SECTION 2. BACKGROUND

.01 Section 6013(d)(3) provides that married taxpayers who file a joint return under § 6013 will be jointly and severally liable for the tax arising from that return. For purposes of § 6013(d)(3), and this revenue procedure, the term “tax” includes additions to tax, interest, and penalties. See §§ 6601(e)(1) and 6665(a)(2). .02 Section 3201(a) of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. No. 105–206, 112 Stat.742 (RRA), enacted § 6015 of the Code, which provides relief in certain circumstances from the joint and several liability imposed by § 6013(d)(3). Sections 6015(b) and 6015(c) specify two sets of circumstances under which relief from joint and several liability is available. Where relief is not available under § 6015(b) or 6015(c), § 6015(f) authorizes the Secretary to grant equitable relief if, taking into account all the facts and

circumstances, the Secretary determines that it is inequitable to hold a requesting spouse liable for any unpaid tax or any deficiency (or any portion of either). Section 3201(b) of RRA amended § 66(c) to add an equitable relief provision similar to § 6015(f). Section 66(c) applies to married individuals with community property income, and provides certain conditions under which an individual may be relieved of separate return liability for items of community income attributable to the individual’s spouse. The enactment of § 6015 and the amendment of § 66(c) are effective with respect to any liability for tax arising after July 22, 1998, and any liability for tax arising on or before July 22, 1998, that is unpaid on that date.

.03 Under § 6015(b), a requesting spouse may elect relief from joint and several liability if the following five conditions are met: (1) a joint return was filed; (2) on the return there was an understatement of tax attributable to erroneous items of the spouse with whom the requesting spouse filed the return (“nonrequesting spouse”); (3) the requesting spouse establishes that in signing the return, the requesting spouse had no knowledge or reason to know that there was an understatement of tax; (4) taking into account all the facts and circumstances, it is inequitable to hold the requesting spouse liable for the understatement; and (5) the requesting spouse elects the application of § 6015(b) no later than two years after the date of the first collection activity after July 22, 1998, with respect to the requesting spouse. If all five conditions would be met except for the fact that the requesting spouse had no knowledge or reason to know of only a portion of the understatement, then the requesting spouse may be granted relief to the extent of that portion of the understatement.

.04 Under § 6015(c), a requesting spouse may elect to allocate a deficiency if the following four conditions are met: (1) a joint return was filed; (2) at the time of the election, the requesting spouse is no longer married to, is legally separated from, or has not been a member of the same household as the nonrequesting spouse at any time during the 12-month period ending on the date the election was filed; (3) the requesting spouse elects the

2000–5 I.R.B. 447 January 31, 2000

portion; and

(c) The requesting spouse will suffer economic hardship if relief is not granted. For purposes of this section, the determination of whether a requesting spouse will suffer economic hardship will be made by the Commissioner or the Commissioner’s delegate, and will be based on rules similar to those provided in § 301.6343–1(b)(4) of the Regulations on Procedure and Administration.

(2) Relief under this section 4.02 is subject to the following limitations:

(a) If the return is or has been adjusted to reflect an understatement of tax, relief will be available only to the extent of the liability shown on the return prior to any such adjustment; and

(b) Relief will only be available to the extent that the unpaid liability is allocable to the nonrequesting spouse.

.03 Factors for determining whether to grant equitable relief . This section 4.03 applies to requesting spouses who filed separate returns in community property states, request relief under § 66(c), and satisfy the applicable threshold conditions of section 4.01. This section 4.03 also applies to requesting spouses who filed joint returns and satisfy the threshold conditions of section 4.01, but do not qualify for relief under section 4.02. The Secretary may grant equitable relief under § 6015(f) or 66(c) if, taking into account all the facts and circumstances, it is inequitable to hold the requesting spouse liable for all or part of the unpaid liability or deficiency. The following is a partial list of the positive and negative factors that will be taken into account in determining whether to grant full or partial equitable relief under § 6015(f) or 66(c). No single factor will be determinative of whether equitable relief will or will not be granted in any particular case. Rather, all factors will be considered and weighed appropriately. The list is not intended to be exhaustive.

(1) Factors weighing in favor of re- lief. The factors weighing in favor of relief include, but are not limited to, the following:

(a) Marital status. The requesting spouse is separated (whether legally separated or living apart) or divorced from the nonrequesting spouse.

(b) Economic hardship . The requesting spouse would suffer economic

.07 Notice 98–61, 1998–51 I.R.B. 13 (Dec. 21, 1998), provided interim guidance to taxpayers seeking equitable relief under § 6015(f) or 66(c). In Notice 98–61, the Service and Treasury Department requested comments from the public by April 30, 1999, regarding the interim guidelines. Notice 99–29, 1999–21 I.R.B. 8 (May 24, 1999), extended the deadline for submitting comments on Notice 98–61 to June 30, 1999.