Nonelecting Spouse May Intervene in Support of Innocent Spouse Relief

Recently, the Tax Court ruled that a nonelecting spouse can intervene in support of the other spouses claim for relief from joint and several liability.

Facts

P filed joint returns with her then spouse, M, for tax years 19921996. The IRS issued a determination notice denying her claim for relief from joint and several liability for those years, under Sec. 6015(b), (c) and (f). P filed a Tax Court petition challenging the notice. The IRS then filed a notice stating that it had informed M of the petition and of his right to intervene, which stated: Under T.C. Rule 325(b), [M] has a right to intervene in this matter for the sole purpose of challenging petitioners entitlement to relief from joint and several liability. However, Ms subsequent notice of intervention stated that he seeks to intervene for the sole purpose of offering evidence in support of the Petitioners right and entitlement to equitable relief under IRC section 6015(f) and will not be offering any evidence to challenge Petitioners right to equitable relief under IRC section 6015(f). (Emphasis added).

Analysis

Congress vested the Tax Court with jurisdiction to review the IRSs denial of a taxpayers election to claim relief from joint and several liability under specified circumstances; see King, 115 TC 118 (2000) and Corson, 114 TC 354 (2000). One method of seeking review is a so-called stand-alone petition seeking relief when the IRS has issued a final determination denying the taxpayers claim or has failed to rule on the taxpayers claim within six months of its filing; see Sec. 6015(e)(1); Mora, 117 TC 279 (2001); and Fernandez, 114 TC 324 (2000). Under Sec. 6015(e)(4), the nonelecting or other spouse is entitled to notice of a stand-alone proceeding. It provides that the Tax Court shall establish rules which provide the individual filing a joint return but not making the electionwith adequate notice and an opportunity to become a party to a proceeding.

Before adopting formal rules as directed in Sec. 6015(e)(4), the Tax Court addressed the scope of a nonelecting spouses right to intervene in a Sec. 6015 case in both Corson and King. After the filing of the Corson and King opinions, the Tax Court adopted new Rule 325. In sum, it provides that the Service has to (1) notify the nonelecting spouse of the filing of a petition claiming relief under Sec. 6015 and (2) inform that spouse of his or her right to intervene in the case. Notably, it does not impose any substantive restriction on the nonelecting spouses right to intervene in support of an electing spouses relief claim.

In addition, there is no direct support in Sec. 6015 or its legislative history for the proposition that a nonelecting spouses ability to intervene is limited to challenging an electing spouses entitlement to relief. Moreover, new Rule 325 and the notes thereto are neutral on the point.

Contrary to the Services argument, permitting a nonelecting spouse to intervene for the purpose of supporting an electing spouses relief claim under Sec. 6015 is consistent with both prior practice and principles governing intervention under the Federal Rules of Civil Procedure (FRCP). Rule 24(a) provides intervention when a statute of the United States confers an unconditional right to intervene.

Sec. 6015(e)(4) confers on a nonelecting spouse an unconditional statutory right to intervene within the meaning of Rule 24(a)(1). It also directs the Tax Court to establish rules which provide the individual filing a joint return but not making the electionwith adequate notice and an opportunity to become a party to a proceeding. The statutory language does not authorize it to impose any significant substantive conditions in respect of a nonelecting spouses right to intervene. Consequently, the Tax Court prescribed intervention procedures in new Rule 325 and did so without imposing substantive conditions on the nonelecting spouse/intervenor.

Consistent with the preceding discussion, the portion of the IRS notice that states that M may intervene in this case only for the purpose of opposing Ps relief claim is incorrect. Accordingly, Ps motion to strike that restrictive language in the notice is granted; M can file his notice of intervention.

Diana Van Arsdalen, 123 TC No. 7 (2004)

Reflections: In this case, the taxpayer filed a stand-alone petition for review. However, the Tax Court can review a claim for relief from joint and several liability in other ways (e.g., as an affirmative defense in a Tax Court deficiency petition under Sec. 6213(a) or in a petition for review of a lien or levy action). The Tax Courts application of Rule 325 appears to apply in all these cases.