Court Opinion

ID: 4474935
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:11:13.283308+00
Date Added: 2024-06-11T07:56:00.674101
License: Public Domain

Thornton and Holmes, JJ., dissenting: We agree with our colleagues that Chevron is the test we have to apply but respectfully disagree with their conclusion that the 2-year limitations period in section 1.6015-5(b)(l), Income Tax Regs., is invalid under either Chevron step 1 or step 2. I. Chevron: Step 1 Chevron’s step 1 asks “whether Congress has directly spoken to the precise question at issue.” Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842 (1984). The majority hears “audible silence” in the absence from section 6015(f) of the expressly stated 2-year deadlines of subsections (b) and (c). Majority op. p. 139. From this it concludes that Congress has foreclosed a 2-year, and possibly any, deadline for subsection (f) relief. The majority likewise hears a whisper from the provision of section 6015(f)(2) that the Secretary may grant equitable relief to a spouse under subsection (f) only “ ‘if * * * relief is not available to such individual under subsection (b) or (c)’”. See majority op. p. 139. From this it similarly reasons that subsection (f) relief must be broader than relief under subsection (b) or (c); and since subsection (b) and (c) relief requires meeting a 2-year deadline, making subsection (f) relief broader requires that requests for subsection (f) relief not be subject to the same deadline. Majority op. p. 139. (The majority does later admit, though, that “the timing of the request for relief is not the only possible element by which subsection (f) relief would be broader than that of subsection (b) or (c).” Majority op. p. 139.) We agree with the majority that the precise question in this case is whether the Secretary can impose a 2-year limit on requests for relief under section 6015(f). And we agree that the answer to this question depends on a close reading of the Code. But we disagree that the express time limits of subsections (b) and (c) denote or even imply that there can be no time limits in subsection (f), for congressional silence may simply be ambiguous. See Crosby v. Natl. Foreign Trade Council, 530 U.S. 363, 388 (2000) (“The State’s inference of congressional intent is unwarranted here, therefore, simply because the silence of Congress is ambiguous.”); Burns v. United States, 501 U.S. 129, 136 (1991) (“An inference drawn from congressional silence certainly cannot be credited when it is contrary to all other textual and contextual evidence of congressional intent.”). Subsection (f) differs markedly from subsections (b) and (c) in giving the Secretary discretion to grant relief where there is an underpayment of tax; i.e., where the joint return shows tax due that is not paid with the return. When added to the Code in 1998, section 6015(f) was new and important and affected a lot of cases, since innocent spouse relief before section 6015(f) was limited to understatements', i.e., where the joint return shows less tax due than is owed. See Butler v. Commissioner, 114 T.C. 276, 283 (2000).1 We think this suggests that it is the Secretary’s discretion, and not the dilatory applicant’s ability to request relief, that subsection (f) makes broad. Consistent with this view, subsections (b) and (c) are mandatory subsections — if a taxpayer meets their requirements, the Secretary has to grant relief. Section 6015(f), in contrast, is a permissive section — if a taxpayer follows the prescribed procedures, the Secretary “may relieve such individual of such liability.” This distinction is important in understanding the majority’s discussion, majority op. pp. 145-147, of the Bureau of Prisons cases. It relies on the Second, Third, Eighth, and Tenth Circuits’ invalidation of 28 C.F.R. secs. 570.20 and 570.21 — regulations that categorically denied some prisoners the chance to serve their entire sentences in halfway houses.2 The problem these cases identified was 18 U.S.C. sec. 3621(b), which gave the bop discretion over where to house inmates but required the agency to consider at least five listed factors. All these Circuit Courts concluded that the BOP regulations categorically removed the agency’s ability to consider these five listed factors for at least some individual prisoners. That meant the challenged regulations stumbled on Chevron step 1. But where is the similar mandatory consideration of any factor in the section of the Code we are looking at? Section 6015(f) does not provide that “if, taking into account all the facts and circumstances, * * * the Secretary shall relieve such individual of such liability;” it provides that “if * * * taking into account all the facts and circumstances, * * * the Secretary may relieve such individual of such liability.” (Emphasis added.) The distinction is an important one. And it is the distinction at the heart of the Supreme Court’s decision in Lopez v. Davis, 531 U.S. 230 (2001) — the decision that, though mentioned briefly in the opinion, majority op. p. 146 — is much more similar to our case than the halfway-house cases on which the majority relies. Lopez involved a different statute, 18 U.S.C. sec. 3621(e)(2)(B), providing that the prison time for an inmate convicted of a nonviolent crime “may be reduced by the Bureau of Prisons”. The BOP issued a regulation that categorically excluded prisoners who had possessed a firearm in connection with their crime; and an affected prisoner sued to invalidate the regulation, arguing that the statutory definition of a class of eligible inmates necessarily invalidated additional exclusions by regulation — he wanted case-by-case consideration. Lopez v. Davis, supra at 239. The Court rejected his argument. In the absence of express statutory language “the agency may exclude inmates either categorically or on a case-by-case basis, subject of course to its obligation to interpret the statute reasonably.” Id. at 240. The Court held that “Even if a statutory scheme requires individualized determinations,” which this scheme does not, “the decisionmaker has the authority to rely on rule-making to resolve certain issues of general applicability unless Congress clearly expresses an intent to withhold that authority.” * * * [Id. at 243-244 (quoting Am. Hosp. Association v. NLRB, 499 U.S. 606, 612 (1991)).3] There is no withholding of such authority here — in contrast to the specific factors Congress told the Secretary to consider in deciding applications for relief under section 6015(b) and (c), it left relief under section 6015(f) to his discretion. It chose to use “may” in section 6015(f) to grant wider discretion to the Secretary than it did in choosing “shall” in section 6015(b) and (c). Read sensibly, section 6015(f) gives the Secretary the authority, but not the duty, to grant relief unavailable under section 6015(b) and (c). And read in the context of delegations of authority to administrative agencies more generally, the statute gives the Secretary authority to issue rules and procedures instead of making case-by-case decisions as to the timeliness of requests for relief. The majority also reads the statutory command to consider “all the facts and circumstances” (emphasis added) as forcing us to toss out the 2-year time limit, because such a strict deadline makes the time that it takes a spouse to request relief into a single, decisive fact or circumstance. Yet section 6015(f), in a passage quoted but unconstrued by the majority, creates discretionary authority to provide equitable relief “Under procedures prescribed by the Secretary”. The question that the majority should have asked is whether setting a deadline is a “procedure” — if it is, then we have no business holding that the Secretary could not set one. The first clue that the 2-year limit is a procedural requirement, and not just another one of the facts to be weighed in each case, is section 6015(b)(1)(D). In that section, the Secretary is also told to take “into account all the facts and circumstances” in deciding whether it is “inequitable” to hold the requesting spouse jointly liable for a particular tax debt. We have already held that the language of section 6015(f) does not significantly differ from this parallel language in section 6015(b). Alt v. Commissioner, 119 T.C. 306, 316 (2002), affd. 101 Fed. Appx. 34 (6th Cir. 2004); Becherer v. Commissioner, T.C. Memo. 2004-282; Doyel v. Commissioner, T.C. Memo 2004-35. And the equitable factors we consider under section 6015(b) are the same equitable factors we consider under section 6015(f). Alt v. Commissioner, supra at 316. That same section 6015(b) imposes the 2-year deadline for electing relief. Sec. 6015(b)(1)(E). We think this allowed the Secretary to infer that deadlines for seeking relief are just part of the procedural rules a taxpayer seeking relief must follow. Read in this way, the language in section 6015(b)(1) and (f) giving the Secretary power to prescribe “procedures” is identical — except that the Secretary cannot set a deadline of other than 2 years for section 6015(b) relief. The silence on deadlines in section 6015(f), seen in this light, is what courts since Chevron have construed to be an implicit delegation to the agency involved to fill the gap with its own construction. Treating deadlines as procedural is the general rule in nontax administrative cases as well. The Seventh Circuit— the court to which this case may be appealed — has already held that rules setting deadlines for seeking discretionary relief from immigration orders are procedural: are the time limits valid and, if so, * * * is the rule procedural and within the Attorney General’s grant of authority? We conclude that it is. Section 1003.44(h) [the regulation setting the deadline] is similar to time limits imposed in the Federal Rules of Civil Procedure, Appellate Procedure, and even Criminal Procedure. And, in general, the formulation of procedures is left to the discretion of the agencies with responsibility for substantive judgments. Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519 * * * (1978). We grant deference to agency interpretations of the law it administers. Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837 * * * (1984). * * * [Johnson v. Gonzales, 478 F.3d 795, 799 (7th Cir. 2007).] See also, e.g., Foroglou v. Reno, 241 F.3d 111, 113 (1st Cir. 2001). We finally note that the majority seems not to notice that the revenue procedure that currently guides the Secretary in the exercise of his discretion has seven threshold conditions — only one of which is the 2-year time limit — and a taxpayer who fails to meet any of them does not currently qualify for equitable relief. If we peek into the future to see where the majority’s reasoning might take us, we can’t help but conclude that at least some of these other threshold conditions4 will have to be invalidated as well. Rev. Proc. 2003-61, sec. 4.01(4), 2003-2 C.B. 296, 297, for example, denies equitable relief to any spouse who transferred assets as “part of a fraudulent scheme”. This language matches section 6015(c)(3)(A)(ii) — and the majority’s reasoning would seem to bar the Secretary from stopping fraudsters at the threshold just as much as it would bar him from stopping the dilatory. For all these reasons, we would hold that Congress has not directly spoken to the precise question of whether the Secretary may impose a deadline for requesting equitable relief. This leaves a gap, and we would therefore climb up to the second step of Chevron: is the 2-year limit “based on a permissible construction of the statute”? Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. at 843. II. Chevron: Step 2 Step 2 of Chevron — whether the contested regulation is a permissible construction of the statute — rests fundamentally on the reasonableness of the choice made by the agency that issued the regulation. See, e.g., Bankers Life & Cas. Co. v. United States, 142 F.3d 973, 983 (7th Cir. 1998). In the Seventh Circuit, this step is also where a court will look to a provision’s legislative history. See id. (we “lean toward reserving consideration of legislative history and other appropriate factors until the second Chevron step * * *. In the second step, the court determines whether the regulation harmonizes with the language, origins, and purpose of the statute”); see also Square D Co. & Subs. v. Commissioner, 438 F.3d 739, 745 (7th Cir. 2006), affg. 118 T.C. 299 (2002).5  The legislative history is quite plain on this point, suggesting that what Congress wanted was primarily to extend relief to spouses with underpayments. The original House-passed version of the expanded relief provisions now found in section 6015(b) included no relief for underpayments. See H. Conf. Rept. 105-599, at 249-250 (1998), 1998-3 C.B. 747, 1003-1004. A Senate amendment would have provided limited relief in underpayment situations by making the separate liability election (now in section 6015(c)) applicable to underpayments. Id. at 250, 1998-3 C.B. at 1004. The conference committee omitted this aspect of the Senate amendment and instead gave the Secretary broad authority in subsection (f) to address such situations. The conference report explained: The conference agreement does not include the portion of the Senate amendment that could provide relief in situations where tax was shown on a joint return, but not paid with the return. The conferees intend that the Secretary will consider using the grant of authority to provide equitable relief in appropriate situations to avoid the inequitable treatment of spouses in such situations. * * * [Id. at 254, 1998-3 C.B. at 1008.] Although the conference report also indicated that this equitable relief was not to be limited to underpayment situations, the only other specific example involved a “spouse that does not know, and had no reason to know, that funds intended for the payment of tax were instead taken by the other spouse for such other spouse’s benefit.” Id. We find nothing in this legislative history suggesting that Congress wanted the Secretary to use his new discretion under subsection (f) to give relief to those who missed the statutory deadlines for relief under subsections (b) and (c). An ounce of history is worth more than a pound of logic on this question, especially since the majority opinion does not even suggest that — quite apart from any legislative history— the 2-year regulatory deadline for requesting relief under subsection (f) is inherently unreasonable. Indeed, it cites with apparent approval an identical 2-year regulatory deadline that applies to comparable requests for equitable relief from joint and several liability under section 66(c) where a joint return is filed from a community property State.6 And it seems to just assume that a 2-year regulatory deadline under subsection (f) is unreasonable if it is the same as the statutory deadlines found in subsections (b) and (c). We do not share that assumption. Drawing a negative inference from subsection (f)’s lack of the 2-year deadlines found in subsections (b) and (c) falls apart if applied to requests for relief from underpayments, for which there is no statutory deadline but only a delegation of authority to the Secretary. Holding that the Secretary cannot exercise his discretion to set a common deadline isn’t a reasonable inference; it’s the usurpation of the authority that Congress delegated to the Secretary, not us. We would hold that the Secretary acted eminently reasonably in exercising his procedure-making authority by prescribing a deadline under subsection (f) that is comparable to the statutory deadlines under subsections (b) and (c) and identical to the regulatory deadline for equitable relief under section 66(c). Indeed, considerations of admin-istrability strongly support consistent deadlines under these various provisions. Spouses filing requests for relief under either section 6015 or section 66(c) use the same Form 8857, Request for Innocent Spouse Relief. See Rev. Proc. 2003-61, sec. 5, 2003-2 C.B. at 299. Many if not most spouses requesting relief may be unsophisticated in the tax laws and may not fully appreciate which of the various provisions of section 6015 or section 66(c) might be most likely to benefit them. We doubt that most applicants seeking relief carefully parse the different categories for which they might qualify; more likely, they simply plead for whatever relief might be available. In recognition of this reality, the Secretary’s Form 8857 elicits information pertinent to all forms of relief under sections 6015 and 66(c) but does not require the requesting spouse to specify under which section or subsection relief is sought. Similarly, the regulations provide that a single claim for relief will suffice for considering relief under section 6015 (b), (c), and (f). Sec. 1.6015-l(a)(2), Income Tax Regs. Having comparable deadlines for the various types of relief facilitates this sensible administrative practice. The majority would confound this practice in bizarre ways and place undue pressure upon the manner in which the request for relief might be drawn up or characterized. For instance, the Court is today invalidating the regulatory deadline for equitable relief under subsection (f) but approving an identical regulatory deadline for equitable relief under section 66(c). The Court is also holding that a request for relief deemed to arise under subsection (b) or (c) remains subject to their 2-year statutory deadlines but may be considered under subsection (f) even if it misses those deadlines, with the untimeliness apparently to be taken into account as part of a facts-and-circumstances analysis. By contrast, a request for relief deemed to arise under subsection (f) — for example, a request involving an underpayment, which cannot arise under subsection (b) or (c)— apparently would be subject to no deadline because the majority has invalidated the regulatory 2-year deadline under subsection (f). Although the majority states that “a taxpayer’s delay in applying for relief under section 6015(f) is a factor to be considered in applying the ‘all the facts and circumstances’ test of section 6015(f)”, it declines to answer the obvious followup question of “whether any temporal limitation would be appropriate”. Majority op. p. 148. Consequently, in the absence of any “temporal limitation”, it is not apparent how “delay” in applying for subsection (f) relief should be identified or measured. It would have been better to leave the regulation alone rather than create a tangle that will now take so much time to unravel. We respectfully dissent. Halpern and Morrison, JJ., agree with this dissenting opinion.   We discuss Congress’s intent in adding sec. 6015(f) in greater detail in our analysis of Chevron step 2, infra p. 157.    See Wedelstedt v. Wiley, 477 F.3d 1160 (10th Cir. 2007); Levine v. Apker, 455 F.3d 71 (2d Cir. 2006); Fulls v. Sanders, 442 F.3d 1088 (8th Cir. 2006); Woodall v. Fed. Bureau of Prisons, 432 F.3d 235 (3d Cir. 2005).    Am. Hosp. Association v. NLRB, 499 U.S. 606, 612 (1991), decided whether the NLRB’s obligation to decide the appropriate size of the collective bargaining unit “in each case”, 29 U.S.C. sec. 159(b), meant that it had to exercise “standardless discretion in each case.” The answer was “no”, because “[T]he principal instruments for regularizing the system of deciding ‘in each case’ are classifications, rules, principles, and precedents. Sensible men could not refuse to use such instruments and a sensible Congress would not expect them to.” * * * [Id. (quoting Davis, Administrative Law Text, sec. 6.04, at 145 (3d ed. 1972)).]    We say “some” because the list, Rev. Proc. 2003-61, sec. 4.01, 2003-2 C.B. 296, 297, includes some conditions that the Code itself requires, e.g., that the requesting spouse have filed a joint return and not be eligible for relief under sec. 6015(b) or (c).    Whether to consider legislative history at step 1 or step 2 is a matter of some controversy. See Coke v. Long Island Care at Home, Ltd., 376 F.3d 118, 127 n.3 (2d Cir. 2004) (collecting cases); see also Tax Analysts v. IRS, 350 F.3d 100, 103-104 (D.C. Cir. 2003); Hosp. Corp. of Am. & Subs. v. Commissioner, 348 F.3d 136, 144 (6th Cir. 2003), affg. 107 T.C. 73 (1996) and 107 T.C. 116 (1996). We put it here because the Seventh Circuit will be reviewing our decision in this case.    The majority seeks to make much of differing deadlines provided in the sec. 66(c) regulations for so-called traditional relief, for which the statute has made provision since 1984, and for “equitable relief”, which Congress authorized in 1998 in the same legislation containing the sec. 6015 relief provisions. Seeming to hold out the sec. 66(c) regulations as a model of sorts, the majority asserts that these regulations provide a deadline for equitable relief that is “four times as long as the 6-month deadline available for traditional relief under section 66(c).” Majority op. p. 143. The majority falls into error, however, by misconstruing what it simplistically mischaracterizes as a “6-month deadline” for requesting traditional relief under sec. 66(c). The actual deadline for traditional relief under the sec. 66(c) regulations is: 6 months before the expiration of the period of limitations on assessment, including extensions, against the nonrequesting spouse for the taxable year that is the subject of the request for relief, unless the examination of the requesting spouse’s return commences during that 6-month period. If the examination of the requesting spouse’s return commences during that 6-month period, the latest time for requesting relief * * * is 30 days after the commencement of the examination. [Sec. 1.66 — 4(j)(2)(i), Income Tax Regs.] By contrast, the equitable relief deadline under sec. 66(c) is the same as the equitable relief deadline under sec. 6015(f); i.e., 2 years after the first collection activity. It is not accurate to say that the equitable relief deadline is four times longer than the sec. 66(c) traditional relief deadline or, for that matter, that they correlate according to any mathematical ratio. Indeed, the traditional relief deadline would seem no more likely to fall on a date that is (as the majority suggests) exactly 18 months before the equitable relief deadline than it would be to fall on a date that is after the equitable relief deadline. In any event, we do not understand the majority to suggest, nor do we understand how it plausibly could be maintained, that the Secretary’s prescribing a 2-year deadline for requesting equitable relief under sec. 66(c) made it unreasonable for the Secretary to prescribe the same 2-year deadline for comparable requests for equitable relief arising under sec. 6015(f).