DocketNumber: No. 13558-06
Citation Numbers: 130 T.C. 115, 2008 U.S. Tax Ct. LEXIS 10, 130 T.C. No. 10
Judges: \"Haines, Harry A.\"
Filed Date: 5/15/2008
Status: Precedential
Modified Date: 1/13/2023
R denied P's application for relief from joint income tax liability under
R urges us to reconsider our holding in
*115 HAINES,
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The stipulation of facts, the exhibits attached thereto, and the stipulation of settled issues are incorporated herein by this reference. At the time she filed her petition, petitioner resided in Silver Spring, Maryland.
Petitioner and her husband (Mr. Porter) filed a joint Form 1040, U.S. Individual Income Tax Return, for 2003 (2003 return). Mr. Porter prepared the 2003 return. On April 21, 2004, 6 days after petitioner signed the 2003 return, she and Mr. Porter legally separated. 2
On June 20, 2005, respondent issued petitioner and Mr. Porter a statutory notice of deficiency for 2003. Neither petitioner nor Mr. Porter petitioned this Court for redetermination of the deficiency.
On December 1, 2005, petitioner submitted a Form 8857, Request for Innocent Spouse Relief. In a June 14, 2006, final determination, *12 respondent's Appeals officer determined that pursuant to
Respondent filed a motion in limine to preclude petitioner from introducing any evidence, documentary or testimonial, which was not available to respondent during the administrative process. The Court took the motion under advisement and permitted petitioner to testify and introduce evidence subject to its ruling on the motion in limine.
*117 OPINION
A.
Respondent contends that, pursuant to the Administrative Procedure Act (APA),
In
B.
Since its enactment in 1946 the APA has generally not governed proceedings in this Court (or in its predecessor, the Board of Tax Appeals). See
As a statute of general application, *15 the APA does not supersede specific statutory provisions for judicial review.
The Code has long provided a specific statutory framework for reviewing deficiency determinations of the Internal Revenue Service.
Our jurisdiction under
*119 Congress first granted the Board of Tax Appeals (the predecessor to the Tax Court) jurisdiction to "redetermine" deficiencies and additions to tax in 1924.
We can presume that in 1998 when Congress chose to use the word "determine" in
*120 Respondent argues that pursuant to the Court of Appeals for the Eighth Circuit's decision in
We have jurisdiction to issue declaratory judgments relating to the status, qualification, valuation, or classification of certain section 501(c)(3) organizations, retirement plans, gifts, governmental obligations, and installment payments under
Congress, in full awareness of our history of de novo review, did not impose a similarly restrictive standard on our review of the Commissioner's determinations under
That
E.
We have reviewed the Commissioner's denial of relief in cases arising under
Examples of actions in which we conduct a trial de novo include those where we must decide whether it was an abuse of discretion for the Commissioner to (1) determine that a *123 taxpayer's method of accounting *26 did not clearly reflect income under
F. Neither
Respondent contends that under
Neither
G.
Adoption of respondent's position would lead to the anomaly of proceedings in some
First, we have jurisdiction to make a determination if a taxpayer petitions this Court 6 months after filing an election for
The nonrequesting spouse may intervene in the proceeding in which we determine whether the requesting spouse qualifies for relief under
H.
We read
To reflect the foregoing,
*126 Reviewed by the Court.
COLVIN, COHEN, SWIFT, WELLS, FOLEY, VASQUEZ, GALE, THORNTON, MARVEL, GOEKE, and WHERRY, JJ., agree with this majority opinion.
VASQUEZ, J., concurring: I agree with the majority opinion and write separately to clarify the confusion that exists between the terms "scope of review" and "standard of review".
It is important to distinguish between two separate concepts: scope of review and standard of review. The
In
With all due respect to the Court of Appeals for the Eighth Circuit, I believe it is incorrect to conclude when the standard of review is "abuse of discretion" that a fortiori our scope of review is limited to the administrative record. See majority op. pp. 13-14 (listing numerous instances where the
SWIFT and WELLS, JJ., agree with this concurring opinion.
*127 THORNTON, J., concurring: I agree with the majority opinion and write separately to offer additional historical perspective.
When the APA was enacted in 1946, the Tax Court of the United States was an agency of the executive branch. In substance, however, it functioned as a court. Consequently, for over two decades after the APA's enactment, there was uncertainty as to whether or how the APA should apply to the Tax Court. 12*34 *35 Partly to resolve that question, in 1969 the United States Tax Court, as it was newly renamed, was formally incorporated into the judiciary as an Article I court. Tax Reform Act of 1969,
Similarly, the APA has never affected this Court's long-established practice of conducting trials de novo in deficiency actions and most other actions, including those involving claims for relief from joint and several liability. The explanation for this well-established practice lies largely in the history of the Tax Court and of the APA.
B.
The precursor of the Tax Court, the Committee on Appeals and Review (the Committee), was part of the Bureau of Internal Revenue. Dubroff, The United States Tax Court: An Historical Analysis 39 (1979). This Committee was not a fact finder; instead, it operated under its own version of a record *128 rule. "The taxpayer was generally permitted to introduce evidence to the Committee only in affidavit or documentary form and could not adduce evidence that had not been considered by the Income Tax Unit."
Pressures to replace the Committee resulted largely from two factors: (1) The Committee was not independent of the *36 Bureau of Internal Revenue; and (2) the proceedings in the Committee were not adversary, were not public, and did not permit the introduction of new evidence.
In the 1924 legislation, Congress changed this plan to make the Board an independent agency in the executive branch; it was generally required to follow formal judicial procedures.
The Revenue Act of 1924 left the resolution of most procedural and evidentiary issues to the discretion of the Board. Dubroff,
In 1942 the Board of Tax Appeals was renamed the Tax Court of the United States. This name change did not significantly affect the jurisdiction, powers, or duties that previously had belonged to the Board. Dubroff,
*129 In sum, when the APA was enacted in 1946, de novo trials in the deficiency actions and various other matters within the Tax Court's jurisdiction were well-established practice and fundamental to this Court's reason for existence. Similarly, it was well-established practice in Federal District Courts to conduct trials *38 de novo in tax refund cases. See, e.g.,
In enacting the APA Congress expressly recognized that tax matters were the subject of de novo proceedings in the courts.
As a corollary to these APA provisions regarding agency adjudications,
*130 D.
Consistent with this legislative history, the courts have uniformly held that deficiency proceedings in the Tax Court are de novo and not governed by the APA. In The Tax Court is given jurisdiction to redetermine the deficiency asserted by the Commissioner, and in doing so it is empowered to prescribe rules of practice and procedure and is required to apply the rules of evidence applicable to nonjury trials in the United States Court of the District of Columbia and make findings of fact upon such *41 evidence. The Tax Court, rather than being a "reviewing court", within the meaning of
In a more recent unpublished opinion, the Court of Appeals for the Ninth Circuit reached the same conclusion. The Tax Court has as its purpose the redetermination of deficiencies, through a trial on the merits, following a taxpayer petition. It exercises de novo review. * * * * * * * * * * The courts carefully review administrative action for arbitrariness when an agency exercises final, statutory decisionmaking authority, such as an agency rulemaking. In tax cases such as this, the Tax Court *42 or United States District Court review the Commissioner's decision on the merits de novo. Too detailed a substantive review of the Commissioner's threshold "determination", undertaken solely for purposes of exercising subject matter jurisdiction would be duplicative and burdensome on the courts and the Commissioner.
Similarly, in an unpublished opinion involving the validity of the Commissioner's issuance of a notice of deficiency, the Court of Appeals for the Seventh Circuit concluded: "The APA is irrelevant, however, because the IRS's issuance of a notice of tax deficiency and the Tax Court's review of it are governed *131 by the Internal Revenue Code and the rules and procedures of the Tax Court * * * and not by the APA."
Although some have criticized the rationale of these decisions, even among these critics there appears to be no dispute that the APA does not affect the Tax Court's long-established practice of conducting trials de novo in deficiency actions. 14*43
E.
The original statutory *44 provision for relief from joint and several liability, as contained in former
*132 F.
1.
Similarly, a claim for relief from joint and several liability that *45 arises under
Some have suggested that actions involving
In any event,
3
In other cases,
Consequently, in a variety of circumstances
*134 Statutorily 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.
*135 As the majority opinion notes, the jurisdictional grant in
COLVIN, SWIFT, WELLS, GALE, and MARVEL, JJ., agree with this concurring opinion.
GOEKE,
In addition to the reasons provided by the statutory analysis in the majority opinion, I believe that the Court's review of
The Office of Chief Counsel attempted to define the "administrative record" in The administrative record is that part of the petitioner's administrative file that the Service considered, or the petitioner or nonrequesting spouse submitted to the Service for consideration, with respect to petitioner's claim for relief. This includes, but is not limited to, Form 8857, Request for Innocent Spouse Relief; Form 12507, Innocent Spouse Statement; Form 12508, Questionnaire for *53 Nonrequesting Spouse; Form 12510, Questionnaire for Requesting Spouse; all written correspondence between the petitioner and the Service; all written correspondence between the nonrequesting spouse and the Service; any documents presented to the examiner or Appeals officer; the preliminary notice of determination; the final notice of determination; any written analysis by the examiner or Appeals officer; and the Appeals Case Memorandum.
Notably, this explanation does not include a record of any hearings or other oral communications between the taxpayer and the settlement officer. In addition, what is characterized as the "administrative record" in fact ranges widely from case to case. In some cases the stipulated administrative record includes draft reports and miscellaneous documents from the Internal Revenue Service's (IRS) Cincinnati Service Center. In others, the administrative record consists of correspondence sent to the taxpayer and abbreviated notes from telephone conversations with the taxpayer.
Another practical problem with the record rule is that the administrative record, however defined, is frequently incomplete. Many taxpayers assume that the settlement officers will request *54 more information if they do not have enough evidence to grant relief, and the taxpayers therefore do not produce all relevant evidence they have because they are not specifically asked for it. In some of these situations, consideration of additional evidence establishes that relief is appropriate even though the settlement officer initially denied relief. See, e.g.,
Although the Court has long accepted telephone hearings in both
This is not a criticism of the Commissioner's administrative practices. The Appeals process is and has been an expedited and efficient means to resolve tax disputes. The Appeals process has never been conducted to create a reviewable administrative record and is ineffective for that purpose.
Congress enacted [The reorganization plan shall] ensure an independent appeals function within the Internal Revenue *56 Service, including the prohibition in the plan of ex parte communications between appeals officers and other Internal Revenue Service employees to the extent that such communications appear to compromise the independence of the appeals officers. One of the major concerns we heard throughout our oversight initiative was that the taxpayers who get caught in the IRS hall of mirrors have no place to turn that is truly independent and structured to represent their concerns. This legislation requires the agency to establish an independent Office of Appeals -- one that may not be influenced by tax collection employees or auditors. Appeals officers will be made available in every state, and they will be better able to work with taxpayers who proceed through the *138 appeals process.
In There is logic in the Government's position. But we do not adopt it. It would require two trials in many cases involving this question. The first trial would include the presentation of the "administrative record" and its *139 study to determine whether, on the basis of what was in it, the administrative decision was tolerable. But the so-called "administrative record" is in many cases a mythical entity. There is no statutory provision for these administrative decisions or for any procedure in making them. * * * Whoever *59 makes it has no power to put witnesses under oath or to compel the attendance of witnesses or the production of documents. There may or may not be a transcript of the oral testimony. The deciding officer may, and even in the departments maintaining the most formal procedures, does, search out and consult other documents which, it occurs to him, would be enlightening, and without regard to the presence or absence of the claimant.
Although
In many of the cases where courts have found it appropriate to limit their review to the administrative record, the administrative record was clearly defined and extensive and, if there was an administrative hearing, closely resembled the record that would be created in one of our own cases. For example, in
The APA itself suggests that hearings conducted under its rules will be well documented. APA section 556, (e) The transcript of testimony and exhibits, together with all papers and requests filed in the proceeding, constitutes the exclusive record for decision in accordance with section 557 of this title and, on payment of lawfully prescribed costs, shall be made available to the parties. When an agency decision rests on official notice of a material fact not appearing in the evidence in the record, a party is entitled, on timely request, to an opportunity to show the contrary.
By contrast, the administrative record in
While courts have applied the record rule in cases where the procedures are less formal than
By contrast, equitable relief under
Rejecting the record rule does not mean that taxpayers will be free to withhold information at the administrative level and then introduce it at trial. Where the settlement officer has requested relevant facts or documents from the taxpayer and the taxpayer has not cooperated, the Court may exclude evidence that is not part of the administrative record. However, the Court should not assume that because certain facts or evidence are not in the administrative record it necessarily follows that the taxpayer had *65 an adequate opportunity to present them.
My concern is that lost in the statutory debate both in our Court and in the Courts of Appeals is the impracticality of the Commissioner's narrow position and the inconsistency of *142 the Commissioner's position with decades of administrative practice in the Appeals process.
I agree with Judge Wherry's concurring opinion that the Court should not apply an abuse of discretion standard of review in
After Congress enacted
After the Court's Opinion in
After
While it was logical for the Court in
*144 COLVIN, SWIFT, FOLEY, MARVEL, WHERRY, and KROUPA,
WHERRY, J., concurring in the result: I agree with the majority's designated scope of review but write separately to urge the adoption of a matching standard of review when the merits of this case are decided.19 The majority concludes that the Administrative Procedure Act,
Given that the recent amendment to (1) In general. -- In the case of an individual against whom a deficiency has been asserted and *72 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 if such petition is filed * * *. [Emphasis added.]
I agree with the majority that the use of the word "determine" suggests that Congress intended for us to use a de novo scope of review in determining the appropriateness of relief under
Importantly, nothing in
*146 An abuse of discretion standard of review is also at odds with our decision to decline to remand
Finally, it is noteworthy that
COLVIN, SWIFT, FOLEY, GALE, MARVEL, GOEKE, and KROUPA, JJ., agree with this concurring opinion.
HALPERN and HOLMES, JJ., dissenting: Respectfully, we dissent. The majority repeats what we considered to be the error of its analysis in
1. Unless otherwise indicated, section references are to the Internal Revenue Code, as amended. Rule references are to the Tax Court Rules of Practice and Procedure. Amounts are rounded to the nearest dollar.↩
2. A Judgment of Absolute Divorce was entered on May 16, 2006.↩
3. Applying these principles, the U.S. Court of Appeals for the Fifth Circuit has indicated that the APA is not an appropriate vehicle for challenging the Commissioner's denial of a request to abate interest under
4. As another example,
5. There are other situations besides the redetermination of deficiencies in which we make determinations de novo. For example,
6. No inference should be drawn that, by distinguishing
7. Our Rules relating to declaratory judgment cases provide for consideration under various circumstances of evidence not in the administrative record. See
8. When the APA was enacted, this Court had jurisdiction not only to redetermine deficiencies, but also to determine certain overpayments, to redetermine excessive profits on defense contracts as previously determined by the Secretary, and to hear claims for refunds of processing taxes; all these matters were reviewed de novo. See
9. 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
10. In deciding petitioner's motion in limine relating to our scope of review, we need not decide any issue relating to the standard of review. Our determination of the proper scope of review does not depend on the standard of review applied.↩
11. This is not to say, however, that we could not or should not, in appropriate circumstances, borrow principles of judicial review embodied in the APA. See
12. During consideration of the APA, at the request of the Chairman of the Senate Judiciary Committee, the Attorney General commented on various aspects of the legislation. In his statement, which was later appended to the Senate report, the Attorney General opined that for purposes of the APA the term "Courts" included the Tax Court and that consequently the APA did not apply to its procedures. S. Rept. 752, 79th Cong., 1st Sess. (1945), reprinted in Administrative Procedure Act Legislative History, 1944-1946, at 224. Notwithstanding this authority, contemporary commentators disagreed over whether the APA applied to the Tax Court. Compare Note, "Effect of the Administrative Procedure Act on Decisions of the Tax Court",
13. The Senate and House reports explain this provision in identical terms, noting that it is one of several exceptions affecting "even adjudications otherwise required by statute to be made after hearing. The first [exception], where the adjudication is subject to a judicial trial de novo, is included because whatever judgment the agency makes is effective only in a prima facie sense at most and the party aggrieved is entitled to complete judicial retrial and decision." S. Rept. 752, 79th Cong., 1st Sess. (1945), reprinted in Administrative Procedure Act Legislative History, 1944-1946, at 202 (1946); H. Rept. 1980, 79th Cong., 2d Sess. (1946), reprinted in Administrative Procedure Act Legislative History, 1944-1946, at 260 (1946).
14. The decision in
15. In any event, the Court of Appeals' concern in this particular regard was addressed by Congress in the
16. While
17.
18. In
19. The majority denies respondent's motion in limine to limit our review to the administrative record. The Court has not yet applied a standard of review because it has yet to address the merits of petitioner's case.
In addition, although the terms "scope of review" and "standard of review" are sometimes used interchangeably, there is undoubtedly a difference between them. Our "scope of review" relates to
20. It is unclear to me why the Court has adopted a deferential standard of review when addressing
That the Court has conducted de novo trials using an abuse of discretion standard of review under other circumstances sheds no light whatsoever on whether it should do so in this particular context. In addition, considering evidence that was not part of the administrative record while at the same time analyzing the agency's decision for an abuse of discretion presents difficult conceptual problems.
21.
22. See
Jonson v. Commissioner , 353 F.3d 1181 ( 2003 )
ra-hildebrand-and-dorothy-a-hildebrand-wahl-v-commissioner-of-internal , 28 F.3d 1024 ( 1994 )
William O'Dwyer and Sloan O'Dwyer v. Commissioner of ... , 266 F.2d 575 ( 1959 )
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James M. Robinette v. Commissioner of the Internal Revenue ... , 439 F.3d 455 ( 2006 )
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Demeter v. Comm'r , 108 T.C.M. 560 ( 2014 )
Thomassen v. Comm'r , 101 T.C.M. 1397 ( 2011 )
Harper v. Comm'r , 2010 Tax Ct. Summary LEXIS 173 ( 2010 )
Alioto v. Comm'r , 96 T.C.M. 63 ( 2008 )
Stolkin v. Comm'r , 96 T.C.M. 143 ( 2008 )
Juanita E. Jackson, Burt Jackson, Intervenor v. Commissioner , 2014 T.C. Summary Opinion 63 ( 2014 )
Cutler v. Comm'r , 105 T.C.M. 1704 ( 2013 )
Wiener v. Comm'r , 2008 Tax Ct. Memo LEXIS 228 ( 2008 )
Abigail Richlin v. Commissioner , 2020 T.C. Memo. 60 ( 2020 )
Withers v. Comm'r , 2010 Tax Ct. Summary LEXIS 93 ( 2010 )
Smith v. Comm'r , 98 T.C.M. 349 ( 2009 )
Pearce v. Comm'r , 2011 Tax Ct. Summary LEXIS 94 ( 2011 )
O'Neil v. Comm'r , 104 T.C.M. 724 ( 2012 )
Bozick v. Comm'r , 99 T.C.M. 1242 ( 2010 )
Sunleaf v. Comm'r , 97 T.C.M. 1283 ( 2009 )
Jackson v. Comm'r , 2014 Tax Ct. Summary LEXIS 65 ( 2014 )
Henson v. Comm'r , 104 T.C.M. 441 ( 2012 )