SECTION 4. SCOPE OF MEDIATION

AND ARBITRATION FOR OIC CASES

1. In addition to the exclusions contained in Revenue Procedure 2009–44 and Revenue Procedure 2006–44, the following limitations on OIC cases apply:

(1) Neither mediation nor arbitration is available for:

i. Cases in which the taxpayer has the ability to pay in full based on the unadjusted financial information submitted by the taxpayer, except when economic hardship exists; ii. Cases in which the taxpayer declines to amend or increase the offer without stating any specific disagreement with the valuations, figures, or methodology used by Appeals in determining reasonable collection potential; iii. Cases in which the disputed issue is

explicitly addressed in established guidance (for example, the issues addressed in the instructions for Form 656, “Offer in Compromise,” such as unsecured debt, college expenses, and non-qualifying charitable contributions); iv. Cases in which an OIC is submitted as an alternative to collection in a Collection Due Process or equivalent hearing case; v. Cases in which the issue of liability was previously determined by Appeals; or vi. Cases in which Delegation Order 5–1

requires a level of approval higher than that of the Appeals Team Manager, such as Effective Tax Administration offers or those in which a determination is made by Appeals that acceptance is not in the best interest of the government (see Policy Statement P–5–100 and IRM 5.8.7.6(6)).

(2) Meditation is not available for:

i. Cases in which the taxpayer has already attempted to resolve the matter through Fast Track Mediation.

(3) Arbitration is not available for:

i. Corporate OIC cases in which the issue to be arbitrated is whether an individual is responsible for a Trust Fund Recovery Penalty or Personal Liability for Excise Tax assessment; or ii. Doubt as to liability cases.

2. Provided all facts are known by both parties, appropriate issues for mediation or arbitration in OIC cases generally include:

(1) The value of assets, including those held by a third party;

(2) The value of dissipated assets and what amount should be included in the overall determination of reasonable collection potential;

(3) A taxpayer’s proportionate interest in jointly held assets;

(4) Projections of future income based on calculations other than current income;

(5) The calculation of a taxpayer’s future ability to pay when living expenses are shared with a non-liable person; and

(6) Other factual determinations, such as whether a taxpayer’s contributions into a retirement savings account are discretionary or mandatory as a condition of employment.

3. Additionally, provided all facts are known by both parties, appropriate issues for mediation in OIC cases generally include whether the taxpayer meets the criteria for deviating from national and/or local expense standards.

4. For cases with liabilities of $50,000 or more, any settlement or agreement reached through mediation or arbitration must be reviewed by the Office of Chief Counsel pursuant to section 7122(b) before being finalized. When review is required, Appeals will forward the case to Area Counsel for an opinion concerning whether the case is subject to compromise. See IRM sections 5.8.8.5 and 8.23.4.2.2.