Proposed
Regulation

Regulation 830 CMR 62C.84.1: Spousal Relief From Joint Income Tax Liability (PROPOSED REGULATION)

Date: 04/29/2022
Organization: Massachusetts Department of Revenue
Regulatory Authority: Massachusetts General Laws
Official Version: Published by the Massachusetts Register

PROPOSED REGULATION

830 CMR: DEPARTMENT OF REVENUE
830 CMR 62C.00: STATE TAX ADMINISTRATION
830 CMR 62C.84.1:  Spousal Relief from Joint Income Tax Liability

Table of Contents

(1) Statement of Purpose; Organization

(a)  Statement of Purpose.  830 CMR 62C.84.1 explains the criteria and procedures a taxpayer must follow in applying for spousal relief from joint income tax liability under M.G.L. c. 62C, § 84.  The statute, as amended, provides for three types of relief from joint tax liability for a requesting spouse: innocent spouse relief, separation of liability relief, and equitable relief, each with its own requirements. The statute does not provide for an abatement of tax. Instead, it provides for circumstances in which a requesting spouse may be relieved of liability for the tax.

830 CMR 62C.84.1 is effective for any pending application to which G.L. c. 62C, § 84 applies.

(b)  Organization.  830 CMR 62C.84.1 is organized as follows:

1.   Statement of Purpose; Organization.
2.   Definitions.
3.   General Rule.
4.   Innocent Spouse Relief.
5.   Separation of Liability Relief.
6.   Equitable Relief.
7.   Time and Manner of Application.
8.   Non-Requesting Spouse’s Notice and Opportunity to Participate.
9.   Effect of Prior Proceedings.
10. Effect of Determination.
11.  Appeal of Determination.

(2) Definitions

For the purposes of 830 CMR 62C.84.1, the following terms have the following meanings unless the context requires otherwise:

Assessment, the process of the Commissioner’s determination or verification of the amount of tax, as provided under M.G.L. c. 62C, §§ 24, 25, and 26, imposed and due from a taxpayer under M.G.L. chs. 60A; 62 through 64J, inclusive; 65B and 65C; 121A, § 10; 138, § 21; and the entry of the amount of the tax due in the Commissioner's assessment records; or the taxpayer's calculation and declaration of the tax due, as provided under M.G.L. c. 62C, § 26(a), completed in full on a return, including any amendment, correction, or supplement thereto, by the taxpayer or the taxpayer's representative and duly filed with the Commissioner, in accordance with rules adopted by the Commissioner.

Commissioner, the Commissioner of Revenue or the Commissioner's duly authorized representative.

Department, the Massachusetts Department of Revenue.

Erroneous Item, any item resulting in an understatement or deficiency in tax to the extent that such item is omitted from, or improperly reported (including improperly characterized) on an individual income tax return, including but not limited to improper omissions from income; improper deductions, exemptions, or credits; improper carryovers of attributes; and improper characterizations of items of income or expense.

Joint Return, a joint return of personal income tax as provided under M.G.L. c. 62C, § 6(a).

Non-requesting Spouse, the individual with whom the requesting spouse filed the joint return for the year for which relief from joint income tax liability is sought.

Notice of Assessment, the notification to a taxpayer, under M.G.L. c. 62C, § 31, that the Commissioner has made a deficiency assessment.

Notice of Intention to Assess, the notification to a taxpayer, under M.G.L. c. 62C, § 26(b), that the Commissioner intends to make a deficiency assessment after 30 days.

Requesting Spouse, an individual who filed a joint return and requests relief from Massachusetts personal income tax liability arising from that return under 830 CMR 62C.84.1(4) or 830 CMR 62C.84.1(5).

Tax or Taxes, with respect to personal income tax, any tax, interest, penalty, or addition to tax imposed by M.G.L. c. 62, 62B, and 62C, including any act in addition thereto or amendment thereof.

Understatement, the understated tax resulting from an erroneous item attributable to the non-requesting spouse.  For purposes of this paragraph, the term "tax" excludes interest and penalties.

(3) General Rule

Pursuant to M.G.L. c. 62C, § 6(a), each spouse is jointly and severally liable for the entire amount of tax due on a jointly filed personal income tax return.  However, M.G.L. c. 62C, § 84 allows a requesting spouse to seek relief from joint tax liability where certain criteria are met.  An eligible requesting spouse may apply for innocent spouse relief (pursuant to M.G.L. c. 62C, § 84(b)) and separation of liability relief (pursuant to M.G.L. c. 62C, § 84(c)).  The Commissioner may also grant equitable relief (pursuant to M.G.L. c. 62C, § 84(d)) if he determines, in his sole discretion, that it is inequitable to hold the requesting spouse liable for any unpaid tax or deficiency, and the requesting spouse is not eligible for innocent spouse or separation of liability relief. These three types of relief are addressed respectively at 830 CMR 62C.84.1(4)-(6).  Any determination under 830 CMR 62C.84.1 shall be made without regard to community property laws.

(4) Innocent Spouse Relief

(a)  Request for Relief.  An eligible requesting spouse may apply for innocent spouse relief, pursuant to M.G.L. c. 62C, § 84(b), by submitting an application in the manner prescribed in 830 CMR 62C.84.1(7), not later than two years after the Commissioner has begun collection activities with respect to the requesting spouse.

(b)  Criteria for Eligibility. The Commissioner may grant a requesting spouse relief from liability for an understatement of tax, including interest and penalties, on a joint return if:

(i)    the understatement is attributable to erroneous items of the non-requesting spouse;

(ii)    the requesting spouse establishes that he or she did not know, and had no reason to know, that there was an understatement of tax; and

(iii)   it is inequitable to hold the requesting spouse liable for the deficiency in tax.  In determining whether it would be inequitable to hold the requesting spouse liable, the Commissioner will consider all facts and circumstances including, but not limited to, the factors described in 830 CMR 62C.84.1(4)(e).                

(c)   Apportionment of Relief. In some cases a requesting spouse would be eligible for innocent spouse relief under 830 CMR 62C.84.1(4) but for the application of 830 CMR 62C.84.1(4)(b)(ii) above. In those cases a requesting spouse may establish that in signing the return he or she did not know, and did not have reason to know, the extent of the understatement.  The requesting spouse may be relieved of liability for the portion of the tax, including interest and penalties, for which such facts are established.

(d)   Knowledge or Reason to Know.  A requesting spouse knows, or has reason to know, of an understatement of tax if the requesting spouse actually knew of the understatement, or if a reasonable person in similar circumstances would have known of the understatement.  The Commissioner will consider all facts and circumstances in determining whether a requesting spouse had reason to know of an understatement.  These facts and circumstances include, but are not limited to:

(i)  The nature of the erroneous item and the amount of the erroneous item relative to other items;

(ii)  The couple’s financial situation;

(iii)  The requesting spouse’s educational background and any relevant business experience;

(iv)  The extent of the requesting spouse’s participation in the activity that resulted in the erroneous item;

(v)  Whether the requesting spouse failed to inquire, at or before the time the return was signed, about items presented on the return or omitted from the return that a reasonable person would question; and

(vi)  Whether the erroneous item represented a departure from a recurring pattern reflected in prior years’ returns.

(e)   “Inequitable" Described.  Whether it is inequitable to hold a requesting spouse liable for a deficiency in tax, within the meaning of 830 CMR 62C.84.1, will be determined on the basis of all the facts and circumstances.  In making such a determination, factors that the Commissioner will consider include but are not limited to:

(i)    whether the non-requesting spouse has deserted the requesting spouse;

(ii)    whether the requesting spouse is divorced or separated from his or her spouse; and

(iii)   whether the requesting spouse significantly benefited, directly or indirectly, from the understatement of tax.

For purposes of this paragraph, 830 CMR 62C.84.1(4)(e), maintaining a normal standard of living is not considered a significant benefit.  However, if it is determined that a requesting spouse maintains a standard of living inconsistent with the amount of income reported on the return, then the requesting spouse will be considered to have benefited.

Transfers of property, including property transferred at any time after the year of the understatement of tax, may constitute evidence of direct or indirect benefit.  For example, if a requesting spouse receives property (including life insurance proceeds) from the non-requesting spouse that is beyond normal support and traceable to items omitted from gross income that are attributable to the non-requesting spouse, the requesting spouse will be considered to have received significant benefit from those items.

(5) Separation of Liability Relief

(a)  Request for Relief.  An eligible requesting spouse may apply for separation of liability relief, pursuant to M.G.L. c. 62C, § 84(b), by submitting an application in the manner prescribed in 830 CMR 62C.84.1(7), not later than two years after the Commissioner has begun collection activities with respect to the requesting spouse. If a requesting spouse is eligible and is granted separation of liability relief, his or her liability for any deficiency assessed with respect to a joint return shall not exceed the portion of the deficiency that is properly allocable to him or her  pursuant to M.G.L. c. 62C, § 84(c)(8)-(12).

(b)  Criteria for Eligibility.

(i)  In general. A requesting spouse is eligible to request the application of 830 CMR 62C.84.1(5) only if, (i) at the time the application is filed, he or she is no longer married to, or is legally separated from, the individual with whom the requesting spouse filed the joint return to which the application relates; or (ii) the requesting spouse was not a member of the same household as the individual with whom the joint return was filed at any time during the 12 month period ending on the date the application is filed.

(ii)  Members of the same household.

      a.  Temporary absences.  A requesting spouse and a non-requesting spouse are considered members of the same household during either spouse’s temporary absence from the household if it is reasonable to assume that the absent spouse will return to the household, and the household or a substantially equivalent household is maintained in anticipation of such return.  Examples of temporary absences may include, but are not limited to, absence due to incarceration, illness, business, vacation, military service, or education.

      b.  Separate dwellings.  Spouses who reside in the same dwelling are considered members of the same household.  In addition, spouses who reside in two separate dwellings are considered members of the same household if the spouses are not estranged or one spouse is temporarily absent from the other’s household within the meaning of 830 CMR 62C.84.1(5)(b)(ii)a

(iii)  Relief may be available to both spouses filing the joint return if each spouse is eligible for and applies for relief under this section

(iv)  Fraudulent schemes. An application under 830 CMR 62C.84.1(5) by either spouse that filed a joint return shall be invalid if the Commissioner determines that assets were transferred between the spouses as part of a fraudulent scheme.  In such cases, each spouse is jointly and severally liable for the entire amount of tax due on the return pursuant to M.G.L. c. 62C, § 6.

(c)  Burden of Proof. Each requesting spouse who applies for relief under 830 CMR 62C.84.1(5) shall have the burden of proof with respect to establishing the portion of a deficiency allocable to the requesting spouse.

(d)  Request for relief not valid with respect to certain deficiencies.

(i)  In General.  If the Commissioner determines that a requesting spouse applying for relief under 830 CMR 62C.84.1(5) had actual knowledge, at the time he or she signed the return, of an erroneous item that is allocable to the non-requesting spouse, the allocation of the deficiency attributable to that item is invalid, and the requesting spouse remains liable for the portion of the deficiency attributable to that item. For example, assume that W knew that H received a retirement distribution but improperly reported it as nontaxable on their joint return.  W remains liable for the portion of the deficiency attributable to the distribution. This subparagraph shall not apply where the requesting spouse establishes that he or she signed the return under duress.

(ii)  Omitted income.  In the case of omitted income, knowledge of the item includes knowledge of the receipt of the income.  For example, assume W received $ 5,000 of dividend income from her investment in X Co. but did not report it on the joint return. H knew that W received $ 5,000 of dividend income from X Co. that year. H had actual knowledge of the erroneous item (i.e., $ 5,000 of unreported dividend income from X Co.), and no relief is available under this section for the deficiency attributable to the dividend income from X Co.  This rule applies equally in situations where the other spouse has unreported income although the spouse does not have an actual receipt of cash.

(iii)  Erroneous deductions or credits.  In the case of an erroneous deduction or credit, knowledge of the item means knowledge of the facts that made the item not allowable as a deduction or credit.

(iv)  Fictitious or inflated deductions.  If a deduction is fictitious or inflated, the Commissioner must determine that the requesting spouse actually knew that the expenditure was not incurred, or not incurred to that extent.

(v)  Partial knowledge.  If a requesting spouse had actual knowledge of only a portion of an erroneous item, then relief is not available for that portion of the erroneous item.  For example, if H knew that W received $ 1,000 of dividend income and did not know that W received an additional $ 4,000 of dividend income, relief would not be available for the portion of the deficiency attributable to the $ 1,000 of dividend income of which H had actual knowledge.  A requesting spouse’s actual knowledge (or lack thereof) of the proper tax treatment of an item is not relevant for purposes of a determination  that the requesting spouse had actual knowledge of an erroneous item.  For example, assume H did not know W’s dividend income from X Co. was taxable, but knew that W received the dividend income. Relief is not available under this section.  In addition, a requesting spouse’s knowledge of how an erroneous item was treated on the tax return is not relevant to a determination of whether the requesting spouse had actual knowledge of the item.  For example, assume that H knew of W’s dividend income, but H failed to review the completed return and did not know that W omitted the dividend income from the return. Relief is not available under this section.

(vi)  Knowledge of the source not sufficient.  Knowledge of the source of an erroneous item is not a sufficient basis for a determination of actual knowledge.  For example, assume H knew that W owned X Co. stock, but H did not know that X Co. paid dividends to W that year. H’s knowledge of W’s ownership in X Co. is not a sufficient predicate for the Commissioner to determine that H had actual knowledge of the dividend income from X Co.  In addition, a requesting spouse’s actual knowledge may not be inferred when the requesting spouse merely had reason to know of the erroneous item.  Even if H’s knowledge of W’s ownership interest in X Co. indicates a reason to know of the dividend income, actual knowledge of such dividend income cannot be inferred from H’s reason to know.  Similarly, the Commissioner need not find that a requesting spouse knew of the source of an erroneous item in order to determine that the requesting spouse had actual knowledge of the item itself. For example, assume H knew that W received $ 1,000, but he did not know the source of the $ 1,000. W and H omit the $ 1,000 from their joint return. H has actual knowledge of the item giving rise to the deficiency ($ 1,000), and relief is not available under this section.

(vii)  Factors supporting actual knowledge.  To determine that a requesting spouse had actual knowledge of an erroneous item at the time the return was signed, the Commissioner may rely upon all of the facts and circumstances.  One factor that may be relied upon in determining that a requesting spouse had actual knowledge of an erroneous item is whether the requesting spouse made a deliberate effort to avoid learning about the item in order to be shielded from liability. This factor, together with all other facts and circumstances, may demonstrate that the requesting spouse had actual knowledge of the item, and the requesting spouse would not be entitled to relief with respect to that entire item. Another factor that may be relied upon in determining that a requesting spouse had actual knowledge of an erroneous item is whether the requesting spouse and the non-requesting spouse jointly owned the property that resulted in the erroneous item. Joint ownership is a factor supporting a finding that the requesting spouse had actual knowledge of an erroneous item. A requesting spouse will be considered to have had an ownership interest in an item only if the requesting spouse’s name appeared on the ownership documents, or there otherwise is an indication that the requesting spouse asserted dominion and control over the item.

(viii)  Abuse exception.  If the requesting spouse establishes that he or she was the victim of domestic abuse prior to the time the return was signed, and that, as a result of the prior abuse, the requesting spouse did not challenge the treatment of any items on the return for fear of the non-requesting spouse’s retaliation, the limitation on actual knowledge in 830 CMR 62C.84.1(5)(d) will not apply.  As used herein, “abuse” may include physical, psychological, sexual, or emotional abuse

(e)  Disqualified Asset. Notwithstanding the provisions of 830 CMR 62C.84.1(5)(d), the portion of a deficiency for which the requesting spouse is liable will be increased by the value of a disqualified asset transferred to the requesting spouse.  For purposes of this paragraph, the term “disqualified asset” means any property or right to property that is transferred to a spouse filing an application under this subsection by the other spouse filing a joint return, if the principal purpose of the transfer is the avoidance of tax.  The Commissioner will presume that the principal purpose of a transfer is the avoidance of tax if the transfer is made less than one year before the Commissioner’s notice of intention to assess the tax.  The presumption will not apply to any transfer pursuant to a decree of divorce or separate maintenance, or to any written instrument incident to such a decree.  

(f)  Allocation of Deficiency.

(i)  Allocation of items of deficiency.

       a.   Except as otherwise provided in this section, items giving rise to a deficiency on a joint return shall be allocated to each spouse in the same manner as they would have been allocated if the spouses had filed separate returns for the taxable year.

       b.   An item otherwise allocable to one spouse under 830 CMR 62C.84.1(5)(f)(i)a. shall be allocated to the other spouse to the extent the item gave rise to a tax benefit on the joint return to the other spouse

       c. Erroneous items of income are allocated to the spouse who was the source of the income. Wage income is allocated to the spouse who performed the services producing such wages. Items of business or investment income are allocated to the spouse who owned the business or investment. If both spouses owned an interest in the business or investment, the erroneous item of income is generally allocated between the spouses in proportion to each spouse’s ownership interest in the business or investment, subject to the provisions of 830 CMR 62C.84.1(5)(d). In the absence of clear and convincing evidence supporting a different allocation, an erroneous income item relating to an asset that the spouses owned jointly is generally allocated 50% to each spouse, subject to the provisions of 830 CMR 62C.84.1(5)(d).       

       d.  Erroneous deductions related to a business or investment are allocated to the spouse who owned the business or investment. If both spouses owned an interest in the business or investment, an erroneous deduction item is generally allocated between the spouses in proportion to each spouse’s ownership interest in the business or investment. In the absence of clear and convincing evidence supporting a different allocation, an erroneous deduction item relating to an asset that the spouses owned jointly is generally allocated 50% to each spouse, subject to the provisions of 830 CMR 62C.84.1(5)(d). Deduction items unrelated to a business or investment are also generally allocated 50% to each spouse, unless the evidence shows that a different allocation is appropriate.

       e. The requesting spouse must prove that all of the qualifications for relief under this section are satisfied and that none of the limitations apply.       

       f. The Commissioner may allocate any item between the spouses if the Commissioner determines that the allocation is appropriate due to fraud by one or both spouses.

(ii)    Disallowance of items due to separate return disregarded. If an item of deduction or credit would have been disallowed in its entirety solely because a separate return was filed, the disallowance shall be disregarded and the item shall be computed as if a joint return had been filed and then allocated appropriately between the spouses.

(iii)   Liability of a child on joint return. Any portion of a deficiency relating to the liability of a child of the requesting and non-requesting spouse is allocated jointly to both spouses. For purposes of this paragraph, a child does not include the taxpayer’s stepson or stepdaughter, unless such child was legally adopted by the taxpayer. If the child is the child of only one of the spouses, and the other spouse had not legally adopted such child, any portion of a deficiency relating to the liability of such child is allocated solely to the parent spouse.

(iv)   Ratio of deficiency. A spouse’s portion of a deficiency on a joint return shall bear the same ratio to the total deficiency that the net amount of the items taken into account in computing the deficiency allocable to that spouse under this section bears to the net amount of all items taken into account in computing the total deficiency.  For example, suppose W and H timely file a joint income tax return, and the Commissioner assesses a $12,000 deficiency.  W and H later divorce, and W timely applies to allocate the deficiency.  Four erroneous items give rise to the deficiency: (1) a disallowed $7,000 business deduction allocable to H; (2) $9,000 of unreported income allocable to H; (3) a disallowed $5,000 deduction for educational expenses allocable to W; and (4) a disallowed $3,000 charitable contribution deduction allocable to W.  In total, there are $24,000 worth of eroneous items, of which $16,000 are attributable to H and $8,000 are attributable to W.  The ratio of erroneous items allocable to W to the total erroneous items is 1/3 ($8,000/$24,000).  W’s liability is thus limited to $4,000 of the deficiency (1/3 of $12,000).  The Commissioner may collect up to $4,000 from W and $12,000 from H (the total amount collected, however, may not exceed $12,000).  If H also applied for relief, there would be no remaining joint and several liability, and the Commissioner would be permitted to collect $4,000 from W and $8,000 from H.

(v)   Any portion of a deficiency that is (1) attributable to the disallowance of a credit or to a tax other than the tax imposed by chapter 62, (2) required to be included with the joint return, and (3) attributable to an item allocated to one spouse under 830 CMR 62C.84.1(5)(f)(i), shall be allocated to that spouse.  Any item giving rise to such deficiency shall not be taken into account for purposes of 830 CMR 62C.84.1(5)(f)(iv).

(g)  No credit or refund shall be allowed as a result of the application of 830 CMR 62C.84.1(5).

(6) Equitable Relief

(a)  If relief is not available to the requesting spouse under 830 CMR 62C.84.1(4) or 830 CMR 62C.84.1(5), and the Commissioner determines, after taking into account all the facts and circumstances, that it is inequitable to hold a requesting spouse liable for any unpaid tax or deficiency, or any portion thereof, attributable to the non-requesting spouse, the Commissioner may nonetheless relieve the requesting spouse of joint liability. The Commissioner may grant equitable relief in his sole discretion. Equitable relief is not available as a matter of right.

(b)   Factors considered.  In determining whether it is inequitable to hold a requesting spouse liable for any unpaid tax or any deficiency, or any portion thereof, the Commissioner may consider any relevant facts and circumstances.  These include but are not limited to:

(i)  The couple’s marital status at the time the Commissioner makes the determination (this factor will weigh in favor of relief if the couple is divorced or legally separated and will be neutral if the couple is still married);

(ii)  Whether the requesting spouse will suffer economic hardship if relief is not granted;

(iii)  In the case of an understatement, whether the requesting spouse knew or had reason to know of the item giving rise to the understatement or deficiency as of the date the joint return was filed;

(iv)  In the case of an underpayment, whether the requesting spouse knew or had reason to know the tax liability would not or could not be paid;

(v)  Whether the requesting spouse was the victim of physical, psychological, sexual, or emotional abuse;

(vi)  Whether the requesting spouse or the non-requesting spouse has a legal obligation to pay the outstanding tax liability;

(vii)  Whether the requesting spouse significantly benefitted from the unpaid tax liability or understatement;

(viii)  Whether the requesting spouse has made a good faith effort to comply with the income tax laws in the taxable years following the taxable year or years to which the request for relief relates; and

(ix)  Whether the requesting spouse was in poor mental or physical health at the time the return was filed.

(7) Time and Manner of Application

(a)  Application Must Be Received Within Two Years of the Beginning of Collection Activities

(i)  The process of applying for innocent spouse relief is distinct from the process of applying for an abatement pursuant to G.L. c. 62C, § 37. A taxpayer wishing to request relief from joint income tax liability under 830 CMR 62C.84.1(4) or 830 CMR 62C.84.1(5) must submit an application for relief (as described in 830 CMR 62C.84.1(7)(b)) to the Commissioner not later than two years after the Commissioner has begun collection activities with respect to such taxpayer.  An eligible taxpayer may submit a single claim seeking relief under either 830 CMR 62C.84.1(4) or 830 CMR 62C.84.1(5), or both.

(ii)  A requesting spouse's failure to receive a notice from the Commissioner does not extend the period for claiming relief under M.G.L. c. 62C, § 84.  In accordance with 830 CMR 62C.26.1, notices regarding income tax liability are sent to a taxpayer's last known address as it appears on the taxpayer's most recent income tax return or on a properly completed and submitted change of taxpayer's address form, whichever is last received by the Commissioner

(iii)  For purposes of 830 CMR 62C.84.1(4) and 830 CMR 62C.84.1(5) collection activities include but are not limited to:

       a.  A bank account levy or a wage levy;

       b.  A lien, bill, or notice from the Commissioner of the commencement of collection activities (including a Notice of Intent to Assess, Notice of Assessment, Statement of Account, Final Notice, or Notice of Levy);

       c.  Offset of a tax refund;

       d.  Intercept of a state and/or federal refund or other government payment;

       e.  Intercept of insurance proceeds, lottery or casino winnings;

       f.  Suspension or revocation of a driver’s license and/or a vehicle registration;

       g.  Suspension, revocation or non-renewal of a professional license or certificate;

       h.  Addition of the requesting spouse to the public disclosure list of delinquent taxpayers; and

       i.  Seizure of business or other assets.

(b)  Content of Application for Relief from Joint Income Tax Liability.  The application for relief under 830 CMR 62C.84.1(4) and 830 CMR 62C.84.1(5) must contain (i) the name, address and taxpayer identification numbers of the requesting spouse and the non-requesting spouse; and (ii) a written statement or affidavit, signed under the penalties of perjury, containing all the facts necessary for determining that the requirements of 830 CMR 62C.84.1 are satisfied.  The burden is on the taxpayer to establish that he or she qualifies for relief under M.G.L. c. 62C, § 84.  The requesting spouse must indicate on the application for relief whether he or she has applied for and received relief from federal tax liability under I.R.C. § 6015(b), (c), or (f).  Copies of the following federal forms, including any supporting or related documentation, should be attached to the Application for Relief where applicable: (i) Form 8857 Request for Innocent Spouse Relief, (ii) the final federal determination letter, and (iii) the relevant federal tax return.

(c)   Written Notice of Determination.  The Commissioner will determine whether the requesting spouse is eligible for relief under M.G.L. c. 62C, § 84, and will issue a written notice thereof to the requesting spouse.

(d)  No Stay of Collection.  The filing of an application for relief will not operate to stay the collection of tax unless and until the application is approved by the Commissioner.  If the application is approved, a refund of the resulting overpayment of tax, if any, will be made to the requesting spouse.

(8) Non-Requesting Spouse’s Notice and Opportunity to Participate

(a)   In general.

(i)  When the Commissioner receives an application for relief, the Commissioner will send a notice to the non-requesting spouse's last known address that informs the non-requesting spouse of the requesting spouse's claim for relief.  The notice will provide the non-requesting spouse with an opportunity to submit any information that should be considered in determining whether the requesting spouse should be granted relief from the joint and several liability requested.  A non-requesting spouse is not required to submit information.  Upon the request of either spouse, the Commissioner will share with one spouse the substantive information submitted by the other spouse, unless the Commissioner determines that the sharing of such information would impair tax administration.  The Commissioner will not share the contact information of one spouse with the other spouse.

(ii)  The non-requesting spouse’s failure to receive notice of the requesting spouse’s claim for relief shall not affect the validity of the requesting spouse’s application for relief.

(iii)  The Commissioner will send a notice to the non-requesting spouse’s last known address informing the non-requesting spouse of his determination with respect to the requesting spouse's claim for relief under M.G.L. c. 62C, § 84.

(b)   Information that will be considered.

The Commissioner may consider any information (as relevant to each particular relief provision) that the non-requesting spouse submits or that is otherwise available to the Commissioner in determining whether relief from joint and several liability is appropriate for the requesting spouse, including information relating to the following -

(1)   The legal status of the requesting and non-requesting spouses’ marriage;

(2)   The extent of the requesting spouse's knowledge of the erroneous items or underpayment;

(3)   The extent of the requesting spouse's knowledge or participation in the family business or financial affairs;

(4)   The requesting spouse's education level;

(5)   The extent to which the requesting spouse benefited from the erroneous items;

(6)   Any asset transfers between the spouses;

(7)   Any indication of fraud on the part of either spouse;

(8)   Whether it would be inequitable, within the meaning of 830 CMR 62C.84.1(4)(e) to hold the requesting spouse jointly and severally liable for the outstanding liability;

(9)   The allocation or ownership of items giving rise to the deficiency; and

(10) Anything else that may be relevant to the determination of whether relief from joint and several liability should be granted.

(c)   Effect of failure to submit information. The failure of the non-requesting spouse to submit information pursuant to paragraph (b) of this section does not affect the non-requesting spouse's ability to seek relief from joint and several liability for the same tax year. However, information that the non-requesting spouse submits pursuant to 830 CMR 62C.84.1(8)(b) is relevant in determining whether relief from joint and several liability is appropriate for the non-requesting spouse should the non-requesting spouse also submit an application for relief.

(9) Effect of Prior Proceedings

(a)  In general.  A final decision regarding the requesting spouse’s tax liability by a Massachusetts court or the Appellate Tax Board in a prior proceeding for the same taxable year shall be conclusive as to the qualification of a requesting spouse for relief under 830 CMR 62C.84.1, so long as (i) relief under 830 CMR 62C.84.1 was at issue in the prior proceeding, or (ii) the requesting spouse meaningfully participated in the prior proceeding and could have raised relief under 830 CMR 62C.84.1. If relief under 830 CMR 62C.84.1 was not at issue in the prior proceeding and the requesting spouse did not meaningfully participate in the prior proceeding, the decision is not conclusive as to the qualification of the requesting spouse for relief.

(b)  Meaningful Participation.  In determining whether a requesting spouse participated meaningfully in the prior proceeding, the Commissioner will consider all relevant information relating to the prior proceeding, including, but not limited to, whether the requesting spouse:

(i)  Was represented by an attorney;
(ii)  Signed court documents;
(iii)  Spoke at, or otherwise participated in, pretrial meetings or settlement negotiations;
(iv)  Appeared at the trial;
(v)  Contributed to decision-making during trial; and
(vi)  Testified at the trial.

(10) Effect of Determination

A grant of relief by the Commissioner under M.G.L. c. 62C, § 84, and 830 CMR 62C.84.1, relieves the requesting spouse of liability for income tax only to the extent specified in the Commissioner's determination.  The requesting spouse remains jointly and severally liable for any amounts where relief is not provided.  Additionally, the non-requesting spouse remains liable for the entire tax determined to be due regardless of the Commissioner’s determination as to the requesting spouse.  If the Commissioner finds that relief was obtained by false or fraudulent means, the grant of relief will be deemed void.

(11) Appeal of Determination

A requesting spouse that is denied relief under 830 CMR 62C.84.1(4) or 830 CMR 62C.84.1(5) may appeal such denial by filing a request for a hearing with the Department’s Office of Appeals.

 

Proposed Regulation – Public Hearing 5/25/2022

Written comments may be emailed to RulesandRegs@dor.state.ma.us.

Feedback