John J. Deneen"
jjdeneen@ricochet.net


Date: Sun, 24 Sep 2000 16:44:04 -0700


Mr. Rod Welch
rowelch@attglobal.net
The Welch Company
440 Davis Court #1602
San Francisco, CA 94111 2496

Subject:   Potential RFP for Welchco.com
Important information about how IRS employees
colluded with a known felon

Hi- Rod,

Relative to your Communications Metrics capability and proposal assignment how would you handle this challenging case...

http://www.mindconnection.com/hoyt

Essentially, all reasonable efforts to resolve 20+ yrs. of tax issues have failed, including the IRS Restructuring and Reform Act ("RRA") of 1998, where Congress amended Section 7122 and directed the Secretary to prescribe guidelines to determine when an offer-in-compromise should be accepted (see Code 7122(c) as added by Section 3462 of the RRA)

Furthermore, a snyopsis of facts and evidence has lead to a moving target that compounds meaning drift and avoidance of IRS answering questions concerning root causes

http://www.mindconnection.com/hoyt/synopsis.htm

http://www.mindconnection.com/hoyt/evidence1.htm

http://www.mindconnection.com/hoyt/7questions.htm

...despite

After reviewing the links above and overall summary below, the bottom line is they need your technical expertise in communication metrics and intelligence. And they need it now.

More than 4000+ investors located in more than 45 states have experienced catastrophic financial failure. Thus, broken families, lost faith in an agency of our government, development of poor health, and loss by suicide are what stain this agency's hands. It's time to do some heavy duty cleaning.

Appreciatively,


--John Deneen

John J. Deneen"
jjdeneen@ricochet.net



 Overall Summary

According to a conscious of experts, the crux of the matter as of 1998, is Congress determined that interest abatement should be part of the new offer-in-compromise procedures in certain situations. As noted above, Congress directed the IRS to take into account factors like "equity" and "public policy." However, two years later, the IRS has yet to develop reasonable guidelines to facilitate offers in compromise that give proper attention to these factors.

On July 21, 1999, the IRS issued proposed regulations which clearly do not incorporate the Congressional mandate of encouraging offers-in-compromise in longstanding cases in which penalties and interest have accumulated as a result of delay. Instead, the regulations continue the traditional focus on economic factors while giving short shrift to equity and public policy considerations. Specifically, the regulations provide that if there are no grounds for compromise based on doubt as to collectability or liability, a compromise may be entered into to promote effective tax administration when:

  1. (i) collection of the liability will create economic hardship; or

  2. (ii) regardless of a taxpayer's financial circumstances, exceptional circumstances exist such that collection of the full liability will be detrimental to voluntary compliance by taxpayers; and

  3. (iii) compromise of the liability will not undermine compliance by taxpayers with the tax laws. Temp. Reg. § 301.7122-1T(b)(4)(i) through (iii).

The regulations provide specific factors for determining when the first and third prongs are satisfied, but no specific factors are provided for determining when the second prong "exceptional circumstances" may be satisfied. Unfortunately, the temporary and proposed regulations only offer two examples of cases of "exceptional circumstances:"

  1. (i)the first involves a taxpayer who suffered a serious illness and was unable to manage his financial affairs during such time; and

  2. (ii)the second example involves a case where a taxpayer relied on incorrect advice from the IRS in an informal E-mail response concerning the rollover period for an IRA account. Temp. Reg. § 301.7122-1T(b)(4)(iv)(E) (examples 1 and 2).

The regulations provide a third example that involves embezzlement of payroll withholding taxes. This example could be viewed as illustrating equitable considerations in the case of a victimized taxpayer. However, the example is classified as a financial hardship example because paying the accumulated taxes, penalties and interest would cause the taxpayer's business to fail. Temp. Reg. §301.7122-1T(b)(4)(iv)(D) (example 4).

In practice, the IRS continues to view "exceptional circumstances" with the same narrowly focused lens as it always has. In the IRS view, the overriding factor is the taxpayer's ability to pay (i.e., financial hardship). This exclusive focus on financial factors to the exclusion of equitable considerations is evidenced in a recent letter from the IRS Chief Counsel's Office to Representative John M. McHugh (R-NY) in response to his inquiry about how the IRS planned to deal with Hoyt investor partners facing large interest accumulations:

Taxpayers may at any time enter into an offer in compromise with regard to their tax liability. We understand that, in many cases, taxpayers will be unable to pay their liability in full, and an offer in compromise based on doubt as to collectibility will be considered under the established procedures for such a request. There are no special rules for Hoyt Partnership investors....

Letter of Deborah A. Butler, Assistant Chief Counsel (Field Service), Internal Revenue Service to The Honorable John M. McHugh (June 4, 1999). Thus, although Congress specified in the 1998 RRA that the IRS should consider equity and public policy and to resolve "longstanding cases" by foregoing penalties and interest, neither the Treasury Department nor the IRS has shown any inclination to provide for significant interest abatement based on equitable considerations or exceptional circumstances.

Conclusion

Where innocent taxpayers are victimized by a tax shelter promoter and the process of adjudicating the tax liabilities takes as long as 20 years, equitable on the Hoyt partnership investors is how such equitable considerations should be taken into account in determining whether a portion of a taxpayer's total liability (e.g., the interest) should be compromised or abated.

In 1998, Congress determined that interest abatement should be part of the new offer-in-compromise procedures in certain situations. As noted above, Congress directed the IRS to take into account factors like "equity" and "public policy." However, two years later, the IRS has yet to develop reasonable guidelines to facilitate offers in compromise that give proper attention to these factors.

If the IRS continues to exhibit resistance to Congressional intent, Congress may want to revisit the issue in a legislative context. The Joint Committee on Taxation staff has recommended that abatement of interest be utilized if a "gross injustice" would otherwise result if interest were to be charged. It is anticipated that such authority would be used infrequently. Although I believe that the IRS already has the authority to address situations of gross injustice under the expanded offer-in-compromise authority of RRA 1998, enactment of a new statutory remedy may be necessary.

If the IRS continues to exhibit resistance to Congressional intent, Congress may want to revisit the issue in a legislative context. The Joint Committee on Taxation staff has recommended that abatement of interest be utilized if a "gross injustice" would otherwise result if interest were to be charged. It is anticipated that such authority would be used infrequently. Although I believe that the IRS already has the authority to address situations of gross injustice under the expanded offer-in-compromise authority of RRA 1998, enactment of a new statutory remedy may be necessary.