Robert and Octavia Jones filed a joint income tax return for the year 2000. After they legally separated, the IRS audited the return and assessed a deficiency, which Robert Jones agreed to discharge through an installment payment plan. When he defaulted, however, the IRS began efforts to collect the deficiency from both Robert and Octavia Jones. More than two years after the IRS first began its collection activities, Octavia Jones requested innocent spouse relief from her tax liability under I.R.C. § 6015(f).
The sole question presented is whether I.R.C. § 6015 is ambiguous and Treasury Regulation § 1.6015-5(b)(1), fixing a two-year limitations period for seeking equitable innocent spouse relief under I.R.C. § 6015(f), was reasonable.
The Tax Court found Treasury Regulation 1.6015-5(b)(1) invalid, concluding that Congress, in failing to provide a limitations period for relief under § 6015(f), communicated unambiguously its intent not to provide a limitations period for such relief, and therefore any regulation providing one was inconsistent with Congress’ intent.
The 4th Circuit rejected this however, interpreting I.R.C.§ 6015(f) pursuant to Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) by:
1. Determine whether the statute directly addresses the precise issue. "If the intent of Congress is clear, that is the end of the matter; for the Court, as well as the Agency, must give effect to the unambiguously expressed intent of Congress."
2. If the statute is silent or ambiguous in expressing congressional intent, an Agency’s interpretation is allowable if based on a "permissible construction of the statute."
Because the meaning of § 6015(f) varies depending on the interpretative principle that is applied, the 4th Circuit concluded that the statute is ambiguous and therefore that the analysis does not end at Chevron step one. Under one interpretative principle, courts have concluded that when a statute omits a limitations period, as is the case here, a court or an administrative agency is free to fill the gap and supply one. Alternatively, courts have concluded that when a statute includes particular language in one section but omits it in another, a court can assume, at least as a general matter, that the omission was deliberate. Accordingly, under the second Chevronstep, the 4th Circuit holds that the regulation was based on a "permissible construction of the statute."
What is strange is that the 4th Circuit seems to abdicate its role in deciding which interpretive principle is the correct one. Had it held that one or the other interpretive principle was the rule, the ambiguity would have vanished.
Jones v. IRS.PDF