FOR IMMEDIATE RELEASE, Contact: (202) 225-7601
February 19, 1998
No. OV-12
Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on Oversight of the Committee on Ways and Means, today announced that the Subcommittee will hold a hearing on the Report to Congress of the Treasury Department on Joint Liability and Innocent Spouse Issues. The hearing will take place on Tuesday, February 24, 1998, in room B-318 Rayburn House Office Building, beginning at 2:00 p.m.
Oral testimony at this hearing will be from invited witnesses only. Witnesses will include individuals testifying on behalf of the Department of Treasury and the U.S. General Accounting Office (GAO). However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing.
BACKGROUND:
Under the Internal Revenue Code, married taxpayers may elect to file their annual income tax returns either jointly or separately. The filing status that the taxpayers elect determines not only the computation of their correct tax, but also their ultimate liability for the proper amount of tax due. Under current law, a married taxpayer who files separately is liable only for the proper amount of tax attributable to his or her own return, and not the tax attributable to his or her spouse's return. However, the decision to file separately generally will result in a higher combined tax liability. By contrast, taxpayers who file a joint return are held jointly and severally liable for the full, correct amount of tax for both spouses for the year in question. Historically, even married couples with only one wage earner often file joint returns in order to benefit from the lower tax rates which may result.
If one spouse has concealed income and failed to report it on a joint return, then it may be unfair to collect the resulting tax liability from the other spouse, if the "innocent" spouse did not know of or benefit from the income. Congress sought to address such instances of unfairness beginning in 1971 by enacting the "innocent-spouse" provisions of the tax law, Section 6013(e). In order to qualify for relief under the current innocent spouse provision, a taxpayer must demonstrate four separate requirements: (1) that a joint return was filed; (2) that the joint return contained a substantial understatement of tax attributable to grossly erroneous items of the other spouse; (3) that the taxpayer did not know, and had no reason to know, of the substantial understatement when he or she signed the joint return; and (4) that it would be unfair to hold the taxpayer liable for the deficiency in income tax attributable to the substantial understatement.
On November 5, 1997, Congress acted again to strengthen the innocent-spouse provision of the tax law when the House passed H.R. 2676, the "Internal Revenue Service (IRS) Restructuring and Reform Act of 1997." H.R. 2676 would improve the operation of the innocent-spouse provision by repealing various statutory dollar thresholds which limit eligibility for relief; by allowing relief for simply erroneous items (rather than limiting relief to "grossly" erroneous items under the current law); and by allowing innocent-spouse relief to be provided on a pro-rata basis (instead of on an 'all or nothing' basis).
In announcing the hearing, Chairman Johnson stated: "The plight of many 'innocent spouses' under current law is nothing less than a disgrace. The House passed IRS Restructuring and Reform Act would mark a big improvement in the innocent-spouse law. We need to review the report of the Treasury Department, which was released after the House acted, to see if it can give us some ideas on how to do more to protect innocent-spouses. "
FOCUS OF THE HEARING:
On July 30, 1996, the President signed into law the Taxpayer Bill of Rights 2, (P.L. 104-168). Section 401 of P.L. 104-168 directed the GAO and the Department of the Treasury to study the innocent spouse issue and report back to Congress within six months. Specifically Treasury was instructed to report on: (1) the effects of changing the liability for tax on a joint return from being joint and several to being proportionate to the tax attributable to each spouse, (2) the effects of providing that, if a divorce decree allocates liability for tax on a joint return filed before the divorce, the Secretary may collect such liability only in accordance with the decree, (3) whether those provisions of the Internal Revenue Code of 1986 intended to provide relief to innocent spouses provide meaningful relief in all cases where such relief is appropriate, and (4) the effect of providing that community income (as defined in section 66(d) of such Code) which, in accordance with the rules contained in section 879(a) of such Code, would be treated as the income of one spouse is exempt from a levy for failure to pay any tax imposed by subtitle A by the other spouse for a taxable year ending before their marriage. The report of the Treasury Department was submitted to Congress on February 10, 1998. A report of the GAO was submitted on March 12, 1997. The Subcommittee will review these reports to determine what legislative action may be appropriate in order to provide meaningful innocent-spouse relief to injured taxpayers. The results may be helpful in guiding Congress to improve H.R. 2676 as it proceeds through the remainder of the legislative process.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Any person or organization wishing to submit a written statement for the printed record of the hearing should submit at least six (6) single-space legal-size copies of their statement, along with an IBM compatible 3.5-inch diskette in ASCII DOS Text or WordPerfect 5.1 format only, with their name, address, and hearing date noted on a label, by the close of business, Tuesday, March 10, 1998, to A.L. Singleton, Chief of Staff, Committee on Ways and Means, U.S. House of Representatives, 1102 Longworth House Office Building, Washington, D.C. 20515. If those filing written statements wish to have their statements distributed to the press and interested public at the hearing, they may deliver 200 additional copies for this purpose to the Subcommittee on Oversight office, room 1136 Longworth House Office Building, at least one hour before the hearing begins.
FORMATTING REQUIREMENTS:
Each statement presented for printing to the Committee by a witness, any written statement or exhibit submitted for the printed record or any written comments in response to a request for written comments must conform to the guidelines listed below. Any statement or exhibit not in compliance with these guidelines will not be printed, but will be maintained in the Committee files for review and use by the Committee.
1. All statements and any accompanying exhibits for printing must be typed in single space on legal-size paper and may not exceed a total of 10 pages including attachments. At the same time written statements are submitted to the Committee, witnesses are now requested to submit their statements on an IBM compatible 3.5-inch diskette in ASCII DOS Text or WordPerfect 5.1 format. Witnesses are advised that the Committee will rely on electronic submissions for printing the official hearing record.
2. Copies of whole documents submitted as exhibit material will not be accepted for printing. Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material not meeting these specifications will be maintained in the Committee files for review and use by the Committee.
3. A witness appearing at a public hearing, or submitting a statement for the record of a public hearing, or submitting written comments in response to a published request for comments by the Committee, must include on his statement or submission a list of all clients, persons, or organizations on whose behalf the witness appears.
4. A supplemental sheet must accompany each statement listing the name, full address, a telephone number where the witness or the designated representative may be reached and a topical outline or summary of the comments and recommendations in the full statement. This supplemental sheet will not be included in the printed record.
The above restrictions and limitations apply only to material being submitted for printing. Statements and exhibits or supplementary material submitted solely for distribution to the Members, the press and the public during the course of a public hearing may be submitted in other forms.
The
Committee seeks to make its facilities accessible to persons with
disabilities. If you are in need of special accommodations, please
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event
(four business days notice is requested). Questions with regard to
special accommodation needs in general (including availability of
Committee materials in alternative formats) may be directed to the
Committee as noted above.