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Enforcement is a necessary component of a voluntary assessment system

A tax system based on voluntary assessment would not be viable without enforcement programs to ensure compliance. Accordingly,
the Service is responsible for taking all appropriate actions provided by law to compel non-compliant taxpayers to file their
returns and pay their taxes.

The Service is committed to educating and assisting taxpayers who make a good faith effort to comply. However, enforcement
action should be taken promptly, in accordance with Internal Revenue Manual guidelines, against taxpayers who have not shown
a good faith effort to comply. These actions include enforcement necessary to move the taxpayer toward compliance.

In determining the appropriate enforcement action to take, factors such as the taxpayers delinquency history should be considered.
Promotion of long-term voluntary compliance is a basic goal of the Service, and in reaching this goal, the Service will be
cognizant not only of taxpayers obligations under our system of taxation but also of their rights. However, when a decision
to enforce has been made, the Service will have no hesitancy in pursuing the matter to conclusion.

COLLECTING PRINCIPLES

All our decisions about collecting must be guided by these principles. To the extent that they are, we will succeed in our
mission.

SERVICE AND ASSISTANCE—All taxpayers are entitled to courteous, responsive, and effective service and assistance in all their
dealings with the Service.

We will actively assist taxpayers who try to comply with the law, and work to continually improve the quality of our systems
and service to meet the needs of our customes. All taxpayers, whether delinquent or fully compliant, are entitled to prompt
and professional service whenever they deal with Service employees.

TAXPAYER RIGHTS—
We will observe taxpayers rights, including their rights to privacy and to fair and courteous treatment.

This affirms our commitment to observe both the spirit as well as the letter of all legal requirements, including the Taxpayer
Bill of Rights I and II and the IRS Restructuring and Reform Act of 1998. Taxpayers will be protected from unauthorized disclosure
of information.

COMPLIANCE—The public trust requires us to ensure that all taxpayers promptly file their returns and pay the proper amount
of tax, regardless of the amount owed.

The public as a whole is our customer, not just delinquent taxpayers. Our customers expect us to promote voluntary compliance
by ensuring that all promptly pay their fair share. Employees should work with taxpayers to meet all their filing and paying
requirements, not only the delinquency at hand. This involves identifying and addressing non-compliance to prevent future
delinquencies. All types of taxpayers (individual and business) who fail to timely file their returns or pay their fair share
of taxes must resolve both current and delinquent taxes to be considered compliant.

CASE RESOLUTION—While we will actively assist taxpayers to comply, we will also take appropriate enforcement actions when
warranted to resolve the delinquency. To resolve a case, good judgment is needed to make sound decisions on the appropriate
action needed.

All taxpayers are required to pay by the due date of the return. From a broad range of collecting tools, employees will select
the one(s) most appropriate for each case. Case resolution, including actions such as: lien, levy, seizure of assets, installment
agreement, offer in compromise, substitute for return, summons, and IRC 6020(b), are important elements of an effective compliance
program. When it is appropriate to take such actions, it should be done promptly, yet judiciously, and based on the facts
of each case.

Trust Fund Recovery Penalty Assessments

Trust Fund Recovery Penalty Assessments: The trust fund recovery penalty, applicable to withheld income and employment (social
security and railroad retirement) taxes or collected excise taxes, will be used to facilitate the collection of tax and enhance
voluntary compliance. If a business has failed to collect or pay over income and employment taxes, or has failed to pay over
collected excise taxes, the trust fund recovery penalty may be asserted against those determined to have been responsible
and willful in failing to pay over the tax. Responsibility and willfulness must both be established. The withheld income and
employment taxes or collected excise taxes will be collected only once, whether from the business, or from one or more of
its responsible persons.

Collection of the withheld income and employment taxes or collected excise taxes is achieved when the Service’s right to retain
the amount collected is established.

Determination of Responsible Persons

Responsibility is a matter of status, duty, and authority. Those performing ministerial acts without exercising independent
judgment will not be deemed responsible.

In general, non-owner employees of the business entity, who act solely under the dominion and control of others, and who are
not in a position to make independent decisions on behalf of the business entity, will not be asserted the trust fund recovery
penalty. The penalty shall not be imposed on unpaid, volunteer members of any board of trustees or directors of an organization
referred to in section 501 of the Internal Revenue Code to the extent such members are solely serving in an honorary capacity,
do not participate in the day-to-day or financial operations of the organization, and/or do not have knowledge of the failure
on which such penalty is imposed.

In order to make accurate determinations, all relevant issues should be thoroughly investigated. An individual will not be
recommended for assertion if sufficient information is not available to demonstrate he or she was actively involved in the
corporation at the time the liability was not being paid. However, this shall not apply if the potentially responsible individual
intentionally makes information unavailable to impede the investigation. Field investigations to determine the trust fund
recovery penalty liability will be conducted promptly to enhance access to relevant information and reduce burden to taxpayers.

Absent statute considerations, assertion recommendations normally will be withheld in cases of approved and adhered to business
installment agreements and bankruptcy payment plans. To the extent necessary, information will be gathered to support a possible
assessment in the event the agreement is defaulted.

Application of Payments in Determining Trust Fund Recovery Penalty Assessments (effective for assessments where notices of
TFRP liability are issued on or after June 19, 2000 and for any undesignated payment made on or after January 1, 2003)

Any payment made on the business account is deemed to represent payment of the nontrust fund portion of the tax liability
(e.g., employer’s share of FICA) unless designated otherwise by the taxpayer. The taxpayer, of course, has no right of designation
of payments resulting from enforced collection measures. To the extent partial payments exceed the nontrust fund portion of
the tax liability, they are deemed to be applied against the trust fund portion of the tax liability (e.g., withheld income
tax, employee’s share of FICA, collected excise taxes). Once the nontrust fund and trust fund taxes are paid, the remaining
payments will be considered to be applied to assessed fees and collection costs, assessed penalty and interest, and accrued
penalty and interest to the date of payment.

Small Business Administration

When employees of the Small Business Administration perform duties in accordance with the regulations of the agency, the Service
will not consider assertion of the liability provided by IRC 6672 or 3505 against those Small Business Administration employees
in any past, current or future cases arising out of these duties.

Forbearance when reasonable doubt exists that assessment is correct

Whenever a taxpayer raises a question or presents information creating reasonable doubt as to the correctness or validity
of an assessment, reasonable forbearance will be exercised with respect to collection provided:

Enforced collection measures to be withheld when disaster impairs ability to pay

Reasonable forbearance should be exercised with respect to the enforced collection of taxes from taxpayers whose businesses
are located in areas affected by major disasters such as floods, hurricanes, droughts, fire, etc., and whose ability to pay
is impaired by such disasters.

Forbearance when refund suit is pending on a divisible assessment

When a refund suit is pending on a divisible assessment, the Service will exercise forbearance with respect to collection
provided that the interests of the government are adequately protected and the revenue is not in jeopardy. However, any refunds
due the taxpayer may be credited to the unpaid portion of the liability pending the outcome of the suit.

Divisible tax cases are those in which the tax assessment may be divided into separate portions or transactions. For example,
a quarterly withholding employment tax liability may be sub-divided into individual liabilities covering each employee.

Successive seizures—Timing to avoid undue hardship

The Code authorizes the service of as many successive levies on the same or other income, property, or rights to property,
as may be necessary to fully satisfy the tax liability. However, sound judgment should be exercised and the service of successive
levies on the same source of income, or type of property, should be so timed as to avoid undue hardship to the taxpayer and/or
family.

Levy on salary or wages—Generally limited to “take home”
pay

Except for the statutory exemptions in IRC 6334(a)(8) and (9), a levy legally attaches to the gross amount of the accrued
wages or salary. However, in the interest of administrative expediency, a levy will be considered as attaching only to the
“take home”
pay of the delinquent taxpayer unless it is determined that the taxpayer is voluntarily allotting his/her pay to an extent
that would defeat the purpose of the levy. A levy under IRC 6331 (h) which attaches any specified payment due to the taxpayer
will not be limited to the”take home”
pay.

Certain Governmental training allowances are not levied

Governmental training and skill development programs qualify people for employment when they cannot reasonably expect to find
full time jobs otherwise. This includes programs such as the Job Training Partnership Act. This Act is intended to alleviate
the hardships of unemployment and underemployment. Payments under this Act are exempt from levy. Payments under other, similar
acts are not exempt. However, levy on those payments would be contrary to the purpose for which the programs exist, so the
payments will not be levied.

Collection enforced through seizure and sale of the assets occurs only after thorough consideration of all factors and of
alternative collection methods

The facts of a case and alternative collection methods must be thoroughly considered before determining seizure of personal
or business assets is appropriate. Taxpayer rights must be respected. The taxpayers plan to resolve past due taxes while
staying current with all future taxes will be considered. Opposing considerations must be carefully weighed, and the official
responsible for making the decision to seize must be satisfied that other efforts have been made to collect the delinquent
taxes without seizing. Alternatives to seizure and sale action may include an installment agreement, offer in compromise,
notice of levy, or lien foreclosure. Seizure action is usually the last option in the collection process.

All seizures will be approved by the Chief, Collection Division, with other specific seizures also requiring District Director,
Assistant District Director, or Counsel approval, or court order.

Establishment of minimum price in distraint sales

The minimum price required by the Code to be established in distraint sales should be set by the Revenue Officer conducting
the sale at an amount which could be readily realized from a subsequent sale in the event the seized property was declared
purchased by the United States. Consideration should be given to conserving the equity of the taxpayer as well as protecting
the Service from unrealistically high valuations. The minimum bid price should ordinarily be computed at 80% or more of the
forced sale value of the property less encumbrances having priority over the Federal tax lien. However, the minimum bid price
should not exceed the lien interest in the property plus costs.

Minimum price of listed securities

The minimum price of listed securities to be sold will be fixed at no less than 95% of the closing market price as of the
day preceding the sale.

Seizure of Assets Located on Private Premises

Seizure of property located on private premises will not be made unless the person in possession of the property to be seized
voluntarily consents, in writing, to entry to seize property; or, a court order is issued by a court of proper jurisdiction
authorizing the entry for the purpose of seizure. District Directors will coordinate requests for court orders with District
Counsel.

Exception in Cases Where Exigent Circumstances Exist

In situations where exigent circumstances are apparent, entry may be made onto private premises for the purpose of seizing
property without prior consent of the person in possession of the property, or the issuance of a court order. A seizure under
exigent circumstances may be defined as a seizure that must be made immediately, because there is not ample time to secure
the necessary Writ of Entry to prevent the taxpayer from putting seized property beyond the reach of the Service. For example,
when property is observed being removed from private premises, or otherwise being secreted, with the apparent intent of placing
it beyond the reach of the Government, immediate entry may be made. Forcible entry onto private premises will not be made
if such entry would cause a breach of the peace or a confrontation.

Reimbursement of Bank Charges Due to Erroneous Levy and Service Loss or Misplacement of Taxpayer Checks

The Service recognizes that there are circumstances when an erroneous use of its unique enforcement powers may cause taxpayers
to incur certain bank charges. Taxpayers who incur bank charges due to an erroneous levy may file a claim for reimbursement
of those expenses. Bank charges include a financial institutions customary charge for complying with the levy instructions
and charges for overdrafts that are a direct consequence of an erroneous levy. In addition, there are times when a taxpayers
check may be lost or misplaced in processing. When the Service asks for a replacement check, the taxpayer may be reimbursed
for bank charges incurred in stopping payment on the original check. The charges must have been paid by the taxpayer and must
not have been waived or reimbursed by the financial institution. Claims must be filed with the District Director or Service
Center Director within one year after accrual of the expense.

The following criteria must be present in all erroneous levy cases:

The following criteria must be present in all lost check cases:

Welfare of livestock and domestic animals to be considered before or during course of seizure

Before conducting a seizure involving livestock and domestic animals, arrangements for their welfare and safety must be planned
for and made in advance. If a seizure is made at a location where such animals are kept and they are not seized, all reasonable
efforts to ensure their welfare and safety should be made.

This statement of policy is to ensure thorough consideration of the welfare of livestock and domestic animals whenever necessary
during the course of any seizure. It is not intended to prohibit or discourage such a seizure once the decision to take such
action has been made.

Notices of lien generally filed only after taxpayer is contacted in person, by telephone or by notice: A notice of lien shall not be filed, except in jeopardy assessment cases, until reasonable efforts have been made to contact
the taxpayer in person, by telephone or by a notice sent by mail, delivered in person or left at the taxpayers last known
address, to afford him/her the opportunity to make payment. All pertinent facts must be carefully considered as the filing
of the notice of lien may adversely affect the taxpayers ability to pay and thereby hamper or retard the collection process.

Notice of lien filing in jeopardy assessment cases

In jeopardy assessment cases, a notice of lien shall be filed immediately after notice and demand has been delivered (whether
or not received by the taxpayer) and the assessment remains unpaid.

Other notice of lien filing requirements

A notice of lien must be filed:

Reporting accounts receivable as currently not collectible—General

If, after taking all steps in the collection process, it is determined that an account receivable is currently not collectible,
it should be so reported in order to remove it from active inventory.

Hardship

As a general rule, accounts will be reported as currently not collectible when the taxpayer has no assets or income which
are, by law, subject to levy.

However, if there are limited assets or income but it is determined that levy action would create a hardship, the liability
may be reported as currently not collectible. A hardship exists if the levy action prevents the taxpayer from meeting necessary
living expenses. In each case a determination must be made as to whether the levy would result in actual hardship, as distinguished
from mere inconvenience to the taxpayer.

Offer may be rejected for public policy reasons

If the acceptance of an offer might in any way be detrimental to the Governments interests, it may be rejected even though
it is shown conclusively that the amounts offered are greater than could reasonably be collected in any other manner.

Stay of collection—offer in compromise cases

Submission of an offer in compromise does not automatically stay collection of an account. If there is any indication that
the filing of an offer in compromise was solely for the purpose of delaying collection of the liability or that delay would
jeopardize the Governments interest, immediate steps should be taken to collect the unpaid liability. However, if it is determined
that the offer merits consideration and that the Governments interests would not be jeopardized by delay, collection action
will be withheld pending consideration of the offer in compromise.

Offers will be accepted

The Service will accept an offer in compromise when it is unlikely that the tax liability can be collected in full and the
amount offered reasonably reflects collection potential. An offer in compromise is a legitimate alternative to declaring a
case currently not collectible or to a protracted installment agreement. The goal is to achieve collection of what is potentially
collectible at the earliest possible time and at the least cost to the Government.

In cases where an offer in compromise appears to be a viable solution to a tax delinquency, the Service employee assigned
the case will discuss the compromise alternative with the taxpayer and, when necessary, assist in preparing the required forms.
The taxpayer will be responsible for initiating the first specific proposal for compromise.

The success of the compromise program will be assured only if taxpayers make adequate compromise proposals consistent with
their ability to pay and the Service makes prompt and reasonable decisions. Taxpayers are expected to provide reasonable documentation
to verify their ability to pay. The ultimate goal is a compromise which is in the best interest of both the taxpayer and the
Service. Acceptance of an adequate offer will also result in creating for the taxpayer an expectation of and a fresh start
toward compliance with all future filing and payment requirements.

Delinquent returns—enforcement of filing requirements

Taxpayers failing to file tax returns due will be requested to prepare and file all such returns except in instances where
there is an indication that the taxpayers failure to file the required return or returns was willful or if there is any other
indication of fraud. All delinquent returns submitted by a taxpayer, whether upon hislher own initiative or at the request
of a Service representative, will be accepted. However, if indications of willfulness or fraud exist, the special procedures
for handling such returns must be followed.

Where it is determined that required returns have not been filed, the extent to which compliance for prior years will be enforced
will be determined by reference to factors ensuring compliance and evenhanded administration of staffing and other Service
resources.

Factors to be taken into account include, but are not limited to: prior history of noncompliance, existence of income from
illegal sources, effect upon voluntary compliance, anticipated revenue, and collectibility, in relation to the time and effort
required to determine tax due. Consideration will also be given any special circumstances existing in the case of a particular
taxpayer, class of taxpayer, or industry, or which may be peculiar to the class of tax involved.

Normally, application of the above criteria will result in enforcement of delinquency procedures for not more than six (6)
years. Enforcement beyond such period will not be undertaken without prior managerial approval. Also, if delinquency procedures
are not to be enforced for the full six year period of delinquency, prior managerial approval must be secured.

Operations to be geared to produce the greatest revenue yield with current tax collections given priority

On the basis of analysis of revenue potential in each category of tax, number and deployment of taxable entities, and other
pertinent local conditions, operations will be concentrated on collecting the taxes which will produce the greatest revenue
yield. On the premise that the collection of delinquent accounts would be most adversely affected, and in many cases would
be impossible in a disaster area, the Service will concentrate on the collection of current taxes. However, in areas where
the taxpaying potential is substantially unimpaired, enforced collection of delinquent accounts will be continued.