In an opinion of the United States Tax Court filed yesterday, May 5, 2011, the United States Tax Court continued to hold that relief for innocent spouses under Section 6015(f) of the Internal Revenue Code is not subject to the 2-year deadline that the Internal Revenue Service seeks to impose. In effect, the 2-year deadline requires a taxpayer seeking innocent spouse relief to file the relief within 2 years of the first collection effort against the taxpayer by the Internal Revenue Service, such as the filing of a Notice of Levy.
In the case of Pullins v. Commissioner, the U.S. Tax Court yesterday held that that the 2-year deadline for filing for innocent spouse relief with the IRS imposed by Treasury Regulation Section 1.6015-5(b)(1) is invalid.
The Tax Court noted that its decision is in direct conflict with decisions of the U.S. Courts of Appeals for the Seventh Circuit and for the Third Circuit. Still, the United States Tax Court’s decision in Pullins v. Commissioner is good news.
The Pullins decision is appealable to the Eighth Circuit. In addition, similar cases are pending currently before a number of other United States Circuit Courts, including the Second, the Fourth, the Sixth (which includes Tennessee), and the Ninth.
The case currently on appeal in the United States Circuit Court for the Sixth Circuit is Hall v. Commissioner. It was decided by the United States Tax Court in September 2010. As in Pullins, the United States Tax Court in the Hall case held that innocent spouse relief should be available for spouses who file their claims after the 2-year deadline imposed by Treasury Regulation 1.6015-5(b)(1).
Taxpayers who file for innocent spouse relief later than the 2-year deadline should expect to have the Internal Revenue Service deny their claims based on a ground of lateness. Still, it appears that, at least at present, a claim filed with the United States Tax Court from a Tennessee taxpayer won’t be unsuccessful solely because the request for relief was made more than 2 years after the IRS first began collection efforts against the taxpayer.
Ultimately, if one of the Circuit Courts in which a case such as the Pullins case or the Hall case is pending decides in favor of the taxpayer, there would be a split in authority among the federal appellate courts that could lead to this issue being adjudicated by the United States Supreme Court.
Two lessons to be gleaned from the Pullins case filed yesterday in the U.S. Tax Court–first, don’t always assume that you have no case just because there is law contrary to your position, even if that law is a published Treasury Regulation; aggressive and smart lawyering has resulted in the U.S. Tax Court finding a Treasury Regulation invalid that, on its face, says that the taxpayer has no chance to succeed, and, second, if you are in a position to claim an innocent spouse defense to a collection action by the IRS, even if it has been more than 2 years since the collection efforts began, consult a lawyer, particularly if you are in a state in which the federal appellate court has not yet taken a contradictory view. You may yet have your day in court.