United States Tax Court

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Seal of the United States Tax Court.
Seal of the United States Tax Court.

The United States Tax Court is a special court created by the U.S. Congress to adjudicate disputes over certain U.S. tax deficiencies. This court is technically an administrative court, and as a result the judges are appointed for a term of 15 years[1], instead of for life. Each regular judge is appointed by the President. Because it does not meet the strictures of a court created under Article Three of the United States Constitution, decisions of the tax court may automatically be reviewed by the applicable United States Court of Appeals[2]. (See Article I and Article III tribunals).

Though taxpayers may choose to litigate tax matters in a variety of legal settings, the Tax Court is the only forum in which taxpayers outside of bankruptcy may do so without having first paid the disputed tax. Parties who contest the imposition of a tax may also bring an action in any United States District Court, or in the United States Court of Federal Claims; however these venues require that the tax be paid first, and that the party then file a lawsuit to recover the contested amount paid (the "full payment rule" of Flora v. United States[3]).

Contents

[edit] The Court and its jurisdiction

The U.S. Tax Court is a Federal court of record established by Congress under Article I of the Constitution of the United States.[4] Congress created the Tax Court to provide a judicial forum in which affected persons could dispute tax deficiencies determined by the Commissioner of Internal Revenue prior to payment of the disputed amounts. The jurisdiction of the Tax Court includes the authority to hear tax disputes concerning notices of deficiency, notices of transferee liability, certain types of declaratory judgment, readjustment and adjustment of partnership items, review of the failure to abate interest, administrative costs, worker classification, relief from joint and several liability on a joint return, and review of certain collection actions.

[edit] Judges

The Tax Court is composed of 19 members appointed by the President and confirmed by the Senate.[5] Trial sessions are conducted and other work of the Court is performed by those judges, by senior judges serving on recall, and by special trial judges. All of the judges have expertise in the tax laws, and the Tax Court asserts that they "apply that expertise in a manner to ensure that taxpayers are assessed only what they owe, and no more". Although the "principal office" of the Court is located in the District of Columbia, Tax Court judges may sit "at any place within the United States".[6] The judges travel nationwide to conduct trials in various designated cities. In 2005, stops in Miami and New Orleans were cancelled due to the effects of hurricanes which had struck shortly before their scheduled visit to each city.

Sitting Judges

Senior Judges

Special Trial Judges


[edit] Representation of parties

The United States government is represented in the Tax Court by the Chief Counsel of the Internal Revenue Service (IRS) or his delegate.[7]

The Tax Court is unusual in that a person who is not an Attorney at Law may be admitted to practice to represent taxpayers by applying for admission and passing an examination administered by the Court. Attorneys are admitted to the bar of the Court without being required to sit for the Tax Court examination. Tax Court practice is highly specialized and most practitioners are licensed as attorneys.

[edit] Genesis of a Tax Court dispute

Many Tax Court cases involve disputes over Federal income tax, often after an examination by the Internal Revenue Service of a taxpayer's return. After issuance of a series of preliminary written notices and a lack of agreement between the taxpayer and the IRS, the IRS formally "determines" the amount of the "deficiency" and issues a formal notice called a "statutory notice of deficiency," or "ninety day letter".[8]In this context, the term "deficiency" is a legal term of art, and is not necessarily equal to the amount of unpaid tax (although it usually is). The deficiency is generally the excess of the amount the IRS contends is the correct tax over the amount the taxpayer showed on the return -- in both cases, without regard to how much has actually been paid.[9]

Upon issuance of the statutory notice of deficiency (after IRS determination of the tax amount, but before the formal IRS assessment of the tax), the taxpayer generally has 90 days to file a Tax Court petition for "redetermination of the deficiency"[10] If no petition is timely filed, the IRS may then statutorily "assess" the tax. To "assess" the tax in this sense means to administratively and formally record the tax on the books of the United States Department of the Treasury.[11] This formal statutory assessment is a critical act, as the statutory tax lien that later arises is effective retroactively to the date of the assessment, and encumbers all property and rights to property of the taxpayer.[12]

[edit] Life cycle of a Tax Court case

Because of the negative legal consequences ensuing with respect to a statutory assessment (especially the tax lien and the Flora requirement that the taxpayer otherwise pay the full disputed amount and sue for refund), a taxpayer is often well advised to timely file a Tax Court petition.

The rule in the Tax Court is that the taxpayer sues the "Commissioner of Internal Revenue," with the taxpayer as "petitioner" and the Commissioner as "respondent." This rule is an example of an exception to the general rule that the proper party defendant in a U.S. tax case filed by a taxpayer against the government is "United States of America." In the Tax Court, the Commissioner is not named personally. The "Secretary of the Treasury," the "Department of the Treasury" and the "Internal Revenue Service" are not proper parties.

The petition must be timely filed within the allowable time. The Court cannot extend the time for filing which is set by statute.

A $60 filing fee must be paid when the petition is filed. Once the petition is filed, payment of the underlying tax ordinarily is postponed until the case has been decided.

In certain tax disputes involving $50,000 or less, taxpayers may elect to have their case conducted under the Court's simplified small tax case procedure.[13] Trials in small tax cases generally are less formal and result in a speedier disposition. However, decisions entered pursuant to small tax case procedures are not appealable and may not be cited as precedent.

Cases are calendared for trial as soon as practicable (on a first in/first out basis) after the case becomes at issue. When a case is calendared, the parties are notified by the Court of the date, time, and place of trial. Trials are conducted before one judge, without a jury, and taxpayers are permitted to represent themselves if they desire.

The vast majority of cases are settled by mutual agreement without the necessity of a trial. However, if a trial is conducted, in due course a report is ordinarily issued by the presiding judge setting forth findings of fact and an opinion. The case is then closed in accordance with the judge's opinion by entry of a decision.

[edit] Notes

Some information on this page is from the web site of the U.S. Tax Court, which, as a publication of the United States government, is in the public domain.

[edit] References

  1. ^ See 26 U.S.C. § 7443(e).
  2. ^ See 26 U.S.C. § 7482(a)(1).
  3. ^ 357 U.S. 63 (1958), aff'd on reh'g, 362 U.S. 145 (1960).
  4. ^ See 26 U.S.C. § 7441.
  5. ^ See generally 26 U.S.C. § 7443(a) and (b).
  6. ^ See 26 U.S.C. § 7445.
  7. ^ 26 U.S.C. § 7452. Although, as explained below, the "Commissioner of Internal Revenue" is the proper party to be sued in Tax Court, the statute actually states that the "Secretary" is represented by the IRS Chief Counsel (or delegate). However, the term "Secretary" is defined in 26 U.S.C. § 7701(a)(11)(B) as the "Secretary of the Treasury or his delegate." Further, the term "or his delegate" is defined (in this context) at 26 U.S.C. § 7701(a)(12)(A)(i) as "any officer, employee or agency of the Treasury Department duly authorized by the Secretary of the Treasury directly, or indirectly by one or more redelegations of authority [ . . . . ]"
  8. ^ See generally 26 U.S.C. § 6212.
  9. ^ See generally 26 U.S.C. § 6211
  10. ^ See generally 26 U.S.C. § 6213.
  11. ^ 26 U.S.C. § 6201 through 26 U.S.C. § 6203.
  12. ^ See 26 U.S.C. § 6321 and 26 U.S.C. § 6322.
  13. ^ See 26 U.S.C. § 7463.

[edit] External links

Law of the United States
Constitutional law Federalism, Separation of powers, Civil rights, Legislative branch
Courts Federal Courts: Supreme Court, Courts of Appeals, District Court, Bankruptcy Court, Claims Court, Tax Court
State Courts: State supreme courts
Education Law school, Law School Admission Test, Admission to the bar
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