dissenting: I agree with the majority’s statement that “The crux of this dispute is the application of the last sentence of section 6015(a) and the language of section 6015(g)(1).” Majority op. p. 51. However, I disagree with the majority that the wording and structure of section 6015 and its legislative history support the majority’s conclusion that a person who resides in a community property State and who qualifies for relief under section 6015 is not entitled to a refund of any part of the community property used to satisfy her spouse’s Federal income tax liability. The principal reasons for my disagreement are summarized below.
Section 6015(a) Unequivocally Provides That “Any determination [under section 6015] shall be made without regard to community property laws.”
As the majority correctly points out, Congress in 1998 enacted section 60151 as a means of expanding relief to innocent spouses. See H. Conf. Rept. 105-599, at 249-255 (1988), 1998-3 C.B. 747, 1003-1009; S. Rept. 105-174, at 55-60 (1998), 1998-3 C.B. 537, 591-596; H. Rept. 105-364 (Part 1), at 60-62 (1997), 1998-3 C.B. 373, 432-434. Section 6015 replaced section 6013(e), which was often criticized as too narrowly crafted to provide broad-based relief from liability to deserving taxpayers.
The last sentence of section 6015(a) unequivocally provides that “Any determination under this section shall be made without regard to community property laws.” Section 6015 does not define the term “determination”, nor does it contain any words limiting the types of determinations to which the last sentence of subsection (a) refers. In particular, section 6015 contains no language limiting the term “determination” to determinations made under subsection (b), (c), or (f), although Congress could very easily have inserted such a limitation if it had intended to enact one.
Under well-recognized principles of statutory interpretation, if a statute does not define a term, that term is given its ordinary and commonly accepted meaning. See Keene v. Commissioner, 121 T.C. 8, 14 (2003); Payless Cashways, Inc. v. Commissioner, 114 T.C. 72, 77-28 (2000). The term “determination” is defined in Webster’s Third New International Dictionary (1971) to mean “the settling and ending of a controversy” and, alternatively, “the resolving of a question by argument or reasoning”. It is also defined in Black’s Law Dictionary (7th ed. 1999) to mean “A final decision by a court or administrative agency”. Under any of these definitions, a decision regarding whether a taxpayer qualifies for a refund under section 6015(g) is a determination.
The majority nevertheless concludes that a decision as to whether a taxpayer is entitled to a refund under section 6015(g) is not a determination within the meaning of section 6015(a). The majority’s analysis begins with “the statutory use of the word ‘determination’ in the context of community property laws and relief from joint liability”, majority op. p. 53, and then traces the use of the term “determination” in former section 6013(e) and in section 6015, and in the legislative history of those sections, see majority op. pp. 53-54. Former section 6013(e)(5) contained a special rule that specifically provided that “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.” Section 6015(a) does not contain any language modifying or limiting the word “determination”. The majority attempts to find a limitation in the structure and wording of the rest of section 6015 and focuses on the fact that the words “determine” and “determination” do not appear in section 6015(g)(1). See majority op. p. 54-55.
Former section 6013(e)(5) specifically described a determination that had to be made without regard to community property law. However, the existence of a limitation in former section 6013(e)(5) is not sufficient to support the majority’s conclusion that section 6015(a) is also so limited. Although a comparable limitation to that contained in former section 6013(e)(5) was included in the House version of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, 112 Stat. 685, see Internal Revenue Service Restructuring and Reform Act of 1997, H.R. 2676, 105th Cong., 1st Sess. sec. 321 (1997); H. Rept. 105-364 (Part 1), supra at 19, 1998-3 C.B. at 391, Congress did not include in the enacted version any limitation upon the types of determinations that, under section 6015(a), must be made without regard to community property laws. Clearly, Congress knew how to craft a limitation had it wanted to do so. See, e.g., former sec. 6013(e)(5). Because I can discern no limitation from either the language or structure of section 6015 or from its legislative history, I conclude that a determination whether a taxpayer is entitled to a refund under section 6015(g) is a determination within the meaning of the last sentence of section 6015(a) and must be made without regard to community property laws.
The Description of “problems and inconsistencies” in the Majority Opinion Confuses the Service’s Right To Collect With the Service’s Obligation To Refund.
The majority points out that the Internal Revenue Service (Service) has the right to collect an unpaid tax liability from community property even if spouses file separate returns and only one spouse is liable for unpaid taxes. Majority op. p. 58. The majority contends that, under petitioner’s section 6015 argument, if married spouses filed jointly, the Government could not collect out of community assets without some tracing mechanism when one spouse received section 6015 relief. Majority op. pp. 58-59. I disagree.
The issue before us involves petitioner’s claimed right to a refund of some portion of the tax payments made with community property. The issue is not whether the Service has a right to collect an unpaid Federal tax liability out of community property. Under California law, a creditor is entitled to collect an unpaid debt out of community property even if the debt is owed solely by one spouse. See Cal. Fam. Code sec. 910 (West 2004). That right has been exercised by the Service and upheld by the Federal courts. See, e.g., McIntyre v. United States, 222 F.3d 655 (9th Cir. 2000). A conclusion that a determination under section 6015(g) must be made without regard to community property law would not change California community property law or restrict the Service from continuing to collect from community property the liability owed by petitioner’s husband. Such a conclusion, however, might require the Service to refund to petitioner a part of what it collected from community property.
Determining a Refund Under Section 6015(g)
Although I disagree with the analysis and conclusion of the majority regarding the proper interpretation of section 6015, I initially was troubled by the lack of guidance in section 6015(g) regarding how we determine whether a refund or credit is warranted. However, upon further thought, I believe that the requirement in section 6015(a) to make determinations under section 6015 without regard to community property law gives us enough guidance to enable us to make the determination required by section 6015(g).
Section 6015(g)(1) provides that “Except as provided in paragraphs (2) and (3), notwithstanding any other law or rule of law (other than section 6511, 6512(b), 7121, or 7122), credit or refund shall be allowed or made to the extent attributable to the application of this section.” Section 6511 contains limitations on credit or refund including a time limit for filing a claim, sec. 6511(a), and a limitation on the allowance of credits and refunds, sec. 6511(b)(1) and (2). Section 6512(b) contains provisions outlining our overpayment jurisdiction in deficiency cases, including a limitation on the amount of the credit or refund. Sec. 6512(b)(3). Section 7121 (closing agreements) and section 7122 (compromises) authorize the Service to enter into agreements to resolve a taxpayer’s tax liability. I interpret section 6015(g) to mean that we must take the provisions of sections 6511, 6512(b), 7121, and 7122 into account in making our determination regarding a refund or credit, but not any other law or rule of law that might operate to restrict the taxpayer’s right to a refund or credit. We must make the determination regarding the taxpayer’s right to a refund or credit without regard to community property law. Sec. 6015(a).
If community property law is disregarded and if the taxpayer can establish that he or she has satisfied the refund requirements set forth in sections 6511 and 6512, it seems logical to me that we must trace the source of the tax payments to determine the amount of the refund. If the payments are traced to income earned by one or both spouses, the income would be attributed to the person who earned it. If the payments are traced to the proceeds from the sale of property and the property is subject to titling, then that property would be allocated in accordance with title and applicable State law. For example, under California law, every interest created in favor of several persons in their own right is an interest in common, unless acquired by them in partnership for partnership purposes, declared in its creation to be a joint interest, or acquired as community property.2 Cal. Civ. Code sec. 686 (West 1982). When two or more people take title to property as tenants in common under an instrument silent as to their respective shares, a presumption arises, which may be overcome by contrary evidence, that their shares are equal. Caito v. United Cal. Bank, 576 P.2d 466, 472 (Cal. 1978); Anderson v. Broadwell, 6 P.2d 267, 268 (Cal. Ct. App. 1931). When the presumption is overcome, in the absence of other controlling facts, the respective interests must be determined by the relative proportion of the purchase price paid by each. Anderson v. Broadwell, supra at 268.
If we disregard community property law in making our determination under section 6015(g), it is both logical and consistent with the directive in section 6015(a) to analyze petitioner’s interest in property that is owned jointly with her husband as if she were an unmarried tenant in common under California law. This form of joint ownership is the closest in character to a community property interest with no survivorship right under California law.
The Need for Remedial Legislation
The majority opinion deprives taxpayers in community property States who are otherwise entitled to relief under section 6015 of the same relief afforded to taxpayers in common law States. Under the majority opinion, a taxpayer who is granted relief under section 6015(b) or (f)3 will be entitled to a refund (assuming other refund requirements are met) only if the taxpayer’s separate property was used to satisfy all or a portion of the spouse’s tax liability. Unlike a taxpayer’s joint property interests in a common law State, a taxpayer’s community property interest will remain a collection source and the taxpayer will have no right to a refund under section 6015(g) with respect to community property used to satisfy the spouse’s tax liability. Given the remedial nature of section 6015 and Congress’s avowed purpose of broadening a taxpayer’s ability to obtain relief from joint and several liability, such a result cannot be consistent with Congress’s intent.
In light of the majority opinion, Congress should revisit section 6015 and provide us with guidance regarding the proper application of section 6015 to taxpayers who reside in community property States. In the meantime, the majority opinion operates as a strong incentive for taxpayers in community property States to take advantage of State laws that may permit them to convert community property into other forms of joint ownership.
Colvin, Foley, and Gale, JJ., agree with this dissenting opinion.Sec. 6015 was enacted in the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3201, 112 Stat. 734.
A community property interest is one form of joint ownership that is recognized under California law. See Cal. Fam. Code sec. 750 (West 2004). The other forms of joint ownership are joint tenancies, tenancies in common, and community property with a right of survivorship. Id. Under California law, property owned jointly by a husband and wife can take any of the above forms as long as the legal requirements are met. In addition, a husband and wife, even if they are still married, can sever the community and convert community property into other forms of joint property.
Sec. 6015(g)(2) provides that no credit or refund shall be allowed as a result of an election under subsec. (c).