Blog posts are admissible in innocent-spouse relief case

The Tax Court held that posts from a personal blog not in the administrative record of a taxpayer’s Sec. 6015(f) equitable innocent-spouse relief claim, which were relevant to the disposition of her claim, were admissible in a Tax Court case brought by the taxpayer seeking the court’s determination of the appropriate relief under Sec. 6015(f).

Background

Sydney Thomas and her husband filed joint federal income tax returns for 2012, 2013, and 2014 but did not pay the full amounts of tax shown on those returns. After her husband’s death, Thomas sought equitable innocent-spouse relief from joint-and-several liability pursuant to Sec. 6015(f). The IRS denied Thomas’s request, and she petitioned the Tax Court, seeking a determination under Sec. 6015(e) of the appropriate relief available to her under Sec. 6015(f).

At trial, the IRS proposed to introduce into evidence certain posts from Thomas’s personal blog, the contents of which were relevant to the ultimate disposition of Thomas’s case because they contained information about her assets, lifestyle, and business, as well as her relationship with her husband. The blog posts were not part of the a dministrative record for Thomas’s equitable innocent-spouse claim; the IRS learned of them after Thomas filed her Tax Court petition.

Thomas, who was representing herself in court, objected to the admission of the posts. The Tax Court took the objection under advisement and, by subsequent order, to advance the orderly resolution of the case, admitted the blog posts in full without prejudice to either party’s ability to file a motion to strike. The judge also advised Thomas that she should get a lawyer, paid or pro bono. Thomas proceeded to engage a pro bono lawyer.

Guided by her new lawyer, Thomas made a post-trial motion to strike from evidence the blog posts that predated the IRS’s denial of her request for equitable innocent-spouse relief, on the grounds that they were not “newly discovered or previously unavailable evidence” as required by Sec. 6015(e)(7)(B), since the blog posts were publicly available before the IRS denied Thomas’s request for innocent-spouse relief.

The IRS filed an objection to Thomas’s motion to strike, arguing that the blog posts were “newly discovered” and “previously unavailable evidence” under Sec. 6015(e)(7)(B).

The relevant law

A spouse who files a joint return may seek relief from joint-and-several liability under the procedures established in Sec. 6015. Sec. 6015(f) generally permits the IRS to relieve a requesting spouse of some or all of the outstanding joint liability if, taking into account all of the facts and circumstances, it is inequitable to hold that spouse liable for any unpaid tax. Under Sec. 6015(e)(1)(A), a spouse requesting equitable innocent-spouse relief who is dissatisfied with the IRS’s decision about the requested relief may petition the Tax Court “to determine the appropriate relief available to the individual under [Sec. 6015].”

In 2019, in Section 1203(a)(1) of the Taxpayer First Act, P.L. 116-25, Congress amended Sec. 6015(e) by adding a new paragraph (7), which provides:

(7) Standard and scope of review. — Any review of a determination made under this section shall be reviewed de novo by the Tax Court and shall be based upon —

(A) the administrative record established at the time of the determination, and

(B) any additional newly discovered or previously unavailable evidence.

The Tax Court’s decision

The Tax Court denied Thomas’s motion to strike, holding that the posts from her personal blog were “newly discovered” evidence within the meaning of Sec. 6015(e)(7)(B) and as such were properly admitted.

The parties’ arguments: Thomas noted that Sec. 6015(e)(7) did not define the term “newly discovered” and that the legislative history of the act is silent in this regard; thus, she argued, the Tax Court should interpret the term by reference to Rule 60(b)(2) of the Federal Rules of Civil Procedure. That rule provides that “[o]n motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding” based on “newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b).”

Thomas acknowledged that the ordinary meaning of “discovered” was “to obtain sight or knowledge of for the first time” and that the court normally should give a phrase its ordinary meaning. However, she reasoned that using this meaning would set too low a bar for the IRS, allowing the Service to reopen the record and submit any evidence at trial by showing that it did not previously know about the evidence, without any consideration of whether it had attempted to obtain it. In Thomas’s view, this was unlikely Congress’s intent in enacting Sec. 6015(e)(7).

The IRS argued that the court should give the phrase “newly discovered” its ordinary meaning and that, as such, the blog posts were newly discovered because the IRS did not become aware of them until after Thomas brought her case.

The Tax Court’s analysis: The Tax Court found that Thomas’s motion presented it an issue of first impression concerning the meaning of Sec. 6015(e)(7). Under Supreme Court precedent, the court found, it was required to give a statute’s terms their ordinary, contemporary, and common meaning. Therefore, it sought to discern the ordinary meaning in 2019 of the undefined phrase “newly discovered evidence” in Sec. 6015(e)(7).

To do so, the Tax Court, following the Supreme Court’s lead in several cases, looked to dictionary definitions of the words in the phrase. After reviewing the definitions in two dictionaries from 2016, it found that the word “newly” generally is defined as “recently” or “lately,” and, as relevant in the present case, the word “discover” generally means “to obtain sight or knowledge of for the first time.” Because the parties did not offer alternative definitions or dispute the ones determined by the court, it concluded that what “newly discovered” meant as of 2019 was “recently obtained sight or knowledge of for the first time.”

Applied to Thomas’s case, the Tax Court found the phrase “newly discovered evidence” encompassed the blog posts that she sought to strike. It came to this conclusion because the IRS discovered the posts by searching the internet after Thomas filed her Tax Court petition, there was no evidence that the IRS found the blog posts any sooner, and Thomas made no argument that the IRS had found the blog posts sooner. Therefore, the court determined that the blog posts were admissible as “newly discovered … evidence” for purposes of its review of Thomas’s innocent-spouse claim.

Thomas argued that Sec. 6015(e)(7)(B) should be read to have an additional limitation similar to that in Rule 60(b)(2). As relevant to her case, the rule states that in determining whether to grant a new trial based on “newly discovered evidence,” the evidence must be evidence “that, with reasonable diligence, could not have been discovered in time to move for a new trial.”

The Tax Court did not agree with Thomas’s interpretation of Sec. 6015(e) (7)(B). It first noted that the “reasonable diligence” language in Rule 60(b) (2) does not define the phrase “newly discovered evidence,” as Thomas claimed; rather, it acts as an additional (and external) limitation on the meaning of that phrase. Sec. 6015(e)(7)(B) contains no such qualifier. Because Rule 60(b)(2) was widely known and available as a model when Congress drafted Sec. 6015(e)(7)(B), but Congress did not include a reasonable-diligence standard in the statute, the court assumed that Congress did not intend to do so.

Furthermore, the Tax Court stated, not only does Sec. 6015(e)(7)(B) lack a limiting qualifier, but also the nearby text of the statute includes an expanding one, permitting the consideration of “any additional” newly discovered evidence. The use of this language, in the court’s view, counseled against adopting the limiting interpretation argued for by Thomas but not presented by the text of the statute.

The Tax Court also reasoned that the grant in Sec. 6015(e)(7) of de novo review to the court in innocent-spouse determinations supported the position that there was no reasonable-diligence standard in Sec. 6015(e)(7)(B). A de novo standard of review, the court found, suggests that the court should construe its authority to consider information outside the administrative record broadly rather than narrowly, because limiting the evidence that can be considered inhibits the court’s ability to evaluate a case’s merits. Accordingly, Congress’s choice of a de novo standard of review in Sec. 6015(e) supported the conclusion that the blog posts, which were evidence unknown to the IRS in Thomas’s innocent-spouse administrative proceeding, should be admissible in Tax Court.

Finally, the Tax Court noted that Sec. 6015(e)(7)(B) applies in a context different from that of Rule 60(b)(2). Most importantly, in the court’s eyes, the parties to a motion for relief from a judgment or order under Rule 60(b)(2) have had a prior opportunity to conduct discovery, introduce evidence at trial, and prosecute their case before a court. In this context, a reasonable-diligence requirement makes perfect sense because the parties have already had their chance to persuade the court.

But in the context of Sec. 6015(e)(7), the Tax Court explained that it considers a case for the first time following a relatively limited administrative proceeding in which not all the evidence relevant to the Tax Court’s determination under Sec. 6015(e) might have been brought forth. Consequently, the court concluded that in these circumstances, the more permissive rule in Sec. 6015(e)(7) is appropriate.

Reflections

In a fairly unusual occurrence, the Center for Taxpayer Rights, the Community Tax Law Project, the UC Hastings Low- Income Taxpayer Clinic, and the Villanova Federal Tax Clinic filed an amicus brief in Thomas’s case. Although it is not clear from the Tax Court’s opinion, these groups were apparently alerted when Thomas sought pro bono counsel.

The amici argued, among other things, that the court should use a more expansive standard than is found in the case law applying Rule 60(b)(2) because the case law addresses whether to accept newly discovered evidence to overturn a previous opinion or final decision of the court. The amici argued that this narrow standard should not be applied to the “skeletal administrative proceedings of the IRS.” They noted that the IRS’s administrative procedures used in deciding an innocent-spouse case do not afford the same level of procedural rights for litigants as a court proceeding does and that taxpayers without sufficient legal knowledge of IRS and court processes may be unaware of what additional documents or information would support their case.

Furthermore, a court proceeding might be the first opportunity the spouse has to learn the complete reasons for the denial of relief. Thus, the amici contended, in the context of a Sec. 6015 determination, the phrase “newly discovered evidence” should be read to allow submission of additional evidence because the necessity of this evidence is “newly discovered” by the taxpayer during pretrial exchanges.

Thomas, 160 T.C. No. 4 (2023)

Contributor

James A. Beavers, CPA, CGMA, J.D., LL.M., is The Tax Adviser’s tax technical content manager. For more information about this column, contact thetaxadviser@aicpa.org.