Final Say on Innocent Spouse Relief
June 03, 2022
By Daniel Gibson
Practitioners tackling innocent spouse relief claims will normally find these cases very challenging. Not the least of which is that facts in deciding these cases can be very subjective in nature. In what could easily be referred to as a “teaching” Tax Court decision, DelPonte v. Comm’r., 158 T.C. No. 7, May 5, 2022, the taxpayer also learned the procedural process required by the court.
Michelle DelPonte (then Goddard) timely filed a joint tax return with her former husband, William Goddard, for years 1999 through 2001. Mr. Goddard was a tax attorney who marketed very aggressive tax-avoidance strategies. He eventually used these same strategies for his own returns and, eventually, IRS issued notices of deficiencies for the years noted above for millions of dollars. However, the notices were issued starting in 2004, after Ms. DelPonte was no longer living with Mr. Goddard. Mr. Goddard took it upon himself, without the knowledge of Ms. DelPonte, to file innocent spouse relief petitions under IRC Sec. 6015. Additional notices were issued in subsequent years, and Mr. Goddard asserted innocent spouse relief for each year cited by the IRS. Ms. DelPonte learned about the deficiency notices in 2010 and promptly hired tax counsel.
The IRS Chief Counsel Office, in preparing its case before the Tax Court, referred the matter for analysis to the IRS Cincinnati Centralized Innocent Spouse Operations (“CCISO”). Chief counsel requested that CCISO not issue a determination letter but, rather, requested that it provide its analysis to chief counsel. CCISO determined that Ms. DelPonte qualified for innocent spouse relief. However, chief counsel disagreed and requested additional information from Ms. DelPonte. She refused to provide additional information, noting that CCISO had already issued its decision. Ms. DelPonte petitioned Tax Court claiming that the IRS should be bound by the CCISO decision. She argued that CCISO’s determination was final, and chief counsel’s only job was to defend it.
Ms. DelPonte argued 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 innocent spouse request in an administrative proceeding.
Chief counsel argued that it is responsible for deciding the IRS's litigation hearings, and the decision whether to concede or settle an innocent-spouse relief claim is a litigating position. Chief counsel may ask CCISO for its opinion about an innocent spouse relief request that is being litigated, but chief counsel has the final say. Therefore, CCISO merely provided "assistance" to chief counsel; it didn't make a final determination that Ms. DelPonte was entitled to innocent spouse relief. As a result, chief counsel attorneys retained their discretion to adopt or reject CCISO's conclusions.
The Tax Court denied Ms. DelPonte’s motion, holding that when a petitioner raises innocent spouse relief as a defense for the first time in a petition invoking the Court’s deficiency jurisdiction, IRS chief counsel has the final authority to concede or settle the issue with the petitioner.