[Congressional Record Volume 152, Number 77 (Thursday, June 15, 2006)]
[Senate]
[Pages S5962-S5963]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. FEINSTEIN (for herself and Mr. Kyl):
  S. 3523. A bill to amend the Internal Revenue Code of 1986 to provide 
that the Tax Court may review claims for equitable innocent spouse 
relief and to suspend the running on the period of limitations while 
such claims are pending; to the Committee on Finance.
  Mrs. FEINSTEIN. Mr. President, I rise to introduce legislation that 
enhances the innocent spouse equitable relief provision of the Internal 
Revenue Code. Through only minor legislative modifications, this bill 
clarifies the statute's original intent, affording innocent spouses the 
necessary recourse to ensure their cases and circumstances are given a 
fair hearing.
  According to section 6015(f) of the Internal Revenue Code, the IRS 
may relieve an innocent spouse of liability for unpaid taxes generated 
through the filing of a joint tax return if ``taking into account all 
the facts and circumstances'' it would be inequitable to hold the 
spouse responsible.
  Little recourse exists, however, to prevent the IRS from seizing 
assets or garnishing wages if a petition for innocent spouse equitable 
relief is not approved.
  Recent decisions of the Eighth and Ninth Circuit Courts of Appeals 
have denied the Tax Court jurisdiction over petitions for equitable 
relief under the Innocent Spouse Statute. Consequently, there is no 
mechanism for review or appeal of these IRS decisions.
  The story of one of my constituents provides a stunning example of 
the problem.
  The IRS seized all of her husband's income to pay a tax liability 
incurred 20 years earlier, before they were married. Because the IRS 
seized the entirety of the income, the taxes on the income remained 
unpaid.
  When her husband died, the IRS pursued the innocent spouse for the 
taxes

[[Page S5963]]

on her husband's income. She was forced to sell her family home and all 
property owned jointly with her husband. My constituent is employed, 
but due to financial hardship she must live with friends. Even so, the 
IRS may have her wages garnished along with funds set aside for her in 
trust by a probate court.
  Because the Tax Court does not have jurisdiction to review claims for 
innocent spouse equitable relief, my constituent can do little to 
prevent the IRS from seizing what remains.
  The aim of this legislation is to provide an avenue through which 
innocent spouse equitable relief decisions may be appealed, if 
originally denied by the IRS.
  This bill: expressly provides that the Tax Court has jurisdiction to 
review the denial of equitable innocent spouse relief under Internal 
Revenue Code section 6015(f); and suspends IRS collection activity 
while a request for relief under Internal Revenue Code section 6015(f) 
is pending.
  I believe that my proposal would provide a straightforward and 
uncontroversial solution to the unfair treatment of innocent spouses 
under current law. Moreover, without this bill, an increasing number of 
innocent spouse equitable relief appeals will remain in limbo--pending, 
with no method for consideration.
  When this body enhanced innocent spouse protections--through passage 
of the 1998 Internal Revenue Service Restructuring and Reform Act--the 
goal was to modernize, simplify, and streamline the cumbersome process 
of seeking relief from liabilities of tax, interest, and related 
penalties.
  Unfortunately, the conference report on the 1998 act included vague 
language, which ultimately has left innocent spouses with no avenue for 
appeal.
  It is worth noting that the IRS grants fewer than three in 10 
requests for innocent spouse relief. This bill in no way guarantees 
relief, but rather fixes the broken appeals process for these IRS 
decisions.
  I urge my colleagues to support this small change that will have a 
profound effect on the lives of many innocent spouses--mostly women--
who deserve their day in court.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 3523

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. TAX COURT REVIEW OF REQUESTS FOR EQUITABLE 
                   INNOCENT SPOUSE RELIEF.

       (a) In General.--Paragraph (1) of section 6015(e) of the 
     Internal Revenue Code of 1986 (relating to petition for tax 
     court review) is amended by inserting ``or in the case of an 
     individual who requests equitable relief under subsection 
     (f)'' after ``who elects to have subsection (b) or (c) 
     apply''.
       (b) Conforming Amendments.--
       (1) Section 6015(e)(1)(A)(i)(II) of the Internal Revenue 
     Code of 1986 is amended by inserting ``or request is made'' 
     after ``election is filed''.
       (2) Section 6015(e)(1)(B)(i) of such Code is amended--
       (A) by inserting ``or requesting equitable relief under 
     subsection (f)'' after ``making an election under subsection 
     (b) or (c)'', and
       (B) by inserting ``or request'' after ``to which such 
     election''.
       (3) Section 6015(e)(1)(B)(ii) of such Code is amended by 
     inserting ``or to which the request under subsection (f) 
     relates'' after ``to which the election under subsection (b) 
     or (c) relates''.
       (4) Section 6015(e)(4) of such Code is amended by inserting 
     ``or the request for equitable relief under subsection (f)'' 
     after ``the election under subsection (b) or (c)''.
       (5) Section 6015(e)(5) of such Code is amended by inserting 
     ``or who requests equitable relief under subsection (f)'' 
     after ``who elects the application of subsection (b) or 
     (c)''.
       (6) Section 6015(g)(2) of such Code is amended by inserting 
     ``or of any request for equitable relief under subsection 
     (f)'' after ``any election under subsection (b) or (c)''.
       (7) Section 6015(h)(2) of such Code is amended by inserting 
     ``or a request for equitable relief made under subsection 
     (f)'' after ``with respect to an election made under 
     subsection (b) or (c)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to requests for equitable relief under section 
     6015(f) of the Internal Revenue Code of 1986 with respect to 
     liability for taxes which are unpaid after the date of the 
     enactment of this Act.
  Mr. KYL. Mr. President, I am pleased to join my colleague from 
California, Senator Feinstein, in introducing legislation to clarify 
the jurisdiction of the U.S. Tax Court in cases involving ``equitable 
relief'' for innocent spouse claims.
  In general, spouses who sign joint tax returns are held jointly and 
severally liable for taxes owed on such returns. An individual may be 
relieved from such liability if she meets the ``innocent spouse'' test 
set forth in section 6015 of the Internal Revenue Code. The current 
standards were put in place by the IRS Restructuring and Reform Act of 
1998.
  An article published in the New York Times in late 1999 notes that 
the number of innocent spouse applications increased sharply after the 
1998 law and that as many as 90 percent of the people filing innocent 
spouse applications are women. Clearly, the 1998 law opened an 
important avenue for ex-spouses to challenge unexpected tax bills they 
received after their former spouses cheated on their taxes without the 
knowledge of the ``innocent'' spouse.
  Unfortunately, the 1998 law also left uncertain the Tax Court's 
jurisdiction to hear appeals from denials of ``equitable relief.'' The 
Treasury Secretary is authorized to grant equitable relief if a 
taxpayer does not meet any of the statutorily specified qualifications 
for being an innocent spouse. But while the Tax Court was given 
jurisdiction to hear appeals under those specific avenues spelled out 
in the Code, the Code is silent on whether the Tax Court can hear 
appeals based on the Treasury Secretary's equitable relief authority. 
Recent decisions by the Eight and Ninth Circuit Courts of Appeals have 
held that the Tax Court lacks jurisdiction to hear petitions for 
innocent spouse equitable relief.
  The legislation Senator Feinstein and I have introduced makes clear 
that the Tax Court has jurisdiction to hear appeals of decisions 
denying equitable relief. The National Taxpayer Advocate has 
recommended that Congress pass this legislation, and I am hopeful that 
we can move this important bill through the Finance Committee in very 
short order.
                                 ______