The Ibrahim opinion states that because the term “separate return” when viewed alone is ambiguous, the Court must consider the Code as a whole and the legislative history of section 6013 to determine its meaning. In reviewing where “separate return” appears throughout the code, the Court focused on section 7703 and how it interplays with other sections of the Code including sections 1, 2, 36 and 6654. This was not surprising as during oral argument, Judge Benton (who wrote the opinion for the court) asked numerous questions to both parties concerning section 7703’s use of the term and how it related to section 6013.   Section 7703 provides for a determination of a person’s marital status and the Court stated that section 7703(b) “creates a special rule: an abandoned spouse ‘who is married,’ ‘files a separate return,’ and supports a child is considered not married.” Following this logic, the Court reasoned that “separate return” in section 7703(b) “refers to a married-filing separately return made by a taxpayer who is considered married. Conversely, head-of-household taxpayers, considered “not married,” may not make joint or separate returns.” Furthermore, the court reviewed and found in the Internal Revenue Manual as well as 28 other Code sections that the term “separate return” is defined as a taxpayer who has filed a tax return with the filing status of “married, filing separately” return.

The Court also looked at the legislative history of section 6013 as found in the Congressional Reports concerning its enactment in 1951, the Glaze court’s view of why the statute was created, and the usage of the term “separate return” by the IRS in its publications prior to its enactment as well as immediately after. The Tax Clinic strongly argued in its briefs this line of review and felt it comprised some of its strongest arguments. The 8^th Circuit determined that section 6013 was created to help taxpayers avoid adverse financial consequences due to the complexity of the Code by preserving the “election” of a married taxpayer to choose the filing “married, filing jointly” after the filing of their original return with the status of “married, filing separate”. Prior to the enactment of section 6013, a taxpayer could not change their election. Consequently, the Court found that the legislative history supported the claim that “separate return” could only apply to those taxpayers who had originally filed “married, filing separately.” Furthermore, the Court referenced IRS instructions on preparing individual tax returns “in 1952 showing that ’separate return’ did not apply to those filing as “head of household.”

In one of the best parts of the opinion, the Court found that the Commissioner was incorrect when he claimed that the “head of household” status did not exist when section 6013(b)(2)(B) was enacted. In fact, the “head of household” status was first enacted at the same time that section 6013(b) was enacted.

Based on its review of the legislative history and the term’s usage in the Code as a whole, the Court held that the “separate return” as used in section 6013(b) only applies to taxpayers who have filed a tax return with the filing status of “married, filing separately.” Because Mr. Ibrahim filed his 2012 income tax return with the filing status of Head of Household, the limitations of section 6013(b)(2)(B) do not apply and he may amend his return with his correct filing status and receive the Earned Income Tax Credit.

Surprisingly, there was a strong dissenting opinion by Judge Bye in this case. Judge Bye argued that Congress created with sections 6013 and 6511 a two-step process to request a refund; “-step one is to amend to a joint return under § 6013(b)(1) and step two is then to use that joint return as the operative return to seek a credit or refund under section 6511.” Based on this logic, if section 6013(b)(1) does not apply to Head of Household taxpayers, then Ibrahim does not have the right to amend his return in compliance with section 6511. The dissenting opinion goes further in arguing that if “separate return” only applies to those with the filing status of “married, filing separately,” then the purpose of section 6013 as explained by the Glaze court is frustrated because it prevents taxpayers with the filings status “single” and “head of household” amending their returns to the filing status of “married, filing jointly.” The majority references this logic in its opinion and discounts it.

Granted, section 6013 expressly provides the married taxpayer a right to go from “married, filing separately” to “married, filing jointly.” However, the majority states that section 6013 is not required for a taxpayer to amend his returns because “section 6511(and IRS regulations) satisfy this ‘first step’ by allowing taxpayers to correct their filing status through Form 1040X.” The tax clinic agrees, but also contends that while the dissenting opinion states the reasoning for the creation of section 6013, it does not illustrate its purpose. Section 6013 was created because prior to 1951 a taxpayer with the filing status of “married, filing separately” could not amend his/her return to the filing status of “married, filing jointly.” The enactment of section 6013 allowed them to do so. As a taxpayer with the “single” or “head of household” filing status is considered non-married by the IRS, they were never prevented from amending their tax returns. Thus, there is no problem for Section 6013 to solve and it benefits and/or limitations should not apply.

The Department of Justice and the Internal Revenue Service currently have five options after this opinion. First, the IRS Office of Chief Counsel could concede the issue in the 8^th circuit as it is has done in 5^th and 11^th circuits while maintaining its position elsewhere. Second, the IRS could concede the issue nationally so that the application of section 6013 is consistent throughout the country. Third, the Department of Justice could request an en banc review before the entire 8^th Circuit which we feel is unlikely to be granted due to the persuasiveness of Judge Benton’s opinion. Fourth, the Department of Justice could request certiorari before the US Supreme Court. However, this request will most likely also not be granted as the only Federal Circuit Courts of Appeals that have ruled on this issue are in agreement despite the contrary opinions of the Tax Court. Lastly, the IRS could follow the recommendations of National Taxpayer Advocate, Nina Olson, who in her most recent annual report to Congress recommended that section 6013(b)(2)(B) be amended, and propose legislation to that effect.

We think it is unlikely that this issue has been put to rest and urge clinics in other circuits to raise the issue in appropriate cases. The Office of Chief Counsel stated in 2006 (25 years after Glaze was decided) that “We continue to disagree with the rationale and holding of Glaze, which holding is inconsistent with Tax Court cases” and “Chief Counsel attorneys with cases appealable to other circuits should look for appropriate cases to litigate that challenge Glaze.” see I.R.S. Chief Counsel Notice CC-2006-010. Regardless, we are extremely happy with the result in this case and look forward to an impoverished immigrant receiving thousands of dollars in income tax refunds.

The petitioner in this matter was Isaak Abdi Ibrahim, an immigrant from Somalia with almost no proficiency of the English language.  Mr. Ibrahim retained a tax preparer to prepare and file his 2011 tax return.  The tax preparer (who not surprisingly cannot now be found) filed returns with incorrect filing status for both Mr. Ibrahim and his wife, despite being advised by them of their marital status and living situation.   Mr. Ibrahim and his wife completely relied on the expertise and knowledge of their tax preparer when preparing their income tax returns as they cannot read English.

Mr. Ibrahim’s filing status, claimed exemptions and credits were contested by the IRS, and his Earned Income Credit frozen.  Ultimately a Notice of Deficiency was issued on October 1^st, 2012 challenging his filing status, disallowing his two dependents and the child tax and earned income credits for those dependents.  Mr. Ibrahim filed a tax court petition pro se on November 16^th, 2012.  Subsequently, Mr. Ibrahim was contacted by the St. Paul Appeals office of the IRS and was notified, based on the evidence provided by Mr. Ibrahim, that his filing status was incorrect but he could claim his two dependents.  The St. Paul Appeals office also referred Mr. Ibrahim to the University of Minnesota Tax Clinic for representation.

Upon review of the circumstances and consultation with our client, we determined the primary issue in that matter was whether section 6013(b)(2)(B) applies and would it prevent our client from amending his personal income tax return.  Section 6013(b)(2)(B) prevents a taxpayer from electing to file a joint return after filing a separate return once  “there has been mailed to either spouse, with respect to such taxable year, a notice of deficiency under section 6212, if the spouse, as to such notice, files a petition with the Tax Court within the time prescribed in section 6213.”  The question becomes whether filing a return with the status of “Head of Household” is considered filing a “separate return” under section 6013(b)(2)(B).

The IRS and Tax Court properly conceded that if this case was in the 5^th or 11^th circuits, the decision would be in our clients favor allowing him to amend his return.  The 5^th Circuit ruled in Glaze v. United States, 641 F.2d 339 (5^th Cir. 1981) that a “separate return” refers to only the filing status of “Married, filing separately” and not to any other election such as “Head of Household”.  Therefore, following the logic in Glaze, our client should be allowed to amend his return as he did not file a “separate return” under section 6013(b)(2)(B).  The 11^th Circuit adopted all prior decisions of the Court of Appeals for the 5^th Circuit in Bonner v. City of Prichard, 661 F.2d 1206 (11^th Cir. 1981).

However, only the 5^th Circuit has ruled directly on this issue.  The Tax Court in numerous T.C. Memo decisions has ruled against petitioners with similar filing status situations.  (See e.g., Currie v. Comm’r, T.C. Memo. 1986-71; Blumenthal v. Comm’r, T.C. Memo. 1983-737; Saniewski v. Comm’r, T.C. Memo. 1979-337; Phillips v. Comm’r, 86 T.C. 433, 439 (1986))  In addition, the IRS stated in its Action on Decision in relation to Glaze that it would decline to follow it circuits beyond the 5^th (AOD 1981-140 (IRS AOD), 1981 WL 176193).

The Tax Court found for the respondent in this matter holding prior Tax Court precedent that “section 6013(b)(2)(B) bars a taxpayer who has filed a return with single or head of household filing status for a tax year and in response to a notice of deficiency for that year filed a petition with this Court from changing his filing status to married filing jointly.”  (Ibrahim at 7) In addition, the court supported its position with the rationale that “Congress enacted the predecessor statute to section 6013(b) in 1951 but did not establish a separate rate structure for married taxpayers filing separately until 1969.” The Tax Reform Act of 1969 created the separate rate structure between “single” and “married, filing separately”.  However, this separate rate structure was created to help avoid the marriage penalty.  We do not feel the addition of the “married, filing separately” tax rate relates in any way to section 6013(b).

We find this decision troubling for numerous reasons.  The IRS concedes a proper filing status if section 6013(b)(2)(B) did not apply for our client is “Married Filing Jointly”.   This filing status would allow him to claim the Earned Income Tax Credit.  Taxpayers who filed with the status of Married filing Separate cannot claim the Earned Income Credit.  However, because our client did not amend his tax return, even after a notice of deficiency was issued but prior to him filing in tax court, he is barred from this credit.  Thus unrepresented and limited English proficient taxpayers who are not aware of section 6013(b)(2)(B) fall into the trap of filing a Tax Court petition instead of amending their returns.  The Tax Court and IRS reading of section 6013(b)(2)(B) works a substantial hardship on this group of taxpayers.

We believe there has been a significant increase in the appearance of this issue after discussion with several of our colleagues.  Low-income taxpayers, especially those that cannot understand English, cannot hope to understand a complex statutory scheme such as the one at issue in this case.  These taxpayers rely on paid preparers who may not understand or choose to properly file their clients’ tax returns.  In this particular case, an unrepresented taxpayer relied on his tax preparer and upon receipt of the notice of deficiency filed a tax petition believing he was following proper procedure.  In trying to follow proper IRS and Tax Court procedures, he prevented himself from obtaining those very refunds he was trying to protect.

We will be speaking with our client in the near future to determine our next course of action.  This may include an appeal to the 8^th circuit.  As the 8^th circuit has not directly ruled on this issue, we hope to obtain a more favorable result if we appeal.