The Offer in Compromise and the Statute of Limitations

 

      The statute of limitations on collections is 10 years from the date of assessment.  If you file an offer in compromise, the time is extended for one year plus the time that the offer was considered.  The running of the statute of limitations does not begin until the IRS formally rejects the offer in compromise.  In Cooper-Smith, 439 F2d 1095, the court held that the statute of limitations for bringing an action for collection of taxes after assessment was suspended while an offer in compromise was outstanding and for one year thereafter. 

 

      A very important case is Rohde, 415 F2d 695.  The court ruled that both the IRS and the taxpayer must sign the offer in compromise for the statute to be waived.  Regulation Section 301.6502(a)(2)(i) provides in part: "The extension of the statute of limitations shall become effective upon execution of the agreement by both the taxpayer and the district director."  Therefore, unless the district director executes the waiver, it is invalid.

 

      In Parenteau, 33 AFTR2d 74-841, the court held that an offer in compromise tolls the statute of limitations until the IRS declares an offer to be in default.  In Decker, 18 AFTR2d 5365 (D. Utah 1966); the court ruled that the statute of limitations is not suspended when the offer in compromise is rejected by the IRS.

More on Contempt

 

 

              The issue of criminal and civil contempt can get complicated.  The case of Spindelfabrik Suessen-Schurr v. Schubert and Salzer, 903 F.2d 1568 (Fed. Cir. 1990), clarifies the issue.  In Spindelfabrik, the Court decided that a flat sum of money unconditionally awarded to the opposing party as a "civil contempt" sanction "to ensure future compliance" is a criminal penalty that must be reversed if the procedures required for a criminal contempt conviction were not followed.

 

          Judges have both criminal and civil contempt powers and they can punish an individual with either civil or criminal contempt or both; but they must follow the correct procedures.

 

          The Federal Circuit stated that a civil contempt sanction is remedial and for the benefit of the complainant while a criminal contempt sentence is punitive and is to vindicate the authority of the court.  See Gompers v. Bucks Stove and Range Co., 221 U.S. 418, 31 S.Ct. 492 (1911). Civil proceedings may be used to coerce the defendant into compliance with the court's order or to compensate the complainant for losses.  When the court intends to make compensation, a fine which is payable to the complainant must be based upon the evidence of the complainant's actual loss.  See United States v. United Mine Workers, 330 US 258, 67 S.Ct.  677 (1947).

 

          In this case, the court determined that civil fines are conditional because they can be terminated once the contemnor purges himself of the contempt.  Criminal penalties cannot be purged; they penalize "yesterday's defiance rather than seeking to coerce tomorrow's compliance." Shillitani v. United States, 384 U.S. 364, 86 S. Ct. 1531 (1966).

 

          The fine in this case was unconditional and was to deter the defendants from future additional violations. The court concluded that the fine was criminal even though the district court described it as civil.  See United States v. Powers, 629 F.2d 619 (9th Cir. 1980).

 

              If you are subject to a contempt sanction, be sure the court has followed the proper procedures.