Offer in Compromise Discriminates against California

From TaxAlmanac

It seems that the IRS is unfairly discriminating against California homeowners due to the increase in property values. Instead of giving a taxpayer the typical 20% equity in their residence to compute the Net Realizable Equity, the IRS is only allowing 10% and sometimes 0% equity in the residence.

There are 3 huge problems with this discriminatory way of thinking.

First, the IRS should not be allowed to treat taxpayers differently depending on what state they happen to reside in.

Second, the IRS is not taking into consideration that most taxpayers do not qualify with lenders to have less than 20% equity in their homes, and even if they do qualify, most taxpayers would not be able to afford the increase in monthly mortgage payments on a 100% refinance.

Third, the IRS has not adjusted the Local Standards amounts for housing in California. How can the IRS try to use skyrocketing home values to their advantage on one side of the equation and not adjust the true amounts in mortgage payments that these skyrocketing home values come attached with?

How does the Net Realizable Equity affect the taxpayer's ability to obtain an offer in compromise? Why is equity of 20% better than equity of 10% or 0%?Janie 16:43, 31 Aug 2005 (CDT)