IRS changes procedures for equitable innocent spouse cases.

• Author: O'Driscoll, David

The Tax Court recently held that it lacks jurisdiction under Sec. 6015(e) to review the Service's Sec. 6015(f) determinations in cases in which a deficiency has not been determined against the taxpayer (Billings, 127 TC No. 2 (7/25/06)); for a discussion, see News Notes, "Innocent Spouse Relief," TTA, October 2006, p. 568. In light of this decision, the IRS subsequently issued this notice, which provides that such cases should not be settled; instead, a motion to dismiss should be filed. This notice supersedes Chief Counsel

Notice N(35)000-338 (6/5/00), which provided that the Service's Sec. 6015(f) determinations are reviewable by any court.

Background

Generally, married taxpayers who file joint Federal income tax returns are jointly and severally liable for the tax under Sec. 6013(d). Sec. 6015 provides procedures for seeking relief from joint and several liability, and is commonly referred to as "innocent spouse relief" Sec. 6015(f) authorizes the IRS to prescribe procedures for providing "equitable relief" when it would be inequitable to hold one individual liable for any unpaid tax or deficiency relating to a joint return. Under Sec. 6015(e), however, the Tax Court only has jurisdiction "[i]n the case of an individual against whom a deficiency has been asserted."

The filing of a petition in response to a final notice of determination under Sec. 6015(f) or after the claim has been pending for six months is often referred to as a "stand-alone" proceeding, because jurisdiction is predicated on Sec. 6015(e) and not deficiency jurisdiction under Sec. 6213. The only issue pending in a stand-alone case is whether the requesting spouse is entitled to relief from joint and several liability. In Billings, the Tax Court held that it lacks jurisdiction in stand-alone cases when the IRS has not determined a deficiency.

Two recent appellate court decisions are in accord with Billings--Ewing, 439 F3d 1009 (9th Cir. 2006), pet. for reh'g en banc den. (8/10/06), and Bartman, 446 F3d 785 (8th Cir. 2006), pet. for reh'g en banc den. (8/3/06). In holding that the Tax Court had no jurisdiction to hear the case in Ewing, the Ninth Circuit vacated the lower court's decision, and thus nullified its holdings...