[Federal Register Volume 71, Number 172 (Wednesday, September 6, 2006)]
[Rules and Regulations]
[Pages 52444-52446]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-14610]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[TD 9284]
RIN 1545-BC72


Collection After Assessment

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations relating to the 
collection of tax liabilities after assessment. The regulations reflect 
changes to the law made by the Internal Revenue Service Restructuring 
and Reform Act of 1998. These regulations affect persons determining 
how long the Internal Revenue Service has to collect taxes that have 
been properly assessed.

DATES: Effective Date: These regulations are September 6, 2006.

FOR FURTHER INFORMATION CONTACT: Debra A. Kohn, (202) 622-7985 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document contains amendments to the Procedure and 
Administration Regulations (26 CFR part 301) under section 6502 of the 
Internal Revenue Code (Code). The regulations reflect the amendment of 
the Code by section 3461 of the Internal Revenue Service Restructuring 
and Reform Act of 1998 (RRA 1998), Public Law 105-206 (112 Stat. 685, 
764).
    On March 4, 2005, a notice of proposed rulemaking (REG-148701-03) 
relating to collection after assessment was published in the Federal 
Register (70 FR 10572). No public hearing was requested or held. 
Written and electronic comments responding to the notice of proposed 
rulemaking were received. After consideration of all the comments, the 
proposed regulations are adopted as amended by this Treasury decision. 
The revisions are discussed in this preamble.

Collection of Tax Liabilities After Assessment Under Section 6502

    Pursuant to section 6502 of the Code, the IRS generally has 10 
years from the date of assessment to collect a timely assessed tax 
liability. Prior to January 1, 2000, the effective date of section 3461 
of RRA 1998, section 6502 permitted the IRS to enter into agreements 
with the taxpayer to extend the period of limitations on collection at 
any time prior to the expiration of the period provided in section 
6502. Prior to the enactment of RRA 1998, the IRS used these collection 
extension agreements, or waivers, in various circumstances to protect 
its ability to collect a tax liability beyond the original 10-year 
period of limitations on collection. For example, the IRS historically 
conditioned consideration of an offer in compromise upon the execution 
of a collection extension agreement or waiver.
    In addition, the Code contains several provisions that operate to 
toll the period of limitations on collection upon the occurrence of 
certain events. For example, section 6331(k) operates in part to 
suspend the period of limitations on collection for the period of time 
during which an offer in compromise is pending, for 30 days after 
rejection, and while a timely filed appeal is pending. Similarly, 
section 6503(h) operates to suspend the period of limitations on 
collection for the period of time during which the IRS is prohibited 
from collecting a tax due to a bankruptcy proceeding, and for 6 months 
thereafter. These statutory suspension provisions toll the period of 
limitations on collection even if the period of limitations on 
collection previously has been extended pursuant to an executed 
collection extension agreement. See Klingshirn v. United States (In re 
Klingshirn), 147 F.3d 526 (6th Cir. 1998).
    Section 3461 of RRA 1998 amended section 6502 of the Code to limit 
the ability of the IRS to enter into agreements extending the period of 
limitations on collection. Section 3461 of RRA 1998 also included an 
off-Code provision governing the continued effect of collection 
extension agreements executed on or before December 31, 1999.

Summary of Comments and Explanation of Provisions

    The final regulations incorporate the amendments made by section 
3461 of RRA 1998. The regulations provide that the IRS may enter into 
an agreement to extend the period of limitations on collection if an 
extension agreement is executed: (1) At the time an installment

[[Page 52445]]

agreement is entered into; or (2) prior to release of a levy pursuant 
to section 6343, if the release occurs after the expiration of the 
original period of limitations on collection.
    One set of comments received in response to the notice of proposed 
rulemaking recommended that the final regulations: (1) Deem void all 
waivers signed prior to January 1, 2000, in conjunction with 
installment agreements that did not provide for payment in full of the 
underlying tax liability by the extended collection statute expiration 
date; and (2) provide that all taxpayers who have made payments since 
December 31, 2002, on such installment agreements are entitled to a 
refund of such payments. Because such provisions are beyond the scope 
of the underlying statute, they are not included in the final 
regulations.
    Another set of comments received in response to the notice of 
proposed rulemaking concerned an inconsistency between the language of 
section 3461(c)(2) and a proposed alternative date of expiration for 
extension agreements made on or before December 31, 1999.
    The notice of proposed rulemaking provided that extension 
agreements executed on or before December 31, 1999, other than those 
executed in connection with installment agreements, expire on the later 
of: (1) December 31, 2002, or if earlier, the date on which the 
extension agreement expired by its terms; or (2) the end of the 
original 10-year statutory period. The comments reflect that the 
language of the proposed regulations is inconsistent with the language 
of the statute. Few cases exist in which waivers executed on or before 
December 31, 1999, are still open under the statutory framework. Thus, 
there is no longer a need to address this provision in final 
regulations.
    To the extent that the notice of proposed rulemaking differs from 
the final regulations, it is withdrawn as of the effective date of the 
final regulations.

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 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 
these 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 Code, the notice of proposed 
rulemaking preceding this regulation was 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 these regulations is Debra A. Kohn of the 
Office of the Associate Chief Counsel (Procedure and Administration), 
Collection, Bankruptcy & 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.

Adoption of Amendments to the Regulations

0
Accordingly, 26 CFR part 301 is amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

0
Paragraph 1. The authority citation for part 301 continues to read in 
part as follows:

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

0
Par. 2. Section 301.6502-1 is revised to read as follows:

Sec.  301.6502-1  Collection after assessment.

    (a) General rule. In any case in which a tax has been assessed 
within the applicable statutory period of limitations on assessment, a 
proceeding in court to collect the tax may be commenced, or a levy to 
collect the tax may be made, within 10 years after the date of 
assessment.
    (b) Agreement to extend the period of limitations on collection. 
The Secretary may enter into an agreement with a taxpayer to extend the 
period of limitations on collection in the following circumstances:
    (1) Extension agreement entered into in connection with an 
installment agreement. If the Secretary and the taxpayer enter into an 
installment agreement for the tax liability prior to the expiration of 
the period of limitations on collection, the Secretary and the 
taxpayer, at the time the installment agreement is entered into, may 
enter into a written agreement to extend the period of limitations on 
collection to a date certain. A written extension agreement entered 
into under this paragraph shall extend the period of limitations on 
collection until the 89th day after the date agreed upon in the written 
agreement.
    (2) Extension agreement entered into in connection with the release 
of a levy under section 6343. If the Secretary has levied on any part 
of the taxpayer's property prior to the expiration of the period of 
limitations on collection and the levy is subsequently released 
pursuant to section 6343 after the expiration of the period of 
limitations on collection, the Secretary and the taxpayer, prior to the 
release of the levy, may enter into a written agreement to extend the 
period of limitations on collection to a date certain. A written 
extension agreement entered into under this paragraph shall extend the 
period of limitations on collection until the date agreed upon in the 
extension agreement.
    (c) Proceeding in court for the collection of the tax. If a 
proceeding in court for the collection of a tax is begun within the 
period provided in paragraph (a) of this section (or within any 
extended period as provided in paragraph (b) of this section), the 
period during which the tax may be collected by levy is extended until 
the liability for the tax or a judgment against the taxpayer arising 
from the liability is satisfied or becomes unenforceable.
    (d) Effect of statutory suspensions of the period of limitations on 
collection if executed collection extension agreement is in effect. (1) 
Any statutory suspension of the period of limitations on collection 
tolls the running of the period of limitations on collection, as 
extended pursuant to an executed extension agreement under paragraph 
(b) of this section, for the amount of time set forth in the relevant 
statute.
    (2) The following example illustrates the principle set forth in 
this paragraph (d):

    Example. In June of 2003, the Internal Revenue Service (IRS) 
enters into an installment agreement with the taxpayer to provide 
for periodic payments of the taxpayer's timely assessed tax 
liabilities. At the time the installment agreement is entered into, 
the taxpayer and the IRS execute a written agreement to extend the 
period of limitations on collection. The extension agreement 
executed in connection with the installment agreement operates to 
extend the period of limitations on collection to the date agreed 
upon in the extension agreement, plus 89 days. Subsequently, and 
prior to the expiration of the extended period of limitations on 
collection, the taxpayer files a bankruptcy petition under chapter 7 
of the Bankruptcy Code and receives a discharge from bankruptcy a 
few months later. Assuming the tax is not discharged in the 
bankruptcy, section 6503(h) of the Internal Revenue Code operates to 
suspend the running of the previously extended period of limitations 
on collection for the period of time the IRS is prohibited from 
collecting due to the bankruptcy proceeding, and for 6 months 
thereafter. The new expiration date

[[Page 52446]]

for the IRS to collect the tax is the date agreed upon in the 
previously executed extension agreement, plus 89 days, plus the 
period during which the IRS is prohibited from collecting due to the 
bankruptcy proceeding, plus 6 months.

    (e) Date when levy is considered made. The date on which a levy on 
property or rights to property is considered made is the date on which 
the notice of seizure required under section 6335(a) is given.
    (f) Effective date. This section is applicable on September 6, 
2006.

Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
    Approved: August 22, 2006.
Eric Solomon,
Acting Deputy Assistant Secretary of the Treasury (Tax Policy).
 [FR Doc. E6-14610 Filed 9-5-06; 8:45 am]
BILLING CODE 4830-01-P