Relief From Joint and Several Liability, 49242-49248 [2013-19502]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 78, Number 156 (Tuesday, August 13, 2013)]
[Proposed Rules]
[Pages 49242-49248]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-19502]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-132251-11]
RIN 1545-BK51


Relief From Joint and Several Liability

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed regulations relating to relief 
from joint and several tax liability under section 6015 of the Internal 
Revenue Code (Code) and relief from the Federal income tax liability 
resulting from the operation of state community property laws under 
section 66. The proposed regulations provide guidance to taxpayers on 
when and how to request relief under sections 66 and 6015. This 
document also invites comments from the public regarding these proposed 
regulations.

DATES: Written or electronic comments and requests for a public hearing 
must be received by November 12, 2013.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-132251-11), room 
5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
132251-11), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW., Washington, DC; or sent electronically via the Federal 
eRulemaking Portal at www.regulations.gov (IRS REG-132251-11).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Mark Shurtliff at (202) 622-4910; concerning submissions of comments 
and requests for a hearing, Oluwafunmilayo (Funmi) Taylor at (202) 622-
7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION: 

Background

    Section 6013(a) of the Code permits taxpayers who are husband and 
wife to file a joint Federal income tax return. Married individuals who 
choose to file a joint income tax return are each jointly and severally 
liable under section 6013(d)(3) for the tax arising from that return, 
which, pursuant to sections 6601(e)(1) and 6665(a)(2), includes any 
additions to tax, additional amounts, penalties, and interest. Because 
the liability is joint and several, the IRS is authorized to collect 
the entire amount from either spouse, without regard to which spouse 
the items of income, deduction, credit, or basis that gave rise to the 
liability are attributable.
    Section 6015 was enacted in 1998 to provide relief from joint and 
several liability in certain circumstances. Section 6015 sets forth 
three bases for relief from joint and several liability. First, section 
6015(b) allows a taxpayer to elect relief from understatements of tax 
attributable to erroneous items of the other spouse if the taxpayer had 
no reason to know of the understatement and, taking into account all 
the facts and circumstances, it is inequitable to hold the taxpayer 
liable. Second, section 6015(c) allows a taxpayer who is divorced or 
legally separated from, or no longer living with, the spouse or former 
spouse with whom the joint return was filed to elect to allocate a 
deficiency (or a portion of a deficiency) to the other spouse, as if 
the spouses had filed separate tax returns. Third, section 6015(f) 
provides that a taxpayer may request, under ``procedures prescribed by 
the Secretary,'' relief from a tax understatement or underpayment when 
the taxpayer does not qualify for relief under the other two 
subsections and it would be inequitable to hold the taxpayer liable 
considering all the facts and circumstances.
    Section 6015(h) directs the Treasury Department and the IRS to 
prescribe such regulations as are necessary to carry out the provisions 
of section 6015. The Treasury Department and the IRS exercised that 
authority by promulgating regulations under section 6015 on July 18, 
2002 (TD 9003, 67 FR 47278). Sections 1.6015-2, 1.6015-3, and 1.6015-4 
of the final regulations provide guidance on the bases for relief in 
section 6015(b), (c), and (f), respectively. Section 1.6015-5 provides 
rules on the time and manner to request section 6015 relief.
    By their terms, paragraphs (b) and (c) of section 6015 impose a 
two-year deadline for a taxpayer to elect the application of either 
subsection. Under the deadline, a taxpayer must make the election no 
later than two years after the date of the IRS's first collection 
activity with respect to the taxpayer. See section 6015(b)(1)(E) and 
(c)(3)(B). In contrast, paragraph (f) of section 6015 does not

[[Page 49243]]

contain an explicit deadline to request relief. In accordance with the 
authority in section 6015(f) to prescribe procedures for the 
administration of equitable relief, the Treasury Department and the 
IRS, beginning in 1998, prescribed in published guidance a two-year 
deadline to request equitable relief under section 6015(f) to be 
consistent with the statutory time limit to claim relief under section 
6015(b) and (c). The two-year deadline to request equitable relief was 
first prescribed in Notice 98-61 (1998-2 CB 758 (December 21, 1998)) 
(see Sec.  601.601(d)(2)(ii)(b) of this chapter). The two-year deadline 
was reiterated in Rev. Proc. 2000-15 (2000-1 CB 447), which was 
superseded by Rev. Proc. 2003-61 (2003-2 CB 296), and ultimately 
adopted in the regulations under section 6015, which were issued on 
July 18, 2002, as Sec.  1.6015-5(b)(1).
    Besides establishing when and how to request relief from joint and 
several liability, Sec.  1.6015-5 also defines key terms, such as 
``collection activity,'' sets forth examples illustrating the time and 
manner provisions, and explains the effect of a final administrative 
determination.
    In Lantz v. Commissioner, 132 T.C. 131 (2009), the Tax Court 
considered for the first time whether the two-year deadline to request 
equitable relief was valid. After analyzing the issue under the 
standard for judicial review of an agency regulation, the Tax Court 
held the two-year deadline for equitable relief in Sec.  1.6015-5(b)(1) 
invalid. The Lantz decision was reversed on appeal by the United States 
Court of Appeals for the Seventh Circuit in an opinion upholding the 
validity of the deadline to request equitable relief. Lantz v. 
Commissioner, 607 F.3d 479 (7th Cir. 2010). After Lantz, the Tax Court 
continued to find the two-year deadline invalid in cases not appealable 
to the Seventh Circuit but the deadline was upheld again in Mannella v. 
Commissioner, 631 F.3d 115 (3d Cir. 2011), and Jones v. Commissioner, 
642 F.3d 459 (4th Cir. 2011).
    Notwithstanding the validity of the regulation setting the two-year 
deadline, the Treasury Department and the IRS considered whether to 
retain the deadline and determined, in the interest of tax 
administration, that the time period to request equitable relief under 
section 6015(f) should be extended. As announced in Notice 2011-70 
(2011-32 IRB 135 (Aug. 8, 2011)), the two-year deadline no longer 
applies to requests for equitable relief under section 6015(f). In 
place of the prior two-year deadline, Notice 2011-70 provides that, to 
be considered for equitable relief, a request must be filed with the 
IRS within the period of limitation for collection of tax in section 
6502 or, for any credit or refund of tax, within the period of 
limitation in section 6511. Notice 2011-70 explains that the 
regulations under section 6015 will be revised to reflect the change. 
These proposed regulations reflect the changes made by Notice 2011-70. 
Notice 2011-70 has no effect on the two-year deadline to elect relief 
under section 6015(b) (and Sec.  1.6015-2) or section 6015(c) (and 
Sec.  1.6015-3).
    Notice 2011-70 specifies transitional rules that apply until the 
Treasury Department and the IRS amend the regulations under section 
6015. Under the transitional rules, the two-year deadline does not 
apply to any request for equitable relief filed on or after July 25, 
2011 (the date Notice 2011-70 was issued) or any request already filed 
and pending with the IRS as of that date. The transitional rules 
provide that the IRS will consider these current and future requests 
for equitable relief if they were filed within the applicable 
limitation period under section 6502 or 6511. As for past requests for 
equitable relief--requests that the IRS denied as untimely under the 
two-year deadline--the notice allows the individuals who filed those 
requests to reapply for equitable relief, unless the individual 
litigated the denial or the denial included a determination that the 
individual was not entitled to equitable relief on the merits. In 
addition, Notice 2011-70 provides separate rules for claiming equitable 
relief with respect to litigated cases.
    A similar rule is added to Sec.  1.66-4 for claims for equitable 
relief under section 66(c). Section 66(c) provides two avenues for 
married taxpayers who do not file a joint Federal income tax return in 
a community property state to request relief from the operation of the 
state community property laws. Under state law, each spouse generally 
is responsible for the tax on one-half of all the community income for 
the year. Traditional relief under section 66(c) allows the requesting 
spouse to avoid liability for tax on community income of which the 
requesting spouse did not know and had no reason to know. If a 
requesting spouse does not satisfy the requirements for traditional 
relief, the Secretary may grant equitable relief. The IRS uses the same 
procedures for determining eligibility for equitable relief under 
section 66(c) as it does for equitable relief under section 6015(f). As 
a result, it is appropriate for the IRS to use the same timing rules 
for consideration of requests for equitable relief, whether under 
section 66(c) or section 6015(f).

Explanation of Provisions

    The Treasury Department and the IRS propose to amend the provisions 
of Sec.  1.6015-5 on the time and manner for requesting relief from 
joint and several liability under section 6015. A similar rule is added 
to Sec.  1.66-4(j)(2)(ii) for claims for equitable relief from the 
Federal income tax liability resulting from the operation of state 
community property law.

1. Requesting Relief as Part of Collection Due Process

    The proposed regulations revise Sec.  1.6015-5(a) to reflect that a 
requesting spouse (defined in Sec.  1.6015-1(h)(1)) may elect the 
application of section 6015(b) [Sec.  1.6015-2 ] or section 6015(c) 
[Sec.  1.6015-3] or request equitable relief under section 6015(f) 
[Sec.  1.6015-4] as part of the collection due process (CDP) hearing 
procedures under sections 6320 and 6330. A corresponding change is made 
to Sec.  1.6015-5(c)(1) to clarify that, although section 6015 relief 
may be raised in a CDP proceeding, a requesting spouse may not request 
section 6015 relief in the course of a CDP hearing if the requesting 
spouse previously requested section 6015 relief and the IRS ruled on 
that request by issuing a final administrative determination. These 
proposed regulations do not change existing CDP hearing procedures. See 
Sec.  301.6330-1(e)(2). Rather, these changes make the regulations 
under section 6015 consistent with the regulations under section 6330.

2. Time To Request Relief

    Section 1.6015-5(b) of the proposed regulations retains the two-
year deadline, measured from the date of the first collection activity, 
to elect the application of Sec.  1.6015-2 (describing the 
circumstances in which a taxpayer may be eligible for relief under 
section 6015(b)) or 1.6015-3 (describing the circumstances in which a 
taxpayer may be eligible for relief under section 6015(c)). In 
accordance with Notice 2011-70, the deadline is removed for a request 
for equitable relief under Sec.  1.6015-4 (describing the circumstances 
in which a taxpayer may be eligible for relief under section 6015(f)) 
and replaced with a requirement that a request for equitable relief 
must be filed with the IRS within the period of limitation in section 
6502 for collection of tax or the period of limitation in section 6511 
for credit or refund of tax, as applicable to the specific request. A 
similar rule is added

[[Page 49244]]

to Sec.  1.66-4(j)(2)(ii) for claims for equitable relief from the 
Federal income tax liability resulting from the operation of state 
community property law.
    Under section 6502(a)(1), the period of limitation on collection of 
tax is normally ten years after the date of assessment of the tax, 
although it may be extended by other provisions of the Code. Under 
section 6511(a), the period of limitation to claim a credit or refund 
of tax is generally the later of three years after the date a tax 
return for the taxable period was filed or two years after the date the 
tax was paid. If no return was filed, the two-year period applies.
    Section 1.6015-5(b)(2) of the proposed regulations explains that if 
a requesting spouse files a request for equitable relief under Sec.  
1.6015-4 within the limitation period on collection of tax, the IRS 
will consider the request, but any relief in the form of a tax credit 
or refund depends on whether the limitation period for credit or refund 
was also open as of the date the claim for relief was filed and the 
other requirements relating to credits or refunds are satisfied. In 
cases in which the limitation period for credit or refund happens to be 
the longer of the two periods and is open when a request for equitable 
relief is filed, the request can be considered for a potential refund 
or credit of any amounts collected or otherwise paid by the requesting 
spouse during the applicable look-back period of section 6511(b)(2), 
even if the collection period is closed.
    If a request for equitable relief is filed after the expiration of 
the limitation period for collection of a joint tax liability, the IRS 
is barred from collecting any remaining unpaid tax from the requesting 
spouse. Similarly, if a request for equitable relief under Sec.  
1.6015-4 is filed after the expiration of the limitation period for a 
credit or refund of tax, section 6511(b)(1) bars the IRS from allowing, 
and a taxpayer from receiving, a credit or refund. The proposed 
regulations provide, therefore, that the IRS will not consider an 
individual's request to be equitably relieved from a tax that is no 
longer legally collectible.

3. Collection Activity

    The proposed regulations clarify what constitutes collection 
activity for purposes of starting the two-year deadline that continues 
to apply to Sec. Sec.  1.6015-2 and 1.6015-3.
    A notice of intent to levy and right to request a CDP hearing 
(section 6330 notice) is a type of collection activity that starts the 
two-year period applicable to applications to elect relief under 
Sec. Sec.  1.6015-2 and 1.6015-3. The proposed regulations at Sec.  
1.6015-5(b)(3)(ii) clarify that the two-year period will start 
irrespective of a requesting spouse's actual receipt of the section 
6330 notice, if the notice was sent by certified or registered mail to 
the requesting spouse's last known address. This clarification is 
consistent with the holding in Mannella v. Commissioner, 132 T.C. 196 
(2009), rev'd on other grounds, 631 F.3d 115 (3d Cir. 2011).

4. Examples

    Section 1.6015-5 in its current form contains several examples 
intended to illustrate how the timing rules for requesting relief under 
section 6015 operate. The proposed regulations update these examples to 
reflect the proposed changes to the timing rules. Thus, Example 1 is 
revised to explicitly limit it to elections under Sec.  1.6015-2 or 
1.6015-3. Example 2 illustrates the operation of both the two-year 
deadline for purposes of Sec. Sec.  1.6015-2 and 1.6015-3 and the 
periods of limitation that apply to equitable relief requests under 
Sec.  1.6015-4, including a situation in which the requesting spouse 
will still be considered for relief for unpaid amounts even though the 
limitation period for credit or refund had expired when the request was 
filed as discussed in Sec.  1.6015-5(b)(2). Example 3 is principally 
intended to illustrate that collection activity against a nonrequesting 
spouse (defined in Sec.  1.6015-1(h)(2)) does not begin the time in 
which a requesting spouse must elect the application of Sec.  1.6015-2 
or 1.6015-3. Example 4 illustrates the rule of Sec.  1.6015-5(c)(3)(i) 
that a section 6330 notice sent to a requesting spouse's last known 
address, even if not actually received by the requesting spouse, is a 
collection activity for purposes of the timing rules, but the issuance 
of the notice, or the time between the mailing of the notice and the 
filing of a request for relief, does not affect the IRS's consideration 
of equitable relief under Sec.  1.6015-4 as no two-year deadline 
applies. Example 5 illustrates the timing rules in Sec.  1.6015-5(b)(2) 
under which if a requesting spouse has paid some or all of a joint tax 
liability, or if the IRS has collected all or a part of the liability 
from a requesting spouse, the requesting spouse will be considered for 
equitable relief under Sec.  1.6015-4 if the requesting spouse filed 
for relief within the limitation period for a credit or refund of tax, 
even though the limitation period for collection of tax was expired 
when the request was filed. The example further illustrates that in a 
case of payments or collection activity over time, a requesting spouse 
is eligible for a credit or refund only for amounts of tax for which 
the period of limitation allows a credit or refund as of when the 
request for relief was filed. The last example, Example 6, builds off 
of Example 5 and illustrates a situation in which the IRS will not 
consider a request for equitable relief under Sec.  1.6015-4 because 
both the limitation period for a credit or refund of tax and the 
limitation period for collection of tax had expired as of the date the 
claim for relief was filed.

5. Reconsideration and Effect of a Final Administrative Determination

    The proposed regulations also revise Sec.  1.6015-5(c), which 
prescribes the effect of a final administrative determination. Under 
Sec.  1.6015-5(c)(1), a requesting spouse generally is entitled to 
submit only one request for relief under section 6015 from a joint tax 
liability (except as provided in Sec.  1.6015-1(h)(5)), and the IRS 
will issue only one final administrative determination. The proposed 
regulations clarify in Sec.  1.6015-5(c)(1) that after a final 
administrative determination, a requesting spouse may not, even under 
the procedures for a CDP hearing, again request relief under section 
6015 with respect to the same joint tax liability.
    Consistent with the general restriction, but to provide flexibility 
within that framework, the IRS has developed procedures in the Internal 
Revenue Manual (Chapter 25.15.17 (Rev. 03/08/2013)) to reconsider a 
final administrative determination if a requesting spouse submits 
additional information not previously submitted and considered and the 
requesting spouse did not petition the Tax Court from the prior final 
administrative determination. If the requesting spouse did petition the 
Tax Court, then the requesting spouse is not eligible for 
reconsideration unless the Tax Court case was dismissed for lack of 
jurisdiction. A reconsideration process allows for relief in situations 
where a requesting spouse was unable to initially provide the 
information, such as the requesting spouse not fully understanding how 
to file a complete request for relief under section 6015. The 
reconsideration process, however, does not replace the IRS's final 
administrative determination for purposes of determining whether Tax 
Court review is available or whether a Tax Court petition was timely 
filed. A request for reconsideration is not a qualifying election 
(``the first timely claim for relief from joint and several liability 
for the tax year for which relief is sought'') under Sec.  1.6015-2 or 
1.6015-3, or request under Sec.  1.6015-4, for

[[Page 49245]]

purposes of Sec.  1.6015-1(h)(5), and does not trigger the restrictions 
on collection pursuant to section 6015(e)(1)(B) or the suspension of 
the collection period of limitation under section 6015(e)(2). A 
reconsideration letter (formerly Letter 4277C and currently either 
Letter 5186C, Letter 5187C, or Letter 5188C)) is not a final 
determination letter for purposes of section 6015(e) and Sec.  1.6015-
7. Accordingly, a requesting spouse who receives a reconsideration 
letter may not petition the Tax Court to challenge a denial of relief 
following the IRS's reconsideration even if the requesting spouse 
provided new information not previously considered. The proposed 
regulations add a new provision to Sec.  1.6015-5(c) acknowledging the 
reconsideration process but also providing that the reconsideration 
letter is not the IRS's final determination and is not subject to 
review by the Tax Court.
    The general restriction in the regulations to one request for 
relief under section 6015 per tax liability and one final 
administrative determination of that request does not prohibit a 
requesting spouse from reapplying for equitable relief under Sec.  
1.6015-4 pursuant to the terms of Notice 2011-70 if the requesting 
spouse's request for relief under Sec.  1.6015-4 was denied solely for 
being untimely and that denial was not litigated. The notice allows 
individuals who filed requests for equitable relief that were denied by 
the IRS solely on the basis of the two-year deadline and were not 
litigated to reapply to the IRS for equitable relief. A Form 8857, 
``Request for Innocent Spouse Relief,'' or substitute written 
statement, signed under the penalties of perjury, filed as a 
reapplication for equitable relief under Notice 2011-70 is not 
considered a second request, and the resulting determination will be 
the final administrative determination for purposes of the regulations. 
A reapplication under Notice 2011-70 is not a reconsideration under the 
IRS's reconsideration process, and a denial of equitable relief on 
reapplication may be timely petitioned to the Tax Court for review.

Proposed Effective/Applicability Date

    Except as provided below, these proposed regulations are effective 
as of the date that final regulations are published in the Federal 
Register. For proposed dates of applicability, see Sec.  1.6015-9.
    Notice 2011-70 announced that the Treasury Department and the IRS 
intended to amend the regulations under section 6015 to remove the 
requirement that taxpayers request equitable relief under section 
6015(f) and Sec.  1.6015-4 within two years of the first collection 
activity. Under section 7805(b)(1)(C), the proposed regulations provide 
that Sec.  1.6015-5(b)(1) and (b)(2) will be effective as of July 25, 
2011, the date that Notice 2011-70 was issued to the public.

Statement of Availability for IRS Documents

    For copies of recently issued Revenue Procedures, Revenue Rulings, 
Notices and other guidance published in the Internal Revenue Bulletin 
or Cumulative Bulletin, please visit the IRS Web site at https://www.irs.gov.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866, as supplemented by Executive Order 13563. Therefore, a 
regulatory assessment is not required. It has also been determined that 
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) 
does not apply to these regulations. In addition, because the 
regulation does not impose a collection of information on small 
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not 
apply. Accordingly, a regulatory flexibility analysis is not required 
under the Regulatory Flexibility Act (5 U.S.C. chapter 6). Pursuant to 
section 7805(f) of the Code, this notice of proposed rulemaking has 
been submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on its impact on small business.

Comments and Requests for Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
and eight (8) copies) or electronic comments that are submitted timely 
to the IRS. The Treasury Department and the IRS request comments on all 
aspects of the proposed rules. All comments submitted by the public 
will be made available for public inspection and copying at https://www.regulations.gov or upon request. A public hearing may be scheduled 
if requested in writing by any person who timely submits comments. If a 
public hearing is scheduled, notice of the date, time, and place for 
the public hearing will be published in the Federal Register.

Drafting Information

    The principal authors of these proposed regulations are Stuart 
Murray and Mark Shurtliff of the Office of the Associate Chief Counsel, 
Procedure and Administration.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *
    Section 1.66-4 also issued under 26 U.S.C. 66(c). * * *
    Section 1.6015-5 also issued under 26 U.S.C. 6015(h). * * *

    Section 1.6015-9 also issued under 26 U.S.C. 6015(h). * * *

0
Par. 2. In Sec.  1.66-4, paragraph (j)(2)(ii) is revised to read as 
follows:


Sec.  1.66-4  Request for relief from the Federal income tax liability 
resulting from the operation of community property law.

* * * * *
    (j) * * *
    (2) * * *
    (ii) Equitable relief. The earliest time for submitting a request 
for equitable relief from the Federal income tax liability resulting 
from the operation of community property law under paragraph (b) of 
this section is the date the requesting spouse receives notification of 
an audit or a letter or notice from the IRS stating that there may be 
an outstanding liability with regard to that year (as described in 
paragraph (j)(2)(iii) of this section). A request for equitable relief 
from the Federal income tax liability resulting from the operation of 
community property law under paragraph (b) of this section for a 
liability that is properly reported but unpaid is properly submitted 
with the requesting spouse's individual Federal income tax return, or 
after the requesting spouse's individual Federal income tax return is 
filed. To request equitable relief under Sec.  1.66-4, a requesting 
spouse must file Form 8857, ``Request for Innocent Spouse Relief,'' or 
other similar statement with the IRS within the period of limitation on 
collection of tax in section 6502 or within the period of limitation on 
credit or refund of tax in section 6511, as applicable to the tax 
liability. If a requesting spouse files a request for equitable relief 
under Sec.  1.66-4 within the period of limitation on collection of 
tax, the IRS will consider the request for

[[Page 49246]]

equitable relief, but the requesting spouse will be eligible for a 
credit or refund of tax only if the limitation period for credit or 
refund of tax is open when the request is filed (assuming all other 
requirements are met, including the limit on amount of credit or refund 
prescribed in section 6511(b)(2)). Alternatively, if a requesting 
spouse files a request for equitable relief after the period of 
limitation on collection of tax has expired but while the limitation 
period on credit or refund of tax remains open, the IRS will consider 
the request for equitable relief insofar as tax was paid by or 
collected from the requesting spouse, and the requesting spouse will be 
eligible for a potential credit or refund of tax. If neither the 
section 6502 nor section 6511 limitation period is open when a 
requesting spouse files a request for equitable relief, the IRS will 
not consider the request for equitable relief.
* * * * *
0
Par. 3. Section 1.66-5 is revised to read as follows:


Sec.  1.66-5  Effective/applicability date.

    Except for Sec.  1.66-4(j)(2)(ii), sections 1.66-1 through 1.66-4 
are applicable on July 10, 2003. Section 1.66-4(j)(2)(ii) applies to 
any request for relief filed on or after July 25, 2011 (the date that 
Notice 2011-70, 2011-32 IRB, was issued to the public).
0
Par. 4. Section 1.6015-0 is amended as follows:
0
1. In Sec.  1.6015-5, revising the entry for paragraph (a) as new entry 
for paragraph (a)(1) and adding a new entry for paragraph (a)(2); 
entries for paragraphs (b)(1) through (b)(5) are revised; entries for 
paragraphs (b)(2)(i) and (b)(2)(ii) are removed; and new entries are 
added for paragraphs (b)(3)(i), (b)(3)(ii), (b)(6), (c)(1), (c)(2), and 
(c)(3).
0
2. Section 1.6015-9 heading is revised.
    The additions and revisions read as follows:


Sec.  1.6015-0  Table of contents.

* * * * *


Sec.  1.6015-5  Time and manner for requesting relief.

    (a) Requesting relief.
    (1) In general.
    (2) Requesting relief as part of a collection due process hearing.
    (b) * * *
    (1) Relief other than equitable relief.
    (2) Equitable relief.
    (3) Definitions.
    (i) Collection activity.
    (ii) Section 6330 notice.
    (4) Requests for relief made before commencement of collection 
activity.
    (5) Examples.
    (6) Premature requests for relief.
    (c) * * *
    (1) In general.
    (2) Reconsideration process.
    (3) Examples.
* * * * *


Sec.  1.6015-9  Effective/applicability date.

0
Par. 5. Section 1.6015-5 is amended to read as follows:
0
1. Paragraph (a) is amended by designating the introductory text as 
(a)(1), adding a new heading for paragraph (a)(1) introductory text, 
and adding new paragraph (a)(2).
0
2. Paragraph (b)(1) is revised.
0
3. Paragraphs (b)(2), (b)(3), (b)(4), and (b)(5) are redesignated as 
paragraphs (b)(3), (b)(4), (b)(5), and (b)(6).
0
4. New paragraph (b)(2) is added.
0
5. Newly-designated paragraphs (b)(3)(ii), (b)(4), (b)(5), and (b)(6) 
are revised.
0
6. Paragraph (c)(1) is amended by adding a new sentence at the end of 
the paragraph.
0
7. Paragraph (c)(2) is redesignated as paragraph (c)(3) and revised and 
new paragraph (c)(2) is added.
    The revisions and additions read as follows:


Sec.  1.6015-5  Time and manner for requesting relief.

    (a) Requesting relief--(1) In general. * * *
    (2) Requesting relief as part of a collection due process hearing. 
A requesting spouse may also elect the application of Sec.  1.6015-2 or 
1.6015-3, or request equitable relief under Sec.  1.6015-4, pursuant to 
the collection due process (CDP) hearing procedures under sections 6320 
and 6330, by attaching Form 8857, ``Request for Innocent Spouse 
Relief,'' or an equivalent written statement to Form 12153, ``Request 
for a Collection Due Process or Equivalent Hearing'' (or other 
specified form).
    (b) * * * (1) Relief other than equitable relief. To elect the 
application of Sec.  1.6015-2 or 1.6015-3, a requesting spouse must 
file Form 8857 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.
    (2) Equitable relief. To request equitable relief under Sec.  
1.6015-4, a requesting spouse must file Form 8857 or other similar 
statement with the IRS within the period of limitation on collection of 
tax in section 6502 or within the period of limitation on credit or 
refund of tax in section 6511, as applicable to the joint tax 
liability. If a requesting spouse files a request for equitable relief 
under Sec.  1.6015-4 within the period of limitation on collection of 
tax, the IRS will consider the request for equitable relief, but the 
requesting spouse will be eligible for a credit or refund of tax only 
if the limitation period for credit or refund of tax is open when the 
request is filed (assuming all other requirements are met, including 
the limit on amount of credit or refund prescribed in section 
6511(b)(2)). Alternatively, if a requesting spouse files a request for 
equitable relief after the period of limitation on collection of tax 
has expired but while the limitation period on credit or refund of tax 
remains open, the IRS will consider the request for equitable relief 
insofar as tax was paid by or collected from the requesting spouse, and 
the requesting spouse will be eligible for a potential credit or refund 
of tax. If neither the section 6502 nor section 6511 limitation period 
is open when a requesting spouse files a request for equitable relief, 
the IRS will not consider the request for equitable relief. See Sec.  
1.6015-1(g).
    (3) * * *
    (ii) Section 6330 notice. A section 6330 notice refers to the 
notice sent, pursuant to section 6330, providing taxpayers notice of 
the IRS's intent to levy and of their right to a CDP hearing. The 
mailing of a section 6330 notice by certified mail to the requesting 
spouse's last known address is sufficient to start the two-year period, 
described in paragraph (b)(1), regardless of whether the requesting 
spouse actually receives the notice.
    (4) Requests for relief made before commencement of collection 
activity. Except as provided in paragraph (b)(6) of this section, an 
election under Sec.  1.6015-2 or 1.6015-3 or a request for equitable 
relief under Sec.  1.6015-4 may be made before any collection activity 
has commenced. For example, an election or request for equitable relief 
may be made in connection with an examination of a joint Federal income 
tax return or a demand for payment, or pursuant to the CDP hearing 
procedures of section 6320 with respect to the filing of a Notice of 
Federal Tax Lien. A request for equitable relief under Sec.  1.6015-4 
for a liability that is properly reported on a joint Federal income tax 
return but not paid with the return or by the due date for payment is 
properly submitted at any time after the return is filed.
    (5) Examples. The following examples illustrate the rules of this 
paragraph (b):

    Example 1. On January 12, 2009, the IRS mailed a section 6330 
notice to H and W, by certified mail to their last known address, 
regarding their 2007 joint Federal income tax

[[Page 49247]]

liability, which was the result of an understatement. The section 
6330 notice was the first collection activity the IRS initiated 
against H and W to collect the 2007 joint liability. H and W did not 
request a CDP hearing in response to the section 6330 notice. On 
June 5, 2009, the IRS issued a levy on W's wages to W's employer. On 
July 10, 2009, the IRS issued a levy on H's wages to H's employer. 
To be considered for relief under Sec.  1.6015-2 or 1.6015-3, a Form 
8857 or other request for relief must be filed on or before January 
12, 2011, which is two years after the IRS sent the section 6330 
notice. The two-year period for purposes of Sec. Sec.  1.6015-2 and 
1.6015-3 (not applicable to Sec.  1.6015-4) runs from the date the 
section 6330 notice was mailed and not from the date of the actual 
levy.
    Example 2. On May 5, 2011, the IRS offset W's overpayment from 
W's 2010 separate Federal income tax return in the amount of $2,000 
to H and W's joint tax liability for 2009 of $5,000, for which H and 
W filed a joint return on April 15, 2010. The offset is the first 
collection activity the IRS initiated against W to collect the 2009 
joint liability. On October 3, 2013, W requests relief under section 
6015. W's request is not timely under Sec. Sec.  1.6015-2 and 
1.6015-3 because the request was made more than two years after the 
IRS's first collection activity against W--the offset of W's 
overpayment from 2010. As to equitable relief under Sec.  1.6015-4, 
the period of limitation on collection is open when W files her 
request, and the request can be considered for equitable relief of 
the unpaid tax of $3,000. W is not, however, eligible for any credit 
or refund of the $2,000 amount that the IRS applied against H and 
W's 2009 joint liability, because the period of limitation on credit 
or refund of tax for 2009 is no longer open when W files her request 
for relief. Under section 6511(a), a credit or refund of tax must 
generally be claimed within three years after the filing date of a 
tax return for the tax year or two years after payment of the tax, 
whichever is later. Thus, the last day for W to claim a credit or 
refund of the $2,000 amount was May 5, 2013, but her request for 
relief was not filed until October 3, 2013.
    Example 3. On June 14, 2011, the IRS offset W's overpayment from 
her separate Federal income tax return for 2010 against H and W's 
joint liability for 2009, which was the result of an understatement. 
On July 5, 2012, the IRS offset H's overpayment from his separate 
Federal income tax return for 2011 against H and W's joint liability 
for 2009. The offset is the first collection activity the IRS 
initiated against H to collect the 2009 joint liability. On November 
25, 2013, H requests relief under section 6015 by filing Form 8857. 
H's request is timely. For purposes of Sec. Sec.  1.6015-2 and 
1.6015-3, the request was filed within two years of the IRS's first 
collection activity against H. The IRS's collection activity against 
W does not start the two-year period for H to request relief. 
Additionally, for purposes of Sec.  1.6015-4, the period of 
limitation on collection was open when H filed Form 8857, making him 
eligible for equitable relief from any unpaid liability for 2009, 
and the period of limitation on a credit or refund of tax for 2009 
that was paid through the offset of H's overpayment for 2011 was 
likewise open when H filed his Form 8857.
    Example 4. On April 15, 2008, H and W filed a joint Federal 
income tax return for tax year 2007. On October 1, 2009, additional 
liability was assessed against H and W as a result of income 
attributable to H being omitted from the return. H and W divorced 
soon after and, in late December 2009, W moved out of the family 
home without notifying the United States Postal Service or the IRS 
of her change of address until the end of January 2010. On January 
15, 2010, the IRS mailed a section 6330 notice regarding H and W's 
2007 joint Federal income tax liability to H and W's last known 
address (the address on H and W's joint Federal income tax return 
for tax year 2008, filed on April 15, 2009). H and W did not request 
a CDP hearing in response to the section 6330 notice. The IRS issued 
a levy on W's wages to W's employer on June 2, 2010. W filed Form 
8857 requesting relief under section 6015 on May 15, 2012. Actual 
receipt of a section 6330 notice is not required to start the two-
year period for purposes of Sec.  1.6015-2 or 1.6015-3, as long as 
the notice is sent to the taxpayer at the taxpayer's last known 
address by certified or registered mail. The two-year period, 
therefore, expired on January 15, 2012. Accordingly, W's request for 
relief is too late to be considered for any relief under Sec.  
1.6015-2 or 1.6015-3, as the request was filed more than two years 
after the IRS sent the section 6330 notice. But because the period 
of limitation on collection was open (generally until October 1, 
2019) when W filed the Form 8857, the IRS will consider whether W is 
entitled to equitable relief under Sec.  1.6015-4. Further, to the 
extent W's request for equitable relief under Sec.  1.6015-4 seeks a 
refund of tax W paid through the levy, W's Form 8857 is a timely 
claim for refund because it was filed within the applicable period 
of limitation for credit or refund of tax (in this case, two years 
from payment of the tax).
    Example 5. H and W timely filed a joint Federal income tax 
return for tax year 1999. The IRS selected the 1999 return for 
examination and determined a deficiency in tax of $10,000. The IRS 
assessed the tax on December 1, 2001. The taxpayers were divorced in 
2005. On her separate Federal income tax return for tax year 2005, W 
reported an overpayment of $2,500, which the IRS applied on May 3, 
2006, to the joint liability for 1999. On her separate Federal 
income tax return for tax year 2009, W reported an overpayment of 
$1,750, which the IRS applied on May 15, 2010, to the joint 
liability for 1999. On May 1, 2012, W filed with the IRS a Form 8857 
requesting relief under section 6015. The IRS will not consider 
whether W is entitled to any relief under Sec.  1.6015-2 or 1.6015-3 
because W's election is untimely as W's Form 8857 was filed after 
the end of the two-year period running from the offset of W's 
overpayment from her tax year 2005 return. Although the collection 
period expired on December 1, 2011, the IRS will consider whether W 
is entitled to equitable relief under Sec.  1.6015-4 for tax year 
1999 because W filed Form 8857 within the two-year period for 
claiming a credit or refund of tax under section 6511(a). Under 
section 6511(b)(2), the amount of any refund to which W might be 
entitled is limited to $1,750 (the amount paid within the two years 
preceding the filing of W's Form 8857), and the $2,500 collected in 
May 2006 is not available for refund.
    Example 6. Assume the same facts as in Example 5, except that 
W's separate Federal income tax return for tax year 2009 did not 
report an overpayment, and there was no offset against the joint 
liability for 1999. The IRS will not consider whether W is entitled 
to any relief under Sec.  1.6015-2 or 1.6015-3 because W's election 
is untimely as W's Form 8857 was filed after the end of the two-year 
period running from the offset of W's overpayment from her tax year 
2005 return. Further, as the collection period expired on December 
1, 2011, and the period for claiming a credit or refund of tax under 
section 6511(a) expired on May 3, 2008, IRS will not consider 
whether W is entitled to equitable relief under Sec.  1.6015-4 for 
tax year 1999.

    (6) Premature requests for relief. The IRS will not consider for 
relief under Sec. Sec.  1.6015-2, 1.6015-3, or 1.6015-4 any election or 
request for relief from joint and several liability that is premature. 
A premature election or request for relief is an election or request, 
other than a request for relief for a liability that is properly 
reported on a joint Federal income tax return but not paid, that is 
filed for a tax year prior to the receipt of a notification of an 
examination or a letter or notice from the IRS indicating that there 
may be an outstanding liability with regard to that year. These notices 
or letters do not include notices issued pursuant to section 6223 
relating to Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) 
partnership proceedings. A premature request for relief is not 
considered an election or request under Sec.  1.6015-1(h)(5).
    (c)  * * *--(1) * * * A requesting spouse who receives a final 
administrative determination of relief under Sec.  1.6015-1 may not 
later elect the application of Sec.  1.6015-2 or 1.6015-3, or request 
equitable relief under Sec.  1.6015-4, including through the CDP 
hearing procedures under sections 6320 and 6330.
    (2) Reconsideration process. Pursuant to Sec. Sec.  1.6015-1(h)(5) 
and 1.6015-5(c)(1), a requesting spouse is generally entitled to submit 
only one request for relief and receive only one final administrative 
determination. Nevertheless, if a requesting spouse submits new 
information (including new facts, evidence, and arguments not 
previously considered) to the IRS after the IRS issues a final 
administrative determination to the requesting spouse, the IRS may 
reconsider the requesting spouse's request for relief under its 
established reconsideration process. A

[[Page 49248]]

request for a reconsideration is not a qualifying election under Sec.  
1.6015-2 or 1.6015-3, or a request under Sec.  1.6015-4, for purposes 
of Sec.  1.6015-1(h)(5). Any reconsideration of a final administrative 
determination by the IRS, and any notice or letter issued to the 
requesting spouse as a result of the reconsideration (such as Letter 
4277C, Letter 5186C, Letter 5187C, or Letter 5188C), is not the IRS's 
final determination for purposes of section 6015(e) and is not subject 
to review by the Tax Court under section 6015(e) or Sec.  1.6015-7.
    (3) Examples. The following examples illustrate the rules of this 
paragraph (c):

    Example 1. In January 2008, W became a limited partner in 
partnership P, and in February 2009, she started her own business 
from which she earned $100,000 of gross income for the taxable year 
2009. H and W filed a joint Federal income tax return for 2009, on 
which they claimed $20,000 in losses from the investment in P, and 
they omitted W's self-employment tax. In March 2011, the IRS 
commenced an examination under the provisions of the Code for TEFRA 
partnership proceedings and sent H and W a notice of the proceeding 
under section 6223(a)(1). In September 2011, the IRS opened an 
examination of H and W's 2009 joint return regarding the omitted 
self-employment tax. In 2012, H decides to pursue relief under 
section 6015. H may file a request for relief as to liability for 
self-employment tax because he has received a notification of an 
examination informing him of potential liability. A request for 
relief regarding the TEFRA partnership proceeding, however, is 
premature under paragraph (b)(6) of this section. H must wait until 
the IRS sends him a notice of computational adjustment or assesses 
any liability resulting from the TEFRA partnership proceeding before 
he may file a request for relief from that liability. An assessment 
of tax in the TEFRA partnership proceeding would be separate from an 
assessment for the self-employment tax. Therefore, a subsequent 
request from H for relief from any liability resulting from the 
TEFRA partnership proceeding will not be precluded under this 
paragraph (c) by a previous request that H filed for relief from 
self-employment tax liability.
    Example 2. On October 21, 2009, H filed a Form 8857 requesting 
relief under Sec. Sec.  1.6015-2, 1.6015-3, and 1.6015-4 for an 
assessed deficiency relating to his joint income tax return for tax 
year 2004. On August 11, 2010, the IRS issued a final administrative 
determination denying H relief from the liability for tax year 2004. 
Under section 6015(e), H had until November 9, 2010, to file a 
petition to the Tax Court to challenge the denial of relief. H did 
not timely file a petition. On October 3, 2011, H submitted 
information with respect to his claim for relief for tax year 2004 
that he did not previously provide. The IRS considered the new 
information pursuant to its established reconsideration process in 
IRM 25.15.17 (Rev. 03/08/2013) and informed H on January 25, 2012, 
via Letter 4277C that he was still not entitled to relief under any 
subsection of section 6015. Letter 4277C is not a final 
administrative determination and did not confer any new rights for H 
to file a petition to the Tax Court to challenge the final 
administrative determination issued on August 11, 2010, or the 
denial of relief from the IRS's reconsideration.

0
Par 6. Section 1.6015-9 is revised to read as follows:


Sec.  1.6015-9  Effective/applicability date.

    (a) In general. Except as provided in paragraph (b) of this 
section, Sec. Sec.  1.6015-0 through 1.6015-9 are applicable for all 
elections under Sec.  1.6015-2 or 1.6015-3 or any requests for relief 
under Sec.  1.6015-4 filed on or after July 18, 2002.
    (b) Except for the rules for determining the timeliness of an 
election under Sec.  1.6015-2 or 1.6015-3, or a request for equitable 
relief under Sec.  1.6015-4 in paragraphs (b)(1) and (b)(2) of Sec.  
1.6015-5, Sec.  1.6015-5 is applicable to any election under Sec.  
1.6015-2 or 1.6015-3, or to any request for equitable relief under 
Sec.  1.6015-4, filed on or after the date of publication of the 
Treasury decision adopting these rules as final regulations in the 
Federal Register. The rules for determining the timeliness of an 
election under Sec.  1.6015-2 or 1.6015-3, or a request for equitable 
relief under Sec.  1.6015-4 in paragraphs (b)(1) and (b)(2) of Sec.  
1.6015-5 are applicable to any election under Sec.  1.6015-2 or 1.6015-
3, or to any request for equitable relief under Sec.  1.6015-4, filed 
on or after July 25, 2011 (the date that Notice 2011-70, 2011-32 IRB 
135, was issued to the public).

Beth Tucker,
Deputy Commissioner for Operations Support.
[FR Doc. 2013-19502 Filed 8-12-13; 8:45 am]
BILLING CODE 4830-01-P