Judicial Misstatement: Intentional, Error or Oversight?

Published Categorized as Tax Litigation, Tax Procedure
Judicial Misstatement: Intentional, Error Or Oversight?
Judicial Misstatement: Intentional, Error Or Oversight?

Judicial opinions often include sentences that misstate the law. Often these sentences will be picked up by the IRS (and sometimes even taxpayers) years later to support arguments that courts should depart from the law. For example, this quote comes from the District Court for the Eastern District of New York in Johnson Home Care Services, Inc. v. US (2005):

In support of the IRS ability to reject installment agreements the court cites precedent that states, “Rejection of a taxpayer’s proposed installment plan will also be upheld where the taxpayer has a history of non-compliance with tax laws.” The court makes this statement, but it does not explain it. Instead the court immediately moves on to another argument. So what is wrong with this statement?

Generally having a history of non-compliance with tax laws is a prerequisite for a taxpayer requesting an installment plan. So the court is saying that courts will not overturn IRS determinations to reject installment agreements submitted by taxpayers. This would mean that there is no judicial review of installment plans proposed by taxpayers. But that is not what the law provides for. The law is well settled that such IRS determinations are to be reviewed by the courts under an abuse of discretion standard. Many courts have reviewed these types of IRS determinations before. In fact, this very court correctly stated this law at the outset of its legal analysis!

These kinds of misstatements bring into question the court’s motives. Courts are supposed to be unbiased bodies that apply the facts of the case to the law. Misstatements like this from the courts make it appear as if the court first determined how the case should be resolved and then went looking for arguments to support that outcome. That is not how courts are supposed to operate.

But this issue may be more complex than that. I often wonder if courts put these types of misstatements in their judicial opinions where the court believes that the unsuccessful party should prevail, but the unsuccessful party would have lost the case on other grounds. Such misstatements would help ensure that the unsuccessful party had the ability to appeal the case to a higher court and if the higher court could review the case de novo (from scratch), then the higher court could be in a position to re-write the law. Is this one of the subtle procedural ways that lower courts set higher courts up to create judicial legislation? Or is this a case of courts passing the buck? By including these misstatements the lower court could be saying that it did wanted to depart from the law, but it did not have the daring to do so. Or perhaps the courts do this when there is a sympathetic party that would otherwise lose their case — allowing the unsuccessful party to have their case heard by a higher court.

Any of these could be the case, but none of them appear to be the case here. The laws involved in this case are pretty mundane, so a higher court would not be likely to re-write these laws and there wouldn’t really be a reason for the court to depart from the law. Similarly, the taxpayers in this case were not particularly sympathetic. Perhaps this was just an oversight or poor legal analysis….

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