About the United States Tax Court
History of the United States Tax Court
The United States Tax Court started as the U.S. Board of Tax Appeals. It was created by Congress as an executive agency, not as a court.
The Board of Tax Appeals was renamed the United States Tax Court. This change was made to help establish that the Board of Tax Appeals was really a court and not an agency of the IRS. It also has its own court building in Washington, D.C.
Whether the tax court is a “real court” is open for debate. Congress has made some changes that make it more like a full court, but the tax court still lacks true independence.
Unlike courts under Article 3 of the Constitution, courts like the tax court under Article 1 are authorized to act by the legislature and report to the executive branch. So the U.S. Tax Court was created by Congress and reports to the U.S. President. It is still part of the executive branch. This is why the court is not truly independent. A so-called “real” court is independent of the legislature and the executive branch.
This distinction may be an academic exercise. If you have a tax issue and decide to litigate the case in the tax court, the court is very much a real court. If it has jurisdiction over your case and you ask the court to hear your case, it will render a decision in your case and, absent an appeal, you will have to live with the court’s holding.
If you want to see an example of where this question was not just an academic exercise, you might read this tax court case. In this case, the court concluded that it was a court at law and not a court at equity, like the U.S. District Court, and, therefore, it could not grant the remedy that the taxpayer was asking for. All the taxpayer was asking is that the IRS be held to its clear and unambiguous statement in its published guidance. The taxpayer lost the tax deduction at issue in the case given that the court didn’t think it had the power to force the IRS to follow its own published guidance.
United States Tax Court Jurisdiction – Types of Cases the U.S. Tax Court Hears
The United States Tax Court is a court of limited jurisdiction. It is only authorized to hear certain types of cases. This means that you have to find a statute that authorizes the tax court to hear the case.
Here are the most common types of cases the tax court hears:
- Deficiency cases – these cases are to “redetermine” a tax deficiency included in a Notice of Deficiency issued by the IRS. This type of case is authorized by I.R.C. § 6214(a). These are the most common types of cases handled by the court. Most cases involve formal tax assessments and disputes are over Federal income taxes.
- Overpayment or refund cases – these cases are similar to deficiency cases (and must be brought as part of a deficiency case). They are cases asking the tax court to determine that the taxpayer overpaid their taxes and are entitled to a refund. These cases are authorized by I.R.C. § 6512(b)(1). These cases are not all that common.
- Collection due process hearing cases – these cases are to review the IRS’s findings in a Notice of Determination issued in a collection due process hearing (the Notice of Determination issued by the IRS Office of Appeals is similar to a Notice of Deficiency in a deficiency case). The taxpayer can ask the tax court to consider whether the IRS should be able to take certain collection actions and, in some cases, the taxpayer may also contest the underlying tax liability (the tax court has to have subject matter jurisdiction over the tax or penalty before it can be challenged in a CDP hearing in the tax court). This type of case is authorized by I.R.C. § 6330(d)(1).
- Employment status redetermination cases – these cases are to challenge the IRS’s independent contractor vs. employee determination or Section 530 relief. These cases are authorized by I.R.C. § 7436.
- Innocent spouse relief cases – these cases are to review the IRS’s denial of a request for innocent spouse relief. They can also be brought as claims in a deficiency case. The taxpayer can challenge the denial of innocent spouse relief and the underlying tax liability. This type of case is authorized by I.R.C. § 6015(e).
- Whistleblower cases – these cases are challenges to the denial or amount of an award made to a whistleblower to report a tax underpayment. This type of case is authorized by I.R.C. § 7623(b)(4).
- Declaratory judgment cases – the Tax Court is given jurisdiction to issue declaratory judgments as to (i) the qualification and continuation of qualification of certain retirement plans under I.R.C. § 7476, (ii) the value of a gift disclosed on a return under I.R.C. § 7477(a), (iii) the qualification for certain governmental bonds for exclusion from income under I.R.C. § 103; and (iv) eligibility for installment payment of estate tax under I.R.C. § 6166.
- Interest abatement cases – these cases are challenges to the IRS’s determination not to abate interest. This type of case is authorized by I.R.C. § 6404(b).
- Administrative cost recovery cases – these cases are to recover attorney’s fees and costs from the IRS in cases in which the taxpayer substantially prevails. This type of case is authorized by I.R.C. § 7430(f).
- Passport cases – these cases are to correct erroneous passport certifications by the IRS. This type of case is authorized by I.R.C. § 7345(e).
As explained below, the process for starting each of these types of cases varies. Deficiency cases are the most common. They start with the taxpayer filing a petition asking the tax court to redetermine the deficiency.
Tax Court Judges
There are two types of tax court judges–regular tax court judges, senior judges, and special trial judges.
The “regular” tax court judges are appointed by the president for a 15-year term. They are often re-appointed for a second term.
If they are not reappointed, the judges may function as retired “senior” judges.
The “special trial judges” are appointed by the court. They hear cases and make findings that are usually accepted by the court.
There are currently seventeen regular judges, ten senior judges, and four special trial court judges.
Many tax court judges are former IRS attorneys or worked for the IRS Office of Chief Counsel, the IRS National Office, the Department of Justice, or the Treasury Department. The tax court judges bring these past experiences to the bench. This is important given that there is no right to a jury trial when it comes to the tax court. The judge makes the decision in tax court cases–not a jury. This may decrease the chances that you will prevail in your case.
Frequently Asked Questions About the United States Tax Court
What is the purpose of the U.S. Tax Court?
The United States Tax Court’s stated mission is to:
provide a national forum for the expeditious resolution of disputes between taxpayers and the Internal Revenue Service; for careful consideration of the merits of each case; and to ensure a uniform interpretation of the Internal Revenue Code. The Court is committed to providing taxpayers, most of whom are self-represented, with a reasonable opportunity to appear before the Court, with as little inconvenience and expense as is practicable.
The key point is that the court provides a forum for handling federal tax disputes. The tax court has expertise in handling tax cases, which can be good or bad for a particular case (sometimes it helps to have a judge that does not have expertise in the tax laws).
The other key feature is that the tax court is the only pre-payment forum that is available (outside of the U.S. Bankruptcy Courts). This allows you to litigate your tax case before they pay the tax. The United States District Courts and the Federal Claims Court are just the opposite. You generally have to pay the tax first and sue for a refund in those courts. This is often referred to as the “full payment rule.”
How many U.S. Tax Courts are there?
There is one tax court. The court assigns its judges to travel to most major cities throughout the year.
Take Texas for example. The tax court judges visit the major cities in Texas several times each year. This includes Houston, Dallas, and San Antonio. It also travels to smaller cities in Texas, such as Austin and El Paso, periodically. The trips to these smaller cities are less frequent.
How does the U.S. Tax Court work?
Cases in the tax court follow a very specific process.
Tax court cases start with the taxpayer filing a petition and other forms, the IRS attorney filing an answer, the parties engaging in informal discovery (the exchange of information and records), one or both parties filing certain motions, one or both parties filing a pre-trial memorandum, the parties presenting their case during the trial, the parties filing any post-hearing briefs, and the court issuing an opinion. We go through each of these topics below.
The tax court’s procedures can be found in the Tax Court Rules of Practice and Procedure. This is a set of rules that apply only to cases in the tax court. The most recent rules can be found on the tax court’s website.
Who are the parties to litigation in U.S. Tax Court?
The taxpayer starts the tax court case by filing a petition. They are referred to as the “petitioner.” They are the equivalent of the plaintiff in a civil lawsuit.
The IRS files an answer. The Commissioner of the IRS is the party that represents the IRS and he or she is the party to the tax court case. The Commissioner of Internal Revenue is the “respondent.” The Commissioner of Internal Revenue is the equivalent of the defendant in a civil lawsuit.
The cases in tax court are named or styled with the party’s names, such as “Joe Taxpayer v. Commissioner of Internal Revenue.” There are cases where the “Internal Revenue Service” is named as the party to the tax court case. The court will usually fix this on its own motion. The same goes for including a middle initial for a party name and not including the period after the initial. The court will usually fix these issues.
What law does the U.S. Tax Court apply?
The tax court applies the law of the court of appeals to which an appeal would be taken. This is known as the Golsen rule. This name comes from the court case that provides the rule. This rule is important as it can result in the tax court reaching a different decision in cases based on the same or similar facts.
There are eleven appeals courts. The courts are referred to by number, such as the “Fifth Circuit.” The circuit courts handle appeals for residents in specific states. This is what the reference to “circuit” means. For example, the Fifth Circuit hears cases for taxpayers who reside in Texas, Louisiana, and Mississippi.
The tax court applies the Federal Rules of Evidence. The Federal Rules of Evidence say what evidence is admissible in court. This is provided for in I.R.C. § 7453. If there is a dispute over these rules or how to apply them, the tax court will apply the interpretation by the district of columbia circuit court for how to interpret the rules.
The tax court also has its own procedural rules. These “Rules of Practice and Procedure” explain how the parties are to interact with the tax court.
How do I contact the U.S. Tax Court?
The tax court generally isn’t a court you call. You usually contact the court by mailing filings (which are electronic these days) or by writing to the court. With that said, the court does have phones. You can start by contacting the Clerk of the Court at 202-521-0700 if you have basic processing or records questions.
If you are calling the judge back, you can reach them through their law clerks. The judge’s phone numbers (which ring to their law clerks) are listed on the tax court website (here is the link).
For many requests, you are better off writing to the court. The mailing address is:
400 Second St., NW
Washington, DC 20217
The court will typically respond to correspondence sent to this address.
How do I access U.S. Tax Court opinions?
The tax court was one of the last Federal courts to adopt electronic filing and case management. The court’s system is referred to as DAWSON, which is short for Docket Access Within a Secure Online Network.
You can find copies of tax court opinions on Dawson. The links to Dawson can be found on the tax court’s website.
You can also use various legal research tools online to access and search the court’s opinions.
How do I access U.S. Tax Court records?
The tax court’s DAWSON system also provides access to tax court records. You have to create a free account to access many of these records.
But note that many of the records are sealed. They may be sealed due to a party filing a protective order or give the court’s policy on sealing records for cases that are actively being litigated.
Who can practice before the U.S. Tax Court?
Attorneys can practice before the tax court. They have to file an application for admission first. The application is short and is usually approved in just a few days.
The tax court is not limited to attorneys or even those with expertise in the tax law. You do not have to be an attorney to practice before the tax court. In fact, most cases litigated in the tax court are handled directly by the taxpayers without the assistance of attorneys. Studies show that the results are less favorable when an attorney is not used, but the fact remains that you can represent yourself in tax court.
CPAs and others can also practice in the tax court. To do so, they have to file an application for admission and take and pass a written exam.
IRS Notice Deficiency
The IRS Notice of Deficiency is the document the IRS provides to you when it wants to assess additional tax. The term “assess” refers to recording a tax balance on the IRS’s books.
The IRS is required to mail this notice to you at your last known address prior to assessing tax.
The notice gives you 90 days to file a petition with the tax court to redetermine your tax. This is why the notice is commonly referred to as the 90-day letter.
United States Tax Court Petition
United States Tax Court forms
A Tax Court case is started by the taxpayer filing a petition with the tax court.
The petition has to apprise the court of the nature of the dispute and list any affirmative issues and defenses.
Tax Court Rule 34(a) & (b) say what the petition has to include. At a minimum, the petition has to set out the party names, the tax year, and identify the type of tax and the amounts in dispute. The tax court will often treat a letter that has some of these items as a petition. Suffice it to say that you should not send a letter to the court and hope it treats the letter as the petition.
If you need guidance on how to prepare the petition, you can find a petition form on the court’s website.
You should include a copy of the notice of deficiency (or other document that gave you the right to file the tax court petition) with the petition. The petition is a public record. So you should redact or remove your Social Security Number from the IRS notice.
You do not mail any other evidence or records with the petition.
Small tax case election
One of the first decisions you have to make is whether to request “small case” or “S case” treatment. This small tax case procedure has to be included in the petition. The tax court’s petition form includes a checkbox to make this request.
The tax court rules also allow you to elect small case treatment at any time before the commencement of the trial.
The tax court handles small case or cases with an “s election” different than other cases. The rules are less formal for these cases. Specifically:
- the case will be heard by a special trial judge,
- the formal rules of evidence that apply to litigation may not be enforced for less sophisticated taxpayers,
- briefs are not required to be filed,
- the court’s decision cannot be cited as precedent for other cases litigated in the future, and
- the court’s decision is not appealable.
Your case may be eligible to be treated as a small case if the taxes at issue are income, estate, gift, some employment and excise taxes. Some innocent spouse and collection cases can also qualify.
Your case may be eligible to be treated as a small case if the tax, penalties, and interest at issue do not exceed $50,000. The dollar amounts are strict. For example, in Schwartz v. Commissioner, 128 T.C. 6 (2007), the court concluded that a collection case did not qualify for small case treatment when the combined total for all years involved exceeded $50,000, but each year individually was less than $50,000.
It should be noted that the $50,000 amounts are only those amounts in dispute. This may be less than the total amount involved in your case if you and the IRS are not disputing some of the amounts included in the IRS’s notice of deficiency.
It should also be noted that the court has the authority to deny or revoke the small case treatment. The court may do this if it feels that the case presents an important issue that would benefit other parties in the future by the court issuing a regular opinion. See, Court Order in Skaggs v. Commissioner, Docket No. 15944-16S.
Designation of place of trial
In addition to the petition, you have to designate the place of trial. This filing tells the court which location you want to have your trial held.
The tax court provides a form that can be used for this purpose. You do not have to use this form. You can prepare your own filing. The form lists each city the tax court visits, so it can be helpful to use the form as a reference if you are preparing your own filing. You are free to pick any city on the list.
Most taxpayers select the location for the trial based on convenience. This is often the best choice. The location can have impact the outcome of your case. The location you select can impact the which judge hears the case and what IRS attorney is assigned to your case.
Tax court filing fee
You have to pay a fee with your tax court petition. The fee is currently $60.00.
The tax court will usually accept your petition if you omit the fee, but it will send you letter saying that the fee has to be paid within a certain date or the case will be dismissed.
The IRS’s Answer
The IRS attorney will eventually file an answer to your petition.
The answer will typically respond to each sentence you include in your petition.
This is why it is helpful to list each sentence in the petition in list format with a number for each item. The IRS answer will then look something like this:
- Denies for lack of information.
- Admits first sentence, denies second sentence.
The IRS’s answer can also raise new issues. This is not common, but the IRS attorney does have the power to raise new issues. If it does, the new issue will typically be included in the answer.
Tax Court Docket & Tax Court Calendar
The “docket” is just the list of cases that the tax court has to consider. It’s the tax court’s agenda. Once a case on the docket is set for a hearing, the case is said to be on the tax court’s calendar.
Many of the deadlines and processes are based on when the case is put on the court’s calendar or set for trial. This often takes several months, if not a year, before a date is set. Your job is to prepare your case and work with the IRS attorney while you are waiting for the case to be set for trial.
If you have not already had an opportunity to discuss the case with the IRS Office of Appeals, your case will likely be sent to Appeals for possible settlement before trial. If you are able to reach a settlement with Appeals, the appeals officer or IRS attorney will send you a decision document to sign. If you are not able to settle the case with Appeals, the appeals officer will send the case back to the IRS attorney to prepare for trial.
Standing Pre-Trial Order
The court will provide you with its standing pretrial order. This order provides basic instructions about the tax court rules. The main topics are discovery, stipulations, and the pre-trial memorandum.
The court expects the parties to engage in informal discovery. For you, this can simply mean that you call the IRS attorney and discuss what records and ask what records the IRS would like to see.
Do not be surprised if the IRS attorney’s requests are much broader than the IRS auditors or IRS appeals officers. The IRS attorney has to present the case to the court. So they will often ask for additional information that was presumed to be true by the IRS previously.
For example, if the issue is whether you are entitled to business expenses and you operate through an LLC, the IRS agent and appeals officer might not just assume the LLC exists. The IRS attorney might not. They might ask for the LLC company agreement, etc.
If you do have phone conversations with the IRS attorney, you should document them with a follow-up letter. You should also document any records provided to the IRS attorney in the letter. These documents should be labeled as 1P, 2P, 3P, etc. in your letter. This way you can identify each document and know when it was provided to the IRS. This will come in handy later when you prepare the pre-trial memorandum and when you have the trial.
Even before you call the IRS attorney, you are likely to receive a letter from the IRS attorney. This is probably going to be the IRS’s Branerton letter. It is a letter asking for informal discovery. It will usually cite the Branderton case by name, as that is the court case in which the court announced its preference for informal discovery.
You should respond to the IRS’s Branerton letter by admitting any facts that are not in dispute, denying any facts that are in dispute (and any legal positions), and providing any relevant documents requested that you have that are not privileged. Note the numbering system mentioned above. You should continue the sequence. So if you have already provided 1P through 5P, you would start with 6P for documents in this request.
You can also issue a Branerton letter to the IRS attorney. You do so just by mailing or emailing the letter or request to the attorney. This can help preserve your ability to ask the court for formal discovery should the IRS attorney not respond informally.
As a side note, in most cases, you, the taxpayer, will have most of the records. The IRS will usually not have very many records. Thus, discovery in tax court cases is primarily an exercise of you, the taxpayer, providing information to the IRS.
If informal discovery fails, the court can assist you or the IRS with formal discovery.
Section 7456(a)(1) authorizes the tax court to compel parties to produce documents and testimony. This allows the parties to issue subpoenas to gather records. The court’s subpoena power is nationwide.
Section 7456(a)(2) authorizes the parties to the litigation to take depositions. A deposition is sworn out-of-court testimony given by a witness. Depositions are not all that common in tax court cases.
Stipulation of Facts and Law
The term “stipulation” means an agreement. Specifically, it is an agreement as to the facts and law in the case. The term is also used as a verb to say that you agree. I “stipulate” to XYZ.
The tax court will expect you and the IRS to stipulate to facts that should not reasonably be in dispute. This is a fundamental difference between cases in the tax court and other courts. Most other courts do not expect the parties to stipulate to the facts.
You or the IRS can file a motion to compel the other party to stipulate. The motion must be filed sufficiently in advance of trial to allow the judge to rule on the motion. The Rules require that it be filed not later than 45 days before trial.
The tax court will expect you and the IRS to submit a pre-trial memorandum.
The pre-trial memorandum informs the court about the case it is about to hear. It identifies the issues that will be presented to the court and any procedural problems that the party expects in the case.
The pretrial memorandum is a short document. The court’s Standing Pretrial Order has a form that can be used. The form can also be used as a starting point for preparing your own custom memorandum.
The pre-trial memorandum should be submitted to the court before the docket call on the first day of the trial calendar.
The tax court usually has a calendar call during the first day set for trials. This lets the court go through all of the cases on the docket to see how long the parties anticipate they will need for the trial, to see if the case has or could be settled by the parties, and to address any concerns presented by the parties.
The court will then schedule the cases it will hear. The court will then have the trials.
The trial starts with the judge providing instructions and addressing procedural issues. The court will then ask the taxpayer and then the IRS attorney to present their opening statement. The opening statements should be short. They are usually just one or two minutes long. The opening statement should just say what the issues are, what the evidence will show, and state a conclusion that the party wants the judge to reach.
The court will then turn the hearing over to you to present your case. This will often involve admitting evidence into the record. Your job is to get relevant evidence into the record. For example, you may say to the court that Exhibits 1P through 10P should be admitted as the IRS has not objected to them. The court will ask the IRS attorney about this. Then you should turn to any disputed evidence and testimonial evidence.
You generally get disputed evidence admitted by “laying the foundation” for the evidence. This means that you have a witness provide the facts surrounding the evidence, then have the witness identify the evidence, and then ask the court to admit the evidence into the record.
For testimony that is offered as its own evidence, you have the ability to ask the witness questions. When you are done asking questions of the witness, you should say that you pass the witness. This will alert the court and IRS attorney that the IRS attorney is to cross-examine the witness.
Once you have presented the evidence and witnesses, you should let the court know that you are done. This can be done by telling the judge that you have nothing further.
The IRS attorney will then have his or her chance to do the same thing you just did. This may involve calling new witnesses, recalling prior witnesses, and admitting evidence.
During your presentation and the IRS attorneys’ presentation, the parties can object. There are a number of objections that can be made. The most common are “relevancy,” “lack of foundation,” and “hearsay.” If the court sustains the objection, that tells the party who asked the question to move on. The court may overrule the objection, which tells the party who asked the question to wait for the answer or ask the same question again to get an answer.
The trial will end with the court asking if the parties want to sum up their argument with closing remarks. This is very similar to the opening statements.
After this, the judge will state the conclusion or advise the parties as to the next steps. This will often involve post-trial briefing.
The tax court will often request post-trial briefs. The judge will provide a deadline for submitting briefs.
The briefs should include detailed proposed findings of fact (with references to the trial record, including the exhibits and transcript) and legal arguments.
This gives the court the last bit of information for its decision and preparation of its court opinion.
Tax Court Opinions
Types of tax court opinions
The United States Tax Court issues three types of court opinions. This includes regular, memorandum, and summary opinions.
Regular opinions generally address more important tax issues. This may include issues that the court has not considered previously, where there has been an ambiguity, or because the issue is interesting.
Regular opinions may be issued by a single tax court judge or by the full court. Opinions that are issued by the full court are referred to as “reviewed opinions.” Reviewed opinions may have several judges agreeing with the majority, concurring, or dissenting.
Memorandum opinions are usually issued in cases that do not create or modify our tax laws. They are usually issued in cases that are less complex. These opinions are not supposed to be cited as precedent in other cases.
Summary opinions are issued by the court in small tax cases. These opinions just record the results of the trial. They do not have any other value.
Citing tax court cases
How to cite a tax court memorandum opinion?
If you are trying to cite to a tax court memorandum opinion, you generally use this format for the citation:
Besten v. Comm’r, T.C. Memo. 2019-154
How to cite a regular tax court opinion?
If you are trying to cite to a regular tax court opinion, you generally use this format for the citation:
Allied Equip. Leasing II v. Comm’r, 97 T.C. 575 (1991)
Academic citations usually include the longer versions.
Once the court issues its opinion in the case, the next step is to prepare tax computations.
Tax computations are basically just a tax return. The parties basically prepare another tax return to reflect the court’s decision. The IRS attorney will often have a tax computation specialist do this for the IRS.
You should prepare your own tax computation as the IRS has a track record of not preparing accurate tax computations.
If the parties have already agreed on the tax computations, the court may include the tax amounts in its decision. If the parties are not in agreement as to the tax computation, the parties have 90 days after the opinion is issued to submit computations to the court. The court will usually schedule a hearing to consider arguments of the parties if there is some disagreement as to the correct amount of tax.
Appealing Tax Court Decisions
U.S. Court of Appeals
The tax court generally does not have the final say when it comes to the cases it hears. The cases can be appealed by either party. The appeal is to the U.S. Courts of Appeals.
This appellate review involves reviewing legal conclusions. Legal conclusions are reviewed “de novo.” This means that the appeals courts do not just accept the tax courts legal conclusions. They reach their own.
Factual disputes are reviewed for clear error. Mixed questions of fact and law are sometimes reviewed de novo and sometimes for clear error.
U.S. Supreme Court
The U.S. Supreme Court can hear appeals from the appeals courts. It is somewhat rare for the U.S. Supreme Court to hear tax cases, let alone tax cases that originated in the tax court.
Decisions from the Supreme Court are the final word. They cannot be appealed.
Get Help With Your Tax Court Case
An experienced tax attorney can help you determine whether you should take your case to court and which court in which to file your case.
We help taxpayers with IRS and state tax court litigation.
Please call us at (713) 909-4906 or schedule an appointment to discuss your tax litigation case.
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