The right to intervene in innocent spouse cases disappears when the affirmative defense of innocent spouse is withdrawn.

• Author: Sheehy, Frances D.

In 1998, Congress enacted legislation to make it easier to obtain relief under the innocent spouse provisions of the Internal Revenue Code (IRC). (1) As part of that legislation, the "nonrequesting spouse" was granted certain procedural rights, including the right to participate and be heard in any Tax Court proceeding on the issue of innocent spouse. (2) This article will discuss a brief background of the innocent spouse statute, the procedures for participation of the nonrequesting spouse, and the limits of intervention under the innocent spouse provisions of the IRC, as defined by the 11th Circuit.

Innocent Spouse Relief Generally

Married couples may choose to file either joint or separate federal income tax returns. (3) The joint return option has not always been available. Congress enacted the joint return legislation in 1948 in an effort to provide the same federal tax treatment to similarly situated married couples regardless of whether they were domiciled in a community property or common law state. (4) In nearly every situation, a married couple will have a lower total tax liability if they choose to file jointly than if they choose to file separately. (5) Indeed, the joint return legislation was supported in part because it worked a significant reduction in federal taxes. (6)

When a married couple chooses to file a joint return, each spouse is jointly and severally liable for the taxes. (7) Because Congress has not defined joint and several liability by statute, common law rules apply. (8) Accordingly, even when the couple files joint re- turns, the tax liability of each spouse may be determined independently of the other; the tax liability of each spouse "is a controversy between [him or] herself and the [g]overnment." (9)

Because joint filing offers financial advantages to both spouses, joint and several liability is "an important adjunct to the privilege of filing joint returns." (10) The normal rule of joint and several liability can cause injustices in certain circumstances, however, such as when a husband, without the wife's knowledge, embezzles funds and disappears with them, leaving her to face the tax liability alone. (11) Though state law generally provides some type of relief from marital liabilities for individuals who find themselves in such harsh circumstances, the relevant state law provisions have no effect when the creditor is the federal government and collection is pursuant to federal law. (12) To provide such relief, Congress enacted former IRC [section] 6013(e), providing relief from joint and several liability to married joint filers who met certain conditions. (13) This relief, and relief under the successor statute, IRC [section] 6015, is commonly known as "innocent spouse relief"; the party seeking relief is commonly referred to as the "requesting" or "electing" spouse and the other signor of the joint return is commonly referred to as the "nonrequesting" or "nonelecting" spouse.

IRC [section] 6013(e), as amended, controlled innocent spouse relief until its repeal (and the enactment of IRC [section] 6015) pursuant to RRA 1998. During that time, the Tax Court had jurisdiction to hear a claim for innocent spouse relief only when the claim was raised as an affirmative defense in a case brought pursuant to the court's deficiency jurisdiction (now generally called a "deficiency proceeding"). (14) Where both spouses were parties to the same deficiency case, and one spouse requested innocent spouse relief, the Tax Court had a practice of allowing the requesting spouse and the commissioner to settle based on the claim of innocent spouse relief, even over the objection of the nonrequesting spouse. (15)

Limitations to the Participation of the Nonrequesting Spouse

* Pre-1998. Estate of Ravetti v. United States, 37 F.3d 1393, 1394 (9th Cir. 1994): No Standing to Appeal the Tax Court Grant of Innocent Spouse Relief--In a case in which the spouses filed separate Tax Court petitions and, therefore, were not parties to each others' deficiency cases, the Tax Court approved a settlement between the ex-wife and the commissioner based on her claim for innocent spouse relief, without first providing the estate of the ex-husband with notice or the opportunity to be heard. The estate's efforts to raise the issue in its own deficiency case were rebuffed. (16) On review, the Ninth Circuit did not reach the due process argument, instead dismissing for lack of jurisdiction on the ground that "[a] taxpayer...lacks standing to challenge the 'innocent spouse' relief granted to his or her spouse." (17)

In holding that a taxpayer lacks standing to challenge the grant of innocent spouse relief to his or her spouse or former spouse, the court relied principally upon the observa- tion that the nonrequesting spouse "would owe the same amount of money regardless." (18) As the court in Ravetti explained, because the estate was jointly and severally liable for the deficiency, (19) "the IRS could take all the money owed from Silvio [the decedent]...