Administrative Procedure AP 634: Offers in Final Settlement
Table of Contents
634.1. In General
The Commissioner of Revenue is authorized to accept payment of less than a taxpayer's full tax liability in full and final settlement of that liability. G.L. c. 62C, § 37A. DOR may consider an Offer in Final Settlement (Offer) only if there is serious doubt as to the collectibility of the total tax. This settlement authority is designed to achieve the least possible loss or cost to the Commonwealth with regard to its collection of taxes and fairness to the taxpayer.
An Offer may also be submitted by a person who has been determined to be personally liable (Responsible Person) for withholding, room occupancy, sales or trustee use taxes of a corporation, partnership or LLC (entity). See 830 CMR 62C.31A.1(13).
DOR may, but is not required to, accept an Offer in Final Settlement. A taxpayer has no right to such a settlement.
A taxpayer or Responsible Person considering filing an Offer should be aware of the following general rules:
As a condition for making an Offer in Settlement, the Department will require the taxpayer to agree to suspend the Statute of Limitations on collection of the liability while the Offer is being evaluated, and will require further extension of the Statute of Limitations on collections of the liability when an accepted Offer includes installment payments. If the Department rejects the Offer, the time from the date the Offer was received by the Department to the date of notice of the rejection from the Department will be added to the statutory time to collect the tax under G.L. c. 62C, § 65.
The Department may, but is not required to, suspend its collection process while it is reviewing the Offer. Interest and penalties will continue to accrue on any unpaid amounts, and the taxpayer will remain subject to other collection actions such as a lien or offset.
Offers in Final Settlement undergo extensive review by DOR. Furthermore, any Offer which is either $20,000 or more below the full tax liability or less than 50% of the tax liability must also be reviewed and approved by the Attorney General.
Accepted Settlement Agreements under this provision are not protected by the confidentiality provisions of G.L. c. 62C, § 21 and are open to public inspection upon request. A list of accepted settlements is required to be published in DOR’s annual report.
Once a Settlement Agreement takes effect, neither party may reopen the matter except for falsification or concealment of assets or mutual mistake of a material fact.
634.2. Filing an Offer in Final Settlement
The taxpayer must file Form M-656, Offer in Settlement, together with the additional documents indicated in AP 634.2.2. Form M-656 must be fully completed and signed under the penalties of perjury. The payment may be the total amount of the Offer or, if the Offer provides for payment in installments, a deposit in an amount agreed to in advance by the DOR. Payments will be applied to the taxpayer’s liability.
DOR will generally not accept an Offer in Settlement on only a portion of the taxpayer's liabilities. All unpaid liabilities should be included in the Offer or paid before the Offer is submitted. Any outstanding returns must be filed before an Offer will be considered for review.
A taxpayer wishing to be represented by a third party in settlement proceedings must file a Form M-2848, Power of Attorney and Declaration of Representative, as described in AP 614 with the Offer.
Taxpayers filing abatements are reminded that a pending Offer does not suspend the 60-day limitation period for appeal of an abatement denial to the Appellate Tax Board. Appeals received by the Board (ATB) more than 60 days after the date of the abatement denial cannot, by law, be processed by the Board as it lacks jurisdiction over such matters.
634.2.1. Offers Based on Doubt as to Liability
Offers in Final Settlement based on doubt as to liability are not reviewed under G.L. c. 62C, § 37A. Taxpayers seeking to make a settlement on these grounds are directed to the Office of Appeals for action under G.L. c. 62C, § 37C. See AP 628 Resolution of Disputes at the Office of Appeals.
634.2.2. Offers Based on Doubt as to Collectibility
An Offer based on a taxpayer's inability to pay the total tax due must include the following documents. These documents will be reviewed by the Collections Bureau.
Statement of Financial Condition and Other Information:
Form M-433-OIS, Statement of Financial Condition and Other Information, must be completed and signed under penalties of perjury. If this form is prepared by someone other than the taxpayer, the preparer must attest that the information provided therein is true and accurate.
The Offer must be accompanied by copies of federal income and/or corporate returns for the past three years. Returns of all Responsible Persons of an entity (pursuant to 830 CMR 62C.31A.1) may also be required by DOR.
Documentation of Financial Circumstances:
The Offer must be accompanied by supporting documentation describing the taxpayer's financial circumstances, e.g., employment status, changes in income, available assets, total liabilities, and any pertinent medical issue.
While a taxpayer is a debtor in a pending bankruptcy proceeding, and before discharge, denial of discharge, or confirmation of a plan, an Offer in Final Settlement will not ordinarily be considered under this Administrative Procedure. Instead, the information provided by the taxpayer may be forwarded to the Bankruptcy Unit in conjunction with its management of the bankruptcy case.
Real Estate Information:
Documentation on all real estate in which the taxpayer has either a legal or a beneficial interest may also be requested by the Collections Bureau including certified copies of all recorded, registered or unrecorded deeds, real estate trusts, liens, mortgages, security agreements, tax title proceedings, and notices of lis pendens, together with the county registry book and page number of each document.
634.3. Offers in Final Settlement - Review Process
Offers Based on Doubt as to Collectibility
All required documents must be submitted to:
P.O. Box 7021
Boston, MA 02204
Attn: Collections/OIS Unit/James Powers
For further information, call (617) 887-6400.
Offer applications are reviewed for eligibility to determine viability. Non-viable applicants receive a letter from the Collections Bureau indicating an Offer is ineligible. Viable Offers will be reviewed by the Collections Bureau. The taxpayer may be contacted during this review for more information, clarification of information submitted or for amendment of the proposal. Only the Commissioner of Revenue may accept an Offer. Two Deputy Commissioners within the DOR and, in appropriate cases, the Attorney General must also approve the settlement. DOR will notify the taxpayer in writing of acceptance or rejection of the Offer.
An Offer will be accepted only if DOR determines that serious doubt exists as to the collectibility of the tax. Failure to establish such serious doubt, failure to comply with requests for information or submission of false information will result in rejection of the Offer. Knowingly submitting false or fraudulent information may also lead to a fine or imprisonment, or both. Frivolous Offers and Offers submitted to delay the collection of taxes are either determined to be ineligible/non-viable or rejected automatically. Rejection of an Offer is not a bar to submission of a later Offer by the taxpayer or the taxpayer's representative on the same liability, but on different terms.
634.4. Responsible Person's Offer in Settlement
Under regulation 830 CMR 62C.31A.1(13), a Responsible Person may make an Offer to the Commissioner under G.L. c. 62C, § 37A which is less than the amount of the Responsible Person assessment. The acceptance of an Offer in Settlement from a Responsible Person discharges the liability for the Responsible Person assessment made against the settling Responsible Person. The effect of Responsible Person settlements upon the liability of the related entity and the liability of other Responsible Persons of the same related entity is discussed below in AP 634.4.1 and AP 634.4.2, respectively.
634.4.1. Effect of Responsible Person settlements upon liability of related entity
Settlement of a Responsible Person's liability pursuant to G.L. c. 62C, § 37A discharges the liability of the entity (taxpayer) only up to the amount of the Responsible Person's payment.
634.4.2. Effect of Responsible Person settlements upon liability of other Responsible Persons of the same entity
Settlement of the Responsible Person's liability pursuant to G.L. c. 62C, § 37A discharges the liability of any other Responsible Person or persons only up to the amount of the Responsible Person's payment.
634.5. Effect of settlement of an entity’s liability upon liability of Responsible Person or Persons of that entity
Settlement of the liability of an entity (taxpayer) for the original assessment, which discharges the full liability of the taxpayer, also discharges the full liability of any Responsible Person or Persons for the original assessment and the Responsible Person assessment.
634.6. Effect of Offer in Settlement of Responsible Person(s) upon limitation period for collection of taxes from that person
If a Responsible Person's Offer in Settlement is pending before the Department of Revenue at the end of the limitation period for collection of taxes from a Responsible Person assessment, the Commissioner's right to collect the amount of the Responsible Person assessment from the Responsible Person will continue until one year after the final determination of such question. G.L. c. 62C, § 65. If the Offer is accepted, and the settlement provides, the time remaining for collection may be extended by an additional period ending the later of two years after the due date of the last installment payment or two years from the expiration of the limitation period for collection of taxes from Responsible Person assessment, whichever is longer.
G.L. c. 62C, §§ 21, 37A, 37C, 65
830 CMR 62C.31A.1
830 CMR 62C.31A.1(13)
AP 614, Power of Attorney
AP 628, Resolution of Disputes at the Office of Appeals
Form M-433-OIS, Statement of Financial Condition and Other Information
Form M-656, Offer in Settlement
Form M-2848, Power of Attorney and Declaration of Representative