CCA 200851055: The levy bar during an offer is what stops the collection clock

Plain-English summary

A colleague could not answer a question in person the day before, went away and found the provision, and writes back with the chain of cross-references. The release is useful mostly for the route it traces.

The Service has ten years from assessment to collect a tax, and that deadline is generally called the collection statute expiration date. An offer in compromise is a taxpayer's proposal to settle the liability for less than the full amount. While such an offer is under consideration, the Service is barred from levying, which raises the obvious question: does the collection clock keep running through a period when the Service is forbidden from collecting?

The answer is no, but no provision says so in those words, which is why the question was hard to answer on the spot. The writer traces it through three steps. Section 6331(k) prohibits levy while an offer in compromise is pending. Subparagraphs (3)(A) and (B) of that provision point across to section 6331(i)(5). And that provision suspends the collection period during any period the Service is prohibited from making a levy. So the suspension is not written into the offer rules at all; it is inherited, by cross-reference, from a general rule tying the collection clock to the levy bar. The consequence, as the writer states it, is that the collection period is suspended while an offer is pending, while it is rejected, and during any appeal of the rejection.

The last few lines are honest about where the statute stops. The writer thinks the collection period is also suspended during the time an offer is in effect, meaning after acceptance while the taxpayer is paying under its terms, but says they are not sure that is in the statute and suspects it is part of the offer agreement instead. That is a real distinction: a suspension imposed by statute and a suspension the taxpayer agrees to in signing the offer are different things, enforceable in different ways. The release does not resolve it, does not identify the agreement provision, and does not cite the offer in compromise statute itself.

Tone matters for how much weight this carries. The writer opens by saying they felt bad about not helping the day before and that the statutes are so convoluted, and closes by guessing the reader has probably found it by now. This is a helpful note between colleagues, not considered advice.

This is a clean digital release rather than a scan, so no OCR correction was needed. Kept as released: "SOL" and "CSED" and "OIC" unexpanded; "IRC 6331(k)" with the parenthetical gloss run into the citation as "6331(k)(no levy while OIC pending"; the unclosed parenthesis that follows it; "(3)(A)and(B)" without spacing; and "so darn convoluted".

Ruling snapshot

• Question: Is the collection period suspended while an offer in compromise is pending?
• Outcome: Advice given, informally. Yes. IRC 6331(k) bars levy while an offer is pending, its subparagraphs (3)(A) and (B) refer over to 6331(i)(5), and that provision suspends the collection period during any period the Service is prohibited from making a levy. The suspension therefore covers the period an offer is pending or rejected and any appeal of the rejection. The writer thinks the period is also suspended while an offer is in effect but is not sure that is statutory, and suspects it comes from the offer agreement.
• Key authorities: IRC sections 6331(k), 6331(k)(3)(A) and (B), and 6331(i)(5).

Full text (IRS public release)

ID: CCA_2008102108413453 Number: 200851055
Office: ---------------------------- Release Date: 12/19/2008

UILC: 6331.00-00

From: --------------------
Sent: Tuesday, October 21, 2008 8:41:40 AM
To: ----------------------------------------
Cc:
Subject: SOL on OIC

Hi ----- - I felt bad I couldn't help you yesterday. The statutes are so darn convoluted. I finally found it. It's under IRC 6331(k)(no levy while OIC pending (3)(A)and(B) which refer you over to 6331(i)(5) which suspends the CSED during the period the IRS is prohibited from making a levy and therefore also suspends the CSED during the period an OIC is pending or rejected and during any appeal of the rejection. Hope that helps. You probably found it by now. I think the CSED is also suspended during the time an OIC is in effect. I am not sure that is in the statute. I think it is part of the OIC agreement. See you next week.

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