Two-year innocent spouse limitation period upheld again.

• Author: Nevius, Alistair M.

The Fourth Circuit overturned a Tax Court decision and upheld a Treasury regulation that sets a two-year statute of limitation on claims for innocent spouse relief (Jones, No. 10-1985 (4th Cir. 6/13/11)). This marks the third time the Tax Court has been overruled on this issue by a higher court.

[ILLUSTRATION OMITTED]

The taxpayer, Octavia Jones, was separated from her husband. After her husband defaulted on an installment agreement with the IRS to pay the couple's joint tax liability for the year 2000, the IRS began collection activities against the taxpayer. More than two years later, she requested innocent spouse relief under Sec. 6015(f). Although the IRS agreed that she would otherwise have been eligible for innocent spouse relief under the facts of the case, it denied her claim because it was barred by the two-year statute of limitation contained in Regs. Sec. 6015-5(b)(l).

The Tax Court granted the taxpayer's petition for summary judgment based on its earlier decision that the regulation at issue is invalid (Lantz, 132 T.C. 131 (2009)). In Lantz) the Tax Court held that because Congress specifically omitted any limitation period from Sec. 6015(f), coupled with the fact that this subsection provides relief that cannot be obtained under Sec. 6015(b) or 6015(c), Congress intended that the two-year limitation would not apply in connection with Sec. 6015(f). Accordingly, the Tax Court held that Regs. Sec. 6015-5(b)(l) was invalid.

Lantz was subsequently overturned by the Seventh Circuit (Lantz, 607 F.3d 479 (7th Cir. 2010)), which held that Congress had granted the IRS the authority to devise appropriate substantive and relevant procedures to be followed, including deadlines, and that the two-year limitation period was a reasonable exercise of that authority.

A similar decision by the Tax Court has also been overturned by the Third Circuit (Mannella, 631 F.3d 115 (3d Cir. 2011)), which found Sec. 6015(f) to be ambiguous, found nothing in the legislative history that clearly demonstrated Congress's...