Wednesday, February 11, 2009

Tax Court Review of Equitable Innocent Spouse Relief is De Novo

In Commissioner v. Neal, ___ F.3d ___ (11th Cir. 2009), decided yesterday, the Court held that Tax Court review of the Commissioner's determinations under Section 6015(f) is de novo rather than limited to the administrative record. The Tax Court itself had previously so held, but the IRS appealed to try to reverse the holding.

The majority and dissenting opinions ably discuss the competing arguments and, in doing so, provides good discussions of the innocent spouse provisions generally. The Court also summarizes the Tax Court's history since inception (see fn. 7 on p. 14 of the slip opinion which is linked above).

The key holding (de novo review) is a major relief for persons who have failed to perfect the administrative record, as is often the case for spouses on limited budgets who try to avoid expense at the administrative level by pursuing relief pro se without benefit of counsel. If the IRS grants relief, that strategy works. If the IRS denies relief, however, so that relief must be sought in the Tax Court, at least counsel engaged at that stage will not be limited by the incomplete administrative record. The dissent was troubled that permitting de novo review in the Tax Court will encourage spouses claiming innocent spouse relief to be less than complete in the administrative proceedings where most of these cases should get resolved. Still, given the dynamics of how many of these cases are pursued, the right thing to do is to forego limiting the Tax Court review to the administrative records.