A majority of a Tenth Circuit panel ruled, in the case of McNeill v. United States, CA10, No. 15-8095, that the managing partner in a TEFRA partnership was not barred, as a matter of law, from raising a reasonable cause/good faith penalty defense in his individual proceeding. That was despite the fact that the IRS had rejected the defense when raised by the partnership, with Mr. McNeill as the Tax Matters Partner, in the examination of the partnership.

The District Court had dismissed the case, holding that Mr. McNeill was barred from raising this defense by TEFRA. The Court did not use any judicial doctrine to bar this matter (such as res judicata, holding the matter had already been litigated), but rather found that TEFRA itself barred the defense.