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Minnesota revenue notice number
99-04
Collections - Compromise Agreements
A compromise
is a written agreement between the
Department of Revenue
(“Department”), the Attorney
General’s Office (“Attorney
General”), and the taxpayer to
settle a tax liability, including
penalty and interest, that is due
and owing. Compromises are reserved
for extraordinary circumstances --
lack of funds alone is not enough to
justify a compromise agreement. The
Department usually requires that the
compromised amount be paid in one
payment. If a compromise proposal by
a taxpayer is rejected by the
Department or the Attorney General,
there are no formal appeal rights
regarding the decision.
Statutory Authority
The statutory
authority for compromising a tax
liability is found in Minnesota
Statutes, § 8.30, which states: ". .
. the attorney general shall have
authority to compromise taxes,
penalties, and interest in any case
referred to the attorney general, .
. . where, in the attorney general's
opinion, it shall be in the best
interests of the state to do so."
Compromise proposals are referred to
the Attorney General by the
Department; in other words, the
Attorney General does not consider
any offer for compromise until it
has first been approved by the
Department.
Submitting an Offer in Compromise
A taxpayer who
wishes to enter into a compromise
agreement must submit a written
proposal to the Department. The
proposal must contain the following
information:
-
amount of the
compromise offer and when it
will be paid;
-
the source of
the funds the taxpayer is using
to pay the compromise amount;
-
current
financial information regarding
the taxpayer, including real and
personal property owned by the
taxpayer; and
-
why the
compromise offer should be
accepted.
Factors Considered By The Department
When reviewing
the above information, the
Department considers the following
factors:
-
age of the
liability and whether the
statute of limitations on
collection will soon expire;
-
employment
potential of the taxpayer;
-
age and health
of the taxpayer;
-
realistic
potential for collecting the
liability in full;
-
other liable
parties (spouse, partner,
corporate officers);
-
credit bureau
report;
-
the make-up of
the balance due (in other words,
tax, penalty, and interest);
-
whether or not
the liability is comprised of
"trust taxes" (such as Minnesota
income tax withheld by an
employer or sales tax collected
by a retailer);
-
whether or not
the taxpayer is current with
filing all tax returns;
-
collection
history -- previous collection
action taken, past or current
bankruptcy of the taxpayer, and
the amount paid against the
liability to date, including any
refunds that may have been
applied;
-
whether any
doubt exists as to the
correctness of the liability;
-
whether all or
a portion of the liability would
be discharged if the taxpayer
declared bankruptcy;
-
in the case of
a business liability, whether or
not the business is open or
closed;
-
whether the
offer is the first offer of
compromise or a reconsideration
of a previous offer; and
-
whether there
are factors that would justify
an abatement of penalty
Procedures Following The
Department’s Review
After
reviewing the proposal, the
Department will:
-
recommend to
the Attorney General that the
compromise offer be accepted;
-
request that
the taxpayer provide further
information to substantiate
information contained in the
proposal;
-
make a
counter-offer to the taxpayer;
or
-
deny the
request for compromise.
If the
Department accepts the proposal,
subject to the Attorney General’s
approval, a written compromise
agreement will be prepared for
signature. The agreement does not
take effect until it is signed by
the taxpayer, a designee of the
Commissioner of Revenue, and a
designee of the Attorney General.
Dated: 1 March
1999
Terese Koenig,
Director
Appeals, Legal Services and Criminal
Investigation Division
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