect to a tax period?
    A-D1. The taxpayer may receive more than one CDP hearing with 
respect to a tax period where the tax involved is a different type of 
tax (for example, an employment tax liability, where the original CDP 
hearing for the tax period involved an income tax liability), or where 
the same type of tax for the same period is involved, but where the 
amount of the tax has changed as a result of an additional assessment 
of tax for that period or an additional accuracy-related or filing 
delinquency penalty has been assessed. The taxpayer is not entitled to 
another CDP hearing if the additional assessment represents accruals of 
interest or accruals of penalties.
    Q-D2. Will a CDP hearing with respect to one tax period be combined 
with a CDP hearing with respect to another tax period?
    A-D2. To the extent practicable, a hearing with respect to one tax 
period shown on the NFTL will be combined with any and all other 
hearings to which the taxpayer may be entitled with respect to other 
tax periods shown on the NFTL.
    Q-D3. Will a CDP hearing under section 6320 be combined with a CDP 
hearing under section 6330?
    A-D3. To the extent practicable, a CDP hearing under section 6320 
will be held in conjunction with a CDP hearing under section 6330.
    Q-D4. What is considered to be prior involvement by an employee or 
officer of Appeals with respect to the tax and tax period or periods 
involved in the hearing?
    A-D4. Prior involvement by an employee or officer of Appeals 
includes participation or involvement in an Appeals hearing (other than 
a CDP hearing held under either section 6320 or section 6330) that the 
taxpayer may have had with respect to the tax and tax period or periods 
shown on the NFTL.
    Q-D5. How can a taxpayer waive the requirement that the officer or 
employee of Appeals had no prior involvement with respect to the tax 
and tax period or periods involved in the CDP hearing?
    A-D5. The taxpayer must sign a written waiver.
    (e) Matters considered at CDP hearing--(1) In general. Appeals has 
the authority to determine the validity, sufficiency, and timeliness of 
any CDP Notice given by the IRS and of any request for a CDP hearing 
that is made by a taxpayer. Prior to the issuance of a determinaton, 
the hearing officer is required to obtain verification from the IRS 
office collecting the tax or filing the

[[Page 3403]]

NFTL that the requirements of any applicable law or administrative 
procedure have been met. The taxpayer may raise any relevant issue 
relating to the unpaid tax at the hearing, including appropriate 
spousal defenses, challenges to the appropriateness of the NFTL filing, 
and offers of collection alternatives. The taxpayer also may raise 
challenges to the existence or amount of the tax liability specified on 
the CDP Notice for any tax period shown on the CDP Notice if the 
taxpayer did not receive a statutory notice of deficiency for that tax 
liability or did not otherwise have an opportunity to dispute that tax 
liability. Finally, the taxpayer may not raise an issue that was raised 
and considered at a previous CDP hearing under section 6330 or in any 
other previous administrative or judicial proceeding if the taxpayer 
participated meaningfully in such hearing or proceeding. Taxpayers will 
be expected to provide all relevant information requested by Appeals, 
including financial statements, for its consideration of the facts and 
issues involved in the hearing.
    (2) Spousal defenses. A taxpayer may raise any appropriate spousal 
defenses at a CDP hearing. To claim a spousal defense under section 
6015, the taxpayer must do so in writing according to rules prescribed 
by the Secretary. Spousal defenses raised under section 6015 in a CDP 
hearing are governed in all respects by the provisions of section 6015 
and the procedures prescribed by the Secretary thereunder.
    (3) Questions and answers. The questions and answers illustrate the 
provisions of this paragraph (e) as follows:
    Q-E1. What factors will Appeals consider in making its 
determination?
    A-E1. Appeals will consider the following matters in making its 
determination:
    (i) Whether the IRS met the requirements of any applicable law or 
administrative procedure.
    (ii) Any issues appropriately raised by the taxpayer relating to 
the unpaid tax.
    (iii) Any appropriate spousal defenses raised by the taxpayer.
    (iv) Any challenges made by the taxpayer to the appropriateness of 
the NFTL filing.
    (v) Any offers by the taxpayer for collection alternatives.
    (vi) Whether the continued existence of the filed NFTL represents a 
balance between the need for the efficient collection of taxes and the 
legitimate concern of the taxpayer that any collection action be no 
more intrusive than necessary.
    Q-E2. When is a taxpayer entitled to challenge the existence or 
amount of the tax liability specified in the CDP Notice?
    A-E2. A taxpayer is entitled to challenge the existence or amount 
of the tax liability specified in the CDP Notice if the taxpayer did 
not receive a statutory notice of deficiency for such liability or did 
not otherwise have an opportunity to dispute such liability. Receipt of 
a statutory notice of deficiency for this purpose means receipt in time 
to petition the Tax Court for a redetermination of the deficiency 
asserted in the notice of deficiency. An opportunity to dispute a 
liability includes a prior opportunity for a conference with Appeals 
that was offered either before or after the assessment of the 
liability.
    Q-E3. Are spousal defenses subject to the limitations imposed under 
section 6330(c)(2)(B) on a taxpayer's right to challenge the tax 
liability specified in the CDP Notice at a CDP hearing?
    A-E3. No. The limitations imposed under section 6330(c)(2)(B) do 
not apply to spousal defenses. A spousal defense raised under section 
6015 is governed by that section; therefore any limitations under 
section 6015 will apply.
    Q-E4. May a taxpayer raise at a CDP hearing a spousal defense under 
section 6015 if that defense was raised and considered in a prior 
judicial proceeding that has become final?
    A-E4. No. A taxpayer is precluded by limitations under section 6015 
from raising a spousal defense under section 6015 in a CDP hearing 
under these circumstances.
    Q-E5. What collection alternatives are available to the taxpayer?
    A-E5. Collection alternatives would include, for example, 
withdrawal of the NFTL in circumstances that will facilitate the 
collection of the tax liability, an installment agreement, an offer-in-
compromise, the posting of a bond, or the substitution of other assets.
    Q-E6. What issues may a taxpayer raise in a CDP hearing under 
section 6320 if he previously received a notice under section 6330 with 
respect to the same tax and tax period and did not request a CDP 
hearing with respect to that notice?
    A-E6. The taxpayer may raise appropriate spousal defenses, 
challenges to the appropriateness of the NFTL filing, and offers of 
collection alternatives. The existence or amount of the tax liability 
for the tax and tax period specified in the CDP Notice may be 
challenged only if the taxpayer did not already have an opportunity to 
dispute that tax liability. Where the taxpayer previously received a 
CDP Notice under section 6330 with respect to the same tax and tax 
period and did not request a CDP hearing with respect to that earlier 
CDP Notice, the taxpayer already had an opportunity to dispute the 
existence or amount of the tax liability.
    Q-E7. How will Appeals issue its determination?
    A-E7. (i) Taxpayers will be sent a dated Notice of Determination by 
certified or registered mail. The Notice of Determination will set 
forth Appeals's findings and decisions. It will state whether the IRS 
met the requirements of any applicable law or administrative procedure; 
it will resolve any issues appropriately raised by the taxpayer 
relating to the unpaid tax; it will include a decision on any 
appropriate spousal defenses raised by the taxpayer; it will include a 
decision on any challenges made by the taxpayer to the appropriateness 
of the NFTL filing; it will respond to any offers by the taxpayer for 
collection alternatives; and it will address whether the continued 
existence of the filed NFTL represents a balance between the need for 
the efficient collection of taxes and the legitimate concern of the 
taxpayer that any collection action be no more intrusive than 
necessary. The Notice of Determination will also set forth any 
agreements Appeals reached with the taxpayer, any relief given the 
taxpayer, and any actions the taxpayer and/or the IRS are required to 
take. Lastly, the Notice of Determination will advise the taxpayer of 
his right to seek judicial review within 30 days of the date of the 
Notice of Determination.
    (ii) Because taxpayers are encouraged to discuss their concerns 
with the IRS office collecting the tax or filing the NFTL, certain 
matters that might have been raised at a CDP hearing may be resolved 
without the need for Appeals consideration. Unless as a result of these 
discussions, the taxpayer agrees to withdraw in writing the request 
that Appeals conduct a CDP hearing, Appeals will still issue a Notice 
of Determination. The taxpayer can, however, waive in writing Appeals's 
consideration of some or all of the matters it would otherwise consider 
in making its determination.
    Q-E8. Is there a time limit on the CDP hearings or on when Appeals 
must issue a Notice of Determination?
    A-E8. No. Appeals will, however, attempt to conduct CDP hearings as 
expeditiously as possible.
    Q-E9. Why is the Notice of Determination and its date important?
    A-E9. The Notice of Determination will set forth Appeals's findings 
and decisions with respect to the matters set forth in A-E1 of this 
paragraph (e)(3).

[[Page 3404]]

The date of the Notice of Determination establishes the beginning date 
of the 30-day period within which the taxpayer is permitted to seek 
judicial review of Appeals's determination.
    (4) Examples. The following examples illustrate the principles of 
this paragraph (e).

    Example 1. The IRS sends a statutory notice of deficiency to the 
taxpayer at his last known address asserting a deficiency for the 
taxable year 1995. The taxpayer receives the notice of deficiency in 
time to petition the Tax Court for a redetermination of the asserted 
deficiency. The taxpayer does not timely file a petition with the 
Tax Court. The taxpayer is therefore precluded from challenging the 
existence or amount of the tax liability in a subsequent CDP 
hearing.
    Example 2. Same facts as in Example 1, except the taxpayer does 
not receive the notice of deficiency in time to petition the Tax 
Court. The taxpayer is not, therefore, precluded from challenging 
the existence or amount of the tax liability in a subsequent CDP 
hearing.
    Example 3. The IRS properly assesses a trust fund recovery 
penalty against the taxpayer. The IRS offers the opportunity for a 
conference at which the taxpayer would have the opportunity to 
dispute the liability. The taxpayer declines the opportunity to 
participate in such a conference. The taxpayer is precluded from 
challenging the existence or amount of the tax liability in a 
subsequent CDP hearing.

    (f) Judicial review of Notice of Determination--(1) In general. 
Unless the taxpayer provides the IRS a written withdrawal of the 
request that Appeals conduct a CDP hearing, Appeals is required to 
issue a Notice of Determination in all cases where a taxpayer has 
timely requested a CDP hearing in writing. The taxpayer may appeal such 
determinations made by Appeals within 30 days after the date of the 
Notice of Determination to the Tax Court or a district court of the 
United States, as appropriate.
    (2) Questions and answers. The questions and answers illustrate the 
provisions of this paragraph (f) as follows:
    Q-F1. What must a taxpayer do to obtain judicial review of a Notice 
of Determination?
    A-F1. Subject to the jurisdictional limitations described in A-F2, 
the taxpayer must, within the 30-day period commencing the day after 
the date of the Notice of Determination, appeal the determination by 
Appeals to the Tax Court or to a district court of the United States.
    Q-F2. With respect to the relief available to the taxpayer under 
section 6015(b) or (c), what is the time frame within which a taxpayer 
may seek Tax Court review of Appeals's determination following a CDP 
hearing?
    A-F2. If the taxpayer seeks Tax Court review not only of Appeals's 
denial of relief under section 6015 (b) or (c), but also of relief 
requested with respect to other issues raised in the CDP hearing, the 
taxpayer should request Tax Court review within the 30-day period 
commencing the day after the date of the Notice of Determination. If 
the taxpayer only seeks Tax Court review of Appeals's denial of relief 
under section 6015 (b) or (c), the taxpayer should request Tax Court 
review, as provided by section 6015(e), within 90 days of Appeals's 
determination. If a request for Tax Court review is filed after the 30-
day period for seeking judicial review under section 6320, then only 
the taxpayer's section 6015 (b) or (c) claims may be reviewable by the 
Tax Court.
    Q-F3. Where should a taxpayer direct a request for judicial review 
of a Notice of Determination?
    A-F3. If the Tax Court would have jurisdiction over the type of tax 
specified in the CDP Notice (for example, income and estate taxes), 
then the taxpayer must seek judicial review by the Tax Court. If the 
tax liability specified in the CDP Notice arises from a type of tax 
over which the Tax Court would not have jurisdiction, then the taxpayer 
must seek judicial review by a district court of the United States in 
accordance with Title 28 of the United States Code.
    Q-F4. What happens if the taxpayer timely appeals Appeals's 
determination to the incorrect court?
    A-F4. If the court to which the taxpayer directed a timely appeal 
of the Notice of Determination determines that the appeal was to the 
incorrect court (because of jurisdictional, venue or other reasons), 
the taxpayer will have 30 days after the court's determination to that 
effect within which to file an appeal to the correct court.
    Q-F5. What issue or issues may the taxpayer raise before the Tax 
Court or before a district court if the taxpayer disagrees with the 
Notice of Determination?
    A-F5. In seeking Tax Court or district court review of Appeals's 
Notice of Determination, the taxpayer can only request that the court 
consider an issue that was raised in the taxpayer's CDP hearing.
    (g) Effect of request for CDP hearing and judicial review on 
periods of limitation--(1) In general. The periods of limitation under 
section 6502 (relating to collection after assessment), section 6531 
(relating to criminal prosecutions), and section 6532 (relating to 
suits) are suspended until the date the IRS receives the taxpayer's 
written withdrawal of the request for a CDP hearing by Appeals or the 
determination resulting from the CDP hearing becomes final by 
expiration of the time for seeking review or reconsideration. In no 
event shall any of these periods of limitation expire before the 90th 
day after the date on which the IRS receives the taxpayer's written 
withdrawal of the request that Appeals conduct a CDP hearing or the 
determination with respect to such hearing becomes final upon 
expiration of the time for seeking review or reconsideration.
    (2) Questions and answers. The questions and answers illustrate the 
provisions of this paragraph (g) as follows:
    Q-G1. For what period of time will the periods of limitation under 
sections 6502, 6531, and 6532 remain suspended if the taxpayer timely 
requests a CDP hearing concerning the filing of a NFTL?
    A-G1. The suspension period commences on the date the IRS receives 
the taxpayer's written request for a CDP hearing. The suspension period 
continues until the IRS receives a written withdrawal by the taxpayer 
of the request for a CDP hearing or the determination resulting from 
the CDP hearing becomes final by expiration of the time for seeking 
review or reconsideration. In no event shall any of these periods of 
limitation expire before the 90th day after the day on which the IRS 
receives the taxpayer's written withdrawal of the request that Appeals 
conduct a CDP hearing or there is a final determination with respect to 
such hearing. The periods of limitation that are suspended under 
section 6320 are those which apply to the taxes and the tax period or 
periods to which the CDP Notice relates.
    Q-G2. For what period of time will the periods of limitation under 
sections 6502, 6531, and 6532 be suspended if the taxpayer does not 
request a CDP hearing concerning the filing of a NFTL, or the taxpayer 
requests a CDP hearing, but his request is not timely?
    A-G2. Under either of these circumstances, section 6320 does not 
provide for a suspension of the periods of limitation.
    (3) Examples. The following examples illustrate the principles of 
this paragraph (g).

    Example 1. The period of limitation under section 6502 with 
respect to the taxpayer's tax period listed in the NFTL will expire 
on August 1, 1999. The IRS sent a CDP Notice to the taxpayer on 
April 30, 1999. The taxpayer timely requested a CDP hearing. The IRS 
received this request on May 15, 1999. Appeals sends the taxpayer 
its determination on June 15, 1999. The taxpayer timely seeks 
judicial review of that determination. The period of limitation 
under section 6502

[[Page 3405]]

would be suspended from May 15, 1999, until the determination 
resulting from that hearing becomes final by expiration of the time 
for seeking review or reconsideration before the appropriate court, 
plus 90 days.
    Example 2. Same facts as in Example 1, except the taxpayer does 
not seek judicial review of Appeals's determination. Because the 
taxpayer requested the CDP hearing when fewer than 90 days remained 
on the period of limitation, the period of limitation will be 
extended to October 13, 1999 (90 days from July 15, 1999).

    (h) Retained jurisdiction of Appeals--(1) In general. The Appeals 
office that makes a determination under section 6320 retains 
jurisdiction over that determination, including any subsequent 
administrative hearings that may be requested by the taxpayer regarding 
the NFTL and any collection actions taken or proposed with respect to 
Appeals's determination. Once a taxpayer has exhausted his other 
remedies, Appeals's retained jurisdiction permits it to consider 
whether a change in the taxpayer's circumstances affects its original 
determination. Where a taxpayer alleges a change in circumstances that 
affects Appeals's original determination, Appeals may consider whether 
changed circumstances warrant a change in its earlier determination.
    (2) Questions and answers. The questions and answers illustrate the 
provisions of this paragraph (h) as follows:
    Q-H1. Are the periods of limitation suspended during the course of 
any subsequent Appeals consideration of the matters raised by a 
taxpayer when the taxpayer invokes the retained jurisdiction of Appeals 
under section 6330(d)(2)(A) or (d)(2)(B)?
    A-H1. No. Under section 6320(b)(2), a taxpayer is entitled to only 
one section 6320 CDP hearing with respect to the tax and tax period or 
periods specified in the CDP Notice. Any subsequent consideration by 
Appeals pursuant to its retained jurisdiction is not a continuation of 
the original CDP hearing and does not suspend the periods of 
limitation.
    Q-H2. Is a decision of Appeals resulting from a retained 
jurisdiction hearing appealable to the Tax Court or a district court?
    A-H2. No. As discussed in A-H1, a taxpayer is entitled to only one 
section 6320 CDP hearing with respect to the tax and tax period or 
periods specified in the CDP Notice. Only determinations resulting from 
CDP hearings are appealable to the Tax Court or a district court.
    (i) Equivalent hearing--(1) In general. A taxpayer who fails to 
make a timely request for a CDP hearing is not entitled to a CDP 
hearing. Such a taxpayer may nevertheless request an administrative 
hearing with Appeals, which is referred to herein as an ``equivalent 
hearing.'' The equivalent hearing will be held by Appeals and will 
generally follow Appeals procedures for a CDP hearing. Appeals will 
not, however, issue a Notice of Determination. Under such 
circumstances, Appeals will issue a Decision Letter.
    (2) Questions and answers. The questions and answers illustrate the 
provisions of this paragraph (i) as follows:
    Q-I1. What issues will Appeals consider at an equivalent hearing?
    A-I1. In an equivalent hearing, Appeals will consider the same 
issues that it would have considered at a CDP hearing on the same 
matter.
    Q-I2. Are the periods of limitation under sections 6502, 6531, and 
6532 suspended if the taxpayer does not timely request a CDP hearing 
and is subsequently given an equivalent hearing?
    A-I2. No. The suspension period provided for in section 6330(e) 
relates only to hearings requested within the 30-day period that 
commences on the day after the end of the five business day period 
following the filing of the NFTL, that is, CDP hearings.
    Q-I3. Will collection action, including the filing of additional 
NFTLs, be suspended if a taxpayer requests and receives an equivalent 
hearing?
    A-I3. Collection action is not required to be suspended. 
Accordingly, the decision to take collection action during the pendency 
of an equivalent hearing will be determined on a case-by-case basis. 
Appeals may request the IRS office with responsibility for collecting 
the taxes to suspend all or some collection action or to take other 
appropriate action if it determines that such action is appropriate or 
necessary under the circumstances.
    Q-I4. What will the Decision Letter state?
    A-I4. The Decision Letter will generally contain the same 
information as a Notice of Determination.
    Q-I5. Will a taxpayer be able to obtain court review of a decision 
made by Appeals with respect to an equivalent hearing?
    A-I5. Section 6320 does not authorize a taxpayer to appeal the 
decision of Appeals with respect to an equivalent hearing. A taxpayer 
may under certain circumstances be able to seek Tax Court review of 
Appeals's denial of relief under section 6015(b) or (c). Such review 
must be sought within 90 days of the issuance of Appeals's 
determination on those issues, as provided by section 6015(e).
    (j) Effective date. This section is applicable with respect to any 
filing of a NFTL on or after January 19, 1999, and before January 21, 
2002.

Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.

    Approved: January 13, 1999.
Donald C. Lubick,
Assistant Secretary of the Treasury.
[FR Doc. 99-1414 Filed 1-19-99; 10:56 am]
BILLING CODE 4830-01-U