Court Opinion

ID: 4474939
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:11:13.457334+00
Date Added: 2024-06-11T14:53:51.876230
License: Public Domain

Gate, J., concurring: I agree with the position taken in the majority opinion that de novo review is the appropriate standard of review in determining entitlement to relief under section 6015(f).1 I write separately to highlight certain other factors that support that position. First, the statute is unclear in prescribing a standard of review. While, as the majority acknowledges, the articulation in section 6015(f) that under certain conditions the Secretary “may” relieve an individual of liability is suggestive that review should be for abuse of discretion, the use of “may” in section 6015(f) is not dispositive. Internal Revenue Code sections providing that the Secretary “may” take an action have sometimes been interpreted as mandating review for abuse of discretion, see, e.g., sec. 482; Ballentine Motor Co. v. Commissioner, 321 F.2d 796, 800 (4th Cir. 1963), affg. 39 T.C. 348 (1962); Dolese v. Commissioner, 82 T.C. 830, 838 (1984), affd. 811 F.2d 543, 546 (10th Cir. 1987); Foster v. Commissioner, 80 T.C. 34, 142-143 (1983), affd. in part and vacated in part on another issue 756 F.2d 1430 (9th Cir. 1985); Ach v. Commissioner, 42 T.C. 114, 125-126 (1964), affd. 358 F.2d 342 (6th Cir. 1966), and sometimes de novo review, see, e.g., sec. 269(a);2 VGS Corp. v. Commissioner, 68 T.C. 563, 595-598 (1977); Capri, Inc. v. Commissioner, 65 T.C. 162, 178 (1975); D'Arcy-MacManus & Masius, Inc. v. Commissioner, 63 T.C. 440, 449 (1975); Indus. Suppliers, Inc. v. Commissioner, 50 T.C. 635, 645-646 (1968); Inductotherm Indus., Inc. v. Commissioner, T.C. Memo. 1984-281, affd. without published opinion 770 F.2d 1071 (3d Cir. 1985). Moreover, our grant of jurisdiction to review the Secretary’s (or Commissioner’s) decisions concerning equitable relief is contained not in section 6015(f) but in section 6015(e)(1)(A), which provides that the Tax Court shall have jurisdiction “to determine the appropriate relief available to the individual under this section”. This broad phrasing3 must be compared, as the majority notes, to another discrete grant of jurisdiction to the Court, a mere 2 years earlier, to review the Secretary’s decisions not to abate interest. That grant, now codified in section 6404(h)(1),4 is explicit with respect to the standard of review: “The Tax Court shall have jurisdiction * * * to determine whether the Secretary’s failure to abate interest under this section was an abuse of discretion”. When the general terms of section 6015(e)(1)(A) are compared with the specificity of the standard enunciated in section 6404(h)(1), Congress’ intention regarding the review standard in the former becomes less clear.5 To suggest that the “may” in section 6015(f) settles the matter in this context puts more freight on that word than it can carry.6  Second, given the statute’s lack of clarity regarding the standard of review, consideration of the legislative history is appropriate. The history of amendments to the joint and several liability relief provisions since the original enactment in 1971 evidences congressional dissatisfaction with the adequacy of relief afforded taxpayers. The 1971 version of “innocent spouse” relief provided relief only in the case of omitted income. See Act of Jan. 12, 1971, Pub. L. 91-679, sec. 1, 84 Stat. 2063. Amendments in 1984 extended relief in the case of erroneous deductions, though the deductions needed to be “grossly erroneous” and the deductions and/or the income omission had to have resulted in a “substantial” understatement of tax on the return. See Deficit Reduction Act of 1984, Pub. L. 98-369, sec. 424(a), 98 Stat. 801. Finding the level of relief afforded by the statute still inadequate, Congress in the 1998 amendments removed the requirement that the deductions claimed be “grossly” erroneous or that the understatement of tax be “substantial” and added provisions allowing elections to allocate liability and establishing equitable relief. See Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105 — 206, sec. 3201(a), 112 Stat. 734. The pattern of legislative changes designed to make innocent spouse relief more readily available also reflected congressional dissatisfaction with the administration of the statute by the Commissioner. This dissatisfaction reached the apex in 1998, when section 6015(f) was enacted as part of RRA 1998. In a February 11, 1998, Senate Finance Committee hearing on “Innocent Spouse Tax Rules” presaging that legislation, Chairman William V. Roth, Jr., diagnosed the problem with the “innocent spouse” rules as due in significant part to unsatisfactory administration by the IRS. [T]he agency [IRS] is all too often electing to go after those who would be considered innocent spouses because they are easier to locate, as well as less inclined and able to fight. Part of these problems reside with the IRS, part of them are the fault of Congress. Though the agency officially acknowledges the status of innocent spouses under current law and has the ability to clear such an individual from his or her tax liability, it rarely does. [IRS Restructuring (Innocent Spouse Tax Rules): Hearings Before the S. Comm, on Finance, 105th Cong., 2d Sess. 142 (1998) (S. Hrg. 105-529, Fourth Hearing); emphasis added.] At a February 24, 1998, hearing7 before the Subcommittee on Oversight of the Committee on Ways and Means concerning a Treasury Department Report on Innocent Spouse Relief,8 Chairman Johnson stated: As the Congress develops legislation to restructure and reform the Internal Revenue Service, we have learned of a number of disturbing cases in which taxpayers have been grossly mistreated by the IRS. Out of all the horror stories that have surfaced in recent months, none have been more heartbreaking than those involving innocent spouses — taxpayers who in many cases have been left to rear children as single parents, often without child support, only to find that their former spouses have saddled them with a crushing debt. Many of these horror stories have been going on for years without the IRS helping the spouses who are seeking relief from mounting tax liabilities, interest, and penalties. [U.S. Treasury Department Report on Innocent Spouse Relief: Hearing Before the Subcommittee on Oversight of the House Comm, on Ways and Means, 105th Cong., 2d Sess. 5 (1998).] Testifying on behalf of the Treasury Department at the hearing, Assistant Secretary for Tax Policy Donald C. Lubick conceded a problem in the Internal Revenue Service’s administration of the statute: Mr. Lubick. I think you’ve put your finger on what I think is the most disturbing part of this whole problem [inadequacy of current arrangements for innocent spouse relief], which is that — and I think it’s produced the most dramatic of the examples; that there have been some particular agents who are hard-nosed and unsympathetic * * *. [Id. at 28.] One of the solutions proposed in the Treasury Department report, as described in Assistant Secretary Lubick’s testimony, was to “significantly expand taxpayers’ procedural opportunities to claim substantive relief under the innocent spouse provisions, by making access to Tax Court routinely available”. Id. at 19. Chairman Johnson endorsed the expansion of Tax Court jurisdiction as an important part of the solution to the unsatisfactory results that had been experienced under the statute. I am particularly pleased to note that the innocent spouse legislative recommendations discussed in the [Treasury and General Accounting Office] reports are included in our House-passed * * * legislation * * *. To summarize, the bill expands the availability of innocent spouse relief by, No. 1, eliminating the various dollar thresholds; No. 2, broadening the definition of eligible tax understatements, and three, providing partial innocent spouse relief in certain situations, and No. 4, providing tax court jurisdiction over denials of innocent spouse relief. [Id. at 7; emphasis added.] Given the evidence of congressional dissatisfaction with the IRS’ track record in administering the “innocent spouse” rules and of the congressional perception that one solution to the problem was expanded Tax Court jurisdiction, it appears unlikely that Congress intended that a significant portion of the Court’s review of the IRS’ disposition of innocent spouse claims be circumscribed under the deferential standard inherent in review for abuse of discretion. To conclude otherwise is to turn a tin ear to the strong critique of the Commissioner’s record in administering “innocent spouse” relief evidenced in congressional hearings on the subject. Third, another specific feature of section 6015 countervails the claim that abuse of discretion review was intended for section 6015(f) claims; namely, the provision in section 6015(e)(4) for intervention in a Tax Court proceeding by the spouse not seeking relief. As originally enacted, section 6015(e)(4) provided as follows: (4) Notice to other spouse. — The Tax Court shall establish rules which provide the individual filing a joint return but not making the election under subsection (b) or (c) with adequate notice and an opportunity to become a party to a proceeding under either such subsection. [RRA 1998 sec. 3201(a).] Congress therefore contemplated that in Tax Court proceedings for review of section 6015 claims — or, more specifically, claims under subsection (b) or (c) — there would be interventions by nonrequesting spouses resulting in new evidence or argument in the Tax Court proceeding that was not available to the Commissioner as part of the administrative determination. The 2006 amendments by the Tax Relief and Health Care Act of 2006, div. C, sec. 408, 120 Stat. 3061, to clarify the Tax Court’s jurisdiction over section 6015(f) cases did not merely modify section 6015(e)(1)(A), as discussed in the majority and dissenting opinions. The 2006 amendments also modified section 6015(e)(4) to read as follows: (4) Notice to other spouse. — The Tax Court shall establish rules which provide the individual filing a joint return but not making the election under subsection (b) or (c) or the request for equitable relief under subsection (f) with adequate notice and an opportunity to become a party to a proceeding under either such subsection. [Emphasis added.] Thus, in connection with clarifying the Tax Court’s jurisdiction over section 6015(f) cases not involving a deficiency, Congress simultaneously added spousal intervention rights for such cases as part of the 2006 amendments.9 The conclusion is inescapable that Congress considered intervention rights to be an important component of this Court’s review of section 6015 cases, including those under section 6015(f). Intervention rights entail the distinct likelihood that new evidence will surface in the Tax Court proceeding. Yet to review the Commissioner’s administrative determination for abuse of discretion on the basis of evidence not available to him would be, at best, anomalous. The Supreme Court has instructed that, in applying an abuse of discretion standard of review, “the focal point for judicial review should be the administrative record already in existence, not some new record made initially in the reviewing court.” Camp v. Pitts, 411 U.S. 138, 142 (1973). By expressly providing for interve-nors in section 6015(f) review cases in the Tax Court, Congress contemplated a “new record made initially in the reviewing court” in those cases. Application of an abuse of discretion standard of review is not appropriate in such circumstances. In addition to the intervenor issue, we must bear in mind problems with the administrative record, our inability to remand, and the fact that a stand-alone nondeficiency petition can bring a section 6015(f) case before us even where there has been no administrative decision.10  This case is appealable, absent stipulation to the contrary, to the Court of Appeals for the Fourth Circuit. Under the rule laid down in Golsen v. Commissioner, 54 T.C. 742, 757 (1970), affd. 445 F.2d 985 (10th Cir. 1971), we abide by that court’s precedent. The Court of Appeals for the Fourth Circuit disapproves of the odd pairing of a de novo scope of review with an abuse of discretion standard of review. See Sheppard & Enoch Pratt Hosp., Inc. v. Travelers Ins. Co., 32 F.3d 120, 125 (4th Cir. 1994) (“Thus, although it may be appropriate for a court conducting a de novo review of a plan administrator’s action to consider evidence that was not taken into account by the administrator, the contrary approach should be followed when conducting a review under either an arbitrary and capricious standard or under the abuse of discretion standard.”).11 That is reason enough to reject that mismatched standard and scope of review in this case. Given the statute’s failure to specifically address the standard of review, Congress’ expressed dissatisfaction with the Commissioner’s history of administering the “innocent spouse” rules, and the anomalous results of the employment of an abuse of discretion standard of review in section 6015(f) cases, I believe the better interpretation of section 6015 is that it provides for a de novo standard of review in all section 6015 cases, whether under subsection (b), (c), or (f). Colvin, Marvel, Goeke, Wherry, Kroupa, and Paris, JJ., agree with this concurring opinion.   It is worth noting that, while 9 Judges have voted “yes” and 8 have voted “no” in this case, two of the “no” votes agree with the majority with respect to the standard of review. Thus, the number of Judges supporting the application of a de novo standard of review is 11 and the number opposing it is 6.    The standard of review applied with respect to the “may” language in sec. 269(a) is noteworthy in that the “may” language in the statute had previously been “shall”. See Revenue Act of 1964, Pub. L. 88-272, sec. 235(c)(2), 78 Stat. 126.    1 emphasize here the entire quoted phrase from sec. 6015(e)(1)(A), not just the verb “determine”, on which the majority places singular emphasis.    The grant of Tax Court jurisdiction was originally codified as sec. 6404(g)(1). Taxpayer Bill of Rights 2 (TBOR 2), Pub. L. 104-168, sec. 302(a), 110 Stat. 1457 (1996).    A similar contrast emerges in the legislative history of secs. 6320 and 6330 as compared to the legislative history of sec. 6015(e)(1)(A). These Code sections were all enacted as part of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, secs. 3401 and 3201, 112 Stat. 734, 746. The legislative history underlying secs. 6320 and 6330 specifies that courts are to apply an abuse of discretion standard in reviewing IRS collection determinations and a de novo standard in reviewing determinations of tax liability. H. Conf. Rept. 105-599, at 266 (1998), 1998-3 C.B. 755, 1020; see Giamelli v. Commissioner, 129 T.C. 107, 111 (2007). Thus, the legislative history of sec. 6330 makes clear that, to the extent specified therein, we must apply a deferential standard of review. See Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). In contrast, the legislative history underlying sec. 6015(e)(1)(A) does not specify the standard of review. See H. Conf. Rept. 105-599, supra at 250-251, 1998-3 C.B. at 1004-1005.    In describing the Secretary’s authority to grant equitable relief, the legislative history puts no emphasis on administrative discretion: The conferees do not intend to limit the use of the Secretary’s authority to provide equitable relief to situations where tax is shown on a return but not paid. The conferees intend that such authority be used where, talcing into account all the facts and circumstances, it is inequitable to hold an individual liable for all or part of any unpaid tax or deficiency arising from a joint return. * * * [H. Conf. Rept. 105-599, supra at 254, 1998-3 C.B. at 1008.]    The Oversight Subcommittee hearing was held after the House had passed its version of RRA 1998 (H.R. 2676, 105th Cong., 1st Sess. (1997)) on Nov. 5, 1997. However, neither the Senate nor the conference version of H.R. 2676 had been considered or passed, and the essential form of sec. 6015(f) as finally enacted did not emerge until the conference version of the legislation.    The report had been mandated by Congress in 1996 legislation. See TBOR 2 sec. 401, 110 Stat. 1459.    Because of the more expansive retooling of sec. 6015(f) review procedures effected by the 2006 amendments of sec. 6015(e)(4), I agree with the majority’s conclusion that the 2006 amendments are cause for the Court to reconsider the standard of review in sec. 6015(f) cases. The Court of Appeals for the 11th Circuit recently upheld this Court’s position in Ewing v. Commissioner, 122 T.C. 32 (2004), vacated on other grounds 439 F.3d 1009 (9th Cir. 2006), and Porter v. Commissioner, 130 T.C. 115 (2008), that the scope of review in a sec. 6015(f) review proceeding should not be limited to the administrative record. Commissioner v. Neal, 557 F.3d 1262 (11th Cir. 2009), affg. T.C. Memo. 2005-201. The standard of review was not in issue in Neal, as the parties had agreed that the standard was abuse of discretion.    In fact, we have recently applied a de novo standard of review in a sec. 6015(0 case. See Wiener v. Commissioner, T.C. Memo. 2008-230 (“Because we cannot ascertain what analysis was made by the Appeals officer in reaching his or her determination that petitioner is not entitled to relief under section 6015(0, we cannot review the determination for abuse of discretion. [Fn. ref. omitted.] Instead, we shall examine the trial record de novo to decide whether respondent properly concluded that petitioner is not entitled to relief.”).    In the sec. 6015(0 context, we have recognized the conceptual difficulty of conducting a trial de novo while at the same time deferring to an administrative determination. See Nihiser v. Commissioner, T.C. Memo. 2008-135 (“Although rarely employed by district courts in reviewing administrative agency action, a trial de novo typically consists of independent fact-finding and legal analysis unmarked by deference to the original factfinder.”); see also Black’s Law Dictionary 1544 (8th ed. 2004) (defining “trial de novo” as “A new trial on the entire case * * * conducted as if there had been no trial in the first instance.”).