Supreme Court Questions U.S. Tax Court’s Rule Violations

Published Categorized as Tax Litigation, Tax Procedure
Supreme Court Questions U.s. Tax Court’s Rule Violations
Supreme Court Questions U.s. Tax Court’s Rule Violations

The U.S. Tax Court provides a forum for contesting tax assessments and for certain collection matters.  It is the only forum that allows taxpayers to maintain litigation without first paying the tax, etc. that is in dispute.  For many taxpayers, it is the only forum that is available.  This is why it is important for the court function impartially.  The Supreme Court recently considered Ballard v. Commissioner, 544 U.S. 40 (2005), which questions whether the U.S. Tax Court is an impartial court.

About the U.S. Tax Court

The U.S. Tax Court has somewhat of a controversial history, as far as courts go. The court, initially named the board of tax appeals, fell under the aegis of the executive branch of the federal government.

The court underwent two subsequent name changes and, in an effort to distance itself from the IRS, the court left the executive branch to become an independent court.

The Ballard Dispute

In Ballard, the trial judge presiding over the case sided with the taxpayers and prepared a report stating the outcome of the case.  The case was subsequently reassigned to a second judge who entered a contrary finding, a finding issued four years after the trial and made without even having heard the case.

The tax courts own rules specify that the second judge is to adopt, modify, or reject the first judge’s report–not write a new report. When the taxpayers discovered that the second judge had disregarded the first judge’s report, they sought access to the report for appeals purposes.  The U.S. Tax Court refused the taxpayer’s request, expressly stating that the second judge had given due regard to the first judge’s report.

The Supreme Court’s Opinion

On appeal, the appeals court found nothing wrong with the U.S. Tax Court’s actions. The Supreme Court was not willing to do the same. The Supreme Court’s observed that:

It is difficult to comprehend how a Tax Court judge would give [d]ue regard to, and presum[e] to be correct, an opinion he himself collaborated in producing. The tax court, like all other decision making tribunals, is obliged to follow its own Rules.


Should the Tax Court some day amend its Rules to adopt the idiosyncratic procedure here rejected, the changed character of the Tax Court judges review of special trial judge reports would be subject to appellate review for consistency with the relevant federal statutes and due process.

The Rules Have Not Changed

What makes this case particularly troubling is that the U.S. Tax Court disregarded its own rules (for over twenty years!), made an expressly misleading (arguably false) statement, and the court took steps to cloak its rule violation.

None of the judges involved were removed or barred from office or sanctioned in any other way. Moreover, the court has not amended its rules or taken any steps to ensure that taxpayers do not run into the same or similar situations in the future.

The Supreme Court’s opinion calls into question whether the U.S. Tax Court is a fair and impartial forum and whether a tax attorney can, in good faith, recommend that his or her client pursue their case in that forum. These are very serious questions.

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