Bankruptcy Courts Do Not Have Jurisdiction to Provide Equitable Tax Relief to Innocent Spouses In Geary v. United States, et al., the U.S. Bankruptcy

Bankruptcy Courts Do Not Have Jurisdiction to Provide Equitable Tax Relief to Innocent Spouses In Geary v. United States, et al., the U.S. Bankruptcy

Court for the Western District of Pennsylvania held that bankruptcy courts do not have jurisdiction to grant so-called “innocent spouse relief” under Section

6015(f)(1) of the Internal Revenue Code. Spouses that file joint federal income tax returns incur joint and several liability with respect to the tax computed on their aggregate income. Through Section 6015(f)(1), the IRC allows the Secretary of the Treasury to relieve a spouse from such liability if it would be equitable to do so.

Section 6015(e)(1)(A) further provides that, if the Secretary denies equitable relief or fails to make a determination within six months, the Tax Court shall have jurisdiction to gran such relief, if appropriate, “[i]n addition to any other remedy provided by law […].” In Geary, the bankruptcy court noted that some courts have construed Section 505(a) of the Bankruptcy Code to fall under the “other remedy provided by law” alluded to in Section 6015(e)(1)(A) of the IRC.

Section 505(a) of the Bankruptcy Code allows bankruptcy courts to, under certain conditions, “determine the amount or legality of any tax […].” In this case, the court concluded that Section 505(a) did not apply.

First, the debtor was not arguing that the taxes are illegal, but rather that they should be waived for equitable reasons. In this context, the court stressed the difference between equitable relief and legal remedies. Second, the court also noted that the debtor was not seeking a determination of the amount of the tax, since the IRS had already done so.