Is it possible to settle with the Department?
Yes. The Department can settle tax disputes when appropriate.
What criteria does the Department consider for settlement?
The Department will consider settling if one or more of the following criteria are met:
- The issue is nonrecurring.
- There is conflict between a statute, rule, or written instructions to the taxpayer.
- A strict application of the law would have harsh consequences.
- There is uncertainty to the outcome of the decision if it were presented in a court of law.
When will the Department not consider settlement?
The Department will not consider settlement if:
- The same issue is being litigated by the Department.
- You challenge a long-standing Department policy or rule.
- You present issues where relief cannot be given (such as to reduce the cost and inconvenience of litigation).
- You argue that a statute is unconstitutional.
What if I want to settle because I cannot afford to pay?
The Appeals Division will not consider settlements where the only reason is your inability to pay. In such cases, you should contact the Department's Compliance Division about a payment plan or other resolution based on financial hardship.
How do I propose settlement?
You may submit a written settlement offer to the Administrative Law Judge (ALJ) handling your appeal at any time while your appeal is pending. You may even submit an offer when you first file an appeal or when you petition for reconsideration. In your proposed offer, state:
- The amount in dispute
- Why your case should be settled
- The amount you are offering in settlement
- Why the amount you are offering is reasonable (A reasonable compromise offer is more likely to be accepted.)
Rule 100(10) provides guidance on the bases upon which an appeal may be settled.
What happens once I propose settlement?
The ALJ will evaluate your offer, may contact you for more information and respond accepting, rejecting, or countering your offer.
What happens once a settlement is accepted?
Once there is a an agreement to settle, the ALJ will prepare a "closing agreement." Both you and the Department must sign the agreement before the case is settled. Oral agreements are not valid or enforceable. The closing agreement may also contain future reporting instructions.
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