chevron-down Created with Sketch Beta.
March 02, 2023 The Tax Lawyer

Taxes, Administrative Law, and Agency Expertise: Questioning the Orthodoxy

Vol. 76, No. 2 - Winter 2023

by Scott A. Schumacher

Abstract

One of the foundations of administrative law is that federal agencies and their employees are experts in their respective fields. In addition, the many judgments and decisions made by these experts are based on a thorough record after extensive factfinding. As a result, so the theory goes, courts, particularly courts of general jurisdiction like the United States District Courts, should give deference to the determinations made by these experts. But what if the facts underpinning this foundation are not true in all cases? Should courts nevertheless provide deference to decisions by agencies when it is evident that an agency’s determinations are not based on a thorough record and that the factfinding is inherently suspect? Should courts, particularly specialty courts like the United States Tax Court, defer to judgments of Service personnel that are no more expert than the judges who review the cases?

This Article challenges traditional notions of administrative law in the context of certain tax cases known as “innocent spouse.” These cases, which are first heard by the Service, involve many of the most vulnerable taxpayers—most of whom are low-income, are women, and many of whom are victims of domestic violence. The Service must decide whether to provide relief from a tax debt if the taxpayer meets certain criteria, including issues like whether it would be equitable to hold requesting taxpayers liable, whether the taxpayers have credibly made their case, whether the taxpayer was subject to abuse, and whether one or both parties committed fraud. These are very fact-intensive inquiries that require a thorough development of the facts through a hearing and document gathering. And yet, under current practices, the Service does very little fact finding, and it never holds in-person hearings. As a result, the determinations made by the Service in these cases are not based on a thorough record, and the justification for decisions is often conclusory with little to no analysis. Therefore, these determinations are not entitled to deference, and the United State Tax Court, which has jurisdiction to review the Service’s determinations, should be allowed to conduct a full hearing to make its own independent determination.

This Article also advocates for substantial changes in the procedures by which innocent spouse cases are heard and decided by the Service. The system should not rely on judicial oversight and review to protect the rights of taxpayers. The Service should change its procedures to ensure that taxpayers are given a full and fair hearing and that decisions by Service personnel are made based upon all relevant evidence. Only then will there be a chance that the rights of taxpayers are adequately protected.

Read the full article or download the complete issue.

Entity:
Topic:
The material in all ABA publications is copyrighted and may be reprinted by permission only. Request reprint permission here.