Michelle DelPonte

United States Tax Court
158 T.C. No. 7MICHELLE DELPONTE,
Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent
—————
Docket Nos. 1144-05, 1334-06, Filed May 5, 2022.
20679-09, 20680-09,
20681-09.
—————
P raised innocent-spouse relief as an affirmative
defense in a deficiency proceeding. Following IRS
procedure, R’s counsel referred the request to its
Cincinnati Centralized Innocent Spouse Operation
(CCISO). CCISO concluded that P was entitled to relief
under I.R.C. § 6015(c). CCISO communicated this to R’s
counsel, who asked P for more information to make a final
determination. P instead moved for entry of decision
granting her relief.
Held: Where innocent-spouse relief is raised as an
affirmative defense for the first time in a petition that
invokes our deficiency jurisdiction, R’s counsel has final
authority to concede or settle the issue with P.
Held, further, P’s motion for entry of decision will be
denied.
—————
Served 05/05/22
2
Alvah Lavar Taylor, Jonathan T. Amitrano, and Lisa O. Nelson, for
petitioner.
Benjamin R. Poor and Paul Colleran, for respondent.
OPINION
HOLMES, Judge: Michelle DelPonte separated from her ex-
husband, William Goddard, in 2000. She is still, more than twenty years
later, trying to untangle his affairs from her own. What concerns us is
her effort to be relieved of her liability on the joint tax returns she filed
with Goddard while they were married. The part of the IRS bureaucracy
that usually handles these sorts of requests thinks she’s entitled to
relief. The IRS’s lawyer disagrees. We must decide who speaks for the
IRS.
Background
During his marriage to DelPonte, 1 Goddard was a lawyer who
sold exceptionally aggressive tax-avoidance strategies with his business
partner David Greenberg and became very wealthy in the process. He
tried to shelter his income from selling shelters by using the same
shelter strategy he sold, but the IRS soon caught on and issued notices
of deficiency for tax years 1999, 2000, and 2001. Most of the facts
surrounding Goddard’s and Greenberg’s schemes—and the audit that
led to their notices of deficiency—are irrelevant to these cases. We have
already described them in detail in Greenberg v. Commissioner, 115
T.C.M. (CCH) 1403 (2018), aff’d, 10 F.4th 1136 (11th Cir. 2021), and
aff’d sub nom. Goddard v. Commissioner, No. 20-73023, 2021 WL
5985581 (9th Cir. Dec. 17, 2021).
What is relevant, though, is the fact that Goddard filed joint
returns with DelPonte for each of those three years. That means she is
jointly and severally liable with Goddard for the several millions of
1 DelPonte’s name during the marriage was “Michelle Goddard,” and her
petitions were filed under that name. She has since remarried and legally changed
her name to “Michelle DelPonte,” and we have amended the captions in these cases to
reflect that change.
3
dollars in tax that we found were owed to the IRS. See § 6013(d)(3). 2 So
when the first notice of deficiency arrived in late 2004, it was addressed
to “William A. and Michelle Goddard.” But DelPonte was kept in the
dark about this notice. It had been sent to Goddard’s law firm, and
Goddard—who had by that time been living apart from DelPonte for a
few years—never told her. He instead filed a petition on her behalf
asserting that she was an “innocent spouse” under section 6015,
apparently recognizing that he was solely responsible for the profits he
had accumulated over the years and that it was only fair that he should
be solely responsible for any large tax bill that might result.
The IRS sent another notice of deficiency to Goddard’s law firm
in 2005 and three more in 2009. In response to each notice, Goddard
filed a petition in which he asserted innocent-spouse relief on DelPonte’s
behalf without telling her. It wasn’t until November 2010 that DelPonte
first became aware of the deficiencies asserted against her and the
ongoing litigation before us. 3 She promptly hired her own lawyer and
ratified the petitions Goddard had filed.
In April 2011 the Office of Chief Counsel referred DelPonte’s
claim for innocent-spouse relief to the IRS’s Cincinnati Centralized
Innocent Spouse Operation (CCISO) “to make a determination
regarding [DelPonte’s] entitlement to such relief.” CCISO is the IRS
unit that receives and processes most requests for innocent-spouse
relief. Internal Revenue Manual (IRM) 25.15.3.3 (Dec. 12, 2016). 4 Its
determination letters are generally binding on the Commissioner and
the spouse asking for relief, see IRM 25.15.18.1.1(2) (Mar. 20, 2019), but
the referral letter that accompanied DelPonte’s request asked CCISO to
not issue a determination letter but instead “provide the results of [its]
consideration directly to [the Office of Chief Counsel].” Having received
the referral, CCISO reached out to DelPonte directly and instructed her
to fill out and return a Form 8857, Request for Innocent Spouse Relief.
2 Unless otherwise indicated, all statutory references are to the Internal
Revenue Code, Title 26 U.S.C., in effect at all relevant times, all regulation references
are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant
times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
3 We had in May 2010 already ordered that the litigation should be bifurcated
so that we could first decide the amounts of the liabilities owed and then address the
issue of whether DelPonte qualified for innocent-spouse relief.
4 The IRM doesn’t have the force of law or confer substantive rights on
taxpayers. It does, however, govern the internal affairs and administration of the IRS,
and reliably describes the functions delegated to the different offices within the IRS.
United States v. McKee, 192 F.3d 535, 540 (6th Cir. 1999).
4
DelPonte did just that, and after reviewing her paperwork, CCISO
concluded in December 2011 that she should be granted relief for each
of the years at issue.
CCISO did what the Chief Counsel lawyer had asked. It did not
send a determination letter to DelPonte, but instead sent a letter
explaining its conclusion directly to the Office of Chief Counsel. And
here’s where an already unusual case got even more unusualer. Rather
than accepting CCISO’s conclusion and settling DelPonte’s cases, the
Office of Chief Counsel “decided that more information was needed . . .
to allow [DelPonte] relief under I.R.C. [section] 6015.” So in August
2012 the Office of Chief Counsel invited DelPonte to participate in a
Branerton 5 conference to exchange documents and information “[i]n
order for [CCISO] to properly evaluate [her] claim for relief.” It also
informed her that CCISO had already “rendered its decision in [her
favor], but that [the Office of Chief Counsel] had overridden that
decision.” DelPonte declined the invitation; she argued that additional
information would be superfluous because CCISO had already decided
she was entitled to relief and that its decision was binding on Chief
Counsel.
Aside from some back-and-forth letters between DelPonte and
Chief Counsel in which they argued the point, that’s where things stood
for many years. In the meantime the consolidated deficiency cases
begun by Goddard and Greenberg progressed through discovery, trial,
and briefing. We released our opinion in those cases in May 2018, and
in it we upheld the Commissioner’s determinations of deficiencies in all
respects except where he failed to meet the supervisory-approval
requirement of section 6751(b). Greenberg, 115 T.C.M. (CCH) at 1418.
We ordered the parties to compute the correct amounts of tax owed
under Rule 155, but in cases as complex as these, that task isn’t as
simple as plugging numbers into a calculator and getting a total—the
parties spent more than a year to precisely calculate the deficiencies.
We severed the five cases in which DelPonte was a petitioner in January
2020, and entered decisions in the remaining ten the following April.
Goddard and Greenberg then appealed their cases to the Eleventh
Circuit in August 2020. Goddard’s cases were severed from Greenberg’s
5 Branerton Corp. v. Commissioner, 61 T.C. 691 (1974) (describing Tax Court’s
informal discovery procedure).
5
and transferred to the Ninth Circuit the following October. 6 The
Eleventh Circuit affirmed our holdings in Greenberg’s cases, Greenberg,
10 F.4th 1136, in August 2021 and the Ninth Circuit did likewise in
December, Goddard, 2021 WL 5985581. So nearly fifteen years after
the lowest numbered cases in that group had first been calendared for
trial, they are now final and unappealable.
DelPonte and Chief Counsel resumed their correspondence on the
innocent-spouse issue shortly after we released our opinion in the
deficiency cases. DelPonte hired a new team of lawyers and responded
to the Chief Counsel’s discovery requests, but still insisted that
discovery was unnecessary because CCISO had already granted her
relief. Chief Counsel stood firm in its position that CCISO didn’t speak
for the IRS in her cases. DelPonte then moved for entry of decisions in
her favor because, in her view, Chief Counsel is wrong.
We usually get motions for entry of decision when a party wants
to renege on a settlement or when parties disagree about computations
under Rule 155. In these cases, however, there is no stipulation or
computation to fight about. This motion is really more like one for
partial summary judgment on the issue of whether DelPonte is entitled
to relief under section 6015(c) because the CCISO determined that she
is.
And that is how we will treat it.
Discussion
This is a novel argument, and to analyze it we will begin with an
account of the evolution of the different species of innocent-spouse relief.
Congress has since 1918 allowed married taxpayers to file joint returns,
Revenue Act of 1918, ch. 18, § 223, 40 Stat. 1057, 1074 (1919); see also
Camara v. Commissioner, 149 T.C. 317, 327 (2017), and has since 1938
held spouses jointly and severally liable for the tax shown on those joint
returns, Revenue Act of 1938, ch. 289, § 51(b), 52 Stat. 447, 476; see also
Wilson v. Commissioner, 705 F.3d 980, 982 (9th Cir. 2013), aff’g 99
T.C.M. (CCH) 1552 (2010). A great many couples benefited richly from
the more favorable tax rates available to joint filers, but some were
6 Greenberg lived in Florida when he filed his petitions, so the venue for appeal
of his cases was the Eleventh Circuit. See § 7482(b)(1). Goddard lived in California at
the time, so the venue for appeal in his cases was the Ninth Circuit. See id. Because
DelPonte also lived in California when the petitions in her cases were filed, venue for
appeal of her cases would also be in the Ninth Circuit. See id.
6
burdened by the harsh consequences of joint liability. See Wilson, 705
F.3d at 983. We commented on the harshness of this rule in Scudder v.
Commissioner, 48 T.C. 36 (1967), remanded by 405 F.2d 222 (6th Cir.
1968), when we held a wife liable for tax on the money her husband had
embezzled from the partnership she and her sisters owned and that he
had unsurprisingly failed to report on their joint returns. 7 We found
that the language of the statute was clear, and that “only remedial
legislation can soften the impact of the rule of strict individual liability.”
Id. at 41. 8
In 1971 Congress enacted legislation to allow a spouse relief from
joint and several liability in certain limited situations. Act of January
12, 1971, Pub. L. No. 91-679, 84 Stat. 2063 (codified at § 6013(e)). Relief
got a little easier in 1984, see Deficit Reduction Act of 1984, Pub. L. No.
98-369, § 424, 98 Stat. 494, 801 (codified at § 6013), but it still required
that a spouse seeking relief show that the joint return showed “a
substantial understatement of tax attributable to grossly erroneous
items of [the other] spouse,” that she signed the return without knowing
and without having reason to know of the substantial understatement,
and that it would be inequitable to hold her liable for the deficiency
attributable to the substantial understatement, id. Neither Congress
nor the Secretary wed this substantive liberalization to any special
procedural rules for requesting relief. See Corson v. Commissioner, 114
T.C. 354, 358 (2000); T.D. 7320, 1974-2 C.B. 391. The result was that
spouses glommed their requests for relief onto petitions to redetermine
deficiencies that they filed in our Court or onto complaints for refund
filed in a U.S. district court. See Corson, 114 T.C. at 358.
Congress liberalized the innocent-spouse-relief provisions again
as part of the IRS Restructuring and Reform Act of 1998 (RRA 1998),
Pub. L. No. 105-206, § 3201, 112 Stat. 685, 734 (codified as amended at
§ 6015). Under new section 6015, relief was available even if the
7 On appeal, the Sixth Circuit noted that “‘trickery’ or ‘deliberate deception,’
employed by [a] husband to obtain his wife’s signature to a tax return, will exonerate
the victimized wife.” Scudder, 405 F.2d at 226. It then ordered us to reexamine our
findings while considering whether at least some of the embezzled funds should have
more properly been treated as a nontaxable loan to the husband because that was how
they were recorded in the partnership’s books and because he paid back about half of
what he took soon after his wrongdoing was discovered. See id. at 225.
8 Two exceptions to this strict rule were that a spouse wouldn’t be held jointly
and severally liable if there had been duress, see, e.g., Furnish v. Commissioner, 262
F.2d 727 (9th Cir. 1958), or fraud, see, e.g., Sharwell v. Commissioner, 419 F.2d 1057(6th Cir. 1969).
7
understatement was not “substantial” or due to “grossly erroneous”
items. Requesting spouses 9 could seek any of three types of relief. The
first requires:
• an understatement of tax on the joint return that is
attributable to erroneous items of the other spouse;
• that the requesting spouse didn’t know or have reason to know
of the understatement when she signed the return;
• that, “taking into account all the facts and circumstances, it
[would be] inequitable to hold [that spouse] liable for the
deficiency . . . attributable to such understatement;” and
• that the requesting spouse seek relief no later than two years
after the Commissioner began collection activities.
§ 6015(b).
The second requires the requesting spouse to:
• be legally separated or divorced from the nonrequesting
spouse at the time of election; and
• have no actual knowledge of any items giving rise to a
deficiency at the time she signed the return.
§ 6015(c).
And then there is the catchall third type that requires proof only
that, “taking into account all the facts and circumstances, it [would be]
inequitable to hold the [requesting spouse] liable for any unpaid tax or
any deficiency,” and that the requesting spouse is not eligible for either
of the other two types of relief. § 6015(f).
These are known by those who have lettered in innocent-spouse
relief as “b”, “c”, and “f” relief. And each of these three letters can be
paired with three paths to Tax Court:
9 Section 6015 speaks of a spouse who “elects” the application of subsections
(b) and (c), and “requests” relief under subsection (f). A spouse seeking relief under
any of the three subsections is nevertheless commonly referred to as a “requesting
spouse.” E.g., Treas. Reg. § 1.6015-5(a).
8
• as an issue—usually called a “defense” even though raised by
a petitioner—in a deficiency case;
• in an action to review the IRS’s determination in a collection-
due-process (CDP) case, a new right also created by RRA 1998;
or
• in a “stand alone” action in which we review the IRS’s
administrative determination made in response to a request
for relief filed by a spouse directly with the IRS.
We’ve already outlined a bit of the history of innocent-spouse
relief in deficiency cases. To place DelPonte’s argument in the proper
context, we need to sketch a bit of background for our expanded
jurisdiction in CDP and stand-alone innocent-spouse cases.
RRA 1998 created CDP procedures to enable taxpayers to
challenge how the Commissioner collected taxes that he assessed. See
RRA 1998 § 3401, 112 Stat. at 746 (codified as amended at §§ 6320,
6330). This new CDP right made for a major change in the way the IRS
used two of its most important collection tools—liens and levies. Once
a taxpayer’s liability has been assessed, the amount of the liability
becomes a lien in favor of the government. § 6321. When that happens,
the Commissioner sends the taxpayer a notice of federal tax lien (NFTL),
informing him that the lien has been filed and, under RRA 1998, of his
right to request a CDP hearing. § 6320. If the Commissioner wishes to
collect tax by seizing a taxpayer’s property he must now also send him
a notice of intent to levy, which, like the NFTL, informs him of his right
to a CDP hearing. § 6330. Congress wedded innocent-spouse relief to
CDP law by specifically providing that a spouse could raise entitlement
to innocent-spouse relief in a CDP hearing. Regulations provide that
when a taxpayer raises innocent-spouse relief in a CDP hearing, the
innocent-spouse issue is “governed in all respects by the provisions
of . . . section 6015 and the regulations and procedures thereunder.”
Treas. Reg. §§ 301.6320-1(e)(2), 301.6330-1(e)(2).
Then there’s our jurisdiction in stand-alone cases. A spouse may
also ask for innocent-spouse relief outside a deficiency case or a CDP
hearing. If she does, and if the Commissioner denies her relief, she may,
“[i]n addition to any other remedy provided by law, . . . petition [us] (and
[we] shall have jurisdiction) to determine the appropriate relief
available” under section 6015. § 6015(e)(1)(A).
9
Congress wanted a requesting spouse to have only one bite from
any of these three legal apples. A requesting spouse is “entitled to only
one final administrative determination of relief” for a given assessment.
Treas. Reg. § 1.6015-5(c)(1). And once we (or a district court) have
rendered a final decision on her eligibility for relief—or if she
“participated meaningfully” in a court proceeding and chose not to raise
a request for relief—then that spouse is barred from relief thereafter.
See § 6015(g)(2).
We can now classify DelPonte’s request with precision. It is for
“c” relief in a deficiency case. But whether it is “b”, “c”, or “f” relief in a
deficiency, CDP, or stand-alone case, a requesting spouse has to
navigate her way through the ever more detailed revenue procedures
and regulations that the Secretary started to issue after section 6015’s
enactment. This journey begins with the Form 8857. T.D. 9003, 2002-
2 C.B. 294. The regulation requires a requesting spouse to file a Form
8857; submit a written statement containing the same information
required by Form 8857; or “submit information in the manner prescribed
by the Treasury and IRS in forms, relevant revenue rulings, revenue
procedures, or other published guidance.” Treas. Reg. § 1.6015-5(a). A
requesting spouse can do this any time after the Commissioner sends
her notice of an audit or a letter that tells her there may be an
outstanding liability, id. para. (b)(5), but no later than two years after
the Commissioner initiates collection activity, id. subpara. (1). 10 A
single claim can simultaneously request relief under section 6015(b), (c),
and (f). Id. para. (a)(2).
But if the Code is now clear that a spouse has these ways to ask
for three kinds of innocent-spouse relief, it is still murky about who gets
to act on those requests and whether that answer differs according to
which of the three ways a spouse chooses.
10 We have held the two-year limitations period is invalid as to requests for
equitable relief under section 6015(f). Pullins v. Commissioner, 136 T.C. 432 (2011).
The Secretary hasn’t revised his regulations, see Treas. Reg. § 1.6015-5(a), and the
limitations period remains valid for elections under section 6015(b) and (c), see Pullins,
136 T.C. at 437. The Seventh Circuit, however, has disagreed with us about the
validity of this two-year limitations period. See Lantz v. Commissioner, 607 F.3d 479,
482 (7th Cir. 2010) (“that Congress designated a deadline in two provisions of the same
statute and not in a third is not a compelling argument that Congress meant to
preclude the Treasury Department from imposing a deadline applicable to cases
governed by that third provision”).
10
We begin with the Code. Section 7803 creates the position of
Commissioner of Internal Revenue, to whom are given broad powers to
“administer, manage, conduct, direct, and supervise the execution and
application of the internal revenue laws or related statutes,” as well as
any other “such duties and powers as the Secretary may prescribe.”
§ 7803(a)(2). Regulations authorize the Secretary of the Treasury to
delegate any function vested in him to the Commissioner, who is in turn
authorized to redelegate that function to an officer or employee under
his direct or indirect supervision and control. Treas. Reg. § 301.7701-
9(b) and (c). The Secretary has of course for decades delegated to the
Commissioner the responsibility of administering and enforcing the
internal revenue laws, I.R.S. Treas. Order 150-10 (Apr. 22, 1982), which
includes making determinations about whether a taxpayer is entitled to
innocent-spouse relief under section 6015, see § 6015(e)(1)(A)(i), (5), (f).
The Commissioner has redelegated the responsibility for processing
most requests for innocent-spouse relief to the CCISO. IRM 25.15.7.1
(Sept. 1, 2006). There are some exceptions: In certain instances, as when
there’s an ongoing audit for the year for which the requesting spouse is
seeking relief, the Field Examination unit conducting the audit has
authority to make the determination. See IRM 25.15.6.1(4) (Mar. 21,
2008). Once CCISO (or the Field Examination unit) has made a
preliminary determination, both the requesting spouse and the
nonrequesting spouse can appeal the determination to the Office of
Appeals. 11 IRS Appeals is responsible for holding an appeals conference,
reviewing the evidence, and issuing a “final determination.” IRM
25.15.6.10.3 (June 19, 2017). Or maybe we should say a final
administrative determination because if Appeals denies her request, a
requesting spouse 12 can petition our Court for a really truly final
determination of her entitlement to relief. § 6015(e). We ourselves can
make a determination of our own if CCISO or the Field Examiner
doesn’t act on a request within six months. § 6015(e)(1)(A).
There is a similarly complicated process when a spouse seeks
relief as part of a CDP hearing. She has to first file a Form 12153,
Request for a Collection Due Process or Equivalent Hearing (or other
written and signed request), with IRS Appeals. IRM 5.19.8.4.2 (Nov. 1,
2007). That form allows her to check a box to claim innocent-spouse
11
Recently renamed the “Independent Office of Appeals.” See Taxpayer First
Act, Pub. L. No. 116-25, § 1001(a), 133 Stat. 981, 983 (2019).
12 But not a nonrequesting spouse. Maier v. Commissioner, 119 T.C. 267(2002), aff’d, 360 F.3d 361 (2d Cir. 2004).
11
relief and, if she does, instructs her to attach a Form 8857. See Form
12153 (Rev. Nov. 2006). IRS Appeals ordinarily sends the Form 8857 to
CCISO to investigate the claim, see IRM 8.22.1.1.1.5.3 (Oct. 19, 2007),
following the same procedures as it would in a stand-alone innocent
spouse case, see IRM 8.22.2.2.11.3(6) (Jan. 1, 2006). A significant
difference, though, is that Appeals retains jurisdiction over the case
while CCISO investigates the claim. See id. 8.22.2.2.11.3(4). One
consequence of this is that CCISO ordinarily doesn’t make a final
determination on what relief is appropriate. See IRM 8.22.2.2.11.3.1
and .2 (Mar. 11, 2009). CCISO instead recommends a determination to
Appeals, which is itself responsible for making a final determination
about what relief if any a taxpayer should get. Id. 13 A disgruntled
requesting spouse can once again petition us to try again.
§ 6015(e)(1)(A).
These paths are well trod. And they may help us in the unusual
situation in DelPonte’s case: where we have a requesting spouse who
raised innocent-spouse relief as an affirmative defense in deficiency
petitions filed under section 6213(a). DelPonte argues that the
Secretary has delegated authority to make a final determination to the
administrative, not the litigating, side of the IRS. She has a textualist
argument based on the regulations, numerous IRM provisions, the Chief
Counsel’s own written guidance, and even the instructions to the Form
8857. She also argues more purposively that her position is buttressed
by the principles of horizontal equity and fundamental fairness. In
short, she contends that it’s only fair that a requesting spouse raising
innocent-spouse relief for the first time in litigation should have CCISO
make the determination, just as if she had raised it for the first time in
a stand-alone request. According to her CCISO is the decider in chief,
and Chief Counsel’s job is only to defend CCISO’s determination.
The Chief Counsel, on the other hand, argues that his office is
responsible for deciding what positions the IRS takes in litigation, and
that decision about whether to concede innocent-spouse relief is a
litigating position. He of course may ask CCISO for its advice, but he
says he gets the final say.
13 As always seems to be the case in tax law, there is a complication: The CCISO
can itself make a final determination if it concludes the requesting spouse should get
relief and the nonrequesting spouse doesn’t appeal the determination and innocent-
spouse relief was the only issue raised in the CDP request and the requesting spouse
chooses to withdraw the CDP request and she waives any right to judicial review. See
IRM 8.22.2.2.11.3.1.
12
The Chief Counsel is right that he and his lawyers are responsible
for the IRS’s litigation decisions. Section 7803—the same section that’s
the source of the Commissioner’s authority—also created the position of
Chief Counsel, and authorized him to “perform such duties as may be
prescribed by the Secretary, including the duty . . . to represent the
Commissioner in cases before the Tax Court.” § 7803(b)(2)(D). General
Counsel Order No. 4 delegates to the Chief Counsel authority “in cases
pending in the Tax Court . . . to decide whether and in what manner to
defend, or to prosecute a claim, or to settle, or to abandon a claim or
defense therein.” See IRM 30.2.2–.6 (Aug. 11, 2004). This order also
gives the Chief Counsel the authority to redelegate any of his authority
to “any officer or employee in the Office of the Chief Counsel, and to
authorize further redelegation of such authority.” Id.
The question we must answer, then, is whether DelPonte’s
request for innocent-spouse relief—and CCISO’s consideration of that
request—was like any claim in a case “pending in Tax Court,” or more
like an administrative request for innocent-spouse relief begun by filing
a Form 8857 with CCISO.
This is a question in which a page of history enlightens us more
than a volume of logic. Taxpayers were raising innocent-spouse claims
as affirmative defenses in deficiency proceedings years before today’s
administrative processes for seeking relief even existed. Our
jurisdiction to rule on those claims is part of our authority under section
6213(a) to redetermine a taxpayer’s deficiency when she’s received a
notice of deficiency. See Corson, 114 T.C. at 363–64 (“In a deficiency
proceeding, we may take into account all facts and circumstances
relevant to ascertaining the correct amount of the deficiency, including
affirmative defenses”). Our power in a deficiency case is not limited to
the issues listed in the notice of deficiency—it includes issues raised in
either the petition or answer or even those tried without objection. See
Ax v. Commissioner, 146 T.C. 153, 160 (2016). Our jurisdiction to decide
an issue in a deficiency case is not dependent on the Commissioner’s
having already made a determination on that issue administratively; all
we need to get jurisdiction to decide is a timely filed petition and a valid
notice of deficiency. Butler v. Commissioner, 114 T.C. 276, 288 (2000)
(citing Naftel v. Commissioner, 85 T.C. 527, 533 (1985)). Once we have
jurisdiction over a case where entitlement to innocent-spouse relief is an
issue, the Commissioner must concede or settle it with a taxpayer if he
doesn’t want to litigate it. Section 7803(b)(2) and related delegation
orders have long delegated those decisions to the Chief Counsel.
13
But the Chief Counsel also has the power to redelegate authority
granted to him. See IRM 30.2.2–.6. DelPonte argues in the alternative
that Chief Counsel Notice CC-2009-021 (June 30, 2009) is just such a
redelegation. That notice instructs attorneys in the Office of Chief
Counsel to request CCISO “to make the determination” with respect to
cases in which a taxpayer raises innocent-spouse relief for the first time
in a deficiency petition. CC-2009-021, at 2. That notice also states: “If
CCISO . . . determines the petitioner is entitled to relief, the case should
be conceded . . . subject to the limitation that a nonrequesting spouse
who is a party to the case must agree” with the determination. Id. at 4.
If the nonrequesting spouse disagrees, then “the grant of relief must be
defended throughout trial and briefing.” Id.
We can dispense with this argument quickly. Chief Counsel has
authority to delegate functions only to an “officer or employee in the
Office of the Chief Counsel,” IRM 30.2.2–.6, and CCISO is not within the
Office of the Chief Counsel, IRM 1.1.13.12.3.3 (Sept. 1, 2005). The plain
language of this order gives the Chief Counsel no authority to delegate
any of his functions to CCISO.
But we can reformulate DelPonte’s contention just a bit: Even
though Chief Counsel has responsibility to respond to requests for relief
raised for the first time in a deficiency case, he has instructed his
lawyers to adhere to CCISO determinations. Are his lawyers going
rogue if they disregard this instruction? This is not an argument based
on powers of delegation, but on what DelPonte identifies as a possible
protection of the Due Process Clause—a requirement that the
government follow the procedures that it establishes even if it didn’t
have to establish them in the first place. DelPonte emphasizes that she
doesn’t raise this issue in her present motion, but we can head off future
motion practice by noting that the Chief Counsel attorneys handling
these cases have been following established procedures.
We first address DelPonte’s argument that CC-2009-021 instructs
Chief Counsel attorneys to refer cases to CCISO for a “determination,”
not a “recommendation.” She relies heavily on the text of CC-2009-
021—along with the Chief Counsel attorney’s correspondence with her
and CCISO—to argue that “determinations” cannot be disregarded by
Chief Counsel attorneys. We, however, are not convinced that use of the
word “determination” in the Chief Counsel notice or any other guidance
is the same as what the regulation calls a “final administrative
determination.” See Treas. Reg. § 1.6015-5. We have long recognized
that “the name or the label of a document does not control whether the
14
document embodies a determination.” Wilson v. Commissioner, 131 T.C.
47, 53 (2008).
In CC-2009-021, the Chief Counsel repeatedly uses “should” when
instructing his attorneys on how to handle cases where CCISO
determines that relief should be granted, e.g., “[i]f CCISO . . . determines
the petitioner is entitled to relief, the case should be conceded.”
CC-2009-021, at 4 (emphasis added). But he elsewhere uses the
imperative “must” when describing how an attorney should proceed in
different circumstances, e.g., “[i]f the nonrequesting spouse disagrees
with the Service’s determination to grant relief [to the requesting
spouse], then . . . the grant of relief must be defended throughout trial
and briefing.” Id. (emphasis added). If Chief Counsel had wanted all
his attorneys to accept CCISO’s determinations in every case, he could
easily have conveyed that desire by telling them they “must” do so. But
he did not.
CC-2009-021 is, moreover, only one of a series of notices that deal
with requests for innocent-spouse relief raised for the first time in cases
pending before us. CC-2009-021 was itself a supplement to the earlier
Chief Counsel Notice CC-2004-26 (July 12, 2009), id. at 1, which was
issued in response to our holding in Ewing v. Commissioner, 122 T.C. 32(2004), rev’d and vacated, 439 F.3d 1009 (9th Cir. 2006). We held in
Ewing that, although we reviewed the Commissioner’s denial of
equitable relief under section 6015(f) for abuse of discretion, our review
was not confined to the administrative record. Ewing, 122 T.C.
at 38–39. CC-2004-26 included instructions for how Chief Counsel
attorneys should handle section 6015(f) cases to keep the scope-of-review
issue alive for appeal. CC-2004-026, at 1–2. It also sought to solve the
problem of how to handle requests for equitable relief that were raised
for the first time before us—either in deficiency petitions or after six
months had passed since the taxpayer requested relief—and in such
cases there would be no administrative record to review. His solution
was to have those cases remanded to CCISO for a determination and to
create an administrative record. Id. at 3. The notice told CCISO to
“send all evidence the petitioner presented . . . and its written analysis
to the Chief Counsel attorney handling the docketed case. If CCISO
determines the petitioner is entitled to relief, the Chief Counsel attorney
should consider whether settlement is appropriate.” Id. at 4 (emphasis
added).
CC-2009-021 itself was prompted by our opinions in Porter v.
Commissioner (Porter I), 130 T.C. 115 (2008), and Porter v.
15
Commissioner (Porter II), 132 T.C. 203 (2009), CC-2009-021, at 1, in
which we held that we would conduct trials de novo in innocent-spouse
cases, Porter I, 130 T.C. at 125, and make our own determinations about
relief under section 6015(f) with no deference to the IRS, Porter II, 132
T.C. at 210. Like its predecessor, CC-2009-021 provided guidance to the
Chief Counsel lawyers on how to preserve these issues for appeal.
CC-2009-021, at 2. It also told Chief Counsel attorneys that they should
continue asking CCISO to make determinations in all section 6015
cases, and they should continue to concede cases where CCISO
determined the requesting spouse was entitled to relief. Id. at 2–4.
Chief Counsel Notice CC-2013-011 (June 7, 2013), issued after
Wilson, 705 F.3d 980, confirmed that section 6015(e)(1)(A) provided for
both a de novo standard and scope of review in section 6015(f) cases, and
rendered both these older notices obsolete. 14 This notice was published
after CCISO had already rendered its decision on DelPonte’s request,
but we believe it is still helpful in understanding the Chief Counsel’s
guidance that was in effect. CC-2013-011 again requires that Chief
Counsel attorneys request a determination from CCISO where a
petitioner requests relief under any provision of section 6015.
CC-2013-011, at 1–2. It also clarifies that “the trial attorney should,
except in rare circumstances, follow the determination made by CCISO
that the petitioner is entitled to relief and settle the case in accordance
with CCISO’s determination.” Id. at 3 (emphasis added). The “should”
instead of a “must” means that in this context the CCISO’s decisions are
advisory, and that Chief Counsel attorneys get to make the final decision
about the IRS’s views on any particular request for innocent-spouse
relief when a taxpayer seeks it in a deficiency case.
And let us zoom out to look one last time at the IRM. It says that
if innocent-spouse relief is raised for the first time in a case already
docketed in court, “[j]urisdiction is retained by . . . Counsel, and a
request is sent to CCISO to consider the request for relief.” IRM
25.15.12.25.2(1) (Nov. 9, 2007). It specifies that “Counsel . . . has
functional jurisdiction over the matter and handles the case and request
for relief, and either settles or litigates the issue on its merits, as
appropriate.” Id. 25.15.12.25.2(3).
14 Congress eventually settled the issue when it decided that we should review
the IRS de novo based upon the administrative record and “any additional newly
discovered or previously unavailable evidence.” Taxpayer First Act § 1203(a)(1), 133
Stat. at 988 (codified at § 6015(e)(7)).
16
We therefore hold that the Chief Counsel notices and the IRM all
tell CCISO to provide “assistance,” not to make a final determination,
and that Chief Counsel attorneys retain their discretion to adopt or
reject CCISO’s conclusions.
We finally address DelPonte’s argument that principles of
horizontal equity and “fundamental fairness” require that all taxpayers
be entitled to a final determination of relief from CCISO, regardless of
whether they first request relief in a petition for redetermination of a
deficiency, in a stand-alone petition, or in a CDP hearing. She correctly
points out that taxpayers often have no choice in when they are first able
to request relief—her case is an excellent example. She believes that
adopting the position of the Office of Chief Counsel would put requesting
spouses who first raise innocent-spouse relief in a petition for
redetermination of a deficiency in a materially worse position than all
other requesting spouses because all other requesting spouses have the
opportunity to appeal a denial of relief by CCISO to Appeals before
starting a case with us as a last resort. Is it not unfair that some who
seek relief can have a try at CCISO, Appeals, and Tax Court, but others
get Tax Court alone?
Arguments from fairness are always fragile, and this one breaks
apart for two reasons. The first is its faulty premise—an Appeals officer
who receives a request for innocent-spouse relief in a CDP hearing
forwards the case to CCISO for processing but retains jurisdiction, see
IRM 8.22.2.2.11.3(4), and makes the ultimate decision for the IRS about
whether to grant relief, see IRM 8.22.2.2.11.3.1–.2. In that sense, the
Appeals officer’s role is very similar to that of the Chief Counsel attorney
in deficiency cases—the difference, of course, being that the Appeals
officer can make a final determination granting relief, whereas a Chief
Counsel attorney can only decide not to argue that we should deny relief.
So a requesting spouse who raises an innocent-spouse claim for the first
time in a CDP hearing really gets only two levels of review—Appeals
and us—not three. Requiring CCISO to have the opportunity to issue a
final determination in cases where the requesting spouse raises an
innocent-spouse claim for the first time in a deficiency petition would
therefore not guarantee that all spouses be treated equally regardless of
when they request relief; it would merely make CDP cases the outlier.
The second and more important problem with this argument is
that we have no power to adopt it. Congress gave us exclusive
jurisdiction to redetermine the correct amount of a taxpayer’s deficiency
for a given tax year once the taxpayer receives a valid notice of deficiency
17
and timely files a petition with us. See § 6213(a); Naftel, 85 T.C.
at 532–33. Congress also gave the Chief Counsel the authority to
litigate cases before us. § 7803(b)(2)(D). We cannot undo this statutory
scheme by depriving either ourselves or the Chief Counsel of the powers
it has given to us in the name of fairness.
The Chief Counsel in these cases has considered the
determination of CCISO to grant DelPonte relief and decided not to
adopt it without further investigation. That is his prerogative, and we
will not force him to do otherwise.
An appropriate order will be issued.