Commissioner v. Neal

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FILED

FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS

________________________ ELEVENTH CIRCUIT

FEB 10, 2009

No. 06-14357 THOMAS K. KAHN

________________________ CLERK

Tax Court No. 8506-03

COMMISSIONER OF INTERNAL REVENUE,

Petitioner-Appellant,

versus

RUTH E. NEAL,

Respondent-Appellee.

________________________

Appeal from the Decision of the

United States Tax Court

_________________________

(February 10, 2009)

Before TJOFLAT, HULL and WILSON, Circuit Judges.

WILSON, Circuit Judge:

The Commissioner of the Internal Revenue Service (the “IRS”) appeals the

decision of the Tax Court granting Ruth E. Neal equitable relief pursuant to the

innocent spouse provision of Internal Revenue Code, 26 U.S.C. § 6015(f), for the

portion of unpaid federal income taxes attributable to the income of Neal’s ex-

husband for tax years 1993, 1994, and 1995. The total amount in controversy,

exclusive of interest and penalties, is $278,996.

In this case, the Tax Court conducted a trial and granted Neal equitable

relief. Both parties agree that the Tax Court appropriately used an abuse of

discretion standard of review and that Neal at trial had to establish the

Commissioner abused its discretion in denying her relief. They disagree about

whether the Tax Court at trial may consider evidence not included in the

administrative record or is limited to consideration of the administrative record.

Neal submits that the Tax Court properly followed its precedent in Ewing v.

Commissioner, 122 T.C. 32 (2004), rev’d on other grounds, 439 F.3d 1009, 1014

(9th Cir. 2006), and Porter v. Commissioner, 130 T.C. No. 10, 2008 WL 2065189

(Tax Ct. May 15, 2008), wherein the Tax Court held that in § 6015(f) cases it may

conduct a “trial de novo” and consider evidence not included in the administrative

record before the Commissioner. The Tax Court uses the term “trial de novo” to

describe the form of its proceeding and applies an abuse of discretion standard of

review in that trial de novo proceeding. However, the Commissioner contends that

the Administrative Procedure Act (“APA”) governs all agency proceedings and

2

thus, the scope of the Tax Court’s inquiry is confined strictly to the administrative

record.

This issue has divided the fourteen members of the Tax Court: the twelve

judges in the Ewing/Porter majority concluded the Tax Court’s determination of

equitable relief in § 6015 cases is made in a trial de novo and is not confined to the

administrative record. Eleven of these twelve believe that (1) a trial de novo gives

effect to the congressional mandate in § 6015(e) that the Tax Court “determine the

appropriate relief available to [an] individual” in § 6015 equitable relief cases, (2)

the Tax Court’s 75-year history of conducting trials de novo under other statutes

authorizing the Tax Court to make “determinations” of relief was well established

when Congress enacted § 6015(e) using the “determine” language, and (3) the

APA’s record rule, limiting review to the administrative record, does not apply to

the Tax Court’s § 6015(e) determinations. Two members dissented and prefer a

scope of Tax Court review limited to the administrative record.

We summarize § 6015, the statute at issue, the facts, and the procedural

history in Part I. In Part II, we hold that the Tax Court did not err in refusing to

limit its consideration to the administrative record and in conducting a trial de novo

in this § 6015 case. In Parts III and IV, respectively, we hold that the Tax Court

did not abuse its discretion in determining that Neal is entitled to equitable relief

and we affirm the Tax Court’s judgment.

3

I.

A.

Section 6015, through which Neal seeks relief, was added to the Internal

Revenue Code in 1998 to broaden existing innocent spouse relief from joint and

several liability. Congress first imposed joint and several liability on joint filers of

tax returns in 1938. Revenue Act of 1938, Pub. L. No. 75-289, § 51(b), 52 Stat.

447, 476 (1938). Until the 1960s, the fairness of this concept was rarely

questioned. In 1961, the Supreme Court held that embezzled funds were taxable.

James v. United States, 366 U.S. 213, 221, 241, 81 S. Ct. 1052, 1056, 1067 (1961).

Because many embezzlers were insolvent, the IRS began assessing underpayment

of taxes to the joint filers of embezzlers, even if the spouses knew nothing of the

embezzlement and had received none of the embezzled funds. See, e.g., Huelsman

v. Comm’r, 416 F.2d 477, 478 (6th Cir. 1969); Horn v. Comm’r, 387 F.2d 621,

622-23 (5th Cir. 1967); Moore v. United States, 360 F.2d 353, 357 (4th Cir. 1966).

Congress responded by adding to the I.R.C. § 6013(e), which allowed relief from

joint liability in certain cases if (1) the underpayment was due to fraud on the part

of the taxpayer’s spouse; (2) the taxpayer did not know and had no reason to know

of the underpayment; and (3) after considering the facts and circumstances,

including whether the taxpayer benefitted from the underpayment, it was

inequitable to hold the innocent spouse liable for the underpayment. Innocent

4

Spouse Act of 1971, Pub. L. No. 91-679, 84 Stat. 2063, 2063-64 (1971). In 1984,

Congress amended § 6013(e) and slightly broadened the grant of relief. Pub. L.

No. 98-369, § 424(a), 98 Stat. 494, 801 (1984).

Congress repealed § 6013(e) and enacted § 6015 in the Internal Revenue

Service Restructuring and Reform Act of 1998 to make “innocent spouse status

easier to obtain.” H.R. R EP. N O. 105-599, at 249-51 (1998) (Conf. Rep.), reprinted

in 1998 U.S.C.C.A.N. 288. Because this case involves § 6015(e) and (f), we quote

those two subparts, which provide in pertinent part:

(e) Petition for review by Tax Court.--

(1) In general.--In the case of an individual against whom a

deficiency has been asserted and who elects to have subsection (b) or

(c) apply, or in the case of an individual who requests equitable relief

under subsection (f)--

(A) In general.--In addition to any other remedy

provided by law, the individual may petition the Tax Court (and the

Tax Court shall have jurisdiction) to determine the appropriate relief

available to the individual under this section . . . .

(f) Equitable relief.--Under procedures prescribed by the Secretary, if–

(1) taking into account all the facts and circumstances, it is

inequitable to hold the individual liable for any unpaid tax or any

deficiency (or any portion of either); and

(2) relief is not available to such individual under subsection (b)

or (c),

the Secretary may relieve such individual of such liability.

26 U.S.C. § 6015(e) and (f).

We start with subpart (f) of § 6015, which authorizes the Commissioner to

grant equitable relief. Specifically, the Commissioner may grant relief to a

5

taxpayer if, under procedures prescribed by the Commissioner, it would be

“inequitable to hold the individual liable for any unpaid tax or any deficiency (or

any portion of either)” and relief would not be available under subsection (b) or

(c). 26 U.S.C. § 6015(f). The parties agree that relief is not available to Neal

under § 6015(b) and (c), and that Neal may properly seek equitable relief under

§ 6015(f) as an alleged innocent spouse.1

In addition, subpart (e) of § 6015 authorizes a taxpayer who has been denied

relief pursuant to subparts (b), (c), or (f) to petition the Tax Court for relief.

Section 6015(e) expressly grants jurisdiction to the Tax Court to “determine the

appropriate relief available to the individual.” 26 U.S.C. § 6015(e). Section

6015(e) does not say the taxpayer “may appeal” the Commissioner’s § 6015(f)

decision to the Tax Court or that the Tax Court may hear an appeal. Rather,

§ 6015(e) authorizes the taxpayer to seek § 6015(f) relief from the Tax Court.2 Id.

1

Section 6015 provides three distinct types of relief for taxpayers who file joint returns.

Subpart (b) of § 6015 provides relief to those taxpayers who can meet certain requirements, such

as: (1) an understatement of income attributable to erroneous items; (2) that the taxpayer “did

not know, and had no reason to know” of the understatement; and (3) that it would be inequitable

to hold the taxpayer liable for the deficiency. 26 U.S.C. § 6015(b). Subpart (c) of § 6015

permits a taxpayer who is no longer married to or is legally separated from his/her spouse to

elect to limit liability for any deficiency attributable to the spouse to the taxpayer’s separate

liability amount in certain situations. 26 U.S.C. § 6015(c).

Subpart (f) applies when relief is not available under § 6015(b) or (c). 26 U.S.C.

§ 6015(f). Subpart (f) applies to Neal’s case because she seeks equitable relief from an unpaid

tax, i.e., an underpayment of taxes shown on the return but not paid with the return.

2

In its Brief to this Court, the Commissioner argued that § 6015(e) did not grant the Tax

Court subject matter jurisdiction over § 6015(f) requests. During the briefing stage of this case,

Congress amended § 6015(e) to explicitly grant the Tax Court jurisdiction over § 6015(f) cases.

6

Section 6015(e) also states that a petition for relief from the Tax Court is “[i]n

addition to any other remedy provided by law.” Id.

B.

Neal and her ex-husband Alimam Neal (“Alimam”) married in 1976, resided

together until 1996, and divorced in 1998. During the marriage, the couple kept

largely separate finances, maintained separate checking accounts, and rarely

discussed their financial arrangements.3 Neal, a radiologist employed by the

Medical College of Georgia, paid most of the family expenses, including half of

the monthly mortgage payment, groceries, and schooling and activities for the

couple’s three children. Alimam, a self-employed anesthesiologist, paid the other

half of the mortgage, the housekeeper, and the utilities and car payments. Despite

Neal’s requests to Alimam, she was not privy to the financial aspects of Alimam’s

business.

Tax Relief and Health Care Act of 2006, Pub. L. No. 109-432, Div. C, § 408, 120 Stat. 2922,

3061-62 (2006). More specifically, in § 6015(e), Congress added, “or in the case of an

individual who requests equitable relief under subsection (f)” after “who elects to have

subsection (b) or (c) apply.” Id. The Commissioner subsequently withdrew this jurisdiction

challenge. The Commissioner’s remaining claims are: (1) that under § 6015(e) the Tax Court

has jurisdiction in innocent spouse cases but its review is confined to consideration of the

administrative record, and (2) alternatively, even if the Tax Court appropriately considered

evidence outside the administrative record, it nevertheless erred in concluding that the

Commissioner’s denial of equitable relief was an abuse of discretion.

3

The majority of the facts recited here are from the Tax Court’s findings. It is unclear

from the administrative record whether Neal disclosed her financial history and these facts to the

IRS in her initial interview because no transcript of the interview exists.

7

Neal relied upon Alimam and his accountant to prepare and file the couple’s

joint federal income tax returns. She merely gave Alimam her W-2 forms and then

signed the returns once Alimam received them from the accountant.4 Neal never

spoke to the accountant nor did she examine the completed tax returns. Neal

“imagined” that Alimam properly submitted their financial information to the

accountant and filed the returns.

In fact, Alimam mailed the completed returns but, unbeknownst to Neal,

assiduously failed to include payment of taxes relating to his income. Thus, while

Neal’s employer appropriately withheld taxes from Neal’s salary, the portion of the

taxes attributable to Alimam’s business went unpaid.

Neal first learned that the couple owed money to the IRS when they sought

bankruptcy protection in 1989. Alimam falsely told Neal that the IRS was a

creditor because it disallowed certain tax shelters. The bankruptcy hearings

revealed that Alimam had purchased in his name, without informing Neal, a boat, a

Colorado villa, six or seven cars, and expensive fine art. After the bankruptcy,

their home was foreclosed and their cars were repossessed. Over the next several

years, Neal’s wages were garnished, and she pawned a diamond ring to pay back

taxes and a Rolex watch to pay utility bills.

4

At the Tax Court trial, Neal presented evidence, not previously presented to the

Commissioner, that Alimam forged Neal’s signature on the 1993 and 1995 returns.

8

In 1993, the IRS audited the couples’ 1990, 1991, and 1992 returns. Though

the couple signed the audit report, they did not make any payments toward the

back taxes assessed. The couple again filed for bankruptcy in 1995 and the IRS

sought underpaid taxes from 1990 to 1993. Alimam falsely claimed to Neal that

the IRS had not permitted certain business expenses resulting in the delinquencies.

The second garnishment of Neal’s wages in 1996 finally prompted Neal to

investigate the reasons underlying the couple’s financial turmoil. When

questioned, the accountant and bankruptcy attorney disclosed that Alimam had

never paid his income taxes. The Commissioner had not contested any of the

couple’s joint returns, nor had it asserted any deficiencies. Rather, the

Commissioner sought to collect $278,996 in unpaid taxes, including interest and

penalties. The back taxes due to the IRS (without interest and penalties) are as

follows: for 1993, $52,689; for 1994, $31,191; and, for 1995, $20,039.5

In July 1996, Neal left the marital home with their children and sued for

divorce because of Alimam’s adulterous relationships and financial

5

Neal’s employer withheld adequate taxes from Neal’s salary, and thus almost all of the

underpayments are due to Alimam’s salary and his failure to withhold or pay taxes thereon.

Taxpayer Alimam Joint

Year Earned Est. sep. Tax Withheld Earned Est. sep. Tax Withheld Tax Liability

1993 $110,163 $21,987 $20,302 $154,316 $51,004 0 $72,991

1994 116,759 23,459 21,711 106,180 29,443 0 52,902

1995 122,693 25,194 23,221 78,310 18,066 0 43,260

Neal paid federal income taxes of $173,453 in the years 1999 through 2003. The total amount of

state and federal taxes, social security withholding and medicare withholding paid by Neal

during the same period totaled $249,752, or 32.83% of her gross income.

9

mismanagement. Unknown to Neal, Alimam was supporting another woman who

bore his child and his share of the tax liability was channeled to his secret life and

support of his second family. At the conclusion of the 1998 divorce proceeding,

Alimam was ordered to pay all past and future tax liabilities incurred by the couple

during their marriage. Alimam made minimal payments to the IRS and the

majority of the unpaid taxes are outstanding. Alimam made sporadic child support

payments of $3,000 per month until he lost his job in 2001. After the divorce, Neal

financially supported herself, one child who lived at home, and two adult children.

C.

On February 8, 2000, Neal petitioned the Commissioner, under § 6015(f),

for equitable relief from joint and several liability for the portion of the unpaid

taxes attributable to Alimam’s income. See 26 U.S.C. § 6015(f). Neal did not

contest payment of approximately $5,400, the portion of the underpayment

attributable to her income. Neal requested relief because she signed the tax returns

“believing that my then-husband was paying any amounts indicated as owed by the

tax return.”

Neal responded to a written questionnaire sent by the IRS in which she

represented that she was not involved with the preparation of tax returns, did not

discuss the tax returns with Alimam, and did not review the tax returns. Neal then

met with an IRS examining agent and related some of the foregoing facts. Neither

10

a court reporter nor an attorney were present, and no recording was made of this

interview. On August 9, 2001, the examining agent denied relief because the agent

determined, “[Neal] knew that an underpayment existed when the tax returns were

signed; that no economic hardship would exist [if Neal were required to pay the

back taxes] and a portion of the tax is attributable to [Neal].”

Neal protested the determination to the IRS Office of Appeals (“Appeals”).

Appeals echoed the examining agent’s conclusions and issued a notice of

determination on April 22, 2003, denying Neal’s request for equitable relief.

Appeals found that Neal was aware of the underpayment of taxes because the IRS

had been a creditor in the 1989 and 1995 bankruptcy actions, the IRS had

garnished her salary twice, and Neal had signed the 1994 audit report which

indicated the underpaid amounts. Appeals also found that Neal would not suffer

economic hardship if relief was withheld because Neal “enjoy[ed] an upper middle

income standard of living” based on her salary of $129,000 per year and child

support payments of $36,000 per year.

Neal sued in the Tax Court to contest the Commissioner’s denial of

equitable innocent spouse relief. At a pre-hearing conference with the Tax Court,

the Commissioner took the position that the Tax Court’s review was limited to the

administrative record. The Tax Court disagreed based on its previous decision in

Ewing, 122 T.C. at 44, and stated that the Tax Court’s review and determination

11

was not limited to the administrative record but was de novo. See also Porter, 130

T.C. No. 10, 2008 WL 2065189, at *2 (upholding the Ewing analysis).

Accordingly, the Tax Court agreed to entertain testimony and other evidence the

parties wished to introduce. See § 6015 (e)(1)(A) (authorizing the Tax Court “to

determine the appropriate relief available to [an] individual” under § 6015(f)). As

provided in Ewing, the Tax Court’s longstanding rule and practice has been to hold

trials de novo in situations where it makes determination and redeterminations,

including § 6015(f) cases. Ewing, 122 T.C. at 40-41. To prevail in the trial de

novo, the taxpayer petitioner must show that the Commissioner’s denial of

equitable relief was an abuse of discretion. Id. at 36-37, 39-40; see Mitchell v.

Comm’r, 292 F.3d 800, 807 (D.C. Cir. 2002).

The Tax Court heard the testimony of two witnesses: Ruth Neal and Gloria

Spann.6 Neal recited the facts summarized above. In addition, to support her

position that payment of back taxes would result in an economic hardship, Neal

testified that she earned $174,940 in 2003 and had expenses of $158,570.81 for

household necessities in that same year. In response, the Commissioner called

Spann, a revenue officer (but not the one who initially reviewed Neal’s petition for

relief). The Commissioner asked Spann to explain the meaning of “economic

6

At trial, the parties also submitted the administrative record to the Tax Court.

12

hardship” according to the Internal Revenue Manual. The Revenue Guidelines

specified that individuals with a salary exceeding $5,834 per month were expected

to subsist on $2,821 per month. Because Neal spent more than $2,821 per month,

Spann testified that requiring Neal to pay the delinquencies would not result in an

economic hardship.

After hearing the evidence, the Tax Court issued a Memorandum finding

that Neal did not have knowledge of the unpaid taxes because “among other things,

the filed tax returns accurately reflected the correct tax liabilities, nonpayment of

the balances of the taxes shown to be due on the returns was concealed by Alimam,

and [Neal] was not otherwise put on notice of the nonpayment.” The Tax Court

also found that the facts before it were “inconclusive as to the degree to which

[Neal] would suffer economic hardship if she were denied relief from joint

liability.” Taking into account “all the facts and circumstances,” the Tax Court

also found that it would be inequitable to hold Neal liable for the tax balances due

for 1993, 1994, and 1995 and noted particularly the following:

Alimam’s legal obligation relating to the unpaid taxes, the fact that the

taxes in issue are attributable to Alimam’s income, Alimam’s

deception with regard to his investments and nonpayment of the taxes

due, the absence of any significant benefit to petitioner from

Alimam’s failure to pay the taxes, Alimam’s exclusion of petitioner

from the tax return preparation process and from his financial affairs,

petitioner’s payment of the majority of the family’s expenses and her

continued support of the children, and petitioner’s payment every year

of the Federal income taxes attributable to her income.

13

The Commissioner timely appealed.

II.

“[W]e review Tax Court decisions ‘in the same manner and to the same

extent as decisions of the district courts in civil actions tried without a jury.’” L.V.

Castle Inv. Group, Inc. v. Comm’r, 465 F.3d 1243, 1245 (11th Cir. 2006) (quoting

26 U.S.C. § 7482(a)(1)). Accordingly, we review interpretations of the Internal

Revenue Code de novo, and “we review the [tax] court’s decision to grant or deny

equitable relief for abuse of discretion, reviewing underlying questions of law de

novo and findings of fact upon which the decision to grant equitable relief was

made under the clearly erroneous standard.” Atlanta J. & Constitution v. City of

Atlanta Dep’t of Aviation, 442 F.3d 1283, 1287 (11th Cir. 2006) (citations

omitted); see Cheshire v. Comm’r, 282 F.3d 326, 332, 338 (5th Cir. 2002).

Whether the Tax Court in a § 6015(e) case may conduct a trial de novo or is

confined to considering only the administrative record presents a question of law

which this Court reviews de novo.7

7

By way of background, we review the development of the Tax Court. In 1924, Congress

established the Board of Tax Appeals to allow taxpayers to challenge deficiency determinations

prior to paying the contested amount. Pub. L. No. 68-176, § 900, 43 Stat. 253, 308, 336-338

(1924); S. Rep. No. 68-398, at 8 (1924). The Board was an independent agency in the executive

branch of government. Id. Though not a judicial body, on appeals of such determinations, the

Board was authorized to hear cases, administer oaths, and examine and subpoena witnesses. Id.

The Board’s jurisdiction was expanded in 1926 to determine overpayment of taxes and

again in 1942 to determine refunds of processing taxes. Revenue Act of 1926, Pub. L. No. 69-

20, § 284(a), 44 Stat. 9, 66-67 (1926); Revenue Act of 1942, Pub. L. No. 77-753, § 510, 56 Stat.

14

Joint taxpayers are normally jointly and severally liable for the full amount

of federal income taxes due, but may be relieved of joint and several liability under

the limited circumstances described in § 6015(b), (c), and (f). As noted earlier,

§ 6015(f) permits the Commissioner to grant equitable relief to an innocent spouse

“for any unpaid tax or any deficiency” if “taking into account all the facts and

circumstances, it is inequitable to hold the individual liable” and if “relief is not

available to such individual under subsection (b) or (c).” 26 U.S.C. § 6015(f).

And as also noted above, § 6015(e), at issue here, expressly grants jurisdiction to

the Tax Court “to determine the appropriate relief available to the individual”

under § 6015(f).

Although the parties agree that the Commissioner’s denial of equitable relief

to Neal under § 6015(f) is subject to judicial review by the Tax Court, they

disagree as to what the Tax Court may consider in its review. In Ewing, the Tax

Court held that in reviewing a denial of § 6015(f) equitable relief, it is not confined

to considering only the facts presented in the administrative record below. 122

798, 967 (1942). Congress changed the name of the Board of Tax Appeals to the “Tax Court of

the United States” in 1942, but retained the Board’s status as an executive agency. Revenue Act

of 1942, Pub. L. No. 77-753, § 504, 56 Stat. 798, 957 (1942).

In 1969, the Tax Court took its present form when Congress established an Article I court

of record named the “United States Tax Court” to replace the Tax Court of the United States.

Pub. L. 91-172, § 951, 83 Stat. 487, 730 (1969). Congress indicated that the change was made to

quell questions of propriety of one agency sitting in judgment of another agency and because the

Tax Court only had judicial duties. S. Rep. No. 91-552 (1969), reprinted in 1969 U.S.C.C.A.N.

2027, 2341.

15

T.C. at 35-36. The Tax Court reaffirmed that holding in Porter, 2008 WL

2065189, at *2, and applied that holding here to conduct a trial de novo in Neal’s

case, which resulted in a reversal of the Commissioner’s decision to deny her

equitable relief. The Commissioner urges us to disapprove the Tax Court’s

Ewing/Porter reasoning and to restrict the Tax Court’s § 6015(e) review in §

6015(f) equitable relief cases to the administrative record.

We first outline the Tax Court’s reasoning in Ewing and Porter for its

conclusion that it may conduct a trial de novo in § 6015(f) cases. The

Ewing/Porter majority focused on the statutory language in § 6015(e) and (f). The

majority reasoned that, in the Internal Revenue Code, the Tax Court’s role in

§ 6015(f) cases is prescribed by the operative terms of § 6015(e). The Ewing

majority concluded that a de novo trial gave effect to § 6015(e)’s statutory mandate

that the Tax Court “determine the appropriate relief available to the individual,”

reasoning as follows:

Part of our interpretative responsibility here is to give proper effect to

both section 6015(e) and (f). Courts attempt to read statutory

provisions harmoniously, so as to give proper effect to all of the

words of the statute. . . . Our de novo review of the Commissioner’s

determinations under section 6015(f) gives effect to the congressional

mandate [in section 6015(e)] that we determine whether a taxpayer is

entitled to relief under section 6015. The measure of deference

provided by the abuse of discretion standard is a proper response to

the fact that section 6015(f) authorizes the Secretary to provide

procedures under which, based on all the facts and circumstances, the

Secretary may relieve a taxpayer from joint liability. That approach

16

(de novo review, applying an abuse of discretion standard) properly

implements the statutory provisions at issue here, and has a long

history in numerous other areas of Tax Court jurisprudence.

We conclude that our determination whether petitioner is

entitled to equitable relief under section 6015(f) is made in a trial de

novo and is not limited to matter contained in respondent’s

administrative record, and that the APA record rule does not apply to

section 6015(f) determinations in this Court.

122 T.C. at 43-44 (citations omitted).

As support for its construction of § 6015(e) and (f), the Ewing/Porter

majority pointed to the Tax Court’s seventy-five year history of conducting trials

de novo in other areas where Congress by statute has authorized the Tax Court to

make “determinations” or “redeterminations” and reasoned that Congress was well

aware of the Tax Court’s well-established interpretation of “determine” when it

enacted § 6015 in 1998. Ewing, 122 T.C. at 37-39; Porter, 2008 WL 2065189, at

*3. The Ewing majority explained, as follows:

Since 1924, the Tax Court (and the predecessor Board of Tax

Appeals, see Consol. Cos. v. Commissioner, 15 B.T.A. 645, 652

(1929)) has had jurisdiction to “redetermine” deficiencies and

additions to tax, secs. 6213 and 6214(a); and, since 1926, to determine

overpayments, sec. 6512(b). Under section 6213(a) and its

predecessors, we (and earlier, the Board of Tax Appeals) have

“redetermined” deficiencies de novo, not limited to the

Commissioner’s administrative record, for more than 75 years.

We can presume that Congress was aware of this long history in

1998 when Congress used the word “determine” in section 6015. If

Congress includes language from a prior statute in a new statute,

courts can presume that Congress intended the longstanding legal

interpretation of that language to be applied to the new statute.

Commissioner v. Noel’s Estate, 380 U.S. 678, 680-681, 85 S. Ct.

17

1238, 14 L.Ed.2d 159, (1965); United States v. 101.80 Acres, 716

F.2d 714, 721 (9th Cir. 1983).

There are other situations in which this Court makes

determinations de novo. For example, section 7436(a) provides that

the Tax Court may “determine” whether the Commissioner’s

determination regarding an individual’s employment status is correct.

Congress intended that we conduct a trial de novo with respect to our

determinations regarding employment status. See H. Rept. 105-148,

at 639 (1997), 1997-4 C.B. (Vol.1) 319, 961; S. Rept. 105-33, at 304

(1997), 1997-4 C.B. (Vol. 2) 1067, 1384; H. Conf. Rept. 105-220, at

734 (1997), 1997-4 C.B. (Vol. 2) 1457, 2204. As another example,

section 6404 authorizes this Court to “determine” whether the

Secretary’s refusal to abate interest was an abuse of discretion. Our

practice has been to make our determination after providing an

opportunity for a trial de novo. See, e.g., Goettee v. Commissioner,

T.C. Memo 2003-43; Jean v. Commissioner, T.C. Memo. 2002-256;

Jacobs v. Commissioner, T.C. Memo. 2000-123.

Our long tradition of providing trials de novo in making our

determinations, and Congress’s use of the word “determine” in our

jurisdictional grant in section 6015(e)(1)(A), suggest that Congress

intended that we provide an opportunity for a trial de novo in making

our determinations under section 6015(f).

Ewing, 122 T.C. at 38-39.8

The Tax Court in Porter emphasized that the jurisdiction granted in

§ 6015(e) “is couched in language similar to that” in §§ 6213, 6214, and 6512(b),

where the Tax Court has long conducted trials de novo, and that § 6015 “is part and

8

The Ewing/Porter majority also cites a longstanding practice of holding trials de novo in

many situations where the abuse of discretion standard applies to the Commissioner’s conduct.

Ewing, 122 T.C. at 39; Porter, 2008 WL 2065189, at *5. As aptly stated by the Tax Court,

“[t]he traditional effect of applying an abuse of discretion standard in this [Tax] Court is to alter

the standard of review, not to restrict what evidence we consider in making our determination.”

Ewing, 122 T.C. at 39. Thus, a trial de novo under § 6015 is not incompatible with abuse of

discretion review.

18

parcel of the same statutory framework”:

The Code has long provided a specific statutory framework for

reviewing deficiency determinations of the Internal Revenue Service.

Secs. 6213 and 6214; Ewing v. Commissioner, 122 T.C. at 52

(Thornton, J., concurring). Section 6015 is part and parcel of the

same statutory framework. Our de novo review procedures emanate

from that statutory framework.

Our jurisdiction under section 6015 is couched in language

similar to that of our deficiency jurisdiction under section 6213 and

6214. Section 6015(e)(1)(A) authorizes this Court to “determine” the

appropriate relief available under section 6015. Section 6213(a)

provides that taxpayers who receive a notice of deficiency may

petition this Court for a “redetermination” of the deficiency. Section

6214(a) provides this Court jurisdiction to “redetermine” the amount

of the deficiency.

Congress first granted the Board of Tax Appeals (the

predecessor to the Tax Court) jurisdiction to “redetermine”

deficiencies and additions to tax in 1924. Ewing v. Commissioner,

122 T.C. at 38. Since 1926 we have also had jurisdiction to

“determine” overpayments. Id. These determinations and

redeterminations have always been made de novo. O’Dwyer v.

Commissioner, supra at 580; Greenberg’s Express, Inc. v.

Commissioner, 62 T.C. 324, 327-328, 1974 WL 2624 (1974); see

Clapp v. Commissioner, 875 F.2d 1396, 1403 (9th Cir. 1989); Raheja

v. Commissioner, 725 F.2d 64, 66 (7th Cir. 1984), affg. T.C. Memo.

1981-690; Jones v. Commissioner, 97 T.C. 7, 18, 1991 WL 119659

(1991). Congress has defined the jurisdiction of this Court using the

words ‘determine” and “redetermination.” Ewing v. Commissioner,

122 T.C. at 38. We see no material difference between “determine” in

section 6512(b), and “redetermination” in section 6213(a) for

purposes of this discussion. Id.

Porter, 2008 WL 2065189, at *3. The Tax Court reasoned that “[w]e can presume

that in 1998 when Congress chose to use the word ‘determine’ in section 6015, it

did so in full awareness of our long history of de novo review,” and that “[t]he use

19

of the word ‘determine’ in section 6015(e)(1)(A) suggests that Congress intended

that we conduct trials de novo in making our determinations under section

6015(f).” Id.9

In both Ewing and Porter, the Tax Court identified procedural anomalies

that further justified its conclusion that trials de novo are appropriate in § 6015

equitable relief cases. Ewing, 122 T.C. at 42-44; Porter, 2008 WL 2065189, at *6.

If the Tax Court were confined to the administrative record in reviewing stand-

alone § 6015(e) petitions (such as Neal’s petition), inconsistent procedures would

be adopted in equitable spouse relief cases. The Tax Court gave several examples.

First, by statute, when a taxpayer files an election for § 6015(f) relief with the

Commissioner and the Commissioner fails to render a determination within six

months, the Tax Court has jurisdiction under § 6015(e) to make a determination as

to the viability of the taxpayer’s petition in the absence of an administrative record.

26 U.S.C. § 6015(e)(1)(A)(i)(II).10 As such, confining the Tax Court to

9

It is also noteworthy that 26 U.S.C. § 7453 provides that, with limited exceptions not

relevant here, Tax Court proceedings shall be conducted in accordance with rules prescribed by

the Tax Court and rules of evidence in trials without a jury. Further, Congress has mandated in

26 U.S.C. § 7459 that the Tax Court make findings of fact in each report upon “any proceeding

instituted before the Tax Court.” Id. (quotation marks omitted). Judge Thornton, in a concurring

opinion joined by five other members of the Porter majority, emphasized that these “[s]tatutorily

mandated standards and procedures contemplate that the Tax Court will generally conduct trials

de novo in its proceedings, including actions involving claims for relief from joint and several

liability.” Porter, 2008 WL 2065189, at *12 (Thornton, J., concurring).

10

Section 6015(e)(1)(A) provides:

In addition to any other remedy provided by law, the individual may petition the Tax

20

consideration of the administrative record in only those § 6015(f) cases in which

the Commissioner has issued a determination would result in inconsistent

procedural treatment of essentially identical § 6015(e) petitions. Ewing, 122 T.C.

at 42; Porter, 2008 WL 2065189, at *6.

Second, in deficiency cases, the Tax Court holds a trial de novo even when a

taxpayer raises equitable spouse relief under § 6015(f) as an affirmative defense to

the deficiency case. Ewing, 122 T.C. at 42 (citing Butler v. Comm’r, 114 T.C. 287,

292 (2000)); Porter, 2008 WL 2065189, at *6. Again, without trials de novo under

§ 6015(e), substantially identical § 6015(f) claims would be treated differently.11

Third, under § 6015(e)(4), the non-requesting spouse can intervene “to

become a party” when a requesting spouse’s petition for equitable relief under

§ 6015(e) reaches the Tax Court. 26 U.S.C. § 6015(e)(4); Ewing, 122 T.C. at 42-

Court (and the Tax Court shall have jurisdiction) to determine the appropriate relief

available to the individual under this section if such petition is filed--

(i) at any time after the earlier of–

(I) the date the Secretary mails, by certified or registered mail

to the taxpayer's last known address, notice of the Secretary’s

final determination of relief available to the individual, or

(II) the date which is 6 months after the date such election is

filed or request is made with the Secretary, and

(ii) not later than the close of the 90th day after the date described in

clause (i)(I).

26 U.S.C. § 6015(e)(1)(A).

11

In addition, § 6015(e)(1) itself refers to both deficiency cases where the taxpayer elects

to have § 6015(b) or (c) apply and other cases where the taxpayer elects to have § 6015(f) apply.

The same judicial review should be applicable in § 6015 cases, whether the innocent spouse

claim is made in a stand-alone deficiency case or stand-alone unpaid tax case.

21

43; Porter, 2008 WL 2065189, at *6. The Tax Court in Ewing and Porter

concluded that the fact that Congress in § 6015 provided for intervention by a non-

requesting spouse as a party directly in the Tax Court also suggests that Congress

intended that the Tax Court conduct trials de novo in § 6015 cases in order to

permit intervening spouses to offer evidence to challenge the requesting spouse’s

entitlement to equitable relief. Ewing, 122 T.C. at 43; Porter, 130 T.C. at *6.

In summary, the Tax Court in Ewing and Porter concluded that Congress

intended that taxpayers have the same opportunity for a trial de novo relating to

§ 6015(f) equitable relief (1) when that relief is raised as an affirmative defense in

a deficiency proceeding, (2) in a stand-alone § 6015(e) proceeding where the

Commissioner has denied § 6015(f) relief (as in this case), (3) in a stand-alone §

6015(e) proceeding where the Commissioner has failed to rule within six months,

and (4) when a non-requesting spouse intervenes in the Tax Court to challenge a

requesting spouse’s claim to § 6015(f) relief.12 Ewing, 122 T.C. at 42-43; Porter,

2008 WL 2065189, at *6. “Identical issues before a single tribunal should receive

similar treatment.” Ewing, 122 T.C. at 43 (quoting Corson v. Comm’r, 114 T.C.

354, 364 (2000)).

12

The Tax Court noted that intervention by the nonrequesting spouse is available both in

deficiency cases in which § 6015(f) relief is requested and in stand-alone § 6015 cases such as

this case. Ewing, 115 T.C. at 122-23; Porter, 130 T.C. at *6 (both citing Rule 325); King v.

Commissioner, 115 T.C. 118, 122-23 (2000); and Corson v. Commissioner, 114 T.C. 354, 364-

65 (2000).

22

Finally, and of particular import here, the Tax Court explained why the

APA’s record rule–limiting a reviewing court to the administrative record–does not

supplant the Tax Court’s own longstanding trial de novo procedures and precedent.

APA § 559 “provides that the APA does ‘not limit or repeal additional

requirements imposed by statute or otherwise recognized by law.’” Porter, 130

T.C. No. 10, 2008 WL 2065189, at *4 (quoting 5 U.S.C. § 559). In both Ewing

and Porter the Tax Court specifically discussed how its trial de novo procedures

for reviewing IRS decisions were “well-established” and “recognized by law”

before the enactment of the APA in 1946. Id.; Ewing, 122 T.C. at 52 (Thornton, J.,

concurring).13 According to the Tax Court, its trial de novo procedures have

remained virtually unchanged since the APA’s enactment, supporting its

conclusion that the APA did not limit or repeal the Tax Court’s de novo review

procedures. Ewing, 122 T.C. at 38-40.

The fact that the APA (enacted in 1946) predates § 6015 (enacted in 1998)

does not change the result because § 6015 is “part and parcel” of the statutory

framework for Tax Court review of IRS deficiency determinations. Ewing, 122

T.C. at 52-53 (Thornton, J., concurring); Porter, 2008 WL 2065189, at **3-4. It is

from this framework that the “[Tax Court’s] de novo review procedures emanate.”

13

Eleven members of the Tax Court joined Judge Thornton’s concurrence in Ewing. 122

T.C. at 56.

23

Ewing, 122 T.C. at 52 (Thornton, J., concurring); Porter, 2008 WL 2065189, at *3.

Accordingly, when Congress chose to use the same statutory language in § 6015 as

it used in establishing the longstanding trial de novo procedure for deficiency

actions, “it did so in full awareness of [the Tax Court’s] long history of de novo

review,” Porter, 2008 WL 2065189, at *3, and did not intend to impose a different

procedure. Thus, per § 559, “the APA does not disturb or supersede [the Tax]

Court’s longstanding de novo judicial review procedures for cases involving

spousal relief under section 6015.” Ewing, 122 T. C. at 54 (Thornton, J.,

concurring).

The Tax Court also explained that “[a]s a statute of general application, the

APA does not supersede specific statutory provisions for judicial review” such as

Congress has granted to the Tax Court. Porter, 2008 WL 2065189, at *2. The Tax

Court pointed out that “nothing in section 6015 or its legislative history indicates

that the APA is to apply to section 6015 cases or that we are to restrict our review

to the administrative record.” Id. at *4.14 Moreover, the Tax Court emphasized

that the legislative history of the APA confirms it does not supersede the Tax

14

In Porter, the Tax Court also contrasted its statutory § 6015 jurisdiction, which has no

limitations written into the statute, with its jurisdiction to issue declaratory judgments relating to

the status, qualification, valuation, or classification of certain § 501(c)(3) organizations,

retirement plans, gifts, and governmental obligations. Porter, 133 T.C. at *4. The Tax Court

pointed out (1) that it has adopted rules regarding declaratory judgments that generally require

such actions to be disposed of on the basis of the administrative record, and (2) that “[t]he reason

for this limited review lies in Congress’s legislative directive,” discussed in Porter, but (3) that

Congress did not impose a similar restrictive standard in § 6015. Id.

24

Court’s adjudication procedures, stating:

The legislative history of the APA confirms this understanding. See

S. Comm. on the Judiciary, 79th Cong., 1st Sess., Administrative

Procedure Act (Comm. Print 1945), reprinted in Administrative

Procedure Act Legislative History, 1944-46, at 22 (1946) (stating that

there are exempted from APA formal adjudication requirements

matters that are subject to de novo review of facts and law such “as

the tax functions of the Bureau of Internal Revenue (which are triable

de novo in The Tax Court)”); S. Rept. 752, 79th Cong., 1st Sess.

(1945), reprinted in Administrative Procedure Act Legislative History,

1944-46, at 214 (1946) (explaining that pursuant to APA provisions

governing the scope of judicial review, courts establish facts de novo

where the agency adjudication is not subject to APA formal

adjudication provisions “such as tax assessments * * * not made upon

an administrative hearing and record, [where] contests may involve a

trial of the facts in the Tax Court”); H. Rept.1980, 79th Cong., 2d

Sess. (1946), reprinted in Administrative Procedure Act Legislative

History, 1944-46, at 279 (1946) (same).

Ewing, 122 T.C. at 53 (Thornton, J., concurring) (alterations in original).15 That

the APA effectively exempted the Tax Court does not mean it exempted the Tax

Court only as to tax matters extant in 1946.

We are persuaded by the Tax Court’s reasoning. Congress’s use of the word

“determine” and not “appeal” in § 6015(e)’s jurisdictional grant is significant.

And, most importantly, § 6015(e) must be read and considered with the other §

6015 provisions, such as § 6015(e)(4) outlining intervention by the non-requesting

15

We quote what the Tax Court said but note that the pertinent legislative history of the

APA being referenced states more fully: “[W]here adjudications such as tax assessments are not

made upon an administrative hearing and record, contests may involve a trial of the facts in the

Tax Court or the United States district courts.” S. Rep. No. 79-752, at 214 (1945), reprinted in

Administrative Procedure Act Legislative History at 214.

25

spouse and § 6015(e)(1)(A)(i)(II) authorizing a petition to the Tax Court if the

Commissioner has not acted in six months. Congress also enacted § 6015 with

knowledge of the Tax Court’s precedent and history of conducting trials de novo in

making its determinations. As the Tax Court noted, § 6015 was enacted “as part

and parcel of,” and with similar language to, the statutory framework for the Tax

Court’s review of deficiency determinations, which determinations had been made

using trials de novo long before the passage of the APA.16 The legislative history

of the APA contains a clear intent to exempt the Tax Court. At a minimum, the

Commissioner has not shown the Tax Court erred in its Ewing and Porter rulings

that it followed in this case.17

16

For this reason, the dissent is incorrect that our analysis “seems to authorize use of [the]

APA § 559 exception in all statutes, without regard to whether the provision at issue was enacted

before or after the APA.”

The Supreme Court’s opinion in Dickinson v. Zurko, 527 U.S. 150, 119 S. Ct. 1816

(1999), discussed by the dissent, does not undercut our reasoning. See Dickinson, 527 U.S. at

152, 119 S. Ct. at 1818 (concluding that APA § 706 applies to the Federal Circuit’s review of

findings of fact made by the Patent and Trademark Office). Dickinson, as the dissent correctly

notes, did not concern a statute enacted after the APA. Instead, it concerned a heightened scope

of review standard that the Federal Circuit’s predecessor court supposedly applied at the time the

APA was enacted. Id. at 154-55, 119 S. Ct. at 1819. The Supreme Court concluded that the

purported standard was not “recognized” by the Federal Circuit’s predecessor at that time and

therefore could not qualify as an “additional requirement[] . . . recognized by law” for purposes

of the APA § 559 exception. Id. at 161, 119 S. Ct. at 1822. Because the Supreme Court in

Dickinson was not faced with a post-APA statute, the case offers no hindrance to our conclusion

that Congress intended the Tax Court to have authority to conduct trials de novo in § 6015(f)

cases, notwithstanding the statute’s enactment after the APA, because it was part and parcel of,

and similar in language to, a statutory framework under which trials de novo were recognized in

the pre-APA era.

17

We are unpersuaded by our dissenting colleague’s concern that recognizing Congress’s

intent to permit the Tax Court to conduct trials de novo in § 6015(f) cases will “decimate[] the

Commissioner’s incentive to be impartial and thorough” in making his § 6015(f) determinations.

26

We recognize that the Commissioner does cite the Eighth Circuit’s decision

in Robinette v. Commissioner, 439 F.3d 455, 461 (8th Cir. 2006), rev’g 123 T.C.

85 (2004), but that decision, if anything, helps Neal. Robinette involved a claim

under § 6330—not § 6015(e) and (f). Section 6330 affords taxpayers notice and a

right to a hearing before the IRS can levy on and sell a taxpayer’s property for

unpaid taxes. 26 U.S.C. § 6330. If the taxpayer requests a hearing, an employee or

officer in the IRS Office of Appeals who had no prior involvement with the unpaid

tax hears the matter and determines whether the requirements of the applicable law

or administrative procedure were met as to the unpaid tax. Id. § 6330(b)(1), (3),

§ 6330(c)(1), (3). This is known as a collection-due-process hearing. Section

6330(c)(3) provides that the “determination by [the] appeals officer” shall take

certain listed factors into consideration. Id. § 6330(c)(3). Then § 6330(d)(1)

provides that the taxpayer, within 30 days of the appeal officer’s “determination,”

First, we disagree with the dissent’s contentions that (1) trials de novo render a “farce” the

requirement that the Tax Court give discretionary weight to the Commissioner’s findings, and

(2) under a trial de novo evidentiary scheme the Commissioner will “know[] that his review of

the facts and law will be ignored.” The Tax Court is quite capable of combining a trial de novo

scope of evidentiary consideration with an abuse of discretion standard of review; in fact, it has

an extensive history of doing so. See Ewing, 122 T.C. at 39 (stating that the Tax Court’s

“longstanding practice has been to hold trials de novo in many situations where an abuse of

discretion standard applies” and listing examples); Porter, 2008 WL 2065189, at *5 (same).

Moreover, we reject the dissent’s speculation that the Tax Court’s ability to hear evidence not

contained in the administrative record can or will result in the Commissioner’s abdication of his

duty to “conduct his [§ 6015(f)] hearings in a careful and diligent manner.”

27

may “appeal such determination” to the Tax Court. Id. § 6330(d)(1).18

This “appeal” language in § 6330 is materially different from § 6015(e),

which does not use the word “appeal” but instead authorizes the Tax Court to

“determine” the appropriate relief. This shows that Congress knows how to use the

term “appeal” and that Congress meant something different when it authorized the

Tax Court in § 6015(e) “to determine the appropriate relief available” to a

taxpayer. Id. § 6015(e). In § 6330(d), Congress chose not to use the word

“determine” or some derivation thereof and instead chose to vest the Tax Court

with jurisdiction over a taxpayer’s “appeal.” For that reason, Robinette’s

interpretation of § 6330 does not undercut, and in fact is consistent with, our

reading of § 6015. See Porter, 2008 WL 2065189, at *3.

For all of these reasons, we agree with Neal that the Commissioner has not

18

I.R.C. § 6330(d) provides, in relevant part:

(d) Proceeding after hearing.--

(1) Judicial review of determination.--The person may, within 30

days of a determination under this section, appeal such determination

to the Tax Court (and the Tax Court shall have jurisdiction with

respect to such matter).

(2) Jurisdiction retained at IRS Office of Appeals.--The Internal

Revenue Service Office of Appeals shall retain jurisdiction with

respect to any determination made under this section, including

subsequent hearings requested by the person who requested the

original hearing on issues regarding--

(A) collection actions taken or proposed with respect to such

determination; and

(B) after the person has exhausted all administrative

remedies, a change in circumstances with respect to such

person which affects such determination.

28

shown that the Tax Court erred by refusing to limit its consideration to the

administrative record and by conducting a trial de novo in this § 6015(f) case.

III.

The Commissioner alternatively contends that even under trial de novo

review, the Tax Court erred in concluding that the Commissioner abused his

discretion in denying equitable relief to Neal. We disagree.

Section 6015(f) expressly authorizes the Commissioner to prescribe

procedures for determining qualification for equitable relief. Under Revenue

Procedure 2000-15, 2000-1 C.B. 447, equitable relief will be granted where (i) the

couple has divorced or has not lived together for a year prior to the request for

relief; (ii) “[a]t the time the return was signed, the requesting spouse had no

knowledge or reason to know that the tax would not be paid”; and (iii) the

requesting spouse will suffer economic hardship if the relief is not granted. Rev.

Proc. 2000-15, § 4.02, 2000-1 C.B. at 448. If a requesting spouse does not qualify

for relief under § 4.02, she may still qualify for relief under § 4.03, which sets forth

a partial, non-exhaustive list of factors, no one of which is determinative.19 Some

19

Under Revenue Procedure 2000-15, § 4.03, factors weighing in favor of relief include

(1) if the requesting spouse is separated or divorced from the non-requesting spouse; (2) if the

requesting spouse would suffer economic hardship in the absence of relief; (3) if the requesting

spouse suffered abuse at the hands of the non-requesting spouse; (4) if the requesting spouse had

no knowledge or reason to know that the liability would not be paid; (5) if the non-requesting

spouse has a legal obligation to pay the outstanding liability; and (6) if the liability for which

relief is sought is attributable solely to the non-requesting spouse.

Further, if the spouse has significantly benefitted, beyond normal support, from the

29

factors weigh in favor of relief and some weigh against; the Commissioner must

take into account all the facts and circumstances, considering and weighing all

factors appropriately. Id. at 449. The taxpayer has the burden of demonstrating

that relief should be granted. Cheshire v. Comm’r, 282 F.3d 326, 332 (5th Cir.

2002); Ewing, 122 T.C. at 36-37.

Here, the Commissioner reasoned that Neal was not entitled to relief because

(1) when she signed the return, she should have known that the tax was unpaid

based on the couple’s prior bankruptcy filings, and (2) that no economic hardship

would befall her if she had to pay the remaining tax liability. After hearing the

evidence at trial, including Neal’s testimony, the Tax Court found that the record

was “inconclusive” as to the existence of economic hardship. But the Tax Court

also found that most of the § 4.03 factors weighed in favor of granting Neal relief.

First, Alimam has a legal obligation to pay the unpaid taxes. Next, the couple is

divorced. Almost all of the underpayments were attributable only to Alimam.

Further, Neal received no significant benefit from the unpaid taxes and has made a

good faith effort to comply with federal tax laws with regard to her income

throughout her marriage and in subsequent years.20 Even now, the only two

unpaid liability, or the requesting spouse has failed to comply with federal income tax laws,

those factors would weigh against granting relief. Rev. Proc. 2000-15, § 4.03, 2000-1 C.B. 447,

448-49.

20

See footnote 5 supra.

30

contested factors are whether Neal knew or should have known about Alimam’s

underpayment, and whether Neal would suffer economic hardship if not granted

relief.

In considering “knowledge or reason to know of underpayment,” relevant

factors include: “(1) the alleged innocent spouse’s level of education; (2) the

spouse’s involvement in the family’s business and financial affairs; (3) the

presence of expenditures that appear lavish or unusual when compared to the

family’s past levels of income, standard of income, and spending patterns; and (4)

the culpable spouse’s evasiveness and deceit concerning the couple’s finances.”

Kistner v. Comm’r, 18 F.3d 1521, 1525 (11th Cir. 1994). The Commissioner

points to Neal’s knowledge that Alimam filed for bankruptcy in 1989 and 1995

(and the levying of Neal’s salary) as evidence that Neal should have known about

Alimam’s lack of trustworthiness as to tax matters. As the Tax Court noted,

however, the couple’s filed tax returns accurately reflected their tax liabilities. The

couple also maintained separate personal finances, and, although Neal asked,

Alimam refused to share information about his business finances. Further, Alimam

lied to Neal about the reason the IRS was a creditor in the 1989 bankruptcy, falsely

telling her that the IRS had disallowed certain tax shelters, resulting in a tax

deficiency. Because Neal knew others who ended up owing large amounts of taxes

31

after investing in tax shelters, she believed Alimam’s explanation.21 Although

Neal became aware during the 1989 bankruptcy of some of Alimam’s lavish

expenses, Neal did not know how much Alimam made in his anesthesiology

practice and real estate investments and thus whether his income might support

those purchases. Furthermore, Alimam contributed much less than Neal to the

family expenses, making it reasonable to assume he had more discretionary

income. Given Alimam’s general level of deceit, we cannot say that the Tax Court

abused its discretion in finding that Neal did not know, nor should she have

known, when she signed the 1990-93 tax returns that Alimam would not pay the

tax balances shown on them.

With regard to the economic hardship factor, economic hardship is generally

defined as the inability to meet “reasonable basic living expenses.” See Treas.

Reg. § 301.6343-1(b)(4). The Tax Court held that the facts were inconclusive as to

the degree to which Neal would suffer economic hardship if she were denied relief.

According to the Commissioner, sufficient evidence exists to sketch some picture

of Neal’s net worth—specifically, the Commissioner points to Neal’s substantial

salary, which in 1996 was $127,103 and had risen to $174,940 in 2003. Yet Neal

21

During the 1995 bankruptcy, Alimam again lied to Neal, falsely explaining that the IRS

was a creditor because it had not permitted the deduction of certain business expenses. In any

event, the 1995 bankruptcy sheds little light on what Neal should have known between 1990 and

1993 about Alimam’s trustworthiness in paying taxes.

32

testified that she has spent all of her income over time (including supporting her

adult children), “just breaks even,” and has a poor credit rating. Although an

incomplete picture of Neal’s “basic living expenses” cuts against relief, economic

hardship is only one factor in a non-exhaustive list, and no single factor is

determinative of whether equitable relief is appropriate. Rev. Proc. 2000-15,

§ 4.03. Thus, taking into account all of the facts and circumstances and the factors

listed in Revenue Procedure 2000-15, § 4.03, we cannot say that the Tax Court

abused its discretion in finding that the factors, taken as a whole, weighed in favor

of granting relief.

IV.

The Tax Court did not err in conducting a trial de novo in reviewing the

Commissioner’s decision whether Neal was entitled to equitable relief under

§ 6015(f). The Tax Court also did not abuse its discretion in granting Neal

equitable relief. The judgment of the Tax Court is therefore

AFFIRMED.

33

TJOFLAT, Circuit Judge, dissenting:

I dissent from the opinion of the court because a careful review of applicable

law reveals that neither the plain language nor the legislative history nor the

historical practices of the Tax Court in relation to the innocent spousal relief

provision, I.R.C. § 6015(f), indicate Congress’s intent to supplant the scope and

standard of review set forth in the Administrative Procedure Act (“APA”).

Without citation to any cases other than Ewing/Porter, the court has succumbed to

the charms of circular reasoning and abdicated its reviewing function—that is, the

court holds that the Tax Court’s reasoning is correct because the Tax Court

provided such reasoning regarding its own scope of review. By condoning the Tax

Court’s use of a de novo scope of review, the court undermines the

Commissioner’s incentive to decide taxpayer contests fairly and adequately. Thus,

I would vacate the Tax Court’s judgment and remand with the instruction that the

Tax Court limit its review to the scope of the administrative record.

I.

A.

I begin by stating the obvious: the IRS is an “agency” as defined by the

APA, the IRS has made findings of fact in this case, and such findings constitute

“agency action.” 5 U.S.C. § 701 (2008) (defining “agency” as an “authority of the

Government of the United States”); id. § 706 (providing scope of review of agency

34

actions). As the court recognizes, it is a fundamental tenet of administrative law

that a court is “ordinarily limited to consideration of the decision of the agency . . .

and of the evidence on which it was based.” United States v. Carlo Bianchi, 373

U.S. 709, 714–15, 83 S. Ct. 1409, 1413, 10 L. Ed. 2d 652 (1963). Pursuant to the

APA, in the absence of an exception, a reviewing court must set aside only those

agency adjudications that are “arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A); Citizens to Preserve

Overton Park v. Volpe, 401 U.S. 402, 416, 91 S. Ct. 814, 823, 28 L. Ed. 2d 136

(1971), abrogated on other grounds by Califano v. Sanders, 430 U.S. 99, 105, 97 S.

Ct. 980, 984, 51 L. Ed. 2d 192 (1977). The court’s review must be “searching and

careful,” but “narrow,” because “the court is not empowered to substitute its

judgment for that of the agency.” Overton Park, 401 U.S. at 416, 91 S. Ct. at 823.

Further, the scope of this review must extend to, and be limited by, the

“whole record” compiled by the agency, id. at 419, 91 S. Ct. at 825, “not some new

record made initially in the reviewing court.” Camp v. Pitts, 411 U.S. 138, 142, 93

S. Ct. 1241, 1244, 36 L. Ed. 2d 106 (1973). The reviewing court may obtain

additional explanation of the agency decision through affidavits or testimony of the

agency officials, but it may not substitute its own facts for those of the agency.

Camp, 411 U.S. at 143, 93 S. Ct. at 1244.

35

Under the APA, in limited circumstances, a reviewing court may conduct a

de novo hearing and consider whether an agency’s decisions are “unwarranted by

the facts to the extent that the facts are subject to trial de novo.” 5 U.S.C. §

706(2)(F). In 1973, the Supreme Court confined this exception and allowed de

novo review of adjudicative decisions in only those situations where the agency

used “inadequate . . . factfinding procedures.” Overton Park, 401 U.S. at 416, 91

S. Ct. at 823.

Informal agency adjudication—that is, a decision made without a hearing,

findings of facts, and other requirements specified in the APA—does not constitute

inadequate factfinding sufficient to justify de novo review. See Camp, 411 U.S. at

141–42, 93 S. Ct. at 1243–44 (holding factfinding procedures adequate where

agency adjudication was based on review of the administrative record without

conducting a formal oral hearing or issuing findings of fact); Pacific Architect &

Eng’rs Inc. v. U.S. Dep’t of State, 906 F.2d 1345, 1348 (9th Cir. 1990) (holding

factfinding procedures adequate where agency provided notice, company stated

objections, and agency rejected objections in a statement of decision); Acumenics

Research & Tech. v. U.S. Dep’t of Justice, 843 F.2d 800, 804–05 (4th Cir. 1988)

(same). But cf. Porter v. Califano, 592 F.2d 770, 782-84 (5th Cir. 1979) (holding

agency factfinding procedures were inadequate where the officials accused of

corruption by the plaintiff played a “pervasive role” in the factfinding). The

36

informal factfinding procedures undertaken here were adequate and not subject to

this de novo exception because Neal had the opportunity to provide information to

the examining agent, discuss her claim with that agent, and respond to the agent’s

determination.

B.

In this case, the Tax Court combined a standard and scope of review not

contemplated by the APA: an abuse of discretion standard and a de novo scope.

Because the innocent spousal relief provision, I.R.C. § 6015, was enacted after the

APA, the judicial review provisions of APA § 706 may be modified or superseded

only if section 6015 does so “expressly.” 5 U.S.C. § 559. The Supreme Court has

explained that exemptions from the APA are not to be lightly presumed and must

be clear. Dickinson v. Zurko, 527 U.S. 150, 155, 119 S. Ct. 1816, 1819, 144 L. Ed.

2d 143 (1999); Marcello v. Bonds, 349 U.S. 302, 310, 75 S. Ct. 757, 762, 99 L. Ed.

1107 (1955). There are no “magical passwords” that signify an exemption, and

even the presence of terms like “clearly erroneous” and “substantial evidence” do

not conclusively indicate departure from the abuse of discretion standard.

Dickinson, 527 U.S. at 156, 119 S. Ct. at 1819 (explaining that the “relevant

linguistic conventions were less firmly established before the APA’s adoption than

they are today”); Marcello, 349 U.S. at 310, 75 S. Ct. at 762.

37

We consider the express terms of the statute and then the legislative history

in prescribing the appropriate standard and scope of review. See Marcello, 349

U.S. at 310, 75 S. Ct. at 762 (holding that the “laborious adaptation” of the APA

procedures to deportation proceedings and related legislative history supported

exemption from APA); Carlo Bianchi, 373 U.S. at 714, 83 S. Ct. at 1413

(concluding, based on a review of the statute and its legislative history, that review

of Wunderlich Act decisions must be made on the administrative record).

Neither the plain language of section 6015(e) or (f) nor its legislative history

explicitly address the standard or scope of review.

The court, relying on the Ewing/Porter majority, argues that, in the Internal

Revenue Code, the scope of review is identified on the face of the statute by the

operative term “determine,” ante at 26. Ewing v. Comm’r, 122 T.C. 32, 37 (2004),

rev’d on other grounds, 439 F.3d 1009, 1014 (9th Cir. 2006); Porter v. Comm’r,

130 T.C. No. 10, 2008 WL 2065189, at *2–3 (Tax Ct. May 15, 2008). I do not

dispute the fact that the Tax Court has on numerous occasions conducted de novo

hearings to “determine” certain issues. However, I am unconvinced by this

argument.

First, we must remain cognizant of the fundamental canon of statutory

construction that, “unless otherwise defined, words will be interpreted as taking

their ordinary, contemporary, common meaning.” Perrin v. United States, 444

38

U.S. 37, 42, 100 S. Ct. 311, 314, 62 L. Ed. 2d 199 (1979). The Supreme Court has

consistently rejected “narrow common-law definition[s]” of statutory terms in

favor of “generic definition[s].” See id. at 49, 100 S. Ct. at 317 (rejecting early

common law definition of “bribery” and using the “accepted contemporary

meaning” in its interpretation of the Travel Act); Taylor v. United States, 495 U.S.

575, 593, 110 S. Ct. 2143, 2155, 109 L. Ed. 2d 607 (1990) (favoring generic

meaning of “burglary”); see also Anderson v. Cagle’s, Inc., 488 F.3d 945, 955

(11th Cir. 2007) (using broad dictionary definition of “clothes” to interpret Fair

Labor Standards Act provision); Walton v. Jamko, Inc., 240 F.3d 1312, 1315 (11th

Cir. 2001) (using dictionary definition of “disbursements” to interpret bankruptcy

provision). The dictionary definition of “determination” is “the settling and ending

of a controversy esp. by judicial decision” or “the resolving of a question by

argument of reasoning” or, in the legal context, “a final decision by a court or

administrative agency.” Webster’s Third New International Dictionary 616

(1993); Black’s Law Dictionary 460 (7th ed. 1999). These definitions make no

mention of scope or standard of review.

Second, even in the Internal Revenue Code, “determination” and

“determine” do not exclusively reference de novo review. Congress has defined

“determination” in sections relating to personal holding company taxes, deficiency

dividends, and mitigation of errors in tax returns as a “decision by the Tax Court . .

39

. which has become final” without reference to the use of a certain scope of review.

I.R.C. §§ 547, 860, 1311. Further, though Congress explicitly limited the Tax

Court’s review to the administrative record when declaring retirement benefits, the

legislative history of that section is nonetheless replete with the word

“determination.” See Tamko Asphalt Prods., Inc. v. Comm’r, 71 T.C. 824, 837

(1979), aff’d, 658 F.2d 735 (10th Cir. 1981) (holding that the Tax Court is limited

to the administrative record when declaring retirement benefits); H.R. Rep. No. 94-

658, at 244 (1975), reprinted in 1976 U.S.C.C.A.N. 2897, 3139 (“The court is to

base its determination upon the reasons provided by the Internal Revenue Service

in its notice to the party making the request for a determination . . . .”).

The court, citing the Ewing majority, ignores these provisions, stating

instead that the Tax Court’s long tradition of conducting de novo trials with the

term “determine” in section 6015(e)(1)(A) “suggest[s]” the use of a de novo trial

here, ante at 18. Ewing, 122 T.C. at 39. A mere suggestion is not sufficient to

override the requirements of the APA. See Marcello, 349 U.S. at 310, 75 S. Ct. at

762 (stating that exemptions from the APA are not to be “presumed lightly”).

Congress could have provided the standard and scope of review either in the

express terms of section 6015(f) or in the legislative history, but it did not do so.

Cf. H.R. Rep. No. 105-599, at 266 (1998) (Conf. Rep.) (specifying use of de novo

review when validity of tax liability is at issue in deciding levies); I.R.C. § 6404(h)

40

(providing the Tax Court with jurisdiction to “determine whether the Secretary’s

failure to abate interest . . . was an abuse of discretion”). Thus, pursuant to the

APA, the Tax Court must revert to the default: an abuse of discretion standard of

review limited to the scope of the administrative record. See Ninilchik Traditional

Council v. United States, 227 F.3d 1186, 1193 (9th Cir. 2000) (rejecting de novo

review where such review was not clearly dictated in statute because Ҥ 706 of the

APA functions as a default judicial review standard”); cf. Moon v. American

Home Assurance Co., 888 F.2d 86, 89 (11th Cir. 1989) (finding, in ERISA action,

that limiting de novo review to the record available to the plan administrator is

contrary to the concept of de novo review).

II.

The court posits that we should look beyond the text and legislative history

of section 6015 and apply the standard and scope of review historically used by the

Tax Court, ante at 23-26. The court’s argument in support of this proposition is

obscure at best and unsupported at worst. It appears that the court is contending

that: (1) prior to the enactment of the APA, statutory and case law required the Tax

Court to review decisions of the Commissioner with an abuse of discretion

standard and de novo scope of review; (2) this “additional requirement” of

procedure continued via the application of APA § 559; and (3) this combination of

41

standard and scope of review applies to the Tax Court’s review of all

Commissioner’s decisions, including those under section 6015(f).

It is true that the enactment of the APA did not “limit or repeal additional

requirements” of administrative procedure authorized by statute or by common

law, but the prior existence of these additional requirements must be “clear.” 5

U.S.C. § 559; Dickinson, 527 U.S. at 155, 119 S. Ct. at 1819. I begin by

summarizing the relevant history of the Tax Court and then explain that, because

section 6015 was enacted after the APA, the “additional requirements” exception

from the APA does not apply.

A.

Tax law was simple in 1913, the year the Constitution was amended to

authorize Congress to “lay and collect taxes on income”: the Internal Revenue

Code was contained in a mere sixteen pages and authorized a flat one-percent

income tax on all corporations and a graduated tax from 1% to 7% on all persons

with a net income above $3,000. U.S. Const. Amend. XVI; Pub. L. 63-16, § II, 38

Stat. 166, 168 (1913). If a taxpayer sought to challenge the government’s

imposition of taxes, the taxpayer’s only recourse was to pay the disputed amount

42

and then file a refund suit in the Court of Claims or in a federal district court.22

Harold Dubroff, The United States Tax Court: An Historical Analysis 28 (1979).

Over the next decade, the tax code became a creature of complexity—the

Form 1040 and joint returns were introduced, tax rates were raised, and new types

of taxes, like the excise tax and excess profits taxes, were added. Recognizing that

increasing complication of the tax code correlated with a rise in tax disputes, in

1924, Congress established the Board of Tax Appeals to allow taxpayers to

challenge deficiency determinations prior to paying the contested amount. Pub. L.

No. 68-176, § 900, 43 Stat. 253, 336–338 (1924); S. Rep. No. 68-398, at 8 (1924)

(“The right of appeal after payment of the tax is an incomplete remedy, and does

little to remove the hardship occasioned by an incorrect assessment.”).

The Board was an independent agency in the executive branch of

government and limited to hearing appeals of “deficiency determinations.” Id.

Congress defined a deficiency as occurring when the amount imposed by the

Internal Revenue Code exceeded the amount shown on the individual or

corporation’s tax return. Pub. L. No. 68-176, § 273, 43 Stat. 253, 297 (1924).

Though not a judicial body, the Board, on appeals of such determinations, was

22

A taxpayer could also seek relief from the Committee on Appeals and Review. But,

the Committee was part of the Bureau of Internal Revenue, and the proceedings in the

Committee were not public or adversarial and did not permit the introduction of new evidence.

Dubroff, supra, at 39.

43

authorized to hear cases, administer oaths, and examine and subpoena witnesses.

Id. At the same time, Congress intended that an appeal before the Board would be

a “flexible and informal procedure” so that cases would be determined

expeditiously. S. Rep. No. 68-398, at 9 (1924).

In appeals to the Board, the Commissioner’s deficiency determinations were

deemed presumptively correct, and the taxpayers had the burden of proving that

the rulings were erroneous or arbitrary. Helvering v. Taylor, 293 U.S. 507, 515, 44

S. Ct. 287, 291, 79 L. Ed. 623 (1935); Welch v. Helvering, 290 U.S. 111, 115, 54

S. Ct. 8, 9, 78 L. Ed. 212 (1933). If the Board’s decision was appealed to a trial

court, the findings of the Board were to be considered prima facie evidence in

favor of the Board’s conclusion. Pub. L. No. 68-176, § 273, 43 Stat. 253, 297

(1924).

Congress expanded the Board’s jurisdiction in 1926 to determine

overpayment of taxes and again in 1942 to determine refunds of processing taxes.

Revenue Act of 1926, Pub. L. No. 69-20, § 284(a), 44 Stat. 9 (1926); Revenue Act

of 1942, Pub. L. No. 77-753, § 510, 56 Stat. 798, 967 (1942). Congress changed

the name of the Board of Tax Appeals to the “Tax Court of the United States” in

1942, but it retained the Board’s status as an executive agency. Revenue Act of

1942, Pub. L. No. 77-753, § 504, 56 Stat. 798, 957 (1942).

44

Four years later, Congress enacted the APA to govern procedure relating to

administrative agencies. Administrative Procedure Act, Pub. L. No. 79-324, § 1,

60 Stat. 237 (1946) (currently codified at 5 U.S.C. § 551). It was, as the Supreme

Court has noted, a “legislative enactment which settled ‘long-continued and hard-

fought contentions, and enacts a formula upon which opposing social and political

forces have come to rest.’” Vermont Yankee Nuclear Power Corp. v. Nat’l

Resources Defense Council, Inc., 435 U.S. 519, 523, 98 S. Ct. 1197, 1201, 55 L.

Ed. 2d 460 (1978). In the legislative history, Congress specifically exempted the

“tax functions of the Internal Revenue Service” from formal adjudications that

require notice, a hearing, and creation of a record because they are “matter[s]

subject to a subsequent trial of the law and the facts de novo in any court.” S. Rep.

No. 79-752, at 221 (1945), reprinted in Administrative Procedure Act Legislative

History, (1994-1946) at 22l (1947); Administrative Procedure Act, 5 U.S.C. §

1005(1) (1946) (currently codified at 5 U.S.C. § 554(a)(1) (2008)). This

exemption from formal adjudication was deemed appropriate because the agency’s

judgment would be effective “only in a prima facie sense at most,” as the aggrieved

party would be entitled to judicial retrial in the Tax Court. S. Rep. No. 79-752, at

202, reprinted in Administrative Procedure Act Legislative History at 202.

Relatedly, a reviewing court could go beyond arbitrary and capricious

review, and reverse an agency decision if it was “unwarranted by the facts so far as

45

the [facts] are subject to trial de novo.” APA § 10 (currently codified at 5 U.S.C. §

706(2)(F)); see also part I.A., supra, (discussing current interpretation of de novo

review). In the 1946 APA legislative history, Congress explained that facts would

be subject to trial de novo if formal adjudication or rule-making were not required

in the organic act or if there had been no administrative hearing that was adequate

and exclusive for purposes of factual review. Congress explained that IRS

decisions met this latter reason: “[W]here adjudications such as tax assessments are

not made upon an administrative hearing and record, contests may involve a trial of

the facts in the Tax Court or the United States district courts.” S. Rep. No. 79-752,

at 214 (1945), reprinted in Administrative Procedure Act Legislative History at

214.

The Fourth Circuit Court of Appeals amplified this legislative history by

holding that the Tax Court was generally not subject to the requirements of the

APA. O’Dwyer v. Comm’r, 266 F.2d 575, 580 (4th Cir. 1959). The O’Dwyer

taxpayer sought to compel the Commissioner to produce the entire administrative

record based upon the language in the APA directing the reviewing court to

consider the “whole record.” Id. at 579. The court concluded that, because the

formal adjudication provisions did not apply to IRS proceedings, the

Commissioner was not required to compile a record, and, therefore, the Tax Court

was not a “reviewing court” that must consider the “whole record.” Id. at 580.

46

Though removing the Tax Court from the ambit of the APA, the Fourth Circuit

confirmed that, upon appeal to the Tax Court, the Commissioner’s assessment was

presumed to be correct and the burden was upon the taxpayer to show that the

Commissioner’s determination was erroneous. Id. at 577.

In 1969, the Tax Court took its present form when Congress established an

Article I court of record named the “United States Tax Court” to replace the Tax

Court of the United States. Pub. L. 91-172, § 951, 83 Stat. 487, 730 (1969).

Congress indicated that it made this change to quell questions regarding the

propriety of one agency sitting in judgment of another agency and because the Tax

Court only had judicial duties. S. Rep. No. 91-552 (1969), reprinted in 1969

U.S.C.C.A.N. 2027, 2343. The United States Tax Court was a “continuation of the

Tax Court of the United States as it existed prior to the date of enactment of the

[1969 Revenue Act]” and the change would have “no effect upon . . . jurisdiction.”

Id. at 2344.

B.

I do not decide, as the court does, ante at 24, whether this history reveals that

Congress clearly imposed an “additional requirement” on the Tax Court to review

deficiency determinations, overpayments, and refunds of processing taxes, using

an abuse of discretion standard and de novo scope. I do not decide this issue

47

because it is not before this court. See Access Now, Inc. v. Southwest Airlines

Co., 385 F.3d 1324, 1330 (11th Cir. 2004) (“[E]valuating an issue on the merits

that has not been raised in the initial brief would undermine the very adversarial

nature of our appellate system.”). However, assuming that such an additional

requirement existed and continues via the application of APA § 559, it is

impermissible to extend this exception from the APA to the review of innocent

spouse relief.

The Supreme Court’s holding in Dickinson v. Zurko is instructive. The

issue before the Court was whether the Federal Circuit Court of Appeals

appropriately reviewed findings of fact made by the Patent and Trademark Office

under a clearly erroneous standard, rather than the APA’s abuse of discretion

standard. Dickinson, 527 U.S. at 152, 119 S. Ct. at 1818. The respondents

contended that, prior to the enactment of the APA, patent determinations had been

reviewed using the clearly erroneous standard and this additional requirement

continued pursuant to APA § 559. In re Zurko, 142 F.3d 1447, 1459 (Fed. Cir.

1998). The Supreme Court stated that the respondents

must show more than a possibility of a heightened standard [prior to

the enactment of the APA], and indeed more than even a bare

preponderance of evidence in their favor. Existence of the additional

requirement must be clear.

48

Dickinson, 527 U.S. at 154–55, 119 S. Ct. at 1819. Permitting departure from the

APA based on an ambiguous historical requirement in previous case law would

frustrate the purpose of the APA to bring “uniformity to a field full of variation and

diversity.” Id. After analyzing 89 pre-APA decisions reviewing findings of fact of

the Patent Office, the Court found ambiguity because most of them used a

“manifest error” or “clearly wrong” standard rather than a “clearly erroneous”

standard. Id. at 156, 119 S. Ct. at 1820. Thus, the Court reversed the Federal

Circuit and held that the APA’s abuse of discretion standard should be applied.

In Dickinson, unlike the case at hand, no new statute had been introduced

that led to the Supreme Court’s review; the Federal Circuit sought to review

findings of fact of patent and trademark applications in 1998 and the courts had

authority to review such findings of fact in 1946. Id. at 154, 119 S. Ct. at 1819; see

also United Transp. Union v. Interstate Commerce Comm’n, 52 F.3d 1074, 1080

n.10 (D.C. Cir. 1995) (finding declaratory orders relating to Interstate Commerce

Act to be an “additional requirement” where the Commission had been using such

orders prior to the APA and the Supreme Court had assumed the practice to be

proper). On the other hand, here, the Tax Court was granted jurisdiction over a

new type of relief in 1998. As discussed in part I, because the innocent spousal

relief provision was enacted subsequent to the APA, an exemption from the

requirements of the APA must be shown clearly via the text of the statute and the

49

legislative history. In other words, we should not even reach the point of analysis

reached by the Dickinson Court, because the statute at issue was not part of the

Internal Revenue Code when the APA was enacted.

The court argues that the steps of review presented in Dickinson are

irrelevant because “§ 6015 was enacted ‘as part and parcel of’ and with similar

language to, the statutory framework of deficiency determinations.” Ante at 27

n.17. The court gives no guidance to determine whether a statute or part of a

statute is “part and parcel of” another. Nor has the court addressed why the

innocent spousal relief provision is “part and parcel” of the deficiency framework.

Indeed, in this case, the innocent spousal relief provision is being used in a

collection case—proving that the innocent spousal relief provision is not

necessarily tied to the deficiency procedures. Even if the “part and parcel”

criterion could provide a rational or administrable test for discerning exceptions to

APA § 559, the most I can concede here is that § 6015 is “part and parcel” of the

Internal Revenue Code as a whole. Surely, the court could not have intended to

exempt any amendment to the tax code from APA § 559; yet that is the logical

conclusion of the court’s tortured and unsupported analysis. At worst, the analysis

presented by the court seems to authorize use of the APA § 559 exception in all

statutes, without regard to whether the provision at issue was enacted before or

after the APA.

50

Even if I blind myself to the inapplicability of the “additional requirements”

exemption, I find no clear indication that a de novo scope of review should be used

in innocent spousal relief determinations. There is no pre-APA indication as to the

standard or scope of review to be used in conjunction with decisions not involving

deficiency determinations, overpayments, or refunds of processing taxes because

such decisions would have been moot or not ripe for adjudication. I also find

unpersuasive the Ewing/Porter majority’s and Neal’s reliance on O’Dwyer, 266

F.2d at 580, because the Fourth Circuit’s decision was premised on the now-

defunct notion that informal agency action need not be reviewed on the

administrative record. See part I.A, supra; Camp, 411 U.S. at 142, 93 S. Ct. at

1244.

Confronted with the same combination of standard and scope of review

argued here, our sister circuit held that review of collection due process cases

should be limited to the administrative record. Robinette v. Comm’r, 439 F.3d

455, 461 (8th Cir. 2006). The Robinette court explained that, when Congress

authorized judicial review of collection determinations to the Tax Court in 1998,

the “nature and purpose” of those proceedings were different from deficiency

determinations and it was “just as likely” that Congress intended traditional

principles of administrative law be used. Id. The Tax Court’s own decisions in

collection due process cases belie the Ewing/Porter majority’s contention that the

51

record rule does not apply to the Tax Court. Giamelli v. Comm’r, 129 T.C. 107,

115 (2007) (holding that collection proceedings reviewed under an abuse of

discretion standard must be limited to the issues raised before Appeals); Magana v.

Comm’r, 118 T.C. 488, 493 (2002) (same). The court avoids the reasoning of the

Robinette court upon the basis that the statutes at issue are different, ante at 28.

However, the court fails to recognize that here, as in Robinette, the Commissioner

seeks to collect unpaid taxes from Neal, not assess a deficiency. These collection

due process cases bolster the case for limiting the scope of review to the

administrative record. To argue, as the court does, that a collection due process

case under I.R.C. § 6330 should be treated differently than a collection case under

I.R.C. § 6015(f) exalts form over substance.

Indeed, that is the same deficiency found in the court’s argument that

limiting review to the administrative record will result in anomalous decisions

involving the same statute. For example, the court posits that, if Taxpayer X seeks

equitable relief via section 6015(f) and the IRS fails to issue a final determination

within six months, X may directly petition the Tax Court for relief. I.R.C. §

6015(e)(1)(A). In that case, unlike Neal’s situation, the Tax Court will be required

to conduct de novo review because the IRS will not have compiled an

administrative record.

52

I disagree that allowing a de novo scope in X’s case but limiting the scope of

review to the administrative record in Neal’s case is problematic. The court and

Porter/Ewing majority focus erroneously on the status of the court reviewing the

decision of the administrative body, rather than the status of the administrative

body itself.23 APA § 706 applies to a court’s review of an “agency action”; where

there is no “agency action,” the APA does not apply. 5 U.S.C. § 706. In Neal’s

case, there has been agency action; in X’s case, there has been no agency action.

To permit the Tax Court to override the agency’s findings of fact undermines the

very purpose of the APA:

This sound and clearly expressed purpose [of expediting review of

agency decisions] would be frustrated if either side were free to

withhold evidence at the administrative level and then to introduce it

in a judicial proceeding. Moreover, the consequence of such a

procedure would in many instances be a needless duplication of

evidentiary hearings and a heavy additional burden in the time and

expense required to bring litigation to an end.

23

This same defect infects Nappi v. Comm’r, 58 T.C. 282, 284 (1972), in which the Tax

Court held that the APA categorically did not apply to the Tax Court because it was an Article I

court. The Nappi court conflated the APA provisions for an agency, which were not applicable

to the Tax Court after 1969, with the APA requirements for a court reviewing an agency action.

See 35 Fed. Reg. 12462 (Aug. 5, 1970) (deleting the Tax Court’s public notices, orders, and

rules from the Federal Register because the court was “no longer within the purview of the

APA”). The appropriate focus should not have been the status of the Tax Court but whether the

administrative body seeking review was an agency subject to standards that a reviewing court

must use. See 5 U.S.C. § 706.

53

Carlo Bianchi, 373 U.S. at 717, 83 S.Ct. at 1415. While both Taxpayer X’s request

for relief and Neal’s are premised on section 6015(f), they arise under wholly

different procedural circumstances and, accordingly, are reviewed differently.24

I do not deny the possibility that Congress may have intended that the Tax

Court continue reviewing all matters in which it is granted jurisdiction using an

abuse of discretion standard and de novo scope of review. But, a mere possibility

is not sufficient to overwhelm Congressional interest in preserving uniformity and

fairness in administrative procedure.

III.

All of this leads to a singular conclusion: allowing the Tax Court carte-

blanche authority to override the Commissioner using the vehicle of a de novo trial

reveals distrust in the Commissioner’s decisions and decimates the

Commissioner’s incentive to be impartial and thorough in those determinations.

Congress, in enacting the judicial review provisions of the Administrative

Procedure Act, protected this incentive by giving deference to agencies:

In the first instance . . . it will be the function of the agency to

determine the sufficiency of the evidence upon which it acts–and the

24

I am equally unpersuaded by the citation to § 6015(e)(4), under which the non-

requesting spouse may intervene in the Tax Court hearing. There is nothing to suggest that, by

allowing intervenors, Congress intended that trials be conducted de novo or that third parties

may introduce matters outside the scope of the administrative record. Cf. Vermont Yankee, 435

U.S. at 554-55, 98 S. Ct. at 1217 (upholding Atomic Energy Commission’s refusal to consider

conservation alternatives introduced by intervenor after the initial decision).

54

proper performance of its public duties will require it to undertake this

inquiry in a careful and dispassionate manner . . . . Judicial review is

of utmost importance, but it can be operative in relatively few cases

because of the cost and general hazards of litigation. . . . For that

reason the agencies must make the first, primary, and most far-

reaching effort to comply with the terms and the spirit of this bill.

S. Rep. No. 79-752, at 216–17 (1945), reprinted in Administrative Procedure Act

Legislative History at 217; see also Overton Park, 401 U.S. at 416, 91 S. Ct. at 823

(“The court is not empowered to substitute its judgment for that of the agency.”).

Today, the court has given the Tax Court the authority to second-guess the

Commissioner at its whim, superimposed upon the farce that the Commissioner’s

determination is given discretionary weight. Under such a scheme, why should the

Commissioner conduct his hearings in a careful and diligent manner? Why bother

when the Commissioner knows that his review of the facts and law will be

ignored? For that matter, why should taxpayers be required to fund and use the

IRS appeals process since any conclusions made by those federal officials will

dissipate in the Tax Court like whispers in the wind? I have found no satisfactory

answers to these questions. Therefore, I respectfully dissent from the court’s

judgment.

55