Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.
Interpreting a Visigothic Spanish Civil Law Tradition to Trump the Internal Revenue Code: Section 6015's Uneven Application in Community Property States
Britt Cass Steckman
In Ordlock v. Commissioner, the United States Court of Appeals for the Ninth Circuit, in affirming a decision by the United States Tax Court, held that the Internal Revenue Code did not preempt state community property laws for purposes of issuing a refund and that therefore a taxpayer who qualified as an innocent spouse under the criteria enumerated in section 6015 was not entitled to a refund of any tax fees or penalties that she had paid out of community funds to cover her husband’s tax liabilities. This decision has important implications for taxpayers seeking innocent spouse relief in California as well as in other community property states. Additionally, it demonstrates the Ninth Circuit’s view that state community property law, a body that exists largely within the borders of its jurisdiction, dominates, even when there is clear congressional intention to preempt.
This Note will demonstrate that the Ninth Circuit’s conclusion in Ordlock was wrongly decided because the decision will lead to inequitable results for certain taxpayers in community property states, an outcome that contravenes congressional intent. Part II will introduce community property law, the innocent spouse rule, and demonstrate that Congress has been trying to harmonize the taxation of married couples in states with different property law traditions for decades. Next, Part III will lay out the procedural history of Ordlock. Finally, Part IV will analyze the law and the Ordlock court’s reasoning, concluding that the plain language of the section of the Code at issue, its legislative history, principles of horizontal equity, and the intent underlying California’s community property law statute all work in support of the reading advocated by the taxpayer.