Wilson v. Commissioner , 705 F.3d 980 ( 2013 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
KAREN MARIE WILSON , No. 10-72754
Petitioner-Appellee,
Tax Ct. No.
v. 23882-04
COMMISSIONER OF INTERNAL
REVENUE , OPINION
Respondent-Appellant.
Appeal from a Decision of the
United States Tax Court
Argued and Submitted
November 15, 2011—San Francisco, California
Filed January 15, 2013
Before: Sidney R. Thomas, Ronald M. Gould,
and Jay S. Bybee, Circuit Judges.
Opinion by Judge Thomas;
Dissent by Judge Bybee
2 WILSON V . CIR
SUMMARY*
Tax
Affirming the Tax Court’s grant of innocent spouse relief
under 26 U.S.C. § 6015, the panel held that the Tax Court
properly reviewed new evidence outside the administrative
record and correctly applied a de novo standard of review in
determining the taxpayer’s eligibility for equitable relief
based on the text, structure, and legislative history of the
statute.
Judge Bybee dissented. He would hold that, because the
Tax Court is a “reviewing court” for purposes of the judicial
review provisions of the Administrative Procedure Act, the
Tax Court can only review the Secretary of the Treasury’s
exercise of discretion for an abuse of discretion.
COUNSEL
Philip A. O’Connell, Jr., SNR Denton US LLP, Boston,
Massachusetts; Katherine J. Evans and Khoa Ngo, SNR
Denton US LLP, San Francisco, California, for Petitioner.
John A. DiCicco, Acting Assistant Attorney General; Teresa
E. McLaughlin and Bethany B. Hauser, Attorneys, Tax
Division, Department of Justice, Washington, D.C., for
Respondent.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
WILSON V . CIR 3
OPINION
THOMAS, Circuit Judge:
In this case, we consider how the Tax Court should
review appeals for equitable innocent spouse relief from joint
and several liability for unpaid taxes under 26 U.S.C.
§ 6015(f). We join the Eleventh Circuit and hold that the Tax
Court properly considered new evidence outside the
administrative record. We also conclude that the Tax Court
correctly applied a de novo standard of review in determining
the taxpayer’s eligibility for equitable relief. We affirm the
judgment of the Tax Court.
I
Thousands of citizens each year discover to their surprise
that they are liable for their former spouse’s tax debt.1 Most
of them are recently divorced, separated, or widowed
women.2 Many are victims of domestic abuse, whose ability
1
The Internal Revenue Service (“IRS”) receives approximately 50,000
innocent spouse claims per year. Gen. Accounting Office, Tax
Administration: IRS’s Innocent Spouse Program Improved; Balanced
Performance Measures Needed 13 (2002) (“2002 GAO Report”). The
GAO estimated in 1998 that there were 587,000 individuals potentially
eligible for innocent spouse relief, although it conceded that the actual
number was probably substantially lower. Gen. Accounting Office,
Innocent Spouse: Alternatives for Improving Innocent Spouse Relief 6
(1998).
2
Stephanie Hunter M cMahon, An Empirical Study of Innocent Spouse
Relief: Do Courts Implement Congress’s Legislative Intent?, 12 Fla. Tax
Rev. 629, 632 (2012); Jerome Borison, Alice Through a Very Dark and
Confusing Looking Glass: Getting Equity from the Tax Court in Innocent
Spouse Cases, 30 Fam. L.Q. 123, 125 (1996).
4 WILSON V . CIR
to review or correct a joint return before it is filed is
impaired.3 A substantial number are low-income, single
parents.4
Congress has not turned a blind eye to this situation, and
the legislative history of its response is important to our
understanding of the Tax Court’s role.
Before 1918, each spouse was required to file a separate
return. In 1918, Congress first permitted married couples to
file a joint return,5 and in 1921 clarified that the tax on a joint
return was to be computed on aggregate income.6 Shortly
thereafter, the Internal Revenue Service (“IRS”) took the
position that each spouse was individually responsible for the
entire tax debt.7 However, we rejected that joint and several
liability interpretation in 1935 and held that the IRS should
3
National Taxpayer Advocate, 2011 Annual Report to Congress 323–
335, 455 (2011). (In 1996, Congress created the independent O ffice of
Taxpayer Advocate, headed by a National Taxpayer Advocate appointed
by the Secretary of the Treasury Secretary. Taxpayer Bill of Rights 2,
Pub. L. No. 104-168, § 101, 110 Stat. 1452, 1453-56 (1996). The
National Taxpayer Advocate is required to submit an annual report to
Congress. Id. at § 101.)
4
National Taxpayer Advocate, 2005 Annual Report to Congress 422
(2005) (“65 percent of the taxpayers who request innocent spouse
. . . relief make less than $30,000 per year. Ninety percent are women.
Thirty-four percent are single filers and another 51 percent file as ‘head
of household,’ meaning they are unmarried and maintain a home for
children or certain other persons.” (footnotes omitted)).
5
Revenue Act of 1918, ch. 18, § 223, 40 Stat. 1057, 1074.
6
Revenue Act of 1921, ch. 136, § 223(b)(2), 42 Stat. 227, 250.
7
Gummey v. Comm’r, 26 B.T.A. 894, 895, 896 (1932).
WILSON V . CIR 5
apportion tax liability on the basis of each spouse’s respective
income. Cole v. Comm’r, 81 F.2d 485, 489 (9th Cir. 1935).
Congress legislatively overruled Cole in 1938, adopting the
IRS theory of joint and several marital tax liability,8 and in
1948 created a separate tax schedule for joint returns.9
The “marriage bonus” awarded when filing jointly
reduced tax liability for many married couples who resided in
certain states. However, joint returns also imposed a heavy
burden on some spouses who discovered they were liable for
extraordinary tax debts created by a former spouse’s
fraudulent activities. During the first five decades of the
income tax, the only way a spouse could avoid joint and
several liability for taxes owed was to prove that he or she
signed a joint tax return under duress. Reg. § 1.6013-4(d).10
An individual who discovered a tax debt on illicit income
concealed by her spouse had no reprieve.
The Tax Court commented on the unfairness of the rule,
noting in one case that “[a]lthough we have much sympathy
for petitioner’s unhappy situation and are appalled at the
harshness of this result in the instant case, the inflexible
statute leaves no room for amelioration.” Scudder v.
8
Revenue Act of 1938, ch. 289, § 51(b), 52 Stat. 447, 476 (1938).
9
Revenue Act of 1948, Pub. L. No. 471, ch. 168, 62 Stat. 110 (1948).
The 1948 Act equalized tax treatment between married couples in states
with community property laws and those who resided in separate property
states. This equitable fix introduced the so called “marriage bonus” into
the tax scheme.
10
See also McM ahon, 12 Fla. Tax Rev. at 636–37 (defining duress in
this context as “a constraint of will so strong that it makes a person
reasonably unable to resist a demand to sign.”).
6 WILSON V . CIR
Comm’r, 48 T.C. 36, 41 (1967). The court concluded that
“only remedial legislation can soften the impact of the rule of
strict individual liability for income taxes on the many
married women who are unknowingly subjected to its
provisions by filing joint returns.” Id.
In 1971, Congress passed the Innocent Spouse Act to
provide relief from joint and several liability for innocent
spouses in limited circumstances. Act of Jan. 12, 1971, Pub.
L. No. 91-679, 83 Stat. 675 (1971). Under this legislation,
taxpayers were eligible for relief only in cases involving
unreported income and only if they could fulfill certain strict
requirements. The scope of this hardship relief was expanded
in 1984, but still required a spouse seeking relief to
demonstrate (1) that a joint return was made for the taxable
year; (2) that the joint return contained a substantial
understatement of tax attributable to grossly erroneous items
of the other spouse; (3) that the taxpayer did not know, and
had no reason to know, of the substantial understatement
when he or she signed the joint return; and (4) that it would
be inequitable to hold the taxpayer liable for the deficiency in
income tax attributable to the substantial understatement.
Deficit Reduction Act of 1984, Pub. L. 98-369, § 424, 98
Stat. 494, 801.
In 1995, the American Bar Association (“ABA”)
examined the innocent spouse defense and, after concluding
that the defense did little to help “a reasonably
knowledgeable spouse to protect herself (or, in rare cases,
himself) against an unknown and unexpected tax liability,”
proposed replacing the joint and several tax liability standard
with a proportional liability standard. ABA Section of
Taxation Domestic Relations Committee, Comments on
WILSON V . CIR 7
Liability of Divorced Spouses for Tax Deficiencies on
Previously Filed Joint Returns, 50 Tax Law. 395, 402 (1997).
In response, Congress directed the GAO and the
Department of the Treasury to study the innocent spouse
relief provisions and to evaluate the ABA proposal.11 After
evaluating the responses, Congress engaged in innocent
spouse taxpayer reform by repealing the prior provisions
altogether and enacting the current innocent spouse laws,
codified at 26 U.S.C. § 6015, IRS Restructuring and Reform
Act of 1998, Pub. L. No. 105-206, § 3201(b), 112 Stat. 685,
734–40. Under § 6015, the IRS may grant taxpayers relief
from joint liability in three contexts. Sections 6015(b) and (c)
apply when taxpayers have demonstrated an
“understatement” or “deficiency” on joint returns filed with
the IRS.12 In non-deficiency cases, “where a spouse asks for
relief on her own initiative, and not in response to a
deficiency action or moves by the IRS to collect a tax debt,”
relief is available through § 6015(f), which provides for
11
T axpayer Bill of Rights II, Pub. L. No. 104-168, § 401, 110 Stat.
1452, 1469 (1996).
12
Subsection (b) of § 6015 grants relief to taxpayers when: (1) “there is
an understatement of tax attributable to erroneous items of one individual
filing the joint return”; (2) the taxpayer establishes that “he or she did not
know, and had no reason to know” about the understatement; (3) the
totality of the circumstances indicates that it is inequitable to hold the
taxpayer liable for the deficiency; and (4) the taxpayer files for innocent
spouse relief within two years of the date on which the Secretary begins
collection activities. 26 U.S.C. § 6015(b). Subsection (c) of § 6015, on
the other hand, allows taxpayers who are no longer married, legally
separated, or not living together to limit their liability for deficiencies
attributable to their spouse. 26 U.S.C. § 6015(c).
8 WILSON V . CIR
equitable relief where there is an underpayment of tax on a
correct return.13
As originally enacted, § 6015(e)(1) allowed taxpayers
denied relief by the IRS under subsections (b) or (c) to
petition the Tax Court for relief. In Ewing v. Commissioner,
118 T.C. 494 (2002), the Tax Court concluded that
§ 6015(e)(1) granted it jurisdiction over non-deficiency cases
brought under § 6015(f) as well. We reversed the Tax
Court’s assertion of jurisdiction over § 6015(f) petitions in
Ewing v. Commissioner, 439 F.3d 1009 (9th Cir. 2006), after
finding that the plain language of the statute precluded this
interpretation. Congress thereafter amended § 6015(e)14 to
13
Section 6015(f) provides:
(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(f).
14
Section 6015(e) provides, 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)–
WILSON V . CIR 9
expressly grant the Tax Court jurisdiction to review petitions
for equitable relief under § 6015(f) that have been denied by
the IRS, like the petition at issue here. Tax Relief and Health
Care Act of 2006, Pub. L. No. 109-432, div. C, § 408, 120
Stat. 2920, 3061–62.
In implementing the innocent spouse tax relief enacted by
Congress, the Department of the Treasury promulgated a
(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–
(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).
...
(4) Notice to other spouse.–The Tax Court shall establish rules
which provide the individual filing a joint return but not making
the election under subsection (b) or (c) or the request for
equitable relief under subsection (f) with adequate notice and an
opportunity to become a party or proceeding under either such
subsection.
10 WILSON V . CIR
regulation establishing the factors to be utilized in analyzing
requests for equitable relief. The IRS established a single
processing site in Cincinnati, Ohio to handle the claims,
known as “The Commissioner’s Cincinnati Centralized
Innocent Spouse Operation” (“CCCISO”). CCCISO staff
screen innocent spouse tax relief requests to determine
whether they meet basic eligibility requirements.
Applications that do not meet the requirements are closed at
screening, and the taxpayer is informed of the decision. If a
claim meets basic eligibility requirements, the file is
transferred to an examiner to further review the claim and
decide whether relief should be granted. When a decision is
made, the taxpayer is informed and given thirty days to
appeal to the IRS’s Office of Appeals. After the
administrative appeal is decided, the IRS sends a final
determination letter. The taxpayer then has the right to
appeal the IRS decision to federal court. The taxpayer has the
option of either petitioning the U.S. Tax Court for review, or
paying the deficiency and filing a refund claim in federal
district court or the Court of Federal Claims.
II
Petitioner Karen Marie Wilson is a fairly typical applicant
for innocent spouse relief. For the first fourteen years of their
marriage, her husband Lloyd worked as a self-employed
insurance salesman. In 1997, Lloyd started a venture capital
business that dramatically increased his income: he went
from earning approximately $30,000 a year as a salesman to
netting $20,000 a month. The new business, however, was a
Ponzi scheme. In May of 1999, the Securities and Exchange
Commission issued a cease-and-desist order that abruptly
ended Lloyd’s enterprise. Significant tax liabilities were
WILSON V . CIR 11
levied. Claiming ignorance of his fraudulent actions, Karen
applied for innocent spouse relief.
Wilson contends that she “did not understand the nature
of her husband’s business–she believed it was legitimate and
had no knowledge about its operations or fraudulent nature.”
Although Wilson had prepared the couple’s joint personal tax
returns in previous years, she did not prepare the 1997, 1998,
or 1999 returns at issue in this appeal, because Lloyd’s new
business made the necessary accounting much more
complicated than it had been previously. Instead, the couple
hired an accountant who prepared the Wilsons’ 1997 and
1998 joint returns without reporting the substantial income
Lloyd was sending to offshore accounts. In 1999, a new
accountant advised the Wilsons to amend their returns for
1997 and 1998 and file a return for 1999 to report the
offshore income; the total tax liability reported on these
returns was $540,000. Wilson signed these returns and
acknowledges that she was aware of the balance due on them.
She contends, however, that she believed the tax debt would
be paid when the returns were filed because her husband was
“still in business during this time.”
The taxes Wilson and her husband owed, however, were
never paid, and in early 2002, Wilson filed a Request for
Innocent Spouse Relief with the IRS. Though Wilson was
still married to Lloyd at the time of this filing, they were
allegedly estranged and living together only because Wilson
lacked the financial resources to move out of the family
home. In her application for relief, Wilson described her
financial status as one “of survival,” given her $11 hourly
wage rate as a clerk at a commercial real estate company.
Wilson reported her monthly expenses as exceeding her
monthly income by $76. Because Lloyd had not sought new
12 WILSON V . CIR
work after the demise of his venture capital business, Wilson
stated that she did not know “what my spouse is able to
provide.” She also noted that she and Lloyd were “not
communicating well” and were not able to “come to an
agreement . . . in this matter.” Wilson did not allege any
domestic abuse.
The CCCISO denied Wilson relief. The CCCISO found
that Wilson lacked reasonable belief that the outstanding
taxes would be paid, because “there was a balance owing
from 1998 when the 1999 return was filed.” The agency also
concluded that since the business income on which the taxes
were owed belonged to both Wilson and her husband, she
could not “be relieved of [her] own liability.”
Wilson appealed the denial to the IRS’s Office of
Appeals. On February 11, 2004, an appeals officer sent
Wilson a letter detailing the factors that favored her petition
for relief, the factors that weighed against her petition for
relief, and the factors that were neutral. The reasons that the
officer believed justified a denial of relief included: (1) the
fact that Wilson was still married and living with her
husband; (2) her awareness of past taxes owed at the time she
signed the returns; (3) her failure to disclose information
about the income of other household members; and (4) that
without substantiation, it appeared that half of the business
and rental income on her tax returns was attributable to her.
The appeals officer invited Wilson to submit specific
additional information that could change the assessment of
each of these factors.
Wilson did not submit any additional information.
However, on March 3, 2004, she called the appeals officer to
discuss her case and disclosed that although she and her
WILSON V . CIR 13
husband still lived in the same house, she had begun divorce
proceedings. In response, the officer delayed the hearing he
had scheduled in his initial letter to Wilson for three months.
The hearing, however, was never held, and on July 14, 2004,
the officer sent a final letter asking to submit her “plan in
dealing with [her] request for relief of the liability” by August
18, 2004. Wilson did not respond, and he closed the case,
denying her relief. The Commissioner issued a final notice
of determination on September 3, 2004, informing Wilson
that her request for relief had been denied by the IRS.
Wilson petitioned the Tax Court for review of the
administrative denial of her claim for equitable innocent
spouse relief. The Tax Court initially heard testimony from
Wilson in September 2005, but “[w]hen complicated facts
and legal issues unfolded, [the court] arranged for pro bono
counsel” to help Wilson prepare her case.15 Wilson later
submitted new exhibits that included detailed financial
information and notified the court of her divorce, which had
become final in April of 2007.
In 2008, the Tax Court reopened the record and held a
second trial where Wilson again testified. The government
made a continuing evidentiary objection to the introduction
of any new evidence at both trials, arguing that review of the
denial of equitable innocent spouse relief should be made
solely on the basis of the record developed before the IRS.
15
The proceedings were then paused due to uncertainty regarding the
Tax Court’s jurisdiction to hear § 6015(f) petitions for relief. Proceedings
resumed after Congress, as previously noted, amended § 6015 to explicitly
grant the tax court jurisdiction to review § 6015(f) petitions in 2006. See
Tax Relief and Health Care Act of 2006, Pub. L. No. 109-432, § 408,
120 Stat. 2922.
14 WILSON V . CIR
The Tax Court overruled these objections, relying on
precedent from other Tax Court decisions.
The Tax Court determined that Wilson was entitled to
relief under § 6015(f). It explained that the Tax Court’s
decisions in Porter v. Commissioner (Porter I), 130 T.C. 115
(2008), and Porter v. Commissioner (Porter II), 132 T.C. 203
(2009), established that the Tax Court should proceed de
novo when reviewing § 6015(f) claims for innocent spouse.
After conducting a de novo review of Wilson’s appeal,
the Tax Court determined that Wilson was entitled to
equitable relief. With the expanded evidentiary record, the
Tax Court found five factors favoring relief. The court
determined that Wilson’s marital status, under a de novo
review of the record, weighed in her favor as she had
finalized her divorce before the second trial. This factor was
not favorable to Wilson during the administrative phase of
her case. The Court agreed with the Commissioner that
Wilson had not received a significant benefit from her
husband’s unpaid liability, a factor weighing in her favor.
In a thorough examination of the facts, the Tax Court
concluded that Wilson had no knowledge or reason to know
of the tax underpayment. The Court determined that credible
evidence supported her testimony that she was ignorant of the
SEC Cease and Desist Order. In addition, it concluded that
even if she had known, it would have been reasonable for her
to assume the couple had sufficient assets to satisfy the tax
liability. No evidence had been submitted or considered
during Wilson’s brief exchanges with the agent about this
factor during the administrative process.
WILSON V . CIR 15
The Tax Court also concluded that Wilson would suffer
significant economic hardship if the tax liability were
imposed. The Tax Court found that her monthly income
exceeded her expenses by $114, and that paying a $540,000
tax debt would cause her to be unable to meet reasonable
basic living expenses. Because Wilson had not submitted
detailed expense statements to the IRS, the Commissioner
had found against her on this factor.
The Tax Court also concluded that the tax liability was
solely attributable to Wilson’s husband. The Commissioner
had concluded that because Wilson performed some clerical
duties for the business, she should be allocated 50% of the
fault. However, the Tax Court found that she was completely
ignorant of his business activities and had no input into any
business decisions.
Thus, the Tax Court found five factors weighing in favor
of relief, four of which had been rejected by the
Commissioner. The court acknowledged that had its review
been restricted to the administrative record, these factors
would have weighed against Wilson.
The IRS filed a timely notice of appeal to this Court. It
did not contest the validity of the Tax Court findings. It only
argues that the Tax Court should not have been permitted to
consider new evidence and that its review should be confined
to the administrative record under an abuse of discretion
standard of review. Because the Tax Court’s scope and
standard of review in § 6015(f) cases are questions of law, we
review the Tax Court’s decision de novo. Keller v. Comm’r,
568 F.3d 710, 716 (9th Cir. 2009).
16 WILSON V . CIR
III
The first question in this case is whether the Tax Court
properly considered new evidence in considering Wilson’s
appeal. Resolution of the issue turns on statutory analysis.
A
The “first step in interpreting a statute is to determine
whether the language at issue has a plain and unambiguous
meaning with regard to the particular dispute in the case.”
Robinson v. Shell Oil, 519 U.S. 337, 340 (1997). This often
requires “examin[ing] not only the specific provision at issue,
but also the structure of the statute as a whole, including its
object and policy.” Children’s Hosp. & Health Ctr. v.
Belshe, 188 F.3d 1090, 1096 (9th Cir. 1999). If the plain
meaning of the statute is unambiguous, that meaning controls.
If the statutory language is ambiguous, then we consult
legislative history. United States v. Daas, 198 F.3d 1167,
1174 (9th Cir. 1999). We need not rely on legislative history
as an aid to interpretation unless “the legislative history
clearly indicates that Congress meant something other than
what it said.” Carson Harbor Village, Ltd. v. Unocal Corp.,
270 F.3d 863, 877 (9th Cir. 2001) (en banc) (citing Perlman
v. Catapult Entm’t, Inc. (In re Catapult Entm’t, Inc.),
165 F.3d 747, 753 (9th Cir. 1999)).
Section 6015(e) states that “an individual who requests
equitable relief under subsection (f)” can “petition the Tax
Court (and the Tax Court shall have jurisdiction) to determine
the appropriate relief available to the individual under this
section.” 26 U.S.C. § 6015(e)(1) (emphasis added). A
determination of whether innocent spouse relief is appropriate
under § 6015(f), meanwhile, requires consideration of “all the
WILSON V . CIR 17
facts and circumstances” relevant to a taxpayer’s petition.
26 U.S.C. § 6015(f)(1). In the absence of any limiting
language directing the Tax Court to consider only that
evidence before the Commissioner during the administrative
phase of review, “determining” the validity of a taxpayer’s
request for innocent spouse relief in light of “all the facts and
circumstances” suggests a de novo scope of evidentiary
review in § 6015(f) cases.
The Eleventh Circuit, the only other circuit court to have
considered the scope of the Tax Court’s review in § 6015(f)
cases, reached the same conclusion in Commissioner v. Neal,
557 F.3d 1262 (11th Cir. 2009). Reviewing the language of
subsections (e) and (f), the Neal Court found that Congress
intended the Tax Court to consider evidence outside the
administrative record. 557 F.3d at 1265. As that Court
explained:
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.
Id.
The Neal Court also found Congress’s use of the words
“petition” and “determine” rather than “appeal” in
§ 6015(e)’s jurisdictional grant significant. Although appeals
to determine whether the IRS made an appropriate decision
18 WILSON V . CIR
about a request for innocent spouse relief may confine the
Tax Court to considering only the administrative record,
petitions to determine whether such relief is warranted
suggest “something different”– namely, an authorization to
proceed de novo. Id. at 1276; see also Friday v. Comm’r, 124
T.C. 220, 222 (2005) (“A petition for a decision as to whether
relief is appropriate under section 6015 is generally not a
‘review’ of the Commissioner’s determination in a hearing
but is instead an action begun in this Court.”).
B
The structure of the statute supports this conclusion, as
well. Section 6015(e)’s jurisdictional grant to determine
whether equitable relief is warranted in a § 6015(f) case must
be read alongside subsection (f)’s mandate to consider the
totality of the circumstances before making an equitable relief
determination. “Taking into account all the facts and
circumstances” is not possible if the Tax Court can review
only the evidence available at the time of the Commissioner’s
prior determination. 26 U.S.C. § 6015(f)(1).
Confining the Tax Court’s review to the administrative
record before the Commissioner would also introduce
significant inconsistencies in different types of § 6015(f)
cases brought before the court. For instance, under
§ 6015(e)(4), a non-petitioning spouse may intervene in a
§ 6015(f) Tax Court proceeding and thereby introduce
evidence outside the administrative record. 26 U.S.C. § 6015
(e)(4) (“The Tax Court shall establish rules which provide the
individual filing a joint return but not making . . . the request
for equitable relief under subsection (f) with adequate notice
and an opportunity to become a party.”); see also Porter II,
132 T.C. 219–220 (Gale, J., concurring) (finding the
WILSON V . CIR 19
explicit provision permitting intervention by a non-
petitioning spouse to “entail the distinct likelihood that new
evidence will surface in the Tax Court proceeding.”). By
“expressly providing for intervenors in section 6015(f) . . .
cases . . . Congress contemplated a new record made initially
in the reviewing court.” Porter II, 132 T.C. 220 (Gale, J.,
concurring). Moreover, the right to intervene provided by
§ 6015(e)(4) would be eviscerated without the ability to
present new evidence. Because the scope of the Tax Court’s
review in § 6015(f) cases should be consistent regardless of
whether a spouse decides to intervene, § 6015(e) must be
interpreted to allow consideration of evidence outside the
administrative record in all § 6015(f) petitions to the Tax
Court.
An intervention by a non-petitioning spouse is not the
only type of § 6015(f) case where the Tax Court can proceed
de novo. There are two other contexts where a de novo scope
of review is not only permitted, but expected. First, when a
taxpayer requests § 6015(f) relief but the Commissioner fails
to make a determination regarding the request within six
months, the taxpayer may petition the Tax Court to render the
determination. 26 U.S.C. § 6015(e)(1)(A). Such a
determination would obviously occur upon de novo review of
a record compiled at the Tax Court, because in this context,
there would be no administrative record to consider. The Tax
Court also proceeds de novo when confronted with taxpayers
who raise relief under § 6015(f) as an affirmative defense in
§ 6015(b) and § 6015(c) deficiency cases. Comm’r v. Neal,
557 F.3d at 1272. As the Neal Court concluded, “without
trials de novo under § 6015(e), substantially identical
§ 6015(f) claims would be treated differently.” Id. at 1272.
20 WILSON V . CIR
The government dismisses these procedural anomalies as
either justified or resolvable through a remand to the
Commissioner to make an initial administrative
determination. The text of § 6015(e) suggests otherwise.
Section 6015(e) not only makes no mention of remand, it
instructs the Tax Court to proceed de novo when reviewing
certain § 6015(f) petitions. Applicable precedent, moreover,
restricts the Tax Court from remanding § 6015(f) cases to the
Commissioner for further administrative consideration.
Friday v. Comm’r, 124 T.C. 220, 222 (2005). “A de novo
scope of review” appears to be the “only means by which [the
Tax Court] can supplement an insufficient record” in
§ 6015(f) cases. Porter II, 132 T.C. 225 (Wells, J.,
dissenting).
C
The government also contends that the Administrative
Procedure Act (“APA”) requires the Tax Court to consider
only the administrative record as it existed at the time of the
Commissioner’s equitable relief determination. See 5 U.S.C.
§ 706(2)(A) (authorizing reviewing courts to set aside agency
actions found to be “arbitrary, capricious, an abuse of
discretion, or not otherwise in accordance with law.”).
1
Where Congress has enacted a special statutory review
process for administrative action, that process applies to the
exclusion of the APA. Bowen v. Massachusetts, 487 U.S.
879, 903 (1988); Steadman v. SEC, 450 U.S. 91, 105 (1981)
(“[T]he general provisions of the APA are applicable only
when Congress has not intended that a different standard be
used in the administration of a specific statute.” (Powell, J.,
WILSON V . CIR 21
dissenting)); W. Watersheds Project v. Kraayenbrink,
632 F.3d 472, 497 (9th Cir. 2011) (noting that the APA
applies only where there is no other adequate remedy in
court); Wash. Toxics Coal. v. EPA, 413 F.3d 1024, 1034 (9th
Cir. 2005).
As we have discussed, Congress has enacted extensive
special provisions providing for judicial remedies in innocent
spouse taxpayer relief cases. Section 6015(e) explicitly
directs the Tax Court to make a “determination” regarding
whether relief is available to a taxpayer under § 6015(f). If
Congress had merely intended the gap-filling APA
procedures to apply, it would have been unnecessary to
address Tax Court remedies at all. In the tax context, as well
as in others, “a precisely drawn, detailed statute pre-empts
more general remedies.” Hinck v. United States, 550 U.S.
501, 506 (2007) (internal quotations and citations omitted).
The extensive legislative history of these provisions
demonstrates that the special procedures enacted by Congress
displace application of the APA in innocent spouse tax relief
cases, and the APA does not apply.16
The administrative structure addressing innocent spouse
taxpayer also supports the conclusion that the APA does not
apply. As we have explained, all claims are first screened by
administrative personnel at the CCCISO center. If a claim
16
Further, although we need not reach the question here, there is
considerable doubt as to whether the APA applies to the Tax Court at all.
The Tax Court has held that the APA does not govern its proceedings. The
Fourth Circuit has agreed. See O’Dwyer v. Comm’r, 266 F.2d 575, 580
(4th Cir. 1959) (“[T]he Tax Court is not subject to the Administrative
Procedure Act.”). The Eighth Circuit has held to the contrary as to review
under § 6330(d). Robinette v. Comm’r, 439 F.3d 455, 459–60 & n.4 (8th
Cir. 2006).
22 WILSON V . CIR
survives screening, it is transferred to an examiner. If the
examiner denies relief, then the taxpayer may appeal to the
IRS’s Office of Appeals. There is no formal administrative
procedure for a contested case at which the taxpayer may
present her case before an administrative law judge. At no
time during the process is the taxpayer afforded the right to
conduct discovery, present live testimony under oath,
subpoena witnesses for trial, or conduct cross-examination.
Rather, in this statutory scheme, it is before the Tax Court
that the taxpayer has the vehicle to conduct discovery, see
26 U.S.C. § 6902(b), subpoena witnesses and documents,
26 U.S.C. § 7456(a)(1), and submit evidence at trial, Tax Ct.
R. 181. Absent the availability of the Tax Court processes, an
innocent spouse has no means to obtain or compel production
of necessary records from the non-innocent spouse. The
structure of administrative process indicates that the usual
APA procedures do not apply.
2
Even assuming, arguendo, that the APA applies here, the
usual exceptions apply so as to permit the Tax Court to
consider additional evidence. Although typically APA
review of an agency decision is limited to the administrative
record, see Camp v. Pitts, 411 U.S. 138, 142 (1973), there are,
as the government concedes, exceptions to this general rule.
We have acknowledged that a “reviewing court may require
supplementation of the administrative record if it is
incomplete.” Lands Council v. Powell, 395 F.3d 1019, 1030
(9th Cir. 2005) (citing Camp v. Pitts, 411 U.S. at 142–43).
Though exceptions to the APA’s record rule are to be
“narrowly construed and applied,” they can be necessary “to
plug holes in the administrative record.” Id.
WILSON V . CIR 23
The ability to supplement the administrative record is
particularly important in equitable relief cases, which require
a fact-intensive inquiry of sensitive issues that may not come
to light during the administrative phase of review.17 The
threshold requirements for innocent spouse relief may present
a complicated and contradictory dilemma for the taxpayer.
The innocent spouse must show that he or she is ignorant of
the spouse’s tax misdeeds, yet must marshal documentary
support to prove it. The taxpayer often has limited or no
access to critical records. The innocent taxpayer who has
been misled by a spouse often may not understand the full
extent or scope of the erring spouse’s misdeeds.
Compounding these difficulties is an administrative system
where the only opportunity to present a case is through
telephonic interviews with an agent in a remote location.
17
Although it is not a factor in this case, domestic abuse is a serious
problem in innocent spouse taxpayer cases. As the National Taxpayer
Advocate reported to Congress last year, facts that suggest a purported
innocent spouse was victimized by the other spouse “have real
consequences for tax administration,” yet often are not sufficiently
recognized or addressed by the IRS. National Taxpayer Advocate, 2011
Annual Report to Congress 323 (2011). Innocent spouse relief has been
identified as “perhaps the most common situation in which the problem of
abuse comes to IRS attention,” yet the agency’s “[d]ocument-[o]riented
[s]ystems and [e]xpectations can be [o]bstacles to [r]elief for [v]ictims of
[d]omestic [v]iolence and [a]buse” when they “cause employees to
overlook the availability of reliable information that would lead to the
correct resolution of tax matters.” Id. at 325, 327, 323. For instance, in
Stephenson v. Commissioner, the IRS denied a taxpayer who alleged she
was a victim of spousal abuse equitable innocent spouse relief because she
lacked documentary support of the abuse. T.C. Memo. 2011-16 at 25
(Jan. 20, 2011). The Tax Court granted relief, however, after finding that
the taxpayer “credibly testified to specific allegations of abuse.” Id.
24 WILSON V . CIR
In this case, supplementation of the administrative record
through testimony given by Wilson was critical to
determining whether the IRS considered all relevant factors
in denying her § 6015(f) petition for innocent spouse relief.
As the Tax Court noted in its decision, because “[t]here was
little information in the administrative record that shed[] any
light” on the portion of the unpaid liabilities attributable to
Wilson, the IRS Appeals Officer attributed 50 percent of the
outstanding tax liability to her. Wilson’s testimony before
the Tax Court, however, revealed a “lack of business
sophistication and limited education” as well as “no
understanding” of the nature of her husband’s business
scheme. In light of her testimony, the court found the
couple’s tax liability “entirely attributable to Lloyd.”
Without the trial testimony, the Tax Court would not have
had a sufficient record to comply with its duty, under
§ 6015(e), “to determine the appropriate relief available” to
Wilson under § 6015(f). Notably, the Commissioner does not
dispute these findings.
This case also demonstrates that restricted access to
important documents can be a significant barrier to
establishing an adequate administrative record. Although
Wilson attempted to comply with the documentation requests
made by the IRS appeals officer handling her case, she could
not submit a complete set of materials due to her husband’s
interference. When she tried to make photocopies of the joint
returns for the tax years at issue in this appeal, her husband
physically prevented her from leaving the house with the
materials. As Wilson’s experience demonstrates, “[a]
taxpayer who interacts with the IRS from a position of near-
total ignorance of her or his tax filing and payment history,
with no control over what was done in her or his name, is at
WILSON V . CIR 25
a serious disadvantage.” National Taxpayer Advocate, 2011
Annual Report to Congress 324 (2011).
Many of the taxpayers who seek innocent spouse relief
share Wilson’s limited educational background, lack of
access to essential documents, and inability to hire counsel.18
Taxpayers in Wilson’s position may have understandable
trouble comprehending, and thus fully complying with, the
IRS’s process in considering requests for equitable spouse
relief or establishing a complete record with the agency.
Allowing the Tax Court to review a supplemented and up-to-
date record under these circumstances is entirely consistent
with the statutory structure of § 6015 and Congress’s
direction that the Tax Court determine the appropriate relief.
Thus, even if the APA applies, the Tax Court
appropriately considered additional evidence.
IV
A
The plain language of § 6015(e), as amended, also
confirms that the Tax Court should apply a de novo standard
of review when considering appeals pursuant to § 6015(f).
Section 6015(e) explicitly authorizes the Tax Court to make
a “determination” regarding whether relief is available to a
taxpayer under § 6015(f). In order “to determine the
appropriate relief available,” the Tax Court must review
§ 6015(f) decisions de novo. There is nothing in § 6015(e) to
18
Over half of all innocent spouse relief cases, for instance, involve pro
se litigants. National Taxpayer Advocate, 2011 Annual Report to
Congress 589 (2011).
26 WILSON V . CIR
indicate that the Tax Court should defer to the
Commissioner’s prior decisions in § 6015(f) petitions.
The government contends that the appropriate standard of
review is dictated not by § 6015(e), but by § 6015(f). As the
government argues, the Tax Court can review petitions for
relief under § 6015(f) only for an abuse of discretion because
the permissive language of § 6015(f) expressly allows the
Commissioner to grant or deny tax relief at his discretion.
Taxpayers are allowed to “request” relief under § 6015(f),
which “the Secretary may” grant. In contrast, the government
points out, under § 6015(b) and (c), the taxpayer “elects”
relief, which “shall” be granted if certain statutory
requirements are met. The government suggests that the clear
discretionary authority granted to the IRS under § 6015(f)
would be eliminated if the Tax Court is permitted to review
§ 6015(f) petitions de novo.
The statutory provision that controls the Tax Court’s
review of § 6015(f) petitions, however, is not § 6015(f), but
§ 6015(e). Section 6015(f) addresses only the Secretary’s
role in considering petitions for equitable relief. The Tax
Court’s role in reviewing requests for relief is dictated solely
by § 6015(e), which does not establish mere review of agency
action, but explicitly calls for a determination by the Tax
Court. This determination occurs either after a taxpayer
receives “notice of the Secretary’s final determination of
relief” or six months after a request for equitable relief “is
filed or request is made with the Secretary.” § 6015(e)(1)(A).
Because § 6015(e) contemplates a situation where the Tax
Court may hear a petition for relief under § 6015(f) without
any administrative record at all, logic dispels the notion that
§ 6015(f) appeals to the Tax Court are reviewable only for an
abuse of discretion.
WILSON V . CIR 27
As the government concedes, a de novo scope of
evidentiary review is incompatible with an abuse of discretion
standard. The government points out that “the overarching
problem with the Tax Court’s trial de novo approach in Ewing
II and Porter I . . . is that the court decided that the
Commissioner abused his discretion in denying relief based
on evidence that was not before him. Such an approach . . .
is ‘illogical and inappropriate’” (citing Ewing v. Comm’r, 122
T.C. 72 (Chiechi, J., dissenting)). We agree. The Tax
Court must be able to compile a de novo record if it is to
consider “all the facts and circumstances” when deciding
whether a taxpayer is entitled to relief from joint liability
under § 6015(f), but it is pointless to do so if it can only
review the Commissioner’s denial of equitable relief for an
abuse of discretion. The only way for the Tax Court to
proceed de novo when hearing petitions for relief under
§ 6015(f) is by applying both a de novo standard and scope of
review.
Finally, the nature of equitable relief also favors de novo
review. Administrative agencies are “creatures of statute,
bound to the confines of the statute that created them, and
lack the inherent equitable powers that courts possess.” U.S.
Fidelity and Guar. Co. v. Lee Invs. LLC, 641 F.3d 1126, 1135
(9th Cir. 2011). The award of equitable spouse relief often
turns on credibility, which is best tested in the crucible of trial
rather than in a bureaucratic office in which the officer is
unlikely even to meet the claimant. In this unique context, de
novo review of the agency decision is particularly
appropriate.
28 WILSON V . CIR
B
The structure of the innocent taxpayer provisions
buttresses the conclusion that a de novo standard of review is
appropriate. Indeed, to hold otherwise would result in
inconsistent application of the three types of innocent spouse
relief available under § 6015.
A jurisdictional grant to the Tax Court “to determine”
whether equitable innocent spouse relief is appropriate
strongly indicates that the Tax Court should proceed de novo
in considering such claims. See Comm’r v. Neal, 557 F.3d at
1276 (comparing statutory language in § 6330(d)(1), which
permits a taxpayer to “appeal” an Appeal Officer’s
determination to the Tax Court, to Ҥ 6015(e), which does not
use the word ‘appeal’ but instead authorizes the Tax Court to
‘determine’ the appropriate relief.”). In the special context of
Tax Court jurisprudence, the word “determine” is frequently
associated with de novo review. Under § 7436(a), for
instance, the Tax Court is authorized to “determine” whether
the Commissioner’s assessment of a taxpayer’s employment
status is correct, and legislative reports confirm that such
determination is to occur after a trial de novo. See Ewing v.
Comm’r, 122 T.C. 32, 38–39 (2004)19 (citing H.R. Rep. No.
105-148, at 639 (1997); S. Rep. No. 105-33, at 304 (1997); H.
Conf. Rep. 105-220, at 734 (1997)). Similarly, the Tax Court
has always made “determinations and redeterminations”
regarding overpayments de novo. Porter I, 130 T.C. 119
(citing O’Dwyer v. Comm’r, 266 F.2d 575, 580 (4th Cir.
19
As previously noted, this case was overturned by Commissioner v.
Ewing, 439 F.3d 1009 (9th Cir. 2006), which was in turn superseded by
statute. See Tax Relief and Health Care Act of 2006, Pub. L. No. 109-
432, § 408, 120 Stat. 2922.
WILSON V . CIR 29
1959); Greenberg’s Express, Inc. v. Comm’r, 62 T.C. 324,
327–328 (1974); Clapp v.Comm’r, 875 F.2d 1396, 1403 (9th
Cir. 1989); Jones v. Comm’r, 97 T.C. 7, 18 (1991)). Given the
Tax Court’s long “history of conducting trials de novo in
other areas where Congress by statute has authorized the Tax
Court to make ‘determinations’ or redeterminations,’” it can
be “reasoned that Congress was well aware of the Tax
Court’s well-established interpretation of ‘determine’ when
it enacted § 6015 . . . .” Comm’r v. Neal, 55 F.3d at 1270.
The government argues that “determine” is not a term of
art connoting a de novo scope of review and gives several
examples where statutory text employs variations of the word
“determine” but clearly mandates review on the
administrative record. It is true that “determine” does not
automatically mandate de novo review whenever it appears
in the Tax Code. However, the history of the Tax Court’s
application of the word “determine” as it appears in § 6015(e)
evidences legislative intent to impose de novo review of
stand-alone § 6015(f) petitions to the Tax Court.
Although there was doubt as to whether the Tax Court
could review denials of equitable relief under § 6015(f) until
2006, it was always clear that § 6015(e) gave the court
jurisdiction over denials of relief in deficiency cases under
§§ 6015(b) and (c). See Comm’r v. Ewing, 439 F.3d at 1013
(“The plain language of the statute clearly indicates that the
Tax Court has jurisdiction over a petition only when a
deficiency has been asserted and the taxpayer has elected
relief under subsection (b) or (c).”). The Tax Court has
“always applied a de novo scope and standard of review in
determining whether relief is warranted under subsections (b)
and (c).” Porter II, 132 T.C. 210 (citing as an example Alt
v. Comm’r, 119 T.C. 306, 313–16 (2002), aff’d 101 Fed.
30 WILSON V . CIR
Appx 34 (6th Cir. 2004)). Given this history of de novo
review in the context of §§ 6015(b) and (c) petitions for
relief, it is significant that in 2006 Congress explicitly
amended § 6015(e) to permit the Tax Court to review
petitions for relief under subsection (f) without making any
change to its direction to “determine the appropriate relief
available” in such petitions. See Tax Relief and Health Care
Act of 2006 § 408, 120 Stat. at 3062. When Congress
decided to keep the word “determine” in § 6015(e), it did so
with full awareness of the Tax Court’s history of holding
trials de novo in cases arising out of §§ 6015(b) and (c).
Given this history, the Tax Court should apply the same
standard of review in all § 6015 cases, regardless of whether
they are brought under subsection (b), (c), or (f).
V
The text, structure, and legislative history of § 6015(e)
direct the Tax Court to proceed de novo when determining
whether a taxpayer is eligible for relief under § 6015(f). The
Tax Court therefore did not err in holding a trial de novo and
applying a de novo standard of review in this case.
AFFIRMED.
BYBEE, Circuit Judge, dissenting:
The question presented in this case is one fundamental to
administrative law: What is the scope of review—and,
concomitantly, the standard of review—of the Tax Court’s
review of the Secretary of the Treasury’s decision to deny
equitable relief to an innocent spouse? Under 26 U.S.C.
WILSON V . CIR 31
§ 6015(f), if, “taking into account all the facts and
circumstances, it is inequitable to hold [an innocent spouse]
liable for any unpaid tax or any deficiency[,] . . . the Secretary
may relieve such individual of such liability.” The Tax Court
held, and the majority affirms, that the Tax Court may review
the Secretary’s decision by “a de novo standard of review as
well as a de novo scope of review.” Porter v. Comm’r
(Porter II), 132 T.C. 203, 210 (2009) (en banc); see Maj. Op.
at 3 (“[T]he Tax Court properly considered new evidence
outside the administrative record. . . . [and] applied a de novo
standard of review . . . .”). The Tax Court so concludes, not
because the Secretary has failed to consider the
administrative record or abused his discretion, but because
the Administrative Procedure Act does not apply to the Tax
Court’s review of the Secretary’s actions. See Porter v.
Comm’r (Porter I), 130 T.C. 115, 117–19 (2008) (en banc)
(holding that the APA does not, and never has, applied to the
Tax Court’s proceedings).
The question is of more than passing interest. It goes to
the heart of the place of the Tax Court in our administrative
system. The question has splintered the Tax Court, which has
proceeded along three different paths, dragging four circuit
courts with them in the process. The Tax Court initially held
that it would review the Secretary’s exercise of discretion
under § 6015(f) for abuse of discretion. Jonson v. Comm’r,
118 T.C. 106, 125 (2002), aff’d on other grounds, 353 F.3d
1181 (10th Cir. 2003). The D.C. and Fifth Circuits confirmed
that position. Mitchell v. Comm’r, 292 F.3d 800, 807 (D.C.
Cir. 2002) (“As the decision whether to grant this equitable
relief is committed by its terms to the discretion of the
Secretary, the Tax Court and this Court review such a
decision for abuse of discretion.”); Cheshire v. Comm’r,
282 F.3d 326, 337–38 (5th Cir. 2002) (reviewing innocent
32 WILSON V . CIR
spouse relief under § 6015(c) for clear error by the Tax Court
and § 6015(f) for abuse of discretion by the Secretary).
Then, a divided Tax Court changed its mind and held that
it would use a de novo scope of review—including trial de
novo—but an abuse-of-discretion standard of review. Ewing
v. Comm’r (Ewing II), 122 T.C. 32, 43–44 (2004) (en banc)
(“[O]ur 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 [sic] contained in [the
Commissioner’s] administrative record, and . . . the APA
record rule does not apply to section 6015(f) determinations
in this Court.”); id. at 50 (Thornton, J., concurring) (“Since its
enactment in 1946, the APA has never governed proceedings
in this Court (or in its predecessor, the Board of Tax
Appeals).”); id. at 71 (Chiechi, J., dissenting) (agreeing with
the majority that “the APA [does not] control[] the
proceedings”). But see id. at 61 (Halpern, J., dissenting)
(“[T]he APA judicial review provisions apply to section
6015(f) cases as well as deficiency cases.”). That position
was confirmed by a divided Eleventh Circuit. Comm’r v.
Neal, 557 F.3d 1262, 1264 (11th Cir. 2009) (“[T]he 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.”); id. at 1287 (Tjoflat, J., dissenting) (“[T]he
court has given the Tax Court the authority to second-guess
the Commissioner at its whim.”).
Finally, a divided Tax Court changed its mind yet again
and decided that it was entitled to both a de novo scope of
review and a de novo standard of review. Porter II, 132 T.C.
at 206–10 (rejecting an abuse-of-discretion standard in favor
of de novo review on an open record); id. at 221 (Gale., J.,
concurring) (“Given the statute’s failure to specifically
WILSON V . CIR 33
address the standard of review, . . . the better interpretation of
section 6015 is that it provides for a de novo standard of
review in all section 6015 cases . . . .”). But see id. at 225
(Wells, J., dissenting) (“[T]he correct standard to use in
reviewing section 6015(f) cases in this Court is abuse of
discretion.”); id. at 232 (Gustafson, J., dissenting) (defending
Tax Court precedent calling for “an abuse-of-discretion
standard of review [and] a de novo record scope of review”).
The majority confirms this in today’s ruling. Maj. Op. at 3.
The majority’s position not only departs from the D.C.,
Fifth, and Eleventh Circuits, but also its reasoning is
inconsistent with the Eighth Circuit’s decision in Robinette v.
Commissioner. 439 F.3d 455, 459–61 (8th Cir. 2006)
(rejecting the Tax Court’s claim to de novo scope of review
in proceedings under 26 U.S.C. § 6330 and concluding that
the Commissioner’s decision was subject to abuse of
discretion review under APA § 706(2)(A)); see also Keller v.
Comm’r, 568 F.3d 710, 718 (9th Cir. 2009) (citing Robinette
with approval).
I cannot follow the majority in this convoluted path.
Because the Tax Court is a “reviewing court” for purposes of
the judicial review provisions of the APA, I am persuaded
that its scope of review is the administrative record before the
IRS, and that the Tax Court can only review the Secretary’s
exercise of discretion for an abuse of discretion pursuant to
5 U.S.C. § 706(2)(A). I respectfully dissent.
I. THE APA AND THE TAX COURT
Let us begin with some first principles of administrative
law. The Internal Revenue Service (“IRS”), located within
the Department of the Treasury, is an “authority of the
34 WILSON V . CIR
Government of the United States” and, thus, an “agency”
subject to the provisions of the Administrative Procedure Act
(“APA”). See 5 U.S.C. § 701(b)(1); see also id. § 551(1).
That means that any person “aggrieved” by “final agency
action” or “[a]gency action made reviewable by statute,” id.
§ 704, is “entitled to judicial review . . . in a court of the
United States,” id. § 702. In general, “[t]he form of
proceeding for judicial review is the special statutory review
proceeding,” id. § 703, typically found in the agency’s
enabling or organic act. A “special statutory review
proceeding” is Congress’s instructions for judicial review of
an agency’s actions. Such judicial review statutes will
frequently identify the reviewing court, confer jurisdiction,
provide venue, and waive sovereign immunity; although, any
particular organic act may not address each of these elements.
See, e.g., 15 U.S.C. § 45(c) (judicial review of Federal Trade
Commission cease-and-desist orders). “Special statutory
review proceeding” statutes may also specify the scope of
review and the standard of review. See, e.g., 30 U.S.C.
§ 1276(a)(1) (“Any action subject to judicial review under
this subsection shall be affirmed unless the court concludes
that such action is arbitrary, capricious, or otherwise
inconsistent with law.”); id. § 1276(b) (“The court shall hear
such petition or complaint solely on the record made before
the Secretary. Except as provided in subsection (a) of this
section, the findings of the Secretary if supported by
substantial evidence on the record considered as a whole,
shall be conclusive.”). “[I]n the absence or inadequacy” of
such special statutory review provisions, the APA supplies a
default “action for judicial review” in a “court of competent
jurisdiction.” 5 U.S.C. § 703. See Bowen v. Massachusetts,
487 U.S. 879, 903 (1988); ANA Int’l Inc. v. Way, 393 F.3d
886, 890 (9th Cir. 2004). There is a strong presumption
favoring the availability of judicial review. Abbott Labs. v.
WILSON V . CIR 35
Gardner, 387 U.S. 136, 140–41 (1967); Helgeson v. Bureau
of Indian Affairs, 153 F.3d 1000, 1003 (9th Cir. 1998).
Unless the special statutory review provided for in the
agency’s enabling act specifies a different scope of review,
§ 706 of the APA supplies both the scope of review and the
standard of review. See 5 U.S.C. § 559 (stating that the APA,
including its chapter on judicial review, “do[es] not limit or
repeal additional requirements imposed by statute or
otherwise recognized by law”); Ninilchik Traditional Council
v. United States, 227 F.3d 1186, 1194 (9th Cir. 2000)
(“[Section] 706 of the APA functions as a default judicial
review standard.”). Section 706 defines the scope of review
as the “whole record” before the agency, while the standard
of review depends on the nature of the issue before the court.
In most cases, the reviewing court may “hold unlawful and
set aside agency action, findings, and conclusions” if they are
“arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law.” 5 U.S.C. § 706(2)(A). In rare
cases, however, a court may set aside agency action if it is
“unwarranted by the facts to the extent that the facts are
subject to trial de novo by the reviewing court.” Id.
§ 706(2)(F).1 Except when the reviewing court is authorized
to conduct a trial de novo, the court’s review is confined
because “[t]he court is not empowered to substitute its
judgment for that of the agency.” Citizens to Preserve
Overton Park Inc. v. Volpe, 401 U.S. 402, 416 (1971).
1
One very obvious example of a reviewing court with the power to
conduct a trial de novo is the district courts’ review of Freedom of
Information Act claims. See 5 U.S.C. § 552(a)(4)(B) (“[T]he [district]
court shall determine the matter de novo, and may examine the contents
of such agency records in camera to determine whether such records or
any part thereof shall be withheld under any of the exemptions . . . .”).
36 WILSON V . CIR
The question before us is not the scope of our review of
the Tax Court, but the scope of review and the standard of
review of the Tax Court’s review of the Commissioner’s
equitable relief decisions under 26 U.S.C. § 6015(f).
Whatever status the Tax Court once enjoyed as the Board of
Tax Appeals vis-a-vis the Commissioner, today it is clearly a
“court of the United States” for purposes of the APA,
5 U.S.C. § 702, and “the reviewing court” in the first
instance, id. § 706, for review of IRS actions.
A. The Constitutional Status of the Tax Court
The status of the Tax Court has shifted over time.
Created in 1924 as the Board of Tax Appeals (the “Board”),
the Board was an independent agency within the executive
branch that heard appeals from IRS deficiency
determinations. Revenue Act of 1924, Pub. L. No. 68-176,
§ 900, 43 Stat. 253, 336–38; Revenue Act of 1926, Pub. L.
No. 69-20, §§ 1000–05, 44 Stat. 9, 105–11; see also Harold
Dubroff, The United States Tax Court: An Historical
Analysis—Part II: Creation of the Board of Tax
Appeals—The Revenue Act of 1924, 40 Alb. L. Rev. 7, 53–58
(1976). Thus, the Board was an executive branch agency
established to review, through adjudication, the decisions of
another executive branch agency. See 5 U.S.C. § 701(b)(1)
(“‘[A]gency’ means each authority of the Government of the
United States, whether or not it is within or subject to review
by another agency . . . .”); Martin v. Occupational Safety &
Health Review Comm’n, 499 U.S. 144, 151 (1991)
(discussing the “unusual regulatory structure” of
“separat[ing] enforcement and rulemaking powers from
adjudicative powers, assigning these respective functions to
two different administrative authorities”). The Board’s
decisions could be appealed to federal district court, where
WILSON V . CIR 37
the court was to assume the correctness of the Board’s
decisions. Revenue Act of 1924, Pub. L. No. 68-176,
§ 900(g), 43 Stat. 253, 337 (“In any proceeding in court . . .
[or] any suit or proceeding by a taxpayer to recover any
amounts paid in pursuance of a decision of the Board, the
findings of the Board shall be prima facie evidence of the
facts therein stated.”) (emphasis added).
The legal status of the Board was not in doubt: “The
Board of Tax Appeals is not a court. It is an executive or
administrative board, upon the decision of which the parties
are given an opportunity to base a petition for review to the
courts after the administrative inquiry of the Board has been
had and decided.” Old Colony Trust Co. v. Comm’r, 279 U.S.
716, 725 (1929). Nor was the scope of the Board’s review in
question: for deficiency proceedings, its scope of review was
“immediate redetermination of the liability” through “a
complete hearing de novo.” Phillips v. Comm’r, 283 U.S.
589, 598 (1931).
In 1942, Congress changed the name of the Board to “The
Tax Court of the United States,” although it continued to
identify the Tax Court as “an independent agency in the
Executive Branch.” Revenue Act of 1942, Pub. L. No. 77-
753, § 504, 56 Stat. 798, 957 (1942) (leaving unchanged all
other aspects of the Tax Court, e.g., “jurisdiction, powers, and
duties”). Once again, the constitutional status of the Tax
Court was not in question. The Supreme Court continued to
treat the court as an independent executive agency, whose
expertise was unquestioned; indeed, “no administrative
decisions [were] entitled to higher credit in the courts.”
Dobson v. Comm’r, 320 U.S. 489, 498–99 (1943). It was no
surprise then, when following the passage of the APA, the
Fourth Circuit concluded that “the Tax Court is not subject to
38 WILSON V . CIR
the Administrative Procedure Act” because it was not a
“reviewing court” under § 706. O’Dwyer v. Comm’r,
266 F.2d 575, 580 (4th Cir. 1959).
All of that changed in 1969. In recognition of the Tax
Court’s judicial functions, Congress “established, under
article I of the Constitution of the United States, a court of
record to be known as the United States Tax Court.”
26 U.S.C. § 7441; see also Harold Dubroff, The United States
Tax Court: An Historical Analysis—Part IV: The Board
Becomes a Court, 41 Alb. L. Rev. 1, 40–51 (1977). This
time, the Tax Court’s constitutional status did change. The
Supreme Court held in Freytag v. Commissioner that the Tax
Court “exercises a portion of the judicial power of the United
States . . . to the exclusion of any other function.” 501 U.S.
868, 891 (1991); see also Comm’r v. Ewing, 439 F.3d 1009,
1012 (9th Cir. 2006) (“The Tax Court, like any federal court,
is a court of limited jurisdiction.”). The Court found that
“[t]he Tax Court’s function and role in the federal judicial
scheme closely resemble those of the federal district courts.”
501 U.S. at 891. In contrast with its former status within the
executive branch, the “Tax Court remains independent of the
Executive and Legislative Branches.” Id. Accordingly, the
courts of appeals may “review [its] decisions ‘in the same
manner and to the same extent as decisions of the district
courts in civil actions tried without a jury,’” a “standard of
review [that] contrasts with the standard applied [under the
APA].” Id. (quoting 26 U.S.C. § 7482(a) and citing 5 U.S.C.
§ 706(2)(A)).
WILSON V . CIR 39
B. The Tax Court as a “Reviewing Court” Under
§ 706(2)(A)
Whatever authority the Board of Tax Appeals or the old
Tax Court of the United States had as an executive agency to
review IRS decisions, the United States Tax Court is now a
court that exercises the judicial authority of the United States,
and that puts it on a different plane from where it began.
Because the IRS is an “agency,” the Tax Court is a
“reviewing court” for purposes of the APA, and “a reviewing
court must apply the APA’s court/agency review standards in
the absence of an exception.” Dickinson v. Zurko, 527 U.S.
150, 154 (1999). Or, as we have stated before, “a reviewing
court must apply the deferential APA standard in the absence
of a stated exception when reviewing federal agency
decisions.” Ninilchik, 227 F.3d at 1193. Exceptions to the
APA may not be inferred, but must be express: a subsequent
statute may not be held to supersede or modify the judicial
review provisions of § 706, “‘except to the extent that such
legislation [does] so expressly.’” Dickinson, 527 U.S. at
154–55 (quoting 5 U.S.C. § 559). We have interpreted this to
mean that “challenges to agency actions are subject to the
APA’s judicial review standard unless Congress specifies a
contrary intent.” Ninilchik, 227 F.3d at 1193 (emphasis
added).
In Dickinson, the Supreme Court faced a similar issue
head-on. The question was what standard of review the
Federal Circuit should use when reviewing findings made by
the Patent and Trademark Office (“PTO”). 527 U.S. at
152–54. The Federal Circuit, claiming that its authority
predated the adoption of the APA in 1946, reviewed PTO
findings for clear error, see Fed. R. Civ. P. 52(a), as though
the PTO were a district court. Dickinson, 527 U.S. at 153–54.
40 WILSON V . CIR
The Supreme Court held, however, that the more deferential
standard of 5 U.S.C. § 706(2)(A) governed. Id. at 154–55.
The APA, the Court said, is a “uniform approach to judicial
review of administrative action,” and any departure from the
APA’s strict guidelines “must be clear.” Id. (citing 5 U.S.C.
§ 559); see 5 U.S.C. § 559 (“[A]dditional requirements [not
contained in the APA must be] imposed by statute or
otherwise recognized by law.”); Marcello v. Bonds, 349 U.S.
302, 310 (1955) (“Exemptions from the terms of the [APA]
are not lightly to be presumed in view of the statement in
[5 U.S.C. § 559] that modifications must be express . . . .”);
see also United States v. Carlo Bianchi & Co., 373 U.S. 709,
715 (1963) (“[W]here Congress has simply provided for
review, without setting forth the standards to be used or the
procedures to be followed, this Court has held that
consideration is to be confined to the administrative record
and that no de novo proceeding may be held.”). The Supreme
Court squarely rejected the notion that anything less than a
clear or express statement would suffice to create an
exception to the APA. In “a field full of variation and
diversity[, i]t would frustrate [the] purpose [of the APA] to
permit divergence on the basis of a requirement ‘recognized’
only as ambiguous.” Dickinson, 527 U.S. at 155; see also II
Richard J. Pierce, Jr., Administrative Law Treatise § 11.1 at
772 (2002) (“The majority [in Dickinson] . . . seemed to
establish a presumption in favor of uniformity in standards
for judicial review of agency actions that can be overcome
only by ‘clear’ evidence in support of a departure.”).
In sum, the IRS is an agency for the purposes of the APA.
The Tax Court is a “reviewing court,” subject to the scope of
review and standard of review provisions of the APA, unless
Congress has expressly exempted the Tax Court from such
provisions.
WILSON V . CIR 41
II. TAX COURT REVIEW OF EQUITABLE RELIEF
UNDER § 6015(f)
The Tax Court claims, and the majority affirms, that it is
exempt from following the APA when it reviews the
Commissioner’s innocent spouse rulings. The Tax Court not
only claims that it is exempt from the APA’s scope of review
in § 706, it claims that it has an unbounded scope of review
and no standard of review. As the Tax Court has stated, it
will “apply a de novo standard of review as well as a de novo
scope of review.” Porter II, 132 T.C. 210; see also Maj.
Op. at 3, 30. That is no “review” at all. The Tax Court is
simply deciding for itself, based on a record it will create for
itself, whether the taxpayer is entitled to innocent spouse
relief. Under the Tax Court’s view, the Commissioner’s
decision plays no role in the Tax Court’s decision. See Porter
II, 132 T.C. 229 (Gustafson, J., dissenting) (“[The
majority’s] conception denudes th[e Secretary’s] ‘discretion’
of any effect and contradicts the essence of discretion being
granted to an agency.”). That is an extraordinary proposition
of American administrative law—one that cries for clear
statutory authorization from Congress. To that question I
now turn.
A. Innocent Spouse Relief Under § 6015
As the majority has ably described, an innocent spouse
has long had some form of relief, from unpaid or deficient
taxes, available under various provisions of the Internal
Revenue Code. See Maj. Op. at 3–8. Currently, 26 U.S.C.
§ 6015 provides two mechanisms for addressing innocent
spouse claims. First, “[u]nder procedures prescribed by the
Secretary, if . . . there is an understatement of tax attributable
to erroneous items of one individual filing the joint return,”
42 WILSON V . CIR
the “other individual”—i.e., the “innocent spouse”—may
“establish[] that in signing the return he or she did not know,
and had no reason to know, that there was such
understatement.” 26 U.S.C. § 6015(b)(1)(B), (C). Where it
would be “inequitable” to hold the innocent spouse liable, and
the innocent spouse elects the benefits of § 6015, the innocent
spouse “shall be relieved of liability for tax.” Id.
§ 6015(b)(1)(D), (E); see also id. § 6015(c) (providing similar
relief for taxpayers who are no longer married or are legally
separated or not living together). Upon the filing of a petition
for review, the Tax Court has jurisdiction to “determine the
appropriate relief” for any individual “against whom a
deficiency has been asserted.” Id. § 6015(e)(1)(A).
Second, § 6015(f) authorizes the Secretary to grant
innocent spouse relief where such relief is not available under
§ 6015(b) or (c). Section 6015(f) reads in its entirety:
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.
The Tax Court also has jurisdiction “to determine the
appropriate relief available” “in the case of an individual who
WILSON V . CIR 43
requests equitable relief under subsection (f).” Id.
§ 6015(e)(1)(A).
I want to begin with a couple of simple observations
about the interplay between these two forms of relief. First,
the principal procedure for obtaining innocent spouse relief
is found in § 6015(b) and (c). That benefit, if the innocent
spouse qualifies and elects such relief, is mandatory: The
innocent spouse “shall be relieved of liability for tax.” Id.
§ 6015(b)(1)(E) (emphasis added). This remedy is only
available under the conditions specified by Congress in
§ 6015 and under the regulations or procedures provided by
the Secretary, see Treas. Reg. § 1.6015 (2012).
Second, if the Commissioner has denied innocent spouse
relief under § 6015(b) or (c) and imposed a deficiency, the
innocent spouse has a remedy in the Tax Court, and the court
will review the deficiency under the its long-standing rules
for reviewing taxpayer deficiencies. See Clapp v. Comm’r,
875 F.2d 1396, 1403 (9th Cir. 1989) (stating that the Tax
Court reviews deficiency determinations de novo).
Third, in contrast to relief available under § 6015(b) and
(c), § 6015(f) relief is an equitable remedy. Section 6015(b)
is titled “Procedures for relief from liability applicable to all
joint filers,” while § 6015(f) is simply titled “Equitable
relief.” Moreover, the substance of § 6015(f) confirms its
equitable nature. See 26 U.S.C. § 6015(f) (“[T]he Secretary
may relieve such individual of such liability.”(emphasis
added)). “The word ‘may’ customarily connotes discretion.”
Jama v. ICE, 543 U.S. 335, 346 (2005) (“That connotation is
particularly apt where, as here, ‘may’ is used in
contraposition to the word ‘shall’ . . . .”); Fernandez v. Brock,
840 F.2d 622, 632 (9th Cir. 1988) (“‘May’ is a permissive
44 WILSON V . CIR
word, and we will construe it to vest discretionary power
absent a clear indication from the context that Congress used
the word in a mandatory sense.”). Compare 26 U.S.C.
§ 6015(b)(1)(E) (“[T]he [innocent spouse] shall be relieved
of liability for tax . . . .” (emphasis added)), with 26 U.S.C.
§ 6015(f) (“[T]he Secretary may relieve [the innocent spouse]
of such liability.” (emphasis added)). Section 6015(f) relief
may be had when other legal remedies fail, and it may not be
had as a matter of right. That makes § 6015(f) an equitable
remedy to provide relief when an individual cannot obtain
relief under either § 6015(b) or (c). 26 U.S.C. § 6015(e)(1)
(referring to “equitable relief under subsection (f)”);
Cheshire, 282 F.3d at 338.2
Fourth, the exercise of discretion is committed to “the
Secretary”—meaning the Secretary of the Treasury—whose
delegee is the Commissioner of the IRS. Treas. Order 150-10
(April 22, 1982) (delegating the Secretary of the Treasury’s
authority to administer and enforce the Internal Revenue laws
to the Commissioner of Internal Revenue). That is, Congress
has both made the grant of innocent spouse relief a matter of
equity and committed it to the discretion of the Secretary of
2
Both an innocent spouse’s legal remedy under § 6015(b) and her
equitable remedy under § 6015(f) depend on a finding that “it is
inequitable to hold the other individual liable” for any deficiency or
unpaid tax. Compare § 6015((b)(1)(D) (emphasis added), with
§ 6015(f)(1) (emphasis added). The fact that both remedies use the word
“inequitable” does not make them both equitable remedies. Many laws
provide remedies to cure inequities; that does not convert them into
equitable remedies, at least not as we have long used that term. Equity is
a discretionary remedy begun “‘with a petition asking the king to interfere
to secure justice where it would not be secured by the ordinary and
existing processes of law.’” Larry L. Teply & Ralph U. W hitten, Civil
Procedure 33 (3d ed. 2004) (quoting George Burton Adams, The Origin
of English Equity, 16 Colum. L. Rev. 87, 91 (1916)).
WILSON V . CIR 45
the Treasury or his delegee. See Porter II, 132 T.C.
226–28 (Gustafson, J., dissenting).
B. The Scope and Standard of Review of § 6015(f)
Denials
The Tax Court arrived at its present position through a
curious and circuitous route. As the majority explains, Maj.
Op. at 8–9, under the original scheme, Congress provided for
statutory review where the Commissioner denied innocent
spouse relief and assessed a deficiency. That is, as originally
enacted in 1998, the “Petition for review by Tax Court,”
§ 6015(e), only applied to relief denied under § 6015(b) and
(c). Comm’r v. Ewing, 439 F.3d at 1012–13. By its terms,
§ 6015(e) did not authorize the Tax Court to review the
Commissioner’s denial of discretionary relief under
§ 6015(f). Id. at 1013.
Nevertheless, in Ewing v. Comm’r (Ewing I), 118 T.C.
494 (2002) (en banc), the Tax Court decided that it had
jurisdiction to hear a taxpayer’s petition from the
Commissioner’s refusal to grant innocent spouse relief where
no deficiency had been asserted. Id. at 506–07. In a
subsequent opinion in the same case, a divided Tax Court
further held that it could conduct a trial de novo to hear
additional evidence not in the administrative record before
the Commissioner, but that it would review the
Commissioner’s decision for an abuse of discretion. Ewing
II, 122 T.C. 43–44.
On appeal to our court, we held that the Tax Court did not
have jurisdiction to review the Commissioner’s decision
under § 6015(f), because its jurisdiction was limited to
petitions “when a deficiency has been asserted and the
46 WILSON V . CIR
taxpayer has elected relief under [§ 6015(b) or (c)].” Comm’r
v. Ewing, 439 F.3d at 1013. The Eighth Circuit followed suit
in Bartman v. Commissioner. 446 F.3d 785, 787–88 (8th Cir.
2006) (“We agree with the Ninth Circuit that the tax court
lacks jurisdiction under § 6015(e) unless a deficiency was
asserted against the individual petitioning for review.”) After
our ruling in Ewing, the Commissioner’s discretion was
complete: His decision whether to grant or not grant equitable
relief to innocent spouses was not only discretionary, but
unreviewable in the Tax Court.
The Tax Court acquiesced in our decision in Ewing and
sought a legislative fix. Billings v. Comm’r, 127 T.C. 7,
19–20 (2006) (“[U]ntil and unless Congress identifies this as
a problem and fixes it legislatively by expanding our
jurisdiction to review all denials of innocent spouse relief, it
is quite possible that the district courts will be the proper
forum for review of the Commissioner’s denials of relief in
nondeficiency stand-alone cases.”). That same year Congress
amended § 6015 to address our decision in Ewing and the
Eighth Circuit’s decision in Bartman. Tax Relief and Health
Care Act of 2006, Pub. L. No. 109-432, § 408, 120 Stat.
2922, 3061–62. The new amendment added language to
§ 6015(e). Id. This is the relevant portion of that section,
with the language added by the 2006 amendments in italics:
(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)—
WILSON V . CIR 47
(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 . . . .
26 U.S.C. § 6015(e)(1)(A) (emphasis added).
Again, I have a couple of observations. First, this section
confirms that innocent spouse relief offered in § 6015(f) is
equitable in nature. And, implicitly, it confirms the
Secretary’s discretion to grant it by repeating that the relief in
question is the “equitable relief under subsection (f).”
Second, the language added in 2006 cures the jurisdictional
defect we identified in Ewing. It does so in the simplest of
ways, by referring to subsection (f) in the general clause,
which permits an individual to petition the Tax Court, that
“shall have jurisdiction.” 26 U.S.C. § 6015(e)(1)(A). Third,
and most importantly, this section, as amended and
considered as a whole, says absolutely nothing about the
scope of review. In fact, it says nothing about either the
scope of review or the standard of review that the Tax Court
should use when reviewing the petition of “an individual who
requests equitable relief under subsection (f).”
Id. § 6015(e)(1). That is particularly significant after
Dickinson because the Supreme Court had made it clear that
ambiguous language would not support “divergence” from
the APA; that is, any departure from the APA’s scope of
review and standard of review “must be clear.” Dickinson,
527 U.S. at 154–55. Yet § 6015 makes no reference to the
scope of review; it does not create a clear exception to the
provisions of the APA.
48 WILSON V . CIR
Under the principles of Dickinson and our cases, that
should be the end of the matter. Section 6015 falls well short
of the “clear” or “express” language required to create an
exception to the APA. Section 6015(e) may be considered a
“special statutory review” provision for purposes of 5 U.S.C.
§ 703, but it does nothing more than grant jurisdiction to the
Tax Court to review a taxpayer’s innocent spouse claim.
Section 6015(e), having failed to supply its own scope of
review or to except Tax Court review from the APA, review
of § 6015(f) petitions brought under § 6015(e) is governed,
by default, by the APA. Thus, the scope of review for the
Tax Court is the “whole record” before the Commissioner,
and the standard of review of the Commissioner’s exercise of
discretion is the familiar standard, “arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law.”
5 U.S.C. § 706(2)(A).3
3
The Tax Court’s review of tax deficiencies has, for largely historical
reasons, been held to be de novo. See Porter I, 130 T.C. 119
(describing the history underlying the Tax Court’s deficiency jurisdiction);
see also Clapp, 875 F.2d at 1403 (“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.”). There would be nothing
inconsistent in permitting the Tax Court to review innocent spouse claims
under § 6015(b) and (c) through a trial de novo— just as other deficiencies
are— while limiting the Tax Court’s review of equitable relief under
§ 6015(f) to abuse of discretion.
In Ewing II, Judge Thornton made a strong argument that at the time
the APA was passed, Congress intended that the Tax Court would
continue using trials de novo when reviewing deficiency claims. 122 T.C.
at 50–56 (Thornton, J. concurring). From this history, Judge Thornton
concludes that APA § 706 does not govern proceedings in the Tax Court.
Id. at 50 (Thornton, J., concurring). I respectfully disagree. As of 1946,
when the APA was adopted, the Tax Court was exempt because it was not
a court, but an executive branch agency. See O’Dwyer, 266 F.2d at 580
(holding that the predecessor of the current Tax Court was not a
WILSON V . CIR 49
Nevertheless, the Tax Court held, following the 2006
amendment expanding its jurisdiction, that it has even
broader review power than any court or legislative body had
previously recognized. See Porter II, 132 T.C. 208
(“Given Congress’s confirmation of our jurisdiction,
reconsideration of the standard of review in section 6015(f)
cases is warranted.”). Overruling in part its 2004 decision in
Ewing II, the Tax Court held that it would “apply a de novo
“reviewing court” under the APA). Once the Tax Court became an article
I court in 1969, however, the APA applied to it as a “reviewing court.”
5 U.S.C. § 706. If Judge Thornton’s argument is correct, that Congress
wanted the Tax Court to continue reviewing deficiency claims through
trials de novo, that does not mean that the APA does not apply to the Tax
Court. It means that § 706(2)(F) governs the Tax Court’s review of
deficiencies, rather than § 706(2)(A).
The Tax Court’s historical de novo review of tax deficiencies— which
dates to the 1920s— may have been grandfathered under the APA, but that
tells us nothing about what the APA says about review of the Secretary’s
denial of equitable relief. Moreover, Section 6015(f)— which Congress
first provided for in 1998— cannot have been grandfathered under
§ 706(2)(F) when the APA was adopted in 1946. Thus, innocent spouse
relief cases must fall under 5 U.S.C. § 706(2)(A). W hile the majority
effortlessly concludes that § 706(2)(F) applies to all innocent spouse relief
cases, Maj. Op. at 20–22, § 706(2)(F) can only be applied in an innocent
spouse relief case where “the agency factfinding procedures are
inadequate.” Overton Park, 401 U.S. at 415. This inquiry must be done
on a case-by-case basis, hewing closely to the Court’s admonition that
§ 706(2)(F) only be applied in rare circumstances. Florida Light &
Power, 470 U.S. at 744; see also Lands Council v. Powell, 395 F.3d 1019,
1030 (9th Cir. 2004) (“The scope of these exceptions permitted by our
precedent is constrained, so that the exception does not undermine the
general rule. W ere the federal courts routinely or liberally to admit new
evidence when reviewing agency decisions, it would be obvious that the
federal courts would be proceeding, in effect, de novo rather than with the
proper deference to agency processes, expertise, and decision-making.”).
The majority eschews this firm command.
50 WILSON V . CIR
standard of review as well as a de novo scope of review.” Id.
at 210. Contrary to the statute (as amended), contrary to
Dickinson, and contrary to its prior cases, the Tax Court
decided that, henceforth, it would decide equity under
§ 6015(f) itself.4
In order to maintain this practice, the Tax Court will have
to demonstrate that Congress clearly exempted the Tax Court
from § 706(2)(A) and intended the Tax Court to be governed
by § 706(2)(F) when reviewing the Secretary’s denial of
equitable relief under 26 U.S.C. § 6015(f).
III. THE TAX COURT AND THE CASE FOR
§ 706(2)(F) REVIEW
The majority makes two main arguments in support of the
Tax Court’s de novo scope of review. First, the majority
claims that the use of the word “determine” in § 6015(e) is
“plain language,” Maj. Op. at 25–26, and “suggests a de novo
scope of evidentiary review in § 6015(f) cases,” id. at 17.
Second, the majority points to the structure of § 6015 to
support the same conclusion. Id. at 18–20. I am going to
address both points.
4
The combination of a de novo scope of review and de novo standard
of review ineluctably means that the Tax Court is deciding the question of
equitable relief. The decision to review the Secretary on a de novo scope
of review effectively determines that the standard of review will also be
de novo; a de novo scope of review but an abuse of discretion standard of
review are inconsistent. As we have pointed out, “[w]hen a reviewing
court considers evidence that was not before the agency, it inevitably leads
the reviewing court to substitute its judgment for that of the agency.”
Asarco, Inc. v. EPA, 616 F.2d 1153, 1160 (9th Cir. 1980). See Neal,
557 F.3d at 1286–87 (Tjoflat, J., dissenting).
WILSON V . CIR 51
A. Statutory Terms Suggesting De Novo Review
The majority’s principal argument is that when Congress
authorized the Tax Court “to determine the appropriate relief
available to the individual under this section,” it granted the
Tax Court the power to decide the matter de novo, and not
just de novo review, but trial de novo. Maj. Op. at 16–17
(quoting 26 U.S.C. § 6015(e)(1)); see also Porter II, 132 T.C.
at 208 (“The use of the word ‘determine’ suggests that
Congress intended us to use a de novo standard of review as
well as scope of review.”). That is a lot of weight to put on
the word “determine,” and I do not think it can bear it.
1. “Determine”
As an initial observation, Congress knows how to
authorize a trial de novo.5 Similarly, Congress knows the
difference between trial de novo and de novo standards of
review, and knows how to specifically authorize a de novo
standard of review.6 Where Congress has elected to use the
phrase “de novo,” either to refer to the scope of review or the
5
See, e.g., 5 U.S.C. § 706(2)(F); 5 U.S.C. § 7702(e)(3); 5 U.S.C.
§ 7703(c); 7 U.S.C. § 499g(c); 7 U.S.C. § 2023(a)(15); 28 U.S.C.
§ 657(a), (c); 38 U.S.C. § 7261(c); 42 U.S.C. § 300e-9(d)(3); 42 U.S.C.
§ 1995; 47 U.S.C. § 504(a).
6
See, e.g., 6 U.S.C. § 1142(c)(7); 12 U.S.C. § 1828(c)(7)(A); 12 U.S.C.
§ 1849(b)(1); 12 U.S.C. § 5567(c)(4)(D)(i); 15 U.S.C. § 2087(b)(4);
15 U.S.C. § 3414(b)(6)(F); 16 U.S.C. § 823b(b), (d)(3)(B); 18 U.S.C.
§ 1514A(b)(1)(B); 18 U.S.C. § 3613A(b)(1); 18 U.S.C. § 3742(e);
19 U.S.C. § 1625(b); 21 U.S.C. § 399d(b)(4)(A); 22 U.S.C. § 4140(b)(2);
28 U.S.C. § 2265(c)(3); 30 U.S.C. § 1300(j)(4)(ii)(I); 42 U.S.C.
§ 2282a(c)(3)(B); 42 U.S.C. § 5851(b)(4); 42 U.S.C. § 6303(d)(3)(B);
42 U.S.C. § 8433(d)(3)(B); 49 U.S.C. § 20109(d)(3); 49 U.S.C.
§ 31105(c).
52 WILSON V . CIR
standard of review, the express requirement of 5 U.S.C. § 559
may be satisfied. See Dickinson, 527 U.S. at 154–55.
On the other hand, the word “determine” is, at best, an
ambiguous term, “a woolly verb, its contours left undefined
by the statute itself.” Pub. Citizen v. U.S. Dep’t of Justice,
491 U.S. 440, 452 (1989). As a matter of common usage,
nothing about the word “determine” inherently
suggests—much less requires—that judicial review be had
using a de novo scope of review and standard of review.7
Moreover, if we look at Congress’s use of the word
“determine” in other contexts, we will confirm its ambiguous
usage. In particular, since Congress has used “determine” in
conjunction with the phrase “de novo,” that strongly suggests
that the use of the word “determine” or “determination” alone
does not suffice to require a de novo scope of review and
standard of review.8
In one such instance where Congress expressly required
that a “de novo determination” be made, the Supreme Court
held that meant de novo review and not necessarily a de novo
hearing. United States v. Raddatz, 447 U.S. 667, 674 (1980).
Section 636 of Title 28 authorizes district courts to refer
certain pretrial matters to magistrate judges to “hear and
determine.” With respect to certain dispositive motions, the
magistrate judge proposes findings of fact and
7
The definition of “determine” is: “To decide or settle (e.g., a dispute)
authoritatively and conclusively,” or “[t]o end or decide by final, esp.
judicial action.” W ebster’s II New Riverside University Dictionary 369
(1984). Likewise, Black’s Law Dictionary defines a “determination” as:
“A final decision by a court or administrative agency.” Black’s Law
Dictionary 514 (9th ed. 2009).
8
See, e.g., 18 U.S.C. § 3664(d)(6); 28 U.S.C. § 636(b)(1)(C).
WILSON V . CIR 53
recommendations, to which the parties may file objections.
Id. § 636(b). The district court “shall make a de novo
determination of those portions of the report . . . to which
objection is made.” 28 U.S.C. § 636(b)(1)(c) (emphasis
added). In Raddatz, the Court found it “clear that on these
dispositive motions, the statute calls for a de novo
determination, not a de novo hearing.” 447 U.S. at 674. It
explained that Congress’s use of the phrase “de novo
determination” did not require a judge to “rehear the
contested testimony in order to carry out the statutory
command to make the required ‘determination.’” Id. In
support of its interpretation, the Supreme Court looked to the
legislative history, where Congress explained its use of the
phrase “de novo determination”:
The use of the words ‘de novo determination’
is not intended to require the judge to actually
conduct a new hearing on contested issues.
Normally, the judge, on application, will
consider the record which has been developed
before the magistrate and make his own
determination on the basis of that record,
without being bound to adopt the findings and
conclusions of the magistrate. In some
specific instances, however, it may be
necessary for the judge to modify or reject the
findings of the magistrate, to take additional
evidence, recall witnesses, or recommit the
matter to the magistrate for further
proceedings.
Id. at 675 (quoting H.R. Rep. No. 94-1609, at 3 (1976)).
Thus, “[t]he legislative history discloses that Congress
purposefully used the word determination rather than
54 WILSON V . CIR
hearing,” thereby “providing for a ‘de novo determination’
rather than de novo hearing.” Id. at 676.
The obvious lesson from Raddatz is that even the term
“de novo determination” is not “plain text,” but requires
consideration of its context and its legislative history in order
to understand it. But we should also take away that the word
“determine” does not self-evidently mean “determine de
novo.” And, even if we thought it might, it does not tell us
whether the de novo determination refers to the standard of
review or the scope of review. In our case, we do not have
the interpretive tools that the Court had available in Raddatz.
Congress did not modify “determine” with the words “de
novo,” and it offered us no legislative history to illuminate
the meaning of “determine” in § 6015(e). That word is
simply too ambiguous to authorize the wholesale expansion
of the review power claimed by the Tax Court.
Moreover, the context in Raddatz—a district court
reviewing a magistrate judge’s findings and
recommendations—was a far more compelling case for de
novo review of some kind than the context of a court
reviewing an executive agency’s decision.9 As the Court
9
A magistrate judge is an “adjunct” of an article III district court. N.
Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 78–81
(1982). This means that the full authority to “deal with matters of law” is
reserved to an article III court, providing for “the appropriate exercise of
the judicial function.” Id. at 81. Thus, a magistrate judge does not usurp
the judicial power when properly functioning as an adjunct of an article
III court. The Court recognized two significant principles that are
important here. First, “it is clear that when Congress creates a substantive
federal right, it possesses substantial discretion to prescribe the manner in
which that right may be adjudicated . . . .” Id. at 80. Second, the
“functions of the adjunct must be limited in such a way that ‘the essential
WILSON V . CIR 55
explained in Florida Power & Light Co. v. U.S. Nuclear
Regulatory Commission:
If the record before the agency does not
support the agency action, if the agency has
not considered all relevant factors, or if the
reviewing court simply cannot evaluate the
challenged agency action on the basis of the
record before it, the proper course, except in
rare circumstances, is to remand to the agency
for additional investigation or explanation.
The reviewing court is not generally
empowered to conduct a de novo inquiry into
the matter being reviewed and to reach its
own conclusions based on such an inquiry.
470 U.S. 729, 744 (1985) (emphasis added). Unless Congress
has expressly authorized a trial de novo, only the rarest of
circumstances will justify a court reviewing administrative
action de novo. See, e.g., Ronald M. Levin, Scope-of-Review
Doctrine Restated: An Administrative Law Section Report,
38 Admin. L. Rev. 239, 273–77 (1986); Nathaniel L.
Nathanson, Probing the Mind of the Administrator: Hearing
Variations and Standards of Judicial Review Under the
Administrative Procedure Act and Other Federal Statutes, 75
Colum. L. Rev. 721, 755 (1975).
attributes’” of the constitutional power at issue, are retained in the proper
branch. Id. So, district court review of a magistrate judge’s determination
is not subject to the same separation of powers concerns, because it is only
the court’s own judicial power that is being exercised. This is inapposite
to the case at hand. The Commissioner is not an “adjunct” of the Tax
Court, although the Tax Court’s scope of review and standard of review
in innocent spouse relief cases suggest as much.
56 WILSON V . CIR
2. “Determine” v. “Redetermine”
Alternatively, the Tax Court has relied upon the similarity
between the use of “determine” in § 6015(e) and its power to
“redetermine” tax deficiencies. Porter I, 130 T.C. 118–19
(referring to 26 U.S.C. §§ 6213(a) and 6214(a)); see also Maj.
Op. at 28–30; Ewing I, 122 T.C. 38 (“We see no material
difference between the words ‘determine’ in section 6015(e)
and ‘redetermination’ in section 6213(a) . . . .”). Although I
continue to believe that the term “determine” is ambiguous,
I am quite unpersuaded that “determine” and “redetermine”
mean the same thing. If anything, the case for
“redetermination” meaning some kind of de novo review is
much stronger than for the term “determine.” The use of the
prefix “re-,” to modify the word “determine,” suggests that
something has been, or must be, done again; a definition in
closer harmony with a de novo standard. See Webster’s II
New Riverside University Dictionary 977 (1984). If anything
at all is to be gleaned from this, the fact that Congress used
“redetermine” to describe the Tax Court’s review of
deficiencies suggests that “determine” must mean something
else. It seems to me that the Tax Court has this one exactly
backwards.10
In Robinette v. Commissioner, the Eighth Circuit faced a
related issue. 439 F.3d 455 (8th Cir. 2006). There, the Tax
10
Further, any reading of “redetermination” must be informed by the
fact that the Tax Court has long had special jurisdiction over deficiencies.
That jurisdiction is accounted for in the Tax Court’s jurisdiction over
innocent spouse relief available under § 6015(b) and (c). On the other
hand, nothing in § 6015(f) requires that a deficiency have been assessed.
Section 6015(f) is not limited to relief from a deficiency; it is self-
consciously “relief . . . not available to such individual under subsection
(b) or (c).” § 6015(f)(2) (emphasis added).
WILSON V . CIR 57
Court had invoked its traditional use of “de novo proceedings
in deficiency proceedings” to justify a trial de novo in
“collection due process hearings” under 26 U.S.C. § 6330.
Id. at 459–61. Approaching the issue through the framework
of the APA, the Eighth Circuit could not find any connection
to the Tax Court’s deficiency jurisdiction. See id. at 461
(“We do not think the proposed conclusion follows from the
history. Collection due process hearings under § 6330 were
newly-created administrative proceedings in 1998, and the
statute provided for a corresponding new form of limited
judicial review. The nature and purpose of these proceedings
are different from deficiency determinations, and it is just as
likely that Congress believed judicial review of decisions by
appeals officers in this context should be conducted in
accordance with traditional principles of administrative
law.”).11 The Eighth Circuit held that the Tax Court’s review
11
In Porter I, the Tax Court purported to distinguish Robinette based on
the fact that § 6330 (at issue in Robinette) does not use the word
“determine,” and “the use of the word ‘determine’ [in § 6015(e)] suggests
that [the Tax Court should] conduct a trial de novo.” 130 T.C. 120; see
also Neal, 557 F.3d at 1275–76. As discussed above, the mere use of the
word “determine” alone is insufficient to satisfy the demands of 5 U.S.C.
§ 559’s “express” requirement.
Porter I also relied on the fact that under 26 U.S.C. § 6512(b), the
Tax Court may “determine” overpayments. 130 T.C. 119; see
also Ewing I, 122 T.C. 38. At first glance, this appears to be a stronger
position, but § 6512(b) is inextricably connected with, and dependent
upon, the Tax Court’s jurisdiction to “redetermine” deficiencies. The Tax
Court can only make a determination as to an overpayment when the Tax
Court has received a petition for review of a deficiency determination by
the Secretary and, during its deficiency “redetermination,” finds that
“there is no deficiency and further finds that the taxpayer has made an
overpayment of income tax.” 26 U.S.C. § 6512(b)(1).
58 WILSON V . CIR
was governed by § 706. Id. at 459–62. We have since cited
Robinette with approval. Keller, 568 F.3d at 718.
3. “Petition” v. “Appeal”
The majority also looked to the Eleventh Circuit’s
decision in Neal, where that court ascribed great weight to the
difference between the words “petition” and “appeal.” Maj.
Op. at 17–18 (quoting Neal, 557 F.3d at 1265). According to
the majority:
Section 6015(e) expressly grants jurisdiction
to the Tax Court to “determine the appropriate
relief available to the individual.” 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.
Maj. Op. at 17 (quoting Neal, 557 F.3d at 1265 (internal
citations omitted)); see also Neal, 557 F.3d at 1276
(“Congress’s use of the word ‘determine’ and not ‘appeal’ in
§ 6015(e)’s jurisdictional grant is significant.”). I am not sure
what significance the majority thinks we should draw from
the use of the word “petition” instead of “appeal.”
Section 6015(e) is actually entitled “Petition for review by
Tax Court,” thus the subsequent use of the word “petition”
must be understood in the context that it is a petition for
WILSON V . CIR 59
review.12 I do not know of any established difference
between the use of “petition” and “appeal” that would dictate
the standard of review. At least in administrative practice,
those terms have been used interchangeably. Many statutes
authorizing judicial review of agency action refer to the
action initiating statutory review as a “petition.”13 Others
refer to the same action as an “appeal,”14 and at least one
statute authorizes “[a]n appeal,” which must be initiated by
filing “a written petition.”15 The APA refers only to “review”
of agency action, without associating either “appeal” or
“petition” with such review. Our own rules refer to “appeals”
from district courts, Fed. R. App. P. 3, and “petitions for
review” from the orders of administrative agencies, Fed. R.
App. P. 15(a), but our tradition of designating some parties
“appellants” and others “petitioners” appears to flow from
tradition enshrined in rule rather than from some intuitive
12
Black’s Law Dictionary defines “petition” as: “A formal written
request presented to a court or other official body.” Black’s Law
Dictionary 1261 (9th ed. 2009). Thus, quite literally, a petition for review,
in this context, is a formal written request presented to the Tax Court for
review of the Secretary’s innocent spouse relief decision. On the other
hand, an “appeal” is defined as: “A proceeding undertaken to have a
decision reconsidered by a higher authority; esp., the submission of a
lower court’s or agency’s decision to a higher court for review and
possible reversal.” Black’s Law Dictionary 112 (9th ed. 2009).
13
See, e.g., 7 U.S.C. § 9(11)(B)(ii) (Secretary of Agriculture); 8 U.S.C.
§ 1252(a)(5) (Board of Immigration Appeals); 15 U.S.C. § 45(c), (d)
(Federal Trade Commission); 15 U.S.C. § 77i(a) (Securities and Exchange
Commission); 29 U.S.C. § 160(f) (National Labor Relations Board).
14
See, e.g., 33 U.S.C. § 1319(g)(8) (Environmental Protection Agency);
47 U.S.C. § 402(b) (Federal Communications Commission).
15
27 U.S.C. § 204(h) (providing for review of Treasury’s denial of a
federal alcohol permit).
60 WILSON V . CIR
meaning. Thus, there is no legal significance to Congress
authorizing a “petition” instead of an “appeal,” and
Congress’s choice of the word “petition” in § 6015(e) tells us
nothing about the scope of review or standard of review.
* * * * *
In sum, nothing in the text—much less the “plain
text”—compels the majority’s analysis. The word
“determine” does not tell us what kind of review the Tax
Court is authorized to conduct, and in the absence of clear
direction from Congress, that means the APA governs its
review.
B. Structural Arguments Suggesting De Novo Review
The majority also relies on the structure of § 6015 in
support of the proposition that § 6015(e) requires a de novo
scope of review and standard of review. Maj. Op. at 18–20.
I am going to address each of its points, which I do not think
persuasive.
1. “Totality of the Circumstances”
The majority argues that because § 6015(e) requires that
the Tax Court “determine the appropriate relief available,”
the Tax Court must consider § 6015(f)’s “totality of the
circumstances” in the same manner as the Secretary would.
Maj. Op. at 18–20 (internal quotations omitted). Thus, the
majority states that “‘[t]aking into account all the facts and
circumstances’ is not possible if the Tax Court can review
only the evidence available at the time of the Commissioner’s
prior determination.” Maj. Op. at 18 (internal quotations
omitted).
WILSON V . CIR 61
With all due respect, this problem is overblown.
Although § 6015(f) requires that the totality of the
circumstances be considered, it is specifically directed to the
Secretary. It is the Secretary who must “tak[e] into account
all the facts and circumstances,” not the Tax Court.
26 U.S.C. § 6015(f). Congress gave the Tax Court no such
charge. Instead, the Tax Court possesses the power to review
the Secretary’s decisions under § 6015(f), not to
independently apply it. See 26 U.S.C. § 6015(e)(1). Here,
there is no reason that the Tax Court cannot review the
Secretary’s decision based on the administrative record. And
that is well suited for abuse-of-discretion review. If the
Secretary failed to consider all the facts and circumstances in
the record before him, then he has failed to follow Congress’s
directions, and he has likely abused his discretion. See, e.g.,
Astrero v. INS, 104 F.3d 264, 267 (9th Cir. 1996) (“[T]his
Court may not substitute its sense of what constitutes
hardship in a given case unless the Board abused its
discretion, by failing to consider all relevant facts bearing
upon extreme hardship or to articulate reasons supported by
the record for denying suspension of deportation.”).
2. Intervention
The majority is also concerned that application of the
record rule would eviscerate the right of a spouse to intervene
under § 6015(e)(4). Maj. Op. at 19 (“By ‘expressly providing
for intervenors in section 6015(f) . . . cases . . . Congress
contemplated a new record made initially in the reviewing
court.’ Moreover, the right to intervene provided by
§ 6015(e)(4) would be eviscerated without the ability to
present new evidence.” (quoting Porter II, 132 T.C. 220
(Gale, J., concurring)) (internal citation omitted); see Ewing
II, 122 T.C. 43. The right to intervene in a petition for
62 WILSON V . CIR
review cannot dictate the standard of review, and nothing in
§ 6015 gives the intervenor the right to proffer additional
evidence.
Like the Tax Court, our rules provide for intervention in
a “petition for review” of an agency order. Fed. R. App. P.
15(d). Under the APA, we must review the whole record,
5 U.S.C. § 706(2), which is the record before the
administrative agency, and we will review extra-record
materials under limited circumstances. City of Las Vegas v.
FAA, 570 F.3d 1109, 1116 (9th Cir. 2009) (“Courts may
review such extra-record materials only when: (1) it is
necessary to determine whether the agency has considered all
relevant factors and explained its decision, (2) the agency has
relied on documents not in the record, (3) supplementing the
record is necessary to explain technical terms or complex
subject matter, or (4) plaintiffs make a showing of bad
faith.”). Intervenors may urge a reviewing court to consult
additional materials, but they have no right to expand the
record before us by virtue of their intervention. See City of
Arlington v. FCC, 668 F.3d 229, 239 (5th Cir. 2012) (“[A]
party [cannot] rely on her timely intervention with respect to
another party’s petition for review to raise matters outside the
scope of the other party’s petition.”); Platte River Whooping
Crane Critical Habitat Maint. Trust v. FERC, 962 F.2d 27, 37
n.4 (D.C. Cir. 1992) (“[I]ntervenors may only join issue on a
matter that has been brought before the court by another
party.”) (internal quotation marks omitted). And no one has
ever thought that intervention affected our standard of review,
much less the scope of our review. See Andersen v. Dist. of
Columbia, 877 F.2d 1018, 1025 (D.C. Cir. 1989) (“The
authority . . . to receive new evidence does not transform the
review proceedings into a trial de novo.”).
WILSON V . CIR 63
3. Timing and Affirmative Defenses
The majority has also raised the specter of the timing of
the petition and the use of § 6015(f) as an affirmative defense
as reasons for recognizing de novo review in the Tax Court.
Maj. Op. at 19 (“There are two other contexts where a de
novo scope of review is not only permitted, but expected.
First, when a taxpayer requests § 6015(f) relief but the
Commissioner fails to make a determination regarding the
request within six months, the taxpayer may petition the Tax
Court to render the determination. . . . The Tax Court also
proceeds de novo when confronted with taxpayers who raise
relief under § 6015(f) as an affirmative defense in § 6015(b)
and § 6015(c) deficiency cases.”); see Ewing II, 122 T.C.
42. Neither of these supplies a reason for de novo review.
As to the timing of a petition, § 6015(e)(1)(A) provides
that a petition for review must be filed within 90 days of the
Secretary’s final decision, or within six months after relief
has been requested if the Secretary has failed to act. In the
latter case, if the Secretary has failed to address a request for
innocent spouse relief, the petitioner may argue that the
Secretary has unreasonably withheld relief. The APA
authorizes a reviewing court to “compel agency acts
unlawfully withheld or unreasonably delayed,” but it does not
authorize the court to preemptively decide the matter.
5 U.S.C. § 706(1). “[W]hen an agency is compelled by law
to act within a certain time period, but the manner of its
action is left to the agency’s discretion, a court can compel
the agency to act, but has no power to specify what the action
must be.” Norton v. S. Utah Wilderness Alliance, 542 U.S.
55, 65 (2004).
64 WILSON V . CIR
As to the question of raising § 6015(f) as an affirmative
defense in a deficiency case, I am not sure I see the problem.
Section 6015(f) relief is not the same as relief under
§ 6015(b) or (c). Both may involve claims related to innocent
spouses, but one is a legal remedy for which there is a special
review proceeding available in the Tax Court and the other is
an equitable remedy committed to the discretion of the
Secretary. Thus, contrary to the Tax Court, there is good
reason to accept that these matters should not receive “similar
treatment and, thus, the same standard of review.” Ewing II,
122 T.C. 43; see also Cheshire, 282 F.3d at 338
(distinguishing between the standard of review applicable to
each remedy). Section 6015(f) exists precisely because
Congress anticipated that relief under § 6015(b) and (c) might
not be available. In this context, I cannot see that § 6015(f)
is an affirmative defense enforceable by the court in the
absence of a decision by the Secretary. If the putative
innocent spouse has no defense under § 6015(b) and (c), she
must seek relief under § 6015(f) from the Commissioner, not
the court.
4. Remand Authority
Finally, the majority states that “[s]ection 6015(e) not
only makes no mention of remand, it instructs the Tax Court
to proceed de novo when reviewing certain § 6015(f)
petitions. Applicable precedent, moreover, restricts the Tax
Court from remanding § 6015(f) cases to the Commissioner
for further administrative consideration.” Maj. Op. at 20
(citing Friday v. Comm’r, 124 T.C. 220, 222 (2005)). The
Tax Court has expressed its concern that it cannot remand
such cases to the Secretary as a justification for its de novo
review. Porter II, 132 T.C. 209–10; id. at 220 (Gale, J.,
concurring); id. at 225 (Wells, J., dissenting).
WILSON V . CIR 65
First, if the problem is Friday, the Tax Court should
reconsider its position. Implicitly, the courts have power to
remand to administrative agencies, with or without express
remand authority. As the Court stated in Florida Power &
Light:
If the record before the agency does not
support the agency action, if the agency has
not considered all relevant factors, or if the
reviewing court simply cannot evaluate the
challenged agency action on the basis of the
record before it, the proper course, except in
rare circumstances, is to remand to the
agency for additional investigation or
explanation. The reviewing court is not
generally empowered to conduct a de novo
inquiry into the matter being reviewed and to
reach its own conclusions based on such an
inquiry.
470 U.S. at 744 (emphasis added); see also INS v. Ventura,
537 U.S. 12, 16–17 (2002) (“Generally speaking, a court of
appeals should remand a case to an agency for decision of a
matter that statutes place primarily in agency hands.”). In
particular, the power (and duty) of the courts to remand to
administrative agencies when the agency errs in some
way—even as to matters of equity—has been a precept of
administrative law that antedates the APA. SEC v. Chenery
Corp. (Chenery I), 318 U.S. 80, 93, 95 (1943) (“Judged,
therefore, as a determination based upon judge-made rules of
equity, the Commission’s order cannot be upheld. . . . The
cause should therefore be remanded to the Court of Appeals
with directions to remand to the Commission for such further
66 WILSON V . CIR
proceedings, not inconsistent with this opinion, as may be
appropriate.”).
Second, if the Tax Court does not wish to revisit its
opinion in Friday,16 then it should seek such remand authority
from Congress. But, I cannot fathom that the existence vel
non of remand authority determines the Tax Court’s scope of
review.
IV. CONCLUSION
Even if the text, structure, and legislative history of the
statute provide some support for a de novo scope of review
and standard of review, this is insufficient to overcome the
strong presumption that the Tax Court is bound to review the
Secretary’s exercise of discretion under § 706(2)(A).
Congress is free to insert language expressly applying a de
novo scope of review and standard of review in § 6015(e).
This, however, it has not done. The Tax Court’s actions have
rendered the APA meaningless, frustrating Congress’s intent
“to bring uniformity to a field full of variation and diversity.”
Dickinson, 527 U.S. at 155.
I respectfully dissent.
16
Ironically, Friday notes that “in our consideration of a request for
relief under sec. 6015(f), the standard for review is abuse of discretion.”
124 T.C. 222 n.4. The Tax Court did not hesitate to overrule this
portion of its holding in Porter II. 132 T.C. 210.