IRS rescinds two-year limitation period for equitable innocent spouse relief

The IRS in Notice 2011-70, 2011-32 IRB has just rescinded its position on a timeline within which to request equitable innocent spouse relief.  It will no longer deny an individual's request for equitable relief under Code Sec 6015(f) based upon it having  been filed more than two years after IRS first acted to collect the liability from the individual.  There are also transition rules for pending requests for relief, denied requests, and cases in litigation or where the litigation is final.

Background. Each spouse is jointly and severally liable for the tax, interest, and penalties stemming from a jointly filed income tax return. Code Sec 6015(f) allows relief to a requesting spouse if, among other conditions, taking into account all the facts and circumstances, it is inequitable to hold the individual liable.
To be eligible for relief under Code Sec 6015(b) (innocent spouse relief) or  Code Sec. 6015(c) (separate liability relief), the Code explicitly provides that the requesting spouse must elect relief not later than the date that is two years after the date that IRS has begun collection activities with respect to the individual making the election. ( Code Sec. 6015(b)(1)(E) , Code Sec. 6015(c)(3)(B) ) However, no such limitation is written in Code Sec. 6015(f) . The IRS had originally issued a regulation Reg. § 1.6015-5(b)(1)  that states that the two year rule also applies for equitable requests.
The Tax Court had repeatedly invalidated the regulation but the Third, Fourth, and Seventh Circuits have rejected the Tax Court's position holding the Regulation to be valid.
Until the Regulation is formally changed, taxpayers can rely on the IRS Notice.
The door is open for existing cases as well as previously denied cases to refile.
If however, payment was already made, no relief will be available.  
Innocent spouses rejoice!