On December 8, 2021, the Tax Court issued its opinion in Coggin v. Commissioner, 157 T.C. No. 12. The primary issue presented in Coggin was whether the Tax Court lacked jurisdiction in a refund suit for years in which the District Court had previously acquired jurisdiction.

Background

The petitioner filed amended returns for tax years 2001 through 2009, claiming refunds for 2001 through 2007. The IRS rejected the refund requests for 2003, 2004, and 2007. The petitioner subsequently filed a complaint in the U.S. District Court seeking refunds for years 2001-2007. The Government, as defendant, filed a counterclaim against the petitioner seeking to reduce the petitioner’s remaining balances due for years 2002-09 to judgment.

The District Court granted summary judgment in favor of the IRS, dismissing the petitioner’s refund claims; however, the District Court retained jurisdiction over the IRS’s counterclaim. As a defense to the counterclaim, the petitioner sought innocent spouse relief under IRC § 6015 for years 2001-09, and she brought a petition before the Tax Court seeking such relief. The IRS answered the petition and filed a motion to dismiss for lack of jurisdiction.

Holding, in a Nutshell

If and when a District Court acquires jurisdiction in a suit for refund, it acquires jurisdiction over the entire liability for that tax year. This means that a District Court has exclusive jurisdiction over the taxpayer’s claim for recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected. Thus, the IRS’s motion to dismiss for lack of jurisdiction was granted as to years 2001-2007 (the years for which the petitioner brought the claim for refund in District Court) and denied as to years 2008 and 2009 (years in which the District Court had not acquired jurisdiction).

Factual Background

Mr. and Mrs. Coggin were married for 61 years before Mr. Coggin kicked the bucket in 2011. Each spouse owned a 50% interest in an S corporation. During their marriage Mr. Coggin untimely filed joint returns for years 2001-2009. For years 2001-2007, Mr. Coggin made untimely full payments of the tax liabilities with the tax returns but did not pay any penalties, additions to tax, or interest. Mr. Coggin made a partial payment for year 2008 and made no payments for year 2009. As a result, the outstanding tax liabilities, penalties, and additions to tax for all relevant years were assessed against both spouses.

Mrs. Coggin, the petitioner, learned about the joint returns and tax liabilities arising from them only weeks before her husband’s death. At the advice of her attorney the petitioner subsequently filed individual Forms 1040 for tax years 2001-2009 (electing “married filing separately” status) on which returns she reported her 50% shares of the income from the S corporation. The separate returns for years 2001-2007 reported that Ms. Coggin was entitled to refunds for those years. Since full payment had not been made for 2008 or 2009, she did not seek refunds for those years.

The separate returns did not claim innocent spouse status or discuss IRC § 6015. For years 2003, 2004, and 2007 the IRS mailed notices of disallowance pursuant to IRC § 6532(a) to the petitioner, disallowing the claims on the separate returns.

In February 2016 two years after the notice of disallowance for year 2007 was mailed, Mrs. Coggin filed a complaint against the United States in the U.S. District Court for the Middle District of North Carolina seeking tax refunds for years 2007 and 2009. She later filed first and second amended complaints that sought a refund for year 2007 only. She then, in July 2017, filed a third (and ultimately operative) amended complaint that sought refunds for years 2001-07.

Mrs. Coggin’s refund suit in the District Court alleged that her husband had signed her name to the joint returns without her knowledge or consent, the joint returns were thus invalid, and she was entitled to refunds on the basis of the separate returns. Her pleadings do not mention her innocent spouse status or refer to relief under IRC § 6015. In its answer to Mrs. Coggin’s third amended complaint the United States included a counterclaim in the District Court to reduce her liabilities for the 2002 through 2009 tax years to judgment.

In April 2018 the United States moved for summary judgment in the District Court regarding Mrs. Coggin’s refund claims for years 2001-07. In July 2018 the District Court granted the United States’ motion for summary judgment. The District Court has not entered a final appealable order or judgment as to Mrs. Coggin’s refund claims; nor does the District Court’s order address years 2008 and 2009.

In October 2018, the petitioner submitted Form 8857, Request for Innocent Spouse Relief under IRC § 6015 to the IRS for years 2001-09. A few days later Mrs. Coggin filed a motion to stay the proceeding with the District Court. This was Ms. Coggin’s first mention of innocent spouse status in the District Court case. In January 2019 the District Court granted her motion for stay. In September 2019, Mrs. Coggin’s request for innocent spouse relief was denied.

On December 6, 2019, Ms. Coggin filed a petition with this Court pursuant to IRC § 6015(e), seeking review of the denial of her request for innocent spouse relief. Mrs. Coggin did not receive a notice of final determination of relief or other communication from the IRS regarding her request for innocent spouse relief. In the petition Mrs. Coggin asked the Tax Court to determine that: (1) she is entitled to innocent spouse relief with respect to years 2001-09; (2) her tax, penalty, and interest liabilities are abated with respect to years 2001-09; and (3) she has no tax, penalty, and/or interest liabilities owed with respect to years 2001-09.

When this petition was filed, six of Ms. Coggin’s refund claims (years 2002-07) had been dismissed by the District Court but final judgment had not been entered. Accordingly, Ms. Coggin’s refund claims and the United States’ counterclaim for 2002-09 remained pending before the District Court.

Tax Court’s Jurisdiction Over Innocent Spouse Relief

The Tax Court is a court of limited jurisdiction.^[1] It exercises its jurisdiction only to the extent authorized by Congress.^[2] Congress vested the Tax Court with jurisdiction to determine the appropriate relief from joint and several liability on a joint return under IRC § 6015 (commonly known as “innocent spouse relief”) in certain circumstances.^[3]

There are three jurisdictional bases for the Tax Court to review a taxpayer’s entitlement to innocent spouse relief. A taxpayer may seek relief from joint and several liability on a joint return by raising the matter as an affirmative defense in a petition for redetermination invoking the Court’s deficiency jurisdiction under IRC § 6213(a).^[4] In addition a taxpayer may file a stand-alone petition seeking relief from joint and several liability on a joint return where the IRS has issued a final determination denying the taxpayer’s claim for such relief or the IRS has failed to rule on the taxpayer’s claim within six months of its filing. Finally, a taxpayer may request relief from joint and several liability on a joint return in a petition for review of a lien or levy action in the context of a collection due process case under IRC § 6330(d)(1).^[5]

The petition in this case was filed with the Tax Court as a “stand-alone petition” seeking relief from joint and several liability on a joint return under IRC § 6015.^[6] In such a proceeding IRC § 6015(e)(1)(A) provides that “[i]n addition to any other remedy provided by law, the individual may petition the Tax Court (and the Tax Court shall have jurisdiction) to determine the appropriate relief available to the individual under this section” so long as certain statutory conditions are met.^[7] IRC § 6015(e)(1)(A) also provides that the petition to the Tax Court is to be filed at any time after the earlier of (a) within 90 days after the IRS’s mailing of a notice of his final determination of relief to the taxpayer or (b) at any time after six months have passed since the taxpayer’s election is filed or request for innocent spouse relief is made with the IRS.

However, IRC § 6015(e)(3) provides a limitation on the Tax Court’s jurisdiction. Specifically, if a suit for refund is begun by either individual filing the joint return pursuant to IRC § 6532, then the Tax Court will lose jurisdiction of the individual’s action under this section to whatever extent jurisdiction is acquired by the district court or the United States Court of Federal Claims over the taxable years that are the subject of the suit for refund, and the court acquiring jurisdiction shall have jurisdiction over the petition filed under this subsection.^[8]

Other Remedies for Innocent Spouse Claims

Two additional provisions in IRC § 6015 indicate that innocent spouse claims may be brought in a legal forum other than the Tax Court. First, the text “any other remedy provided by law” found in IRC § 6015(e)(1)(A) indicates that there are other instances in which innocent spouse relief may be sought. Second, IRC § 6015(g)(2) provides an exception to the general rule of res judicata and in so doing indicates that an innocent spouse claim may be “an issue in” a prior proceeding. Specifically, “if a decision of a court in any prior proceeding for the same taxable year has become final, such decision shall be conclusive except with respect to the qualification of the individual for relief which was not an issue in such proceeding.”^[9]

The type of “prior proceeding” is not defined in IRC § 6015(g)(2); though, the statute indicates it must be in a “court”. The proceeding must address a “taxable year,” it must involve a joint liability, and it must be the sort of proceeding from which a decision might “become final” in such a manner that res judicata would preclude subsequent relief. Stated differently, the prior proceeding must be a lawsuit in which the “res” (matter) to be adjudicated is a joint tax liability.

Apart from the exception provided under IRC § 6015(g)(2), a final judgment in any such proceeding would foreclose any future attempt by the taxpayer to reduce her liability (for the same tax period as previously litigated) on account of innocent spouse relief.^[10] The determination of liability would be judicata (“having already been determined”), whether or not innocent spouse relief had been litigated in the prior suit, because res judicata bars not only contentions actually litigated but also anything “which might have been offered” for the same tax period.^[11] That an exception was needed in IRC § 6015(g)(2) indicates that there are indeed lawsuits in which an innocent spouse relief claim can “be offered.”

The most familiar “other remedy” is claiming innocent spouse relief as an affirmative defense in a deficiency case before the Tax Court.^[12] An innocent spouse claim may also be raised as a defense in a District Court collection action,^[13] Additionally, other courts have held that “other remedy” includes a bankruptcy case.^[14]

Innocent Spouse Issues in a Refund Suit

Although it is not a settled question, some District Courts have held that if a taxpayer files a jurisdictionally valid refund suit after her innocent spouse claim has been denied by the IRS, the District Court indeed has jurisdiction to determine the taxpayer’s entitlement to a refund on the basis of innocent spouse relief.^[15] Other courts have concluded that the District Court will obtain jurisdiction over an innocent spouse claim for relief in more limited circumstances, that is, only when the taxpayer files a refund suit in the District Court while an IRC § 6015 petition is pending with the Tax Court.^[16] In such cases the Tax Court loses jurisdiction over the taxpayer’s claim for innocent spouse relief to whatever extent jurisdiction is acquired by the District Court or the Court of Federal Claims.^[17]

The Pendency of the District Court Refund Suit for Years 2001-2007

When a suit for refund is filed in a District Court or in the Court of Federal Claims by either individual filing the joint return pursuant to IRC § 6532, the Tax Court loses jurisdiction over a taxpayer’s action under IRC § 6015 to whatever extent a District Court (or the Court of Federal Claims) acquires jurisdiction over the taxable years that are subject of the suit for refund.^[18] Mrs. Coggin initiated a jurisdictionally valid refund suit in the District Court for years 2001-2007. She now seeks innocent spouse relief for years 2001-2009 in the Tax Court, while her court action involving some of the same years remains pending in the District Court.

IRC § 6015(e)(3) provides that “[i]f a suit for refund is begun” the “Tax Court shall lose jurisdiction.” Where, as here, a District Court acquires jurisdiction in a suit for refund, it acquires jurisdiction over the entire liability for that tax year including the taxpayer’s claim for recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected.^[19]

As evidenced by its July 2018 order, the District Court retained jurisdiction over Mrs. Coggin’s claim for innocent spouse relief under IRC § 6015. Although the District Court dismissed her refund claims for years 2001-2007 after ruling on their merits, the District Court has not entered judgment, it has not ruled on Mrs. Coggin’s claim for innocent spouse relief, and it has stayed the case pending administrative review of her request for innocent spouse relief.

Although Mrs. Coggin filed her Form 8857 with the IRS requesting relief from joint liability for years 2001-2009, waited six months, and filed with the Tax Court a petition seeking that relief, she met the prerequisites for invoking the Tax Court’s jurisdiction for years 2001-2009; because Mrs. Coggin’s refund action pending in the District Court overlaps with some of the tax years before this Court—namely years 2001-2007—the Tax Court concluded that it lost jurisdiction, and the District Court acquired jurisdiction over her petition under IRC § 6015(e)(3) for those same tax years. Accordingly, the Tax Court granted the IRS’s motion, in part, with respect to years 2001-07, and dismissed the case as to such years.

The Pendency of the District Court Counterclaim for Years 2008 and 2009

However, the Tax Court loses jurisdiction only to the extent that the District Court “acquired” jurisdiction in a suit for refund.^[20] The District Court has not held that it has acquired jurisdiction as to Mrs. Coggin’s refund claims for 2008 and 2009. Further, the District Court cannot actually acquire jurisdiction over such years, because full payment of the tax liability has not been made.^[21] Since the District Court does not have (nor does it claim to have) refund jurisdiction for these two years, this Court does not lose jurisdiction with respect to years 2008 and 2009.

IRC § 6015(e)(3) does not address this overlap in jurisdiction and therefore leaves the Tax Court to consult principles of comity to decide whether both courts should go forward on these common issues or, if not, which one should proceed. The District Court’s order suggests that such court anticipated that the Tax Court will proceed in considering Mrs. Coggin’s innocent spouse relief claim to the extent of the Tax Court’s jurisdiction. Consequently, the Tax Court held that it would do so. Accordingly, the Tax Court denied the IRS’s motion to dismiss with respect to Mrs. Coggin’s claims for years 2008 and 2009.

(157 T.C. No. 12) Coggin v. Commissioner

Footnotes:

1. Naftel v. Commissioner, 85 T.C. 527, 529 (1985). ↑
2. Id. ↑
3. IRC § 6015(e); see King v. Commissioner, 115 T.C. 118, 121-122 (2000); Corson v. Commissioner, 114 T.C. 354, 363-364 (2000). ↑
4. See Butler v. Commissioner, 114 T.C. 27, 287-288 (2000). ↑
5. See IRC § 6330(c)(2)(A)(i), (d); IRC § 6320(c). ↑
6. See IRC § 6015(e)(1)(A); Mora v. Commissioner, 117 T.C. 279 (2001); Fernandez v. Commissioner, 114 T.C. 324 (2000). ↑
7. Maier v. Commissioner, 119 T.C. 267, 270-271 (2002), aff’d, 360 F.3d 361 (2d Cir. 2004). ↑
8. IRC § 6015(e)(3)(A)-(B). ↑
9. IRC § 6015(g)(2). ↑
10. See Commissioner v. Sunnen, 333 U.S. 591, 597 (1948). ↑
11. Id. (quoting Cromwell v. Cty. of Sac, 94 U.S. 351, 352 (1876)). It should be noted, however, that in the instant case, no judgment has yet been entered in the District Court; therefore, the doctrine of res judicata has no current effect. ↑
12. See Koprowski v. Commissioner, 138 T.C. 54 (2012); King, 115 T.C. at 121-22. ↑
13. See Thurner v. Commissioner, 121 T.C. 43 (2003). ↑
14. See In re Bowman, 632 B.R. 64, 65-66 (Bankr. E.D. La. 2021). ↑
15. See Hockin v. United States, 400 F. Supp. 3d 1085 (D. Or. 2019); Jones v. United States, 322 F. Supp. 2d 1025 (D. N.D. 2004); but see Chandler v. United States, 338 F. Supp. 3d 592, 602 (N.D. Tex. 2018) (finding to the contrary where an IRC § 6015 petition was not filed in the Tax Court). ↑
16. See United States v. LeBeau, 2012 WL 835160 (S.D. Cal. 2012); United States v. Boynton, 2007 WL 737725 (S.D. Cal. 2007). ↑
17. IRC § 6015(e)(3). ↑
18. IRC § 6015(e)(3)(A). ↑
19. See 28 U.S.C. sec. 1346(a)(1) (2018); Flora v. United States, 357 U.S. 63, 71-72 (1958); Lewis v. Reynolds, 284 U.S. 281, 283 (1932). ↑
20. See IRC § 6015(e)(3)(A). ↑
21. See Flora, 357 U.S. at 71-72. ↑

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