The recent decision by the United States Court of Appeals for the Eleventh Circuit in Fannie Wright v. Commissioner of Internal Revenue, No. 24-10563, offers important insights into innocent spouse relief and the application of constitutional law in tax disputes. This article details the factual background, the taxpayer’s request for relief, and the Eleventh Circuit’s rigorous analysis of the law, its application to the facts, and the conclusions reached.

Factual Overview

Fannie Wright was married to Willie Wright from 1973 until his death in August 2016. The Wrights consistently filed joint federal income tax returns until 2006 or 2007, when they began filing individually. In 2012, Ms. Wright experienced a workplace accident, ceased working, and commenced receiving social security income (SSI). It is important to note that social security income is includable in gross income and thus subject to federal income tax under I.R.C. §§ 61, 63, and 86. Despite this, Ms. Wright claimed her attorney and tax return preparer advised her that she would no longer need to file tax returns after she stopped working.

For the 2013 and 2014 tax years, neither Ms. Wright nor Mr. Wright filed individual tax returns; instead, they resumed filing joint federal tax returns. These joint returns reported Mr. Wright’s wage income but failed to report Ms. Wright’s social security income, which amounted to approximately $18,881 in 2013 and $17,723 in 2014. Consequently, the Internal Revenue Service (IRS) added Ms. Wright’s social security income to these joint returns and issued notices of deficiency to the Wrights. Ms. Wright later asserted that she was initially unaware Mr. Wright had filed joint returns for these years, claiming she had told him "no" when asked about joint filing, reasoning that he "didn’t want to file with me" previously and that she "did not have to file".

In 2015, the Wrights again filed a joint tax return, which this time included Ms. Wright’s social security income and Mr. Wright’s wage income. This return indicated an owed tax amount exceeding one thousand dollars due to Ms. Wright’s previously unreported SSI. Mr. Wright passed away in 2016.

Taxpayer’s Quest for Relief

On January 11, 2017, Ms. Wright submitted an administrative request for innocent spouse relief from joint and several liability for the 2013, 2014, and 2015 tax years. The IRS initially denied her request on June 14, 2017, stating that "[a]ll of the debt is linked to you. Relief generally isn’t allowed on tax you owe on your own or jointly owned income". Upon appeal, the IRS Office of Appeals issued a final determination denying relief on August 6, 2018, reiterating that "[w]e generally can’t grant relief on tax you owe for your income or deductions".

Ms. Wright timely petitioned the U.S. Tax Court to challenge this determination. During the pendency of her appeal, she filed a motion to declare 26 U.S.C. § 7443(f) unconstitutional. This provision stipulates that a tax court judge may be removed by the President only "for inefficiency, neglect of duty, or malfeasance in office". Ms. Wright argued that this "for-cause" removal restriction impermissibly restricts the President’s Article II power to remove tax court judges, violating separation of powers. Alternatively, she contended that the Tax Court does not exercise executive power, and the President’s for-cause removal power violates the prohibition on interbranch removal under separation of powers. She sought to have Section 7443(f) struck and requested a new hearing before a different tax court judge. The Tax Court denied her motion on December 27, 2023.

Following trial, the Tax Court affirmed the IRS’s denial of innocent spouse relief for all three tax years. The Tax Court found that Ms. Wright failed to satisfy any of the requirements for innocent spouse relief under Section 6015 (b), (c), or (f) of the Internal Revenue Code because the joint tax deficiencies were entirely traceable to her own social security benefits. Ms. Wright subsequently appealed this judgment to the Eleventh Circuit.

On appeal, Ms. Wright advanced two primary arguments:

The Tax Court erred by denying her innocent spouse relief without first making a factual finding about the validity of the joint income tax returns for the years in question.
The constitutional challenge to Section 7443(f).

Judicial Analysis of Innocent Spouse Relief

The Eleventh Circuit reviews a tax court’s decision denying equitable relief for abuse of discretion, while underlying questions of law are reviewed de novo and findings of fact for clear error. Generally, when a married couple files a joint income tax return, each spouse is jointly and severally liable for the entire unpaid tax liability, irrespective of individual responsibility, as per I.R.C. § 6013(d)(3). However, I.R.C. § 6015(b)–(f) provides conditions under which a spouse who filed jointly may be relieved of this liability.

The Court outlined the three primary avenues for innocent spouse relief:

Section 6015(b) Relief: This is available if (a) a joint return was filed for the year; (b) there is an understatement of tax attributable to the erroneous items of one individual filing the joint return; (c) the other individual did not know, and had no reason to know, of the understatement when signing the return; (d) it would be inequitable to hold such other individual liable; and (e) the other individual timely elects relief. The Court emphasized that relief under this subsection can only be granted for understatements attributable to erroneous items of "one individual filing the joint return," if "the other individual elects" to seek relief.
Section 6015(c) Separate Liability Relief: A taxpayer who has filed a joint return can elect "separate liability" relief for any deficiency if she separated from her spouse and is not a member of the same household within the year the joint return was filed. For this subsection, any item giving rise to a deficiency on a joint return is allocated to the individuals as if they had filed separate returns. The Court noted that items giving rise to the joint tax deficiency will be "allocated . . . in the same manner as it would have been allocated if the individuals had filed separate returns".
Section 6015(f) Equitable Relief: If neither Section 6015(b) nor (c) applies, relief may still be possible if, "taking into account all the facts and circumstances, it is inequitable to hold the individual liable for any unpaid tax or any deficiency". The procedures for obtaining relief under this subsection clearly establish that relief is available only for "the portion of the liability attributable to the non-requesting spouse" (Rev. Proc. 2013-34, § 4.01(7)). While not binding, the Eleventh Circuit has treated this revenue procedure as persuasive authority on relevant factors for Section 6015 relief.

Application of Innocent Spouse Law to the Facts

The Eleventh Circuit found that the Tax Court properly denied Ms. Wright innocent spouse relief under any of the relevant provisions of Section 6015 because the deficiencies were allocable solely to Ms. Wright’s own social security income. The Court reiterated that Section 6015 is designed to relieve a married joint filer of tax liabilities attributable to her spouse’s income, not those attributable to her own income.

Ms. Wright did not dispute that the deficiency was attributable to her own social security benefits. Instead, her argument centered on the claim that the Tax Court could not consider her entitlement to Section 6015 relief without first finding that a valid joint return was filed for each applicable year. The Eleventh Circuit decisively rejected this argument, stating that the Tax Court was not required to determine the validity of the joint returns to deny Ms. Wright Section 6015 relief. The Court reasoned that Ms. Wright’s liability for tax on her social security income is imposed by Congress, taxing the taxable income of "every married individual" regardless of whether they file jointly, separately, or not at all. This liability flows directly from congressional tax law (I.R.C. §§ 61, 63, 86).

Furthermore, the Court clarified that Ms. Wright was confusing the Tax Court’s jurisdiction with the requirements for her claim to succeed on the merits. Under I.R.C. Section 6015(e), the Tax Court has jurisdiction to grant or deny innocent spouse relief if (1) a deficiency has been asserted; (2) the taxpayer elects Section 6015(b) or (c) or requests Section 6015(f) relief; and (3) the taxpayer timely petitions the Tax Court. A requirement for a valid joint return is not among these jurisdictional provisions; rather, it is a necessary element for a claim for innocent spouse relief to succeed on the merits. Thus, the Tax Court properly asserted jurisdiction without needing to determine the validity of the joint returns as part of that jurisdictional finding.

Judicial Analysis of the Constitutional Challenge

Ms. Wright’s second argument challenged the constitutionality of 26 U.S.C. § 7443(f), which limits the President’s power to remove tax court judges to "for inefficiency, neglect of duty, or malfeasance in office". She contended this violated Article II of the Constitution and the separation of powers doctrine.

The Eleventh Circuit declined to reach the constitutional question, applying the longstanding doctrine of constitutional avoidance. This fundamental principle of judicial restraint dictates that courts should avoid deciding constitutional questions unless absolutely necessary. Generally, a constitutional issue that is "wholly academic" will not be answered. To pass upon the validity of a statute, a complaining party must show that they are injured by its operation. A constitutional decision is "unnecessary and therefore inappropriate" when "no additional relief would have been warranted" on constitutional grounds.

The Court referenced the Supreme Court’s decision in Collins v. Yellen, 141 S. Ct. 1761 (2021). In Collins, the Supreme Court explained that to obtain relief based on an unconstitutional removal provision, a party challenging an agency’s actions must demonstrate that the removal provisions "inflict[ed] compensable harm". In Collins, despite finding an unconstitutional for-cause removal restriction for the director of the Federal Housing Finance Agency (FHFA), the Supreme Court did not void the FHFA’s actions because the officers were properly appointed, and the unlawfulness of the removal provision did not strip them of the power to undertake their responsibilities.

The Collins Court identified two specific scenarios where an unconstitutional removal provision could inflict compensable harm:

If the President attempted to remove the official but was prevented by a lower court ruling that there was no "cause" for removal.
If the President publicly expressed displeasure with the official’s actions and asserted intent to remove the official if not for the statutory restriction.

In both scenarios, the challenged action would not have occurred but for the removal restriction. The Eleventh Circuit also cited its own application of Collins in Rodriguez v. Social Security Administration, 118 F.4th 1302 (11th Cir. 2024), where it held that an "unconstitutional removal provision [does] not affect the underlying agency officials’ authority to act, as it [does] not implicate appointment" if the officials were properly appointed and there was no indication the Commissioner or President considered dismissal due to the removal provisions. Other circuit courts have applied Collins similarly.

Application of Constitutional Law to the Facts and Conclusion

In Ms. Wright’s case, the Eleventh Circuit found that she failed to allege any harm caused by Section 7443(f) that would entitle her to relief. She did not argue that the tax court judge was improperly appointed or that he lacked lawful authority to rule on her case. Crucially, there was no evidence in the record that any President ever attempted to remove the tax court judge from office or expressed disapproval of his decisions. Ms. Wright also failed to demonstrate any other causal relationship between Section 7443(f) and the Tax Court’s ruling she sought to vacate. She did not even contend that a different decision in her case was possible if Section 7443(f) had not been in place.

In summation, Ms. Wright did not demonstrate any "compensable harm" as required by Collins. Consequently, the Eleventh Circuit declined to answer the constitutional question, concluding that even if she were correct about the provision’s unconstitutionality, no relief would be granted to her on that basis. The Tax Court’s determination was therefore affirmed.

This case serves as a valuable reminder for tax professionals regarding the strict criteria for innocent spouse relief—primarily, that it is intended for liabilities stemming from the other spouse’s income—and the high bar for raising constitutional challenges, particularly the need to demonstrate concrete, compensable harm flowing from the alleged constitutional infirmity.

Prepared with assistance from NotebookLM.