IRS Commissioner Douglas H. Shulman told lawmakers in an April 29 letter that the Service is reviewing its rules for equitable innocent spouse determinations. Shulman replied to lawmakers’ concerns over the Service’s two-year limitations period for requesting Code Sec. 6015(f) equitable innocent spouse relief.

Limitations Period

Under Reg. §1.6015-5, a taxpayer requesting equitable innocent spouse relief must file Form 8857, Request for Innocent Spouse Relief, or other similar statement with the IRS no later than two years from the date of the first collection activity against the requesting spouse after July 22, 1998, with respect to the joint tax liability. The two-year limitations period has been challenged by taxpayers in court with mixed results.

In C.M. Lantz, 132 TC No. 8, Dec. 57,784, the Tax Court rejected the two-year limitations period . The court found that Code Sec. 6015(f) does not impose a two-year limitations period and Reg. §1.6015-5 is an invalid interpretation of the statute. The Tax Court again held the regulation invalid in A.M. Hall, 135 TC No. 19, Dec. 58,337; TAXDAY, 2010/09/23, J.1. The Tax Court indicated in Hall that it will continue to rule in this way in future cases.

The Seventh Circuit Court of Appeals reversed the Tax Court’s decision inLantz and held the challenged regulation valid (2010-1 USTC ¶50,446). The Third Circuit Court of Appeals also held the regulation valid in D. Mannella, 2011-1 USTC ¶50,159 (TAXDAY, 2011/01/26, J.6).