                      123 T.C. No. 19



                UNITED STATES TAX COURT



           NATALIE W. MCGEE, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 2884-03.             Filed October 18, 2004.



     By notice of determination dated Nov. 22, 2002, R
denied P’s request for relief under the equitable relief
provisions of sec. 6015(f), I.R.C., for the taxable year
1997 solely because P’s request was made more than 2
years after R’s first collection activity on the 1997
account. In May 1999, R withheld a $291 refund P claimed
on her 1998 individual Federal income tax return to
partially offset the unpaid 1997 joint liability. R’s
related notice of offset did not advise P of her rights
to seek relief under sec. 6015, I.R.C.

     Held: The May 1999 offset was a collection action.
Campbell v. Commissioner, 121 T.C. 290 (2003).

     Held, further, The Commissioner is required to
include with collection-related notices, such as the
letter sent to P informing her of the withholding of her
refund for 1998, a description of taxpayers’ rights under
                                 - 2 -

     sec. 6015, I.R.C. Internal Revenue Service Restructuring
     and Reform Act of 1998 (RRA 1998), sec. 3501(b), Pub. L.
     105-206, 112 Stat. 770.

          Held, further, It is inequitable and an abuse of
     discretion for R to apply the 2-year limitation period of
     Rev. Proc. 2000-15, sec. 5, 2000-1 C.B. 447, 449, because
     of R’s failure to send the notice required by RRA 1998
     sec. 3501(b).


     Natalie W. McGee, pro se.

     Marshall R. Jones, for respondent.



                              OPINION


     GOEKE, Judge:   The sole matter before the Court is whether

it was an abuse of discretion for respondent to deny petitioner’s

request for equitable relief from joint liability based on

section 6015(f)1 solely because petitioner made her request more

than 2 years after respondent’s first collection activity.

     Petitioner challenges the application of the 2-year limit on

section 6015(f) requests imposed by Rev. Proc. 2000-15, sec. 5,

2000-1 C.B. 447, 449, when inadequate notice of collection

activity was sent to her, and, as a result, she did not become

aware of her section 6015 rights until after the 2-year period

expired.




     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code currently in effect.
                               - 3 -

Background

     Petitioner timely filed a petition requesting a review of

respondent’s denial of her request for equitable relief under

section 6015(f) following respondent’s denial of such relief in a

notice of determination issued on November 22, 2002.    Respondent

denied relief solely because petitioner’s Form 8857, Request for

Innocent Spouse Relief (And Separation of Liability and Equitable

Relief), was untimely.   Respondent argues that the 2-year period

began with the first collection activity on May 17, 1999.     At

the time the petition was filed, petitioner resided in

Birmingham, Alabama.

     Petitioner and her former spouse filed a joint Federal

income tax return for 1997 (the return).   The return was dated

October 14, 1998.   The return showed a joint tax liability of

$11,252.   The only payment made regarding this liability was the

withholding from petitioner’s earnings as a teacher in the amount

of $3,137, leaving an unpaid liability of $8,328.   Petitioner’s

former spouse was a self-employed veterinarian and no estimated

tax payments were made regarding his business income.    The unpaid

liability for 1997 and related additions to tax and interest are

the source of the present dispute.

     On May 17, 1999, respondent withheld a $291 refund

petitioner claimed on her 1998 individual Federal income tax

return to partially offset the unpaid 1997 joint liability (the
                               - 4 -

offset).   At or about that time, respondent sent petitioner a

letter notifying her of the offset.    This letter was not in

respondent’s administrative file and is not a part of the record,

but based on petitioner’s testimony and the parties’ agreement at

trial, this notice is consistent with a similar notice petitioner

received on August 13, 2001.   Neither of the notices sent to

petitioner regarding the offset advised petitioner of her

potential rights to relief under section 6015.    As a result,

petitioner was unaware of those rights until she hired an

attorney in late 2001 after a problem arose with her credit

rating because a notice of Federal tax lien had been filed on her

residence.   On February 17, 2002, petitioner filed with

respondent an executed Form 8857 with respect to the 1997

liability.

Discussion

     Section 6013(d)(3) provides that married individuals who

file a joint return are jointly and severally liable for the tax

arising from the return.   Section 6015 provides that

notwithstanding section 6013(d)(3), an individual who filed a

joint return may seek relief from joint liability under three

specific alternatives set forth in subsections (b), (c), and (f)

of section 6015.   This case only involves a request for relief

under subsection (f), which provides that the Secretary may

relieve an individual of joint liability if subsections (b) and
                                 - 5 -

(c) do not apply, and, if, based on the facts and circumstances,

it is inequitable to hold the individual liable for the joint

unpaid tax or deficiency.

     Respondent argues it is not necessary to use a facts and

circumstances analysis in this case because petitioner’s request

for relief was not submitted to respondent within 2 years of the

first collection action on the 1997 joint liability.    As a

result, respondent made no analysis of the facts and

circumstances in denying petitioner’s request.

     Section 6015(b)(1)(E) and (c)(3)(B) provides that requests

for relief under each of these two subsections must be made not

later than 2 years after “the Secretary has begun collection

activities.”   Applicable at the time of petitioner’s request for

relief, Rev. Proc. 2000-15, sec. 5, 2000-1 C.B. 447, 449,

provides that requests under section 6015(f) must also be made

within 2 years “of the first collection activity against the

requesting spouse.”2    Section 6015(f) does not impose a

limitation period.     Respondent bases his position on Rev. Proc.

2000-15, sec. 5, maintaining that the offset was a “collection

activity”.   However, respondent also asserts that a “collection-



     2
      Rev. Proc. 2000-15, 2001-1 C.B. 447, is applicable for
requests for relief under sec. 6015 made before July 18, 2002.
Thereafter, secs. 1.6015-0 through 1.6015-9, Income Tax Regs.,
are operative. Since secs. 1.6015-0 through 1.6015-9, Income Tax
Regs., are not applicable to petitioner’s request for relief, we
do not address the regulations here.
                                - 6 -

related notice” was not required to be sent to petitioner because

the offset only merited an “accounting adjustment” notice.    In

other words, respondent asserts the offset was a collection

activity under the revenue procedure but that the notice of the

offset is not a collection-related notice.

     The 2-year limitation period applicable to section 6015(b)

and (c) was added to the Internal Revenue Code by the Internal

Revenue Service Restructuring and Reform Act of 1998 (RRA 1998),

sec. 3201(a), Pub. L. 105-206, 112 Stat. 734.   RRA 1998 sec.

3501, 112 Stat. 770, required that the Commissioner change

collection-related notices to inform individuals subject to joint

liability of their rights to relief under section 6015.   RRA 1998

sec. 3501(b), 112 Stat. 770.3   RRA 1998 sec. 3501 is part of the



     3
      RRA 1998 sec. 3501 provides as follows:

     SEC. 3501. EXPLANATION OF JOINT AND SEVERAL LIABILITY.

          (a) In General.–-The Secretary of the Treasury or
     the Secretary’s delegate shall, as soon as practicable,
     but not later than 180 days after the date of the
     enactment of this Act, establish procedures to clearly
     alert married taxpayers of their joint and several
     liabilities on all appropriate publications and
     instructions.

          (b) Right to Limit Liability.–-The procedures
     under subsection (a) shall include requirements that
     notice of an individual’s right to relief under section
     6015 of the Internal Revenue Code of 1986 shall be
     included in the statement required by section 6227 of
     the Omnibus Taxpayer Bill of Rights (Internal Revenue
     Service Publication No. 1) and in any collection-
     related notices.
                                - 7 -

public law but was not codified.    However, despite not being

incorporated into the Code, RRA 1998 sec. 3501, has the force of

law.    See, e.g., Rochelle v. Commissioner, 116 T.C. 356, 358 n.2

(2001), affd. 293 F.3d 740 (5th Cir. 2002); Smith v.

Commissioner, 114 T.C. 489, 491 (2000), affd. 275 F.3d 912 (10th

Cir. 2001).

       Respondent offers inconsistent meanings of the word

“collection” in the context of offsets as between Rev. Proc.

2000-15, sec. 5, and RRA 1998 sec. 3501(a).    Respondent argues

that collection actions requiring notice only occur when the

taxpayer retains a right to prevent the actual collection action

from occurring.    However, RRA 1998 sec. 3501 makes no such

distinction and requires the Commissioner to send notice

regardless of the type of collection activity that is occurring.

The notice is not intended to preempt collection action; rather,

it is intended to be informative.

       Congress enacted the change to collection-related notices in

connection with the same statutory scheme that added the 2-year

period of limitations to claims made under subsections (b) and

(c) of section 6015.    S. Rept. 105-174, at 59-60 (1998), 1998-3

C.B. 537, 595-596.    The legislative history makes it clear that

Congress imposed the 2-year limitation period as part of a new

statutory mechanism that also requires the Commissioner to alert

taxpayers to their section 6015 rights.    Id.; see also H. Conf.
                               - 8 -

Rept. 105-599, at 251 (1998), 1998-3 C.B. 747, 1005.    In

addition, RRA 1998 sec. 3501 and the legislative history reflect

Congress’s view that knowledge of the relief provisions by

married taxpayers was important to the effective application of

section 6015.   Section 6015 added new options for taxpayers

seeking relief from joint liability.    See King v. Commissioner,

115 T.C. 118, 120 (2000); Corson v. Commissioner, 114 T.C. 354,

359 (2000).   The notice of the offset in this case (the

“accounting adjustment” notice) did not inform petitioner of her

section 6015 rights, and, as a result, petitioner was unaware of

her rights to relief under section 6015 until she hired counsel

in late 2001.

     The incongruity of respondent’s position is untenable.    The

offset was a collection action.   Campbell v. Commissioner, 121

T.C. 290, 292 (2003).   Accordingly, the notice of the offset was

a collection-related notice and should have included the

information required by RRA 1998 sec. 3501(b).

     Respondent asserts that petitioner’s claim is nonetheless

barred by the 2-year limitation period reflected in Rev. Proc.

2000-15, sec. 5.   Rev. Proc. 2000-15, supra, has been cited and

referenced by this Court in determining whether the Commissioner

abused his discretion in determinations regarding section

6015(f).   Campbell v. Commissioner, supra at 292; Hall v.

Commissioner, T.C. Memo. 2004-170.     We have not previously been
                               - 9 -

faced with the Commissioner’s reliance on the 2-year limitation

period when the Commissioner took an inconsistent position in

failing to provide the collection-related notice required by RRA

1998 sec. 3501(a).   In this case, respondent’s treatment of the

offset as a collection action, coupled with his failure to send

petitioner notice of her section 6015 rights as required by RRA

1998 sec. 3501, resulted in petitioner’s failure to seek section

6015(f) relief within 2 years after the first collection action

because she did not know of her rights.    The problem here is not

with the language of the revenue procedure per se, but that the

revenue procedure has been interpreted in this case in a fashion

inconsistent with respondent’s application of the public law, and

that interpretation causes a result that is inconsistent with the

statutory scheme.

     It would be inequitable if respondent could prevent review

of a request for relief under section 6015(f) by failing to

inform petitioner of her right to relief in defiance of a

congressional mandate.   Such a result would be contrary to the

very purpose of section 6015(f), which is to relieve inequitable

situations involving joint liabilities.    Respondent’s

administrative interpretations are given little weight when

inconsistent with a statutory scheme.     United States v. Vogel

Fertilizer Co., 455 U.S. 16, 26 (1982); FEC v. Democratic

Senatorial Campaign Comm., 454 U.S. 27, 30 (1981).    Rev. Proc.
                               - 10 -

2000-15, sec. 5, should not be applied in a manner which

frustrates the legislative intent of section 6015 and the related

public law.

     Accordingly, we hold that the running of the 2-year period

set forth in Rev. Proc. 2000-15, sec. 5, was not commenced by the

collection activity in May 1999.    Respondent’s contrary

interpretation of Rev. Proc. 2000-15, sec. 5, is an abuse of

discretion.4

     In Rochelle v. Commissioner, supra, and Smith v.

Commissioner, supra, we upheld the adequacy of notices of

deficiency despite their failure to state accurately the Tax

Court petition due date where there was no prejudice to the

taxpayers as a result of the Commissioner’s failure to follow the

public law.    The petition due dates in those cases were

statutory, not provided by a revenue procedure.    Regardless, we

specifically stated in Rochelle that “Simply put, this is not a

case of taxpayer prejudice which Congress intended to rectify”.

Rochelle v. Commissioner, 116 T.C. at 363.    Our holding in Smith

relied on the lack of prejudice to the taxpayer, stating: “where

respondent failed to put the petition date on the notice, and

petitioners nevertheless received the notice and filed a petition


     4
      Petitioner also argues that it is inappropriate to have a
strict limitations period on sec. 6015(f) because sec. 6015(f) is
designed to address inequitable situations. Because of our
analysis in this case, it is not necessary for us to reach this
argument.
                             - 11 -

in a timely manner, such notice was valid.” Smith v.

Commissioner, 114 T.C. at 492.

     In the present case, respondent’s failure to follow section

3501(a) resulted in prejudice to petitioner by causing her to

fail to realize that she had rights to relief under section 6015

until more than 2 years after respondent applied her refund.

Unlike the notices of deficiency in Rochelle and Smith, which

notified the taxpayers of the 90-day period and the right to

petition the Tax Court, the notice of offset in the present case

did not give petitioner any information about her rights under

section 6015.

     To reflect the foregoing,

                                        An appropriate order will

                                   be issued.
