Can the IRS deny an otherwise proper offer in compromise because the taxpayer has been involved in some type of activity that the IRS deems against the public interest? For example, can the IRS deny an offer solely because the taxpayer was prosecuted for evasion of assessment or even payment of the taxes in question? Or, even if not prosecuted, the taxpayer's activity had the characteristics of being prosecuted?
Keith Fogg of the Procedurally Taxing Blog has an interesting blog on the issue of whether developments in the law "will soon eliminate the ability of the IRS to make public policy or best interest of the government the basis for rejecting an offer in compromise." See Keith Fogg, Oversight of Offers – Response to Comment raising Thornberry v. Commissioner (Procedurally Taxing Blog 12/6/13), here. The article has a short summary of the history of the OIC and some valuable links. Professor Fogg believes that the IRS retains some residual right to reject claims on public policy or public interest bases. The discussion is quite good, so I recommend it generally.
I have posted some comments on the issue on my Federal Tax Crimes Blog. See Criminal and FBAR Noncompliance, Offers in Compromise and the Public Interest (Federal Tax Crimes Blog 12/10/13), here.
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