[Federal Register Volume 70, Number 179 (Friday, September 16, 2005)]
[Proposed Rules]
[Pages 54687-54693]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-18470]


-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[REG-150091-02]
RIN 1545-BB97


Miscellaneous Changes to Collection Due Process Procedures 
Relating to Notice and Opportunity for Hearing Prior to Levy

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

-----------------------------------------------------------------------

SUMMARY: This document contains proposed amendments to the regulations 
relating to a taxpayer's right to a hearing before or after levy under 
section 6330 of the Internal Revenue Code of 1986. The proposed 
regulations make certain clarifying changes in the way collection due 
process (CDP) hearings are held and specify the period during which a 
taxpayer may request an equivalent hearing. The proposed regulations 
affect taxpayers against whose property or rights to property the 
Internal Revenue Service (IRS) intends to levy on or after January 19, 
1999. This document also contains a notice of public hearing on these 
proposed regulations.

DATES: Written and electronic comments must be received by December 15, 
2005. Outlines of topics to be discussed at the public hearing 
scheduled for 10 a.m. on January 19, 2006 must be received by December 
29, 2005.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-150091-02), Room 
5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
150091-02), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue, NW., Washington, DC, or sent electronically, via the IRS 
Internet site at http://www.irs.gov/regs or via the Federal eRulemaking 
Portal at http://www.regulations.gov (indicate IRS and REG-150091-02). 
The public hearing will be held in the IRS Auditorium, Internal Revenue 
Building (7th Floor), 1111 Constitution Avenue, NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, call 
Laurence K. Williams, 202-622-3600 (not a toll-free number). Concerning 
submissions and/or to be placed on the building access list to attend 
the hearing, call Robin Jones, 202-622-7180 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document contains proposed amendments to the Regulations on 
Procedure and Administration (26 CFR part 301) relating to the 
provision of notice under section 6330 of the Internal Revenue Code to 
taxpayers of a right to a CDP hearing (CDP Notice) before levy. Final 
regulations (TD 8980) were published on January 18, 2002 in the Federal 
Register (67 FR 2549). The final regulations implemented certain 
changes made by section 3401 of the Internal Revenue Service 
Restructuring and Reform Act of 1998 (Pub. L. 105-206, 112 Stat. 685) 
(RRA 1998), including the addition of section 6330 to the Internal 
Revenue Code. The final regulations affected taxpayers against whose 
property or rights to property the IRS intends to levy.
    Section 3401 of RRA 1998 also added section 6320 to the Internal 
Revenue Code. That statute provides for notice to taxpayers of a right 
to a hearing after the filing of a notice of Federal tax lien (NFTL). A 
number of the provisions in section 6330 concerning the conduct and 
judicial review of a CDP hearing are incorporated by reference in 
section 6320. On January 18, 2002, final regulations (TD 8979) under 
section 6320 were published in the Federal Register (67 FR 2558) along 
with the final regulations under section 6330.

Explanation of Provisions

    A taxpayer is entitled to one CDP hearing with respect to the tax 
and tax period covered by a CDP Notice concerning a levy or a CDP 
Notice concerning the filing of a NFTL. The IRS Office of Appeals 
(Appeals) has conducted over 92,000 CDP hearings and more than 30,000 
equivalent hearings since sections 6320 and 6330 became effective for 
collection actions initiated on and after January 19, 1999.
    In general, the experience of the past six years with CDP hearings 
has demonstrated that there is a need for changes to allow Appeals to 
effectively and fairly handle the cases of taxpayers who raise issues 
of substance. Appeals has instituted many improvements in its 
processing of CDP cases and has conducted extensive training in an 
effort to provide careful, but timely, review of CDP cases, which 
currently are filed at a rate of approximately 2,450 per month. The 
proposed regulations, if adopted as final regulations, will increase 
efficiency without compromising the quality and fairness of review.
    In many CDP cases, significant time is spent merely identifying the 
issues. Although the Form 12153 used to request a CDP hearing requires 
a taxpayer to state a reason or reasons for disagreeing with the 
proposed levy, many taxpayers either do not supply that information, or 
raise new issues during the CDP hearing process not identified on the 
hearing request. Delays result while taxpayers provide new supporting 
documentation and Appeals personnel reconsider prior conclusions in 
light of the new information. Cases of other taxpayers pending in 
Appeals are delayed because other work must be constantly rescheduled.
    Cases are also delayed when taxpayers propose collection 
alternatives for which they are not eligible. The IRS does not consider 
offers in compromise or installment agreements from taxpayers who have 
failed to file required returns as of the date the offer or the 
proposed

[[Page 54688]]

installment agreement is submitted. See Publication 594, ``What You 
Should Know about the IRS Collection Process (Rev. 2-2004).'' 
Similarly, the IRS will not consider an offer in compromise from an in-
business taxpayer unless the taxpayer has timely filed all returns and 
timely made all Federal tax deposits for two consecutive quarters. See 
Form 656, ``Offer in Compromise (Rev. 7-2004).'' The resources of 
Appeals are ineffectively utilized arranging and conducting face-to-
face conferences requested by non-compliant taxpayers whose only 
complaint is the rejection of an offer to compromise or installment 
agreement for which they are not eligible.
    Frivolous cases also cause unnecessary delays. During fiscal year 
2004, 5.4 percent of the 32,226 CDP and equivalent-hearing cases 
Appeals handled involved taxpayers who were non-filers or raised only 
frivolous issues. Cases raising frivolous issues, in particular, 
consume a disproportionately large amount of time, because Appeals 
personnel must often read lengthy, frivolous submissions in search of 
any substantive issue buried within. Delays also result when taxpayers 
use face-to-face conferences as a venue for frivolous oration and 
harassment of Appeals personnel.
    The proposed regulations attempt to address these and other 
problems that have become apparent during the first six years of CDP 
practice. The proposed changes are aimed at creating a more focused 
procedure that will allow Appeals to continue to provide careful review 
of proposed levies as the volume of cases increases.
    A taxpayer must request a CDP hearing in writing. The current 
regulations require that a request for a CDP hearing include the 
taxpayer's name, address, and daytime telephone number, and that the 
request be dated and signed by either the taxpayer or the taxpayer's 
authorized representative. Section 301.6330-1(c)(2), Q&A-C1. A Form 
12153, ``Request for a Collection Due Process Hearing,'' is included 
with the CDP Notice sent to the taxpayer pursuant to section 6330. The 
Form 12153 requests (1) the taxpayer's name, address, daytime telephone 
number, and taxpayer identification number (SSN or EIN), (2) the type 
of tax involved, (3) the tax period at issue, (4) a statement that the 
taxpayer requests a hearing with Appeals concerning the proposed levy, 
and (5) the reason or reasons why the taxpayer disagrees with the 
proposed levy. Although taxpayers are encouraged to use a Form 12153 in 
requesting a CDP hearing, the current regulations do not require the 
use of Form 12153.
    Section 301.6330-1(c)(2), A-C1, of the proposed regulations 
requires taxpayers to state their reasons for disagreement with the 
proposed levy whether or not a Form 12153 is used to request a CDP 
hearing. In addition, a taxpayer who fails to sign a timely CDP hearing 
request because the request is made by a spouse or other unauthorized 
representative must affirm in writing that the request was originally 
submitted on the taxpayer's behalf. Failure to provide the written 
affirmation within a reasonable time after a request from Appeals will 
result in the denial of a CDP hearing for that taxpayer.
    A CDP hearing is to be conducted by an Appeals officer or employee 
who has had no ``prior involvement'' with respect to the tax for the 
tax periods to be covered by the hearing, unless the taxpayer waives 
this requirement. Section 301.6330-1(d)(2), A-D4 of the current 
regulations provides that ``prior involvement'' by an Appeals officer 
or employee includes participation or involvement in an Appeals hearing 
that the taxpayer may have had with respect to the tax and tax period 
shown on the CDP Notice, other than a CDP hearing held under either 
section 6320 or section 6330. It is important that ``prior 
involvement'' be construed in a manner that reasonably protects against 
predisposition but at the same time does not disqualify too broad a 
range of Appeals personnel. A broad standard of ``prior involvement'' 
would lead to uncertain application, could result in the 
disqualification of an entire Appeals office, many of which have small 
staffs, and could make it difficult to conduct the CDP hearing. Section 
301.6330-1(d)(2), A-D4 of the proposed regulations provides that prior 
involvement exists only when the taxpayer, the tax liability and the 
tax period shown on the CDP Notice also were at issue in the prior non-
CDP hearing or proceeding, and the Appeals officer or employee actually 
participated in the prior hearing or proceeding. Examples are provided 
in Sec.  301.6330-1(d)(3) of the proposed regulations.
    Section 301.6330-1(d)(2), A-D7, of the proposed regulations 
clarifies that a face-to-face conference is merely one aspect of a CDP 
hearing under section 6330 and is not by itself the entire CDP hearing.
    A-D7 of the proposed regulations also provides that, in all cases, 
the Appeals officer or employee will review the taxpayer's request for 
a CDP hearing, the case file, other written communications from the 
taxpayer, and any notes of oral communications with the taxpayer or the 
taxpayer's representative. If no face-to-face or telephonic conference 
is held, review of those documents will constitute the CDP hearing for 
purposes of section 6330(b).
    A-D7 of the proposed regulations further clarifies that when a 
business taxpayer is offered an opportunity for a face-to-face 
conference it will be held at the Appeals office closest to the 
taxpayer's principal place of business. The current regulations have 
been misinterpreted by some taxpayers as requiring the IRS to hold a 
face-to-face conference at the taxpayer's principal place of business.
    Q&A-D8 of the proposed regulations is new. It describes specific 
circumstances in which Appeals will not hold a face-to-face conference 
with the taxpayer or the taxpayer's representative because a conference 
will serve no useful purpose. The experience of Appeals is that 
although most taxpayers request face-to-face conferences, they are 
sometimes difficult to schedule on a date and at a time that is 
convenient for the taxpayer. In some of these cases, taxpayers or their 
representatives have used the scheduling of a face-to-face conference 
as a tactic to delay the IRS's collection efforts. In other cases, 
taxpayers have requested a face-to-face conference merely to raise 
frivolous arguments concerning the Federal tax system or to request 
collection alternatives for which they do not qualify. Q&A-D8 of the 
proposed regulations provides that a face-to-face conference need not 
be offered if the taxpayer or the taxpayer's representative raises only 
frivolous arguments concerning the Federal tax system. See the IRS 
Internet site, http://www.irs.gov/pub/irs-utl/friv_tax.pdf, for 
examples of frivolous arguments. A face-to-face conference also will 
not be granted if the taxpayer proposes collection alternatives that 
would not be available to other taxpayers in similar circumstances. A 
face-to-face conference need not be granted if the taxpayer does not 
provide in the written request for a CDP hearing, as perfected, the 
required information set forth in A-C1(ii)(E) of paragraph (c)(2) of 
the proposed regulations.
    In addition, a face-to-face conference will not be held at the 
location closest to the taxpayer's residence or principal place of 
business if all Appeals officers or employees at that location are 
considered to have prior involvement as provided in A-D4. In this case, 
the taxpayer will be offered a hearing by telephone or correspondence, 
or some combination thereof. The taxpayer may be able to obtain a face-
to-face

[[Page 54689]]

conference at the Appeals office closest to the taxpayer's residence or 
principal place of business under these circumstances if the taxpayer 
waives the requirement of section 6330(b)(3) concerning impartiality of 
the Appeals officer or employee. Appeals will offer the taxpayer a 
face-to-face conference at another Appeals office if in the exercise of 
its discretion Appeals would have offered the taxpayer a face-to-face 
conference at the original location.
    With the foregoing exceptions, it is anticipated that a face-to-
face conference will ordinarily be offered with respect to any relevant 
issues or collection alternatives for which the taxpayer qualifies.
    Sections 301.6330-1(e)(1) and 301.6330-1(e)(3), A-E2 and A-E7 have 
been changed to more closely follow the language of section 
6330(c)(2)(B). These changes are necessary because these regulations 
have been misinterpreted as defining the underlying tax liability that 
may be considered at the CDP hearing under section 6330(c)(2)(B) to be 
the tax liability listed on the CDP Notice. The existing regulations, 
which refer to tax liability on the CDP Notice, were intended merely to 
make clear that taxpayers may only challenge taxes or tax periods 
listed on the CDP Notice, not to supply a substantive definition of 
underlying tax liability. Section 301.6330-1(e)(3), A-E6 has been 
amended to clarify that taxpayers who receive CDP hearings can only 
qualify for collection alternatives available generally to taxpayers in 
similar circumstances.
    The experience of the past six years has revealed that many 
taxpayers raise an issue with Appeals but fail to furnish any 
documentation or evidence with respect to the issue despite being given 
a reasonable period to do so. For example, a taxpayer may request an 
installment agreement, but when an Appeals officer or employee requests 
financial data necessary to determine eligibility for the installment 
agreement, the taxpayer may not comply with the request. Or a taxpayer 
may dispute liability for a tax period by claiming entitlement to 
deductions, but provide no substantiation for the deductions in 
response to requests from Appeals. Current Sec.  301.6330-1(f)(2), A-F5 
provides that a taxpayer may not seek judicial review of an issue that 
he has not raised during the CDP hearing. A-F5 is revised to clarify 
that in order to obtain judicial review, a taxpayer must not only bring 
the issue to the attention of Appeals but must also submit, if 
requested, evidence with respect to that issue. Under revised A-F5, if 
the taxpayer does not provide Appeals any evidence with respect to the 
issue after being given a reasonable opportunity to submit such 
evidence, then he may not ask a court to consider the issue.
    There has been some confusion about what documents Appeals should 
retain, and what notations the Appeals officer or employee conducting 
the hearing should make, in order to provide a judicially reviewable 
administrative record. A new Q&A-F6 has been added to specify the 
contents of the administrative record required for court review.
    The IRS receives a number of tardy requests for CDP hearings. The 
changes to Sec.  301.6330-1(i)(2) explain how these requests will be 
treated. The proposed amendments to the regulations add a new Q&A-I1 to 
Sec.  301.6330-1(i)(2) to explain that a taxpayer must request an 
equivalent hearing in writing. A taxpayer may obtain an equivalent 
hearing if the 30-day period described in section 6330(a)(3) for 
requesting a CDP hearing has expired. Unlike an Appeals determination 
in a CDP hearing, the Appeals decision in an equivalent hearing is not 
reviewable in court. Under new Q&A-I1, the IRS is not required to treat 
a late-filed CDP request as a request for an equivalent hearing. 
Section 301.6330-1(c)(2), A-C7 has been amended to require that the 
taxpayer be notified of the right to an equivalent hearing in all cases 
in which a tardy request for a CDP hearing is received. It is expected 
that the IRS will either send the taxpayer a letter or orally inform 
the taxpayer that the CDP hearing request is untimely and ask if the 
taxpayer wishes to have an equivalent hearing. If the taxpayer elects 
to have an equivalent hearing, the IRS will treat the CDP hearing 
request as a request for an equivalent hearing without requiring the 
taxpayer to make an additional written request.
    Current Q&A-I1 through I5 are renumbered Q&A-I2 through I6. The 
proposed regulations add Q&A-I7 to Sec.  301.6330-1(i)(2) to clarify 
that the period during which a taxpayer may obtain an equivalent 
hearing is not indefinite. The equivalent hearing procedure is not 
provided by statute but, consistent with the legislative history of RRA 
1998, was adopted in order to accommodate taxpayers who failed timely 
to exercise their right to a CDP hearing. The equivalent hearing was 
meant to occur near the time a CDP hearing held pursuant to a timely 
request would have occurred, because it was meant to address the same 
matters that would have been addressed at a CDP hearing. The procedure 
was not meant to provide a hearing right that could be exercised months 
or years after the circumstances that precipitated the proposed levy 
have passed. A hearing before Appeals at a later time may be obtained 
under the Collection Appeals Program. Therefore, proposed Q&A-I7 limits 
to one year the period during which a taxpayer may request an 
equivalent hearing. The period commences the day after the date of the 
CDP Notice issued under section 6330.
    Because the time for requesting an equivalent hearing will be 
limited, the proposed regulations add new Q&A-I8, Q&A-I9, Q&A-I10 and 
Q&A-I11 to Sec.  301.6330-1(i)(2) to provide the same rules governing 
mailing, delivery and determination of timeliness that apply to 
requests for CDP hearings. Unlike existing Sec.  301.6330-1(c)(2), A-
C6, new A-I10 does not identify the officials to whom to send an 
equivalent hearing request if the CDP Notice does not specify where to 
send the request. Because the identity and the address of the person to 
whom the request should be sent may change in the future, taxpayers 
will be able to obtain more current information by calling the 1-800 
number listed in A-I10. Section 301.6330-1(c)(2), A-C6 also has been 
revised in the proposed regulations to provide that taxpayers should 
call the 1-800 number to obtain the address to which the CDP hearing 
request should be sent.
    The proposed regulations are effective the date 30 days after final 
regulations are published in the Federal Register with respect to 
requests for CDP hearings or equivalent hearings made on or after the 
date 30 days after final regulations are published in the Federal 
Register.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866. Therefore, a regulatory assessment is not required. It also has 
been determined that section 553(b) of the Administrative Procedure Act 
(5 U.S.C. chapter 5) does not apply to these regulations, and because 
the regulations do not impose a collection of information on small 
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not 
apply. Pursuant to section 7805(f) of the Internal Revenue Code, this 
notice of proposed rulemaking will be submitted to the Chief Counsel 
for Advocacy of the Small Business Administration for comment on its 
impact on small business.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any

[[Page 54690]]

electronic and written comments that are submitted timely to the IRS. 
The IRS and Treasury Department specifically request comments on the 
clarity of the proposed regulations and how they may be made easier to 
understand. All comments will be available for public inspection and 
copying.
    A public hearing has been scheduled for January 19, 2006, at 10 
a.m. in the IRS Auditorium, Internal Revenue Building (7th Floor), 1111 
Constitution Avenue NW., Washington, DC. All visitors must present 
photo identification to enter the building. Because of access 
restrictions, visitors will not be admitted beyond the immediate 
entrance area more than 30 minutes before the hearing starts. For 
information about having a visitor's name placed on the building access 
list to attend the hearing, see the FOR FURTHER INFORMATION CONTACT 
caption.
    An outline of the topics to be discussed and the time to be devoted 
to each topic must be submitted by any person who wishes to present 
oral comments at the hearing. Outlines must be received by December 29, 
2005.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. A period of 
10 minutes will be allotted to each person for making comments.
    An agenda showing the scheduling of the speakers will be prepared 
after the deadline for receiving requests to speak has passed. Copies 
of the agenda will be available free of charge at the hearing.

Drafting Information

    The principal author of these regulations is Laurence K. Williams, 
Office of Associate Chief Counsel, Procedure and Administration 
(Collection, Bankruptcy and Summonses Division).

List of Subjects in 26 CFR Part 301

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

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 301 is proposed to be 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 301.6330-1 is proposed to be amended as follows:
    1. Paragraph (c)(2) A-C1, Q&A-C6 and A-C7 are revised.
    2. Paragraph (d)(2) A-D4 and A-D7 are revised.
    3. Paragraph (d)(2) Q&A-D8 is added.
    4. Paragraph (d)(3) is added.
    5. Paragraph (e)(1) is revised.
    6. Paragraph (e)(3) A-E2, A-E6 and A-E7 are revised.
    7. Paragraph (f)(2) A-F5 is revised.
    8. Paragraph (f)(2) Q&A-F6 is added.
    9. Paragraph (i)(2) Q&A-I1 through Q&A-I5 are redesignated as Q&A-
I2 through Q&A-I6, a new paragraph (i)(2) Q&A-I1 and new paragraphs 
Q&A-I7 through Q&A-I11 are added.
    10. Paragraph (j) is revised.


Sec.  301.6330-1  Notice and opportunity for hearing prior to levy.

* * * * *
    (c) * * *
    (2) * * *
    A-C1. (i) The taxpayer must make a request in writing for a CDP 
hearing. The request for a CDP hearing shall include the information 
specified in A-C1(ii) of this paragraph (c)(2). See A-D7 and A-D8 of 
paragraph (d)(2).
    (ii) The written request for a CDP hearing must be dated and must 
include the following information:
    (A) The taxpayer's name, address, daytime telephone number (if 
any), and taxpayer identification number (SSN or EIN).
    (B) The type of tax involved.
    (C) The tax period at issue.
    (D) A statement that the taxpayer requests a hearing with Appeals 
concerning the proposed levy.
    (E) The reason or reasons why the taxpayer disagrees with the 
proposed levy.
    (F) The signature of the taxpayer or the taxpayer's authorized 
representative.
    (iii) The taxpayer must perfect any timely written request for a 
CDP hearing that does not provide the required information set forth in 
A-C1(ii) of this paragraph within a reasonable period of time after a 
request from the IRS.
    (iv) Taxpayers are encouraged to use a Form 12153, ``Request for a 
Collection Due Process Hearing,'' in requesting a CDP hearing so that 
the 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, by downloading a copy from the IRS Internet 
site, http://www.irs.gov/pub/irs-pdf/f12153.pdf, or by calling, toll-
free, 1-800-829-3676.
    (v) The taxpayer must affirm any timely written request for a CDP 
hearing which is signed or alleged to have been signed on the 
taxpayer's behalf by the taxpayer's spouse or other unauthorized 
representative by filing, within a reasonable time after a request from 
the IRS, a signed, written affirmation that the request was originally 
submitted on the taxpayer's behalf. If the affirmation is not filed 
within a reasonable period of time after a request, the CDP hearing 
request will be denied with respect to the non-signing taxpayer.
* * * * *
    Q-C6. Where must the written request for a CDP hearing be sent?
    A-C6. The written request for a CDP hearing must be sent, or hand 
delivered (if permitted), to the IRS office and address as directed on 
the CDP Notice. If the address of that office does not appear on the 
CDP Notice, the taxpayer should obtain the address of the office to 
which the written request should be sent or hand delivered by calling, 
toll-free, 1-800-829-1040 and providing the taxpayer's identification 
number (SSN or TIN).
* * * * *
    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 date of 
the CDP Notice, the taxpayer foregoes the right to a CDP hearing under 
section 6330 with respect to the unpaid tax and tax periods shown on 
the CDP Notice. If the request for CDP hearing is received after the 
30-day period, the taxpayer will be notified of the untimely request 
and of the right to an equivalent hearing. See paragraph (i) of this 
section.
* * * * *
    (d) * * *
    (2) * * *
    A-D4. Prior involvement by an Appeals officer or employee 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 shown on 
the CDP Notice. Prior involvement exists only when the taxpayer, the 
tax liability and the tax period at issue in the CDP hearing also were 
at issue in the prior non-CDP hearing or proceeding, and the Appeals 
officer or employee actually participated in the prior hearing or 
proceeding.
* * * * *
    A-D7. Except as provided in A-D8 of this paragraph (d)(2), a 
taxpayer who presents in the CDP hearing request relevant, non-
frivolous reasons for disagreement with the proposed levy will 
ordinarily be offered an opportunity for a face-to-face conference at 
the Appeals office closest to taxpayer's residence. A business taxpayer 
will ordinarily be offered an opportunity for a face-to-face conference 
at the Appeals office closest to the taxpayer's principal place of 
business. If

[[Page 54691]]

that is not satisfactory to the taxpayer, the taxpayer will be given an 
opportunity for a hearing by telephone or by correspondence. In all 
cases, the Appeals officer or employee will review the case file, which 
includes the taxpayer's request for a CDP hearing, any other written 
communications from the taxpayer or the taxpayer's authorized 
representative, and any notes made by Appeals officers or employees of 
any oral communications with the taxpayer or the taxpayer's authorized 
representative. If no face-to-face or telephonic conference is held, 
review of those documents will constitute the CDP hearing for purposes 
of section 6330(b).
    Q-D8. In what circumstances will a face-to-face CDP conference not 
be granted?
    A-D8. A taxpayer is not entitled to a face-to-face CDP conference 
at a location other than as provided in A-D7 of this paragraph (d)(2) 
and this A-D8. If all Appeals officers or employees at the location 
provided for in A-D7 of this paragraph have had prior involvement with 
the taxpayer as provided in A-D4 of this paragraph, the taxpayer will 
not be offered a face-to-face meeting at that location, unless the 
taxpayer elects to waive the requirement of section 6330(b)(3). The 
taxpayer will be offered a face-to-face conference at another Appeals 
office if Appeals in the exercise of its discretion would have offered 
the taxpayer a face-to-face conference at the location provided in A-
D7. A face-to-face CDP conference concerning a taxpayer's underlying 
liability will not be granted if the request for a hearing or other 
taxpayer communication indicates that the taxpayer wishes only to raise 
irrelevant or frivolous issues concerning that liability. A face-to-
face CDP conference concerning a collection alternative, such as an 
installment agreement or an offer to compromise liability, will not be 
granted unless the alternative would be available to other taxpayers in 
similar circumstances. For example, because the IRS does not consider 
offers to compromise from taxpayers who have not filed required returns 
or have not made certain required deposits of tax, as set forth in Form 
656, ``Offer in Compromise,'' no face-to-face conference will be 
offered to a taxpayer who wishes to make an offer to compromise but has 
not fulfilled those obligations. A face-to-face conference need not be 
granted if the taxpayer does not provide the required information set 
forth in A-C1(ii)(E) of paragraph (c)(2). See also A-C1(iii) of 
paragraph C-2.
    (3) Examples. The following examples illustrate the principles of 
this paragraph (d):

    Example 1. Individual A timely requests a CDP hearing concerning 
a proposed levy for the 1998 income tax liability assessed against 
individual A. Appeals employee B previously conducted a CDP hearing 
regarding a NFTL filed with respect to A's 1998 income tax 
liability. Because employee B's only prior involvement with 
individual A's 1998 income tax liability was in connection with a 
section 6320 CDP hearing, employee B may conduct the CDP hearing 
under section 6330 involving the proposed levy for the 1998 income 
tax liability.
    Example 2. Individual C timely requests a CDP hearing concerning 
a proposed levy for the 1998 income tax liability assessed against 
individual C. Appeals employee D previously conducted a Collection 
Appeals Program (CAP) hearing regarding a NFTL filed with respect to 
C's 1998 income tax liability. Because employee D's prior 
involvement with individual C's 1998 income tax liability was in 
connection with a non-CDP hearing, employee D may not conduct the 
CDP hearing under section 6330 unless individual C waives the 
requirement that the hearing will be conducted by an Appeals officer 
or employee who has had no prior involvement with respect to C's 
1998 income tax liability.
    Example 3. Same facts as in Example 2, except that the prior CAP 
hearing only involved individual C's 1997 income tax liability and 
employment tax liabilities for 1998 reported on Form 941. Employee D 
would not be considered to have prior involvement because the prior 
CAP hearing in which she participated did not involve individual C's 
1998 income tax liability.
    Example 4. Appeals employee F is assigned to a CDP hearing 
concerning a proposed levy for a trust fund recovery penalty (TFRP) 
assessed pursuant to section 6672 against individual E. Appeals 
employee F participated in a prior CAP hearing involving individual 
E's 1999 income tax liability, and participated in a CAP hearing 
involving the employment taxes of business entity X, which incurred 
the employment tax liability to which the TFRP assessed against 
individual E relates. Appeals employee F would not be considered to 
have prior involvement because the prior CAP hearings in which he 
participated did not directly involve the TFRP assessed against 
individual E.
    Example 5. Appeals employee G is assigned to a CDP hearing 
concerning a proposed levy for a TFRP assessed pursuant to section 
6672 against individual H. In preparing for the CDP hearing, Appeals 
employee G reviews the Appeals case file concerning the prior CAP 
hearing involving the TFRP assessed pursuant to section 6672 against 
individual H. Appeals employee G is not deemed to have participated 
in the previous CAP hearing involving the TFRP assessed against 
individual H by such review.

    (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 issuance of a determination, 
Appeals is required to obtain verification from the IRS office 
collecting the tax 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 
proposed levy, and offers of collection alternatives. The taxpayer also 
may raise challenges to the existence or amount of the underlying 
liability for any tax period specified 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 the tax 
liability. Finally, the taxpayer may not raise an issue that was raised 
and considered at a previous CDP hearing under section 6320 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.
* * * * *
    (3) * * *
    A-E2. A taxpayer is entitled to challenge the existence or amount 
of the underlying liability for any tax period specified on 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 determined in the notice of 
deficiency. An opportunity to dispute the underlying liability includes 
a prior opportunity for a conference with Appeals that was offered 
either before or after the assessment of the liability.
* * * * *
    A-E6. Collection alternatives include, for example, a proposal to 
withhold the proposed levy or future collection action in circumstances 
that will facilitate the collection of the tax liability, an 
installment agreement, an offer to compromise, the posting of a bond, 
or the substitution of other assets. A collection alternative is not 
available unless the alternative would be available to other taxpayers 
in similar circumstances. For example, the IRS does not consider an 
offer to compromise made by a taxpayer who, at

[[Page 54692]]

the time of the CDP hearing, has not filed required returns or has not 
made certain required deposits of tax, as set forth in Form 656, 
``Offer in Compromise.'' The collection alternative of an offer to 
compromise would not be available to such a taxpayer in a CDP hearing.
* * * * *
    A-E7. The taxpayer may raise appropriate spousal defenses, 
challenges to the appropriateness of the proposed collection action, 
and offers of collection alternatives. The existence or amount of the 
underlying liability for any tax period specified in the CDP Notice may 
be challenged only if the taxpayer did not already have an opportunity 
to dispute the tax liability. If the taxpayer previously received a CDP 
Notice under section 6320 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 has already had an opportunity to dispute the 
existence or amount of the underlying tax liability.
* * * * *
    (f) * * *
    (2) * * *
    A-F5. In seeking Tax Court or district court review of a Notice of 
Determination, the taxpayer can only ask the court to consider an 
issue, including a challenge to the underlying tax liability, that was 
properly raised in the taxpayer's CDP hearing. An issue is not properly 
raised if the taxpayer fails to request consideration of the issue by 
Appeals, or if consideration is requested but the taxpayer fails to 
present to Appeals any evidence with respect to that issue after being 
given a reasonable opportunity to present such evidence.
    Q-F6. What is the administrative record for purposes of court 
review?
    A-F6. The case file, including written communications and 
information from the taxpayer or the taxpayer's authorized 
representative submitted in connection with the CDP hearing, notes made 
by an Appeals officer or employee of any oral communications with the 
taxpayer or the taxpayer's authorized representative and memoranda 
created by the Appeals officer or employee in connection with the CDP 
hearing, and any other documents or materials relied upon by the 
Appeals officer or employee in making the determination under section 
6330(c)(3), will constitute the record in any court review of the 
Notice of Determination issued by Appeals.
    (i) * * *
    (2) * * *
    Q-I1. What must a taxpayer do to obtain an equivalent hearing?
    A-I1. (i) A request for an equivalent hearing must be made in 
writing. A written request in any form that requests an equivalent 
hearing will be acceptable if it includes the information required in 
paragraph (ii) of this A-I1.
    (ii) The request must be dated and must include the following 
information:
    (A) The taxpayer's name, address, daytime telephone number (if 
any), and taxpayer identification number (SSN or EIN).
    (B) The type of tax involved.
    (C) The tax period at issue.
    (D) A statement that the taxpayer is requesting an equivalent 
hearing with Appeals concerning the levy.
    (E) The reason or reasons why the taxpayer disagrees with the 
proposed levy.
    (F) The signature of the taxpayer or the taxpayer's authorized 
representative.
    (iii) The taxpayer must perfect any timely written request for an 
equivalent hearing that does not provide the required information set 
forth in paragraph (ii) of this A-I1 within a reasonable period of time 
after a request from the IRS. If the requested information is not 
provided within a reasonable period of time, the taxpayer's equivalent 
hearing request will be denied.
    (iv) The taxpayer must affirm any timely written request for an 
equivalent hearing that is signed or alleged to have been signed on the 
taxpayer's behalf by the taxpayer's spouse or other unauthorized 
representative, and that otherwise meets the requirements set forth in 
paragraph (ii) of this A-I1, by filing, within a reasonable time after 
a request from the IRS, a signed written affirmation that the request 
was originally submitted on the taxpayer's behalf. If the affirmation 
is not filed within a reasonable period of time, the equivalent hearing 
request will be denied with respect to the non-signing taxpayer.
* * * * *
    Q-I7. When must a taxpayer request an equivalent hearing with 
respect to a CDP Notice issued under section 6330?
    A-I7. A taxpayer must submit a written request for an equivalent 
hearing within the one-year period commencing the day after the date of 
the CDP Notice issued under section 6330. This period is slightly 
different from the period for submitting a written request for an 
equivalent hearing with respect to a CDP Notice issued under section 
6320. For a CDP Notice issued under section 6320, a taxpayer must 
submit a written request for an equivalent hearing within the one-year 
period commencing the day after the end of the five-business-day period 
following the filing of the NFTL.
    Q-I8. How will the timeliness of a taxpayer's written request for 
an equivalent hearing be determined?
    A-I8. The rules and regulations under section 7502 and section 7503 
will apply to determine the timeliness of the taxpayer's request for an 
equivalent hearing, if properly transmitted and addressed as provided 
in A-I10 of this paragraph (i)(2).
    Q-I9. Is the one-year period within which a taxpayer must make a 
request for an equivalent hearing extended because the taxpayer resides 
outside the United States?
    A-I9. No. All taxpayers who want an equivalent hearing must request 
the hearing within the one-year period commencing the day after the 
date of the CDP Notice issued under section 6330.
    Q-I10. Where must the written request for an equivalent hearing be 
sent?
    A-I10. The written request for an equivalent hearing must be sent, 
or hand delivered (if permitted), to the IRS office and address as 
directed on the CDP Notice. If the address of the issuing office does 
not appear on the CDP Notice, the taxpayer should obtain the address of 
the office to which the written request should be sent or hand 
delivered by calling, toll-free, 1-800-829-1040 and providing the 
taxpayer's identification number (SSN or EIN).
    Q-I11. What will happen if the taxpayer does not request an 
equivalent hearing in writing within the one-year period commencing the 
day after the date of the CDP Notice issued under section 6330?
    A-I11. If the taxpayer does not request an equivalent hearing with 
Appeals within the one-year period commencing the day after the date of 
the CDP Notice issued under section 6330, the taxpayer foregoes the 
right to an equivalent hearing with respect to the unpaid tax and tax 
periods shown on the CDP Notice. The taxpayer, however, may seek 
reconsideration by the IRS office collecting the tax, assistance from 
the National Taxpayer Advocate, or an administrative hearing before 
Appeals under its Collection Appeals Program or any successor program.
* * * * *
    (j) Effective date. This section is applicable the date 30 days 
after the date final regulations are published in the Federal Register 
with respect to requests made for CDP hearings or equivalent hearings 
on or after the date

[[Page 54693]]

30 days after final regulations are published in the Federal Register.

Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 05-18470 Filed 9-15-05; 8:45 am]
BILLING CODE 4830-01-P