dissenting: I respectfully disagree with the majority opinion’s holdings primarily because I believe they are contrary to the controlling statute and legislative intent.
I. Whether Petitioner Is Entitled to a Refund
A. Statutory Interpretation and Construction
In interpreting section 6015, the Court should give effect to congressional intent. Ewing v. Commissioner, 118 T.C. 494, 503 (2002); Fernandez v. Commissioner, 114 T.C. 324, 329 (2000). Congress enacted section 6015 in the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3201, 112 Stat. 734, as a means of expanding relief to innocent spouses. See Hopkins v. Commissioner, 120 T.C. 451, 458-459 (2003) (“section 6015 was enacted to provide spouses with broader access to relief from joint and several tax liabilities”); Washington v. Commissioner, 120 T.C. 137, 159-160 (2003) (“We believe that Congress wanted to grant the broadest relief, while providing certainty in the settlement of tax refund claims”); H. Conf. Rept. 105-599, at 249-255 (1998), 1998-3 C.B. 747, 1003-1009; S. Rept. 105-174, at 65, 68 (1998), 1998-3 C.B. 537, 601, 604; H. Rept. 105-364 (Part 1), at 60-62 (1998), 1998-3 C.B. 373, 432-434. “Moreover, we are mindful that section 6015 was designed ‘to correct perceived deficiencies and inequities’, and it is well settled law that ‘curative legislation should be liberally construed to effectuate its remedial purpose.’” Washington v. Commissioner, supra at 155-156; see also Tcherepnin v. Knight, 389 U.S. 332, 336 (1967) (remedial legislation should be construed broadly to effectuate its purposes); Piedmont & N. Ry. Co. v. ICC, 286 U.S. 299, 311 (1932) (remedial legislation should be given a liberal interpretation).
B. “Application of this section”
Section 6015(g)(1) provides that “credit or refund shall be allowed or made to the extent attributable to the application of this section.” In Fernandez v. Commissioner, supra at 331, in determining whether the Court has jurisdiction to review a request for relief under section 6015(f), we stated: “It is our view that Congress intended the term ‘under this section’ to include all subsections of 6015 in their entirety.” See Butler v. Commissioner, 114 T.C. 276, 290 (2000); see also Woodral v. Commissioner, 112 T.C. 19, 22-23 (1999). Accordingly, the Court must apply all subsections of section 6015, including subsection (a), to determine the amount of a taxpayer’s refund pursuant to subsection (g).
C. Section 6015(a)
1. The Flush Language
The flush language at the end of section 6015(a) provides: “Any determination under this section shall be made without regard to community property laws.” The majority invents a narrow definition of “determination” despite strong indications to the contrary in the statute.
A section 6015 “determination” is not merely that a spouse is entitled to relief from joint and several liability. Contra majority op. p. 60. The amount that the Commissioner determines the electing spouse must pay towards the tax liability attributable to the nonelecting spouse1 and the amount of any refund are part of the determination. Sec. 6015(e)(1)(A) (“the individual may petition the Tax Court * * * to determine the appropriate relief available to the individual under this section”); Washington v. Commissioner, supra at 145 (holding we have jurisdiction under section 6015(e)(1) to review all relief afforded by section 6015); Rooks v. Commissioner, T.C. Memo. 2004-127 (analyzing the Commissioner’s determination and deciding whether taxpayer was entitled to a refund pursuant to section 6015(g)).
Thus, the flush language of section 6015(a) requires that community property laws be disregarded in determining the amount of a taxpayer’s refund pursuant to section 6015(g). See Estate of Capehart v. Commissioner, 125 T.C. 211 (2005) (accepting and applying the parties’ stipulations which disregarded Nevada community property law for purposes of allocating the liability pursuant to section 6015(d)).
2. Section 6013 Compared With Section 6016
Contrary to the view of the majority, the evolution of former section 6013(e) into section 6015 shows that Congress intended to disregard community property laws with respect to all of section 6015 and not to limit disregarding community property laws to determining whether an electing spouse is entitled to relief pursuant to section 6015(b), (c), or (f). Former section 6013(e)(5) — before its repeal by RRA 1998, sec. 3201(e), 112 Stat. 740 — provided: “For purposes of this subsection, the determination of the spouse to whom items of gross income (other than gross income from property) are attributable shall be made without regard to community property laws.” In contrast, section 6015(a) is broader than former section 6013(e)(5), providing: “Any determination under this section shall be made without regard to community property laws.”
The Court should not ignore (1) this statutory change eliminating the language modifying and limiting the term “determination” in former section 6013(e)(5); or (2) that this same limitation was not enacted as part of section 6015 even though the initial proposals to reform former section 6013 contained this same limitation. Internal Revenue Service Restructuring and Reform Act of 1997, H.R. 2676, 105th Cong., 1st Sess. sec. 321 (1997); see majority op. p. 53. Yet the majority does just that. The majority recognizes the statutory change, majority op. p. 53, and the controlling nature of the statutory language, majority op. p. 52, but then declines to give the statutory language effect, majority op. pp. 53-54.
D. Section 6015(g)(1)
1. Evolution of Section 6015(g)(1)
Section 6015(g)(1) first was enacted as section 6015(e)(3)(A). RRA 1998 sec. 3201, 112 Stat. 739. Section 6015(e)(3)(A) formerly provided: “Allowance of credit or refund. — Except as provided in subparagraph (B), notwithstanding any other law or rule of law (other than section 6512(b), 7121, Or 7122), credit or refund shall be allowed or made to the extent attributable to the application of subsection (b) or (f).”
On December 21, 2000, Congress moved the provisions of former 6015(e)(3)(A) to section 6015(g)(1). Community Renewal Tax Relief Act of 2000, Pub. L. 106-554, sec. 313(a)(2), 114 Stat. 2763A-640. At that time, Congress added section 6511 to the list of exceptions in the parenthetical following the phrase “notwithstanding any other law or rule of law”. Id.
2. “Notwithstanding any other law or rule of law”
Section 6015(g)(1) includes the phrase “notwithstanding any other law or rule of law”. Accordingly, a credit or refund pursuant to section 6015(g) takes precedence over all other laws and rules of law that otherwise would restrict the refund or credit.
The only exceptions to this phrase are sections 6511, 6512(b), 7121, and 7122. Sec. 6015(g)(1). Congress did not include section 6321 in the list of exceptions. Sec. 6015(g)(1); see Washington v. Commissioner, 120 T.C. at 160 (“the only limitations on the refund are those set forth in sections 6511, 6512(b), 7121, and 7122”). Contrary to the analysis of the majority, the Court should not add an exception to section 6015(g)(1) for section 6321. Section 6015(a) and (g) clearly requires State community property laws to be disregarded to determine what rights the taxpayer has in the property and the amount of an electing spouse’s refund.
The majority holds that “notwithstanding any other law or rule of law (other than section 6511, 6512(b), 7121, or 7122)” in section 6015(g) should not be read literally but never explains what the phrase means. See majority op. pp. 56-57. It must mean something — a fundamental rule of statutory construction is to give effect to all of the language of the statute. See Hellmich v. Hellman, 276 U.S. 233 (1928); Stanford v. Commissioner, 297 F.2d 298, 308 (9th Cir. 1961), affg. 34 T.C. 1150 (1960).
a. Caselaw
Domestic relations are preeminently matters of State law, and the Supreme Court has consistently recognized that Congress rarely intends to displace State authority in this area. Mansell v. Mansell, 490 U.S. 581, 587 (1989) (addressing the application of California community property law to military retirement pay). Accordingly, the Supreme Court stated: “we have held that we will not find preemption absent evidence that it is positively required by direct enactment.” Id. (internal quotation marks omitted).
The plain and precise language of section 6015 evidences its preemption of State community property laws. Sec. 6015(a), (g); see Mansell v. Mansell, supra at 587, 590-591, 592. Section 6015(a) and (g) contains clear and unequivocal language expressing congressional intent to preempt State law. Mansell v. Mansell, supra at 587; Dunkin v. Commissioner, 124 T.C. 180, 189 (2005).
Although not discussed in detail by the majority, majority op. pp. 51 n.5, 58, respondent relies on United States v. Stolle, 86 aftr 2d 5180, 2000-1 ustc par. 50,329 (C.D. Cal. 2000), and McIntyre v. United States, 222 F.3d 655 (9th Cir. 2000), for the proposition that a Federal tax lien attaches to community property and that section 6321 takes precedence over section 6015. I disagree. I believe section 6015 is clear and the directives in section 6015(a) and (g)(1) take precedence over section 6321.
Stolle was a District Court order that dealt with the relationship between Federal tax liens and community property held in a revocable trust. United States v. Stolle, supra. The District Court concluded that a tax lien attached to community property for the tax debts of an individual and that community property held on behalf of the individual and his wife by a revocable trust could be used to satisfy the tax debts of the individual. Id.
Mrs. Stolle’s entitlement to section 6015 relief was not at issue in the case. Id. The District Court, however, stated that, even assuming Mrs. Stolle was entitled to relief pursuant to section 6015, nothing in section 6015 prevents the Government from collecting against the community property. Id. I am not persuaded by the reasoning of Stolle because (1) the issue of Mrs. Stolle’s entitlement to section 6015 relief and a refund pursuant to section 6015(g) was not before the District Court and (2) the District Court did not address the plain and clear language of section 6015(a) and (g).
Respondent relies on McIntyre v. United States, supra, for the proposition that a Federal tax lien attaches to the entire community property and that section 6321 takes precedence over section 6015. In McIntyre, the U.S. Court of Appeals for the Ninth Circuit, to which this case is appealable, considered whether the Commissioner may levy upon ERiSA-regu-lated pension benefits to satisfy a husband’s tax debt against the claim that the wife has a vested interest in half of those benefits pursuant to California community property laws. Id. at 657. The Court of Appeals noted:
We have held before that, by granting creditors recourse against the whole community estate on debts of only one spouse, California law “implicitly” establishes that spouse’s “interest” in the whole of the community property, at least to a degree sufficient for the IRS to impose tax liens under the Internal Revenue Code. * * * [Id. at 658.]
Mrs. McIntyre argued that ERISA preempts California community property law and that ERISA’s antialienation provision prevented the IRS from levying on the benefits from any ERISA-governed pension plan.2 Id. at 659, 660. The court stated: “This argument relies on an over-exuberant interpretation of ERISA’s anti-alienation provision” -and rejected the premise that ERISA’s antialienation provision would preclude operation of California community property law to the extent that it would permit creditors to proceed against the pension benefits at issue. Id. at 659. In rejecting this premise, the court stated: “ERISA’s anti-alienation provision plainly does not preempt the operation of California law” because “erisa itself has a saving clause that states: ‘Nothing in this subchapter [which includes the anti-alienation provision] shall be construed to alter, amend, modify, invalidate, impair, or supersede any law of the United States.’” Id. at 659, 660 (insertion in original).
McIntyre is distinguishable from this case. First, McIntyre deals with ERISA and not section 6015. Second, section 6015(a) and (g), unlike ERISA, expressly preempts community property law. Sec. 6015(a) (section 6015 determinations are made “without regard to community property laws”), (g) (refunds are made “notwithstanding any other law or rule of law (other than section 6511, 6512(b), 7121, or 7122)”). Third, section 6015 has no saving clause like ERISA.
b. Section 6015 Was Enacted Later
Even if section 6015 and section 6321 are in conflict, section 6015 controls because section 6015 was enacted later than section 6321 and supersedes section 6321 insofar as the two sections are in conflict. See McLean Trucking Co. v. United States, 321 U.S. 67, 79 (1944); Adkins v. Arnold, 235 U.S. 417, 421 (1914); Specking v. Commissioner, 117 T.C. 95, 116 (2001), affd. sub nom. Haessly v. Commissioner, 68 Fed. Appx. 44 (9th Cir. 2003).
Thus, I believe section 6015(g)(1) takes precedence over section 6321 where the IRS or the Court determines a taxpayer is entitled to section 6015 relief.
E. Legislative History of Section 6015
The legislative history regarding refunds pursuant to section 6015 is scant. The House report states: “The Tax Court may order refunds as appropriate where it determines the spouse qualifies for relief and an overpayment exists as a result of the innocent spouse qualifying for such relief.” H. Rept. 105-364 (Part 1), supra at 61, 1998-3 C.B. at 433. The conference and Senate reports state: “The separate liability election may not be used to create a refund, or to direct a refund to a particular spouse.” H. Conf. Rept. 105-599, supra at 250, 1998-3 C.B. at 1004; S. Rept. 105-174, supra at 59, 1998-3 C.B. at 595.
The legislative history of section 6015 supports calculating the refund on the basis of the amount paid by the electing spouse without regard to community property laws towards the understatement or underpayment attributable to the nonelecting spouse. Under the heading “Reasons for change”, the Senate report states:
The Committee believes that a system based on separate liabilities will provide better protection for innocent spouses than the current system. The Committee generally believes that an electing spouse’s liability should be satisfied by the payment of the tax attributable to that spouse’s income and that an election to limit a spouse’s liability to that amount is appropriate. [S. Rept. 105-174, supra at 55, 1998-3 C.B. at 591.]
The limited legislative history, however, is immaterial in the light of the plain and precise language of the statute. Mansell v. Mansell, 490 U.S. at 592, 594. “Congress is not required to build a record in the legislative history to defend its policy choices.” Id. at 592.
F. Common Law States and Community Property States
Section 6015 applies to taxpayers in common law jurisdictions and community property jurisdictions. Denying petitioner a refund of community assets used to pay Mr. Ordlock’s understatements creates an inequity between taxpayers in community property jurisdictions and taxpayers in common law jurisdictions.
To obtain a refund pursuant to section 6015, taxpayers in common law jurisdictions, like the electing spouse in Washington, must prove the amount they paid toward the underpayment or understatement attributable to the non-electing spouse (i.e., do tracing). See Washington v. Commissioner, 120 T.C. at 163; Rooks v. Commissioner, T.C. Memo. 2004-127. The majority prevents taxpayers in community property States from obtaining refunds of community property payments that can be traced to the spouse entitled to relief. I believe the directive in section 6015(a) and (g) to disregard community property laws indicates Congress’s intent to treat taxpayers in community property jurisdictions and common law jurisdictions the same.
In Washington v. Commissioner, supra at 159, the Court noted that “section 6015(g) is very specific with respect to the limitations placed on a refund”. As in Washington, petitioner’s relief should not be limited merely to relief from joint and several liability as respondent contends. Accordingly, I would conclude that community property laws are disregarded in determining the amount of petitioner’s refund pursuant to section 6015(g).
II. Amount of Petitioner’s Refund
If, in a community property State, an electing spouse who is entitled to section 6015(b) or (f) relief has made payments towards the understatement/underpayment attributable to the nonelecting spouse, the electing spouse is entitled to a refund of the amounts applied to the understatement or underpayment attributable to the nonelecting spouse and paid by the electing spouse without regard to community property laws.
This is how the refund was calculated in Washington. In Washington, the taxpayer was employed as a Federal purchasing agent. Washington v. Commissioner, supra at 139. The taxpayer’s spouse was a self-employed carpenter who did not pay self-employment taxes. Id. The taxpayer’s wages were garnished, and her overpayments from subsequent years (listed on returns she filed separately from her spouse) were applied to pay her spouse’s liability. Id. at 140. The Court held that the taxpayer was entitled to a refund of the amount she paid toward the underpayment attributable to her former spouse (i.e., the amount it was inequitable to hold the taxpayer liable for pursuant to section 6015(f)). Id. at 163; see also Leissner v. Commissioner, T.C. Memo. 2003-191 (taxpayer granted relief under section 6015(f) was entitled to refund of moneys taken from her individual retirement account to pay tax liabilities attributable to her former spouse).
The record consists solely of the Forms 4340, Certificate of Assessments, Payments and Other Specific Matters, for Bayard M. and Lois Ordlock for 1982, 1983, and 1984, which do not show how much petitioner paid towards Mr. Ordlock’s understatements without regard to community property laws. To decide whether petitioner has made an overpayment, I would hold — as the parties agree — that the Court needs additional evidence of the amounts petitioner paid without regard to community property laws toward Mr. Ordlock’s understatements. See Washington v. Commissioner, supra; Rooks v. Commissioner, supra; Leissner v. Commissioner, supra. I would conclude that petitioner is entitled to a refund of these payments. I would hold that petitioner bears the burden of proof on this issue. See Rule 142(a).3 Additionally, I would note the applicability of the 2-year rule of section 6511, which is not excepted by section 6015(g)(1). See Washington v. Commissioner, supra at 160-163. As the Court would require additional evidence for resolution of this case, and as the parties agreed to leave the record open, I would hold that this case could no longer be submitted under Rule 122.
III. Additional Problems With the Majority Opinion
A. This Is a Section 6015 Case; Collection Is Not in Issue
The majority basically holds that disregarding community property law, for purposes of section 6015, would create a statutory exception to the rule that “State law defines ownership interests in property for purposes of Federal tax collections under section 6321.” Majority op. p. 52; see also majority op. pp. 56, 57, 59. This is a section 6015 case, not a collection (section 6330) case. As the majority states: “The issue for decision is the amount of refund, if any, petitioner is entitled to under section 6015(g).” Majority op. p. 48.
Collection is independent from the determination of whether a taxpayer is an “innocent spouse” and the amount of the refund a taxpayer is entitled to upon a finding that he/ she is an innocent spouse. Respondent’s collection rights are not at issue in this case. This leads to my next point.
B. Legal or Statutory Voids? “General” State Property Laws Define the Source of the Payments
The majority opines that if California community property laws are disregarded to determine the amount of petitioner’s refund, the Court will be left “with no law or resource to define the [source of] ownership of the payments made” on the tax liabilities for the years in issue. Majority op. pp. 56, 57, 59. If the Court disregarded community property laws when determining the amount of section 6015(g) refunds, the Court would not be left in a void without any guidance any more than State courts in community property States are in a void when dealing with nonmarried persons. The Court could apply the “general” property laws of California (i.e., laws regarding holding property as joint tenants, tenants in common, etc.) to determine the source (i.e., ownership) of the payments. As I stated supra, the parties could present evidence on and brief this point.
C. Potential for Abuse
The majority concludes that if community property laws were disregarded for purposes of section 6015(g), “married taxpayers in community property States could structure future payments so that [the economic source of] ownership is attributable to the spouse requesting relief under section 6015, while continuing a jointly financed lifestyle.” Majority op. p. 58.
The first problem with this conclusion is the implication that taxpayers who remain married should be denied the benefits provided by section 6015. Congress did not make divorce a precondition to section 6015 relief. Taxpayers who remain married can be innocent spouses under section 6015(b) and (f) and can obtain refunds under section 6015(g). Notably, divorced or separated taxpayers who elect and obtain section 6015(c) relief cannot obtain refunds. Sec. 6015(g)(3).
The second problem is that the same potential abuse is available to taxpayers in common law States. Taxpayers in common law States can structure their payments so that the ownership and/or economic source of ownership is attributable to the spouse requesting (or who has obtained) relief under section 6015, while continuing a jointly financed lifestyle. If the electing spouse in a common law State pays the liability attributable to the nonelecting spouse with income/ assets traceable to the electing spouse, he or she is entitled to a refund of those amounts.
The third problem is that taxpayers in community property States can structure their future payments and continue to enjoy a jointly financed lifestyle (i.e., the majority opinion does not prevent this abuse). As respondent concedes, petitioner is entitled to a refund of the amounts paid with her separate property. Taxpayers in community property States can pay the tax liability attributable to the nonelecting spouse with separate property of the electing spouse and then seek a refund of these amounts.
D. Complexity / Administrative Difficulty
The majority concludes that “petitioner’s approach would lead to a very complex factual analysis to trace” the assets used to make the payments and would lead to “an administrative nightmare that would severely impede collection”. Majority op. p. 59.
The fact that tracing may be complex is not a sufficient reason to disregard the plain language of the statute. Contrary to the majority’s suggestion that this would burden respondent, my proposal, supra, is that the burden of proof would be on petitioner as to this issue (i.e., to prove the economic source of ownership of the payment).
IV. Conclusion
I believe that the majority gives too little consideration to the text of section 6015 and instead digresses into policy matters that are better left to Congress. Additionally, the majority imposes limitations and distinctions not found in the statute. Furthermore, the majority narrowly construes the term “determination”.
We can presume that when Congress enacted section 6015 in 1998 it knew (1) the effects of joint and several liability, (2) the benefits available to persons who qualify for relief from joint and several liability, and (3) the effects that the majority finds objectionable. See majority op. pp. 58-61. These policy choices are for Congress, and not the Court, to make. Our “task is to interpret the statute as best we can, not to second-guess the wisdom of the congressional policy choice.” Mansell v. Mansell, 490 U.S. at 592, 594.
I believe that section 6015(a) and (g) is unambiguous and that community property laws are to be disregarded in determining the amount of the section 6015(g)(1) refund. The IRS’s ability to collect the nonelecting spouse’s liability via section 6321 is distinct from the relief afforded pursuant to section 6015. See secs. 6015 (which is part of Chapter 61, Information and Returns, of the Code), 6321 (which is part of Chapter 64, Collection, of the Code). As in Washington v. Commissioner, 120 T.C. 137 (2003), I believe that Mrs. Ordlock’s relief is not limited merely to relief from joint and several liability — which is very little relief indeed as, per the majority, respondent can levy on her wages, her bank accounts, and her other assets, which are community property under State law, to satisfy liabilities she was “relieved” from pursuant to section 6015.
Respectfully, I dissent.
Swift, Wells, Colvin, and Foley, JJ., agree with this dissenting opinion.I note that in the notice of determination respondent determined the amount of relief petitioner was entitled to pursuant to sec. 6015(b), not just that petitioner was entitled to relief, and that respondent clarified his determination by stipulating the amount of petitioner’s liability for the years in issue after application of sec. 6015(b).
The court also rejected Mrs. McIntyre’s argument that California community property law gave her a vested interest in half of her husband’s pension benefits and the IRS could not therefore levy on this half of the pension benefits. McIntyre v. United States, 222 F.3d 655, 658-659 (9th Cir. 2000). The court relied on Cal. Fam. Code sec. 910(a) and the reasoning in Babb v. Schmidt, 496 F.2d 957 (9th Cir. 1974), and held that creditors have recourse over the whole of the community property. Id. The issue before us, regarding the preemption of community property laws by sec. 6015(a) and (g), and the application of sec. 6015, however, were not at issue in McIntyre.
Sec. 7491(a) is inapplicable to this case as respondent’s examination of the 1982, 1983, and 1984 tax years began before July 22, 1998. See Higbee v. Commissioner, 116 T.C. 438, 440 (2001).