Pension Protection Act Modernizes the Tax Court

The Pension Protection Act of 2006 does far more than protect pensions. It also attempts to modernize the Tax Court.

The modernization of the Tax Court consists of five major issues including:

  • Broadening authorization to impose a petition filing fee on any Tax Court petition.
  • Giving the Tax Court sole jurisdiction over all Collection Due Process appeals.
  • Codifying the Tax Court authority to apply equitable recoupment doctrine.
  • Permitting the Tax Court to use the annual registration fee on Tax Court practitioners to provide services to pro se taxpayers.
  • Allowing Tax Court special trial judges to hear and decide any small case employment tax proceeding and allowing retired special trial judges of the Tax Court to be recalled for judicial duty for certain periods.

The 2006 Pension Act Section 859(a) eliminates the list of specific Tax Court petitions that limited the types of petitions subject to a filing fee, effectively authorizing the Tax Court to charge a filing fee of up to $60 in all cases commenced by the filing of a petition. Eliminating the list of petitions for which a filing fee can be imposed also eliminates the need to amend Code Sec. 7451 every time the Tax Court is granted new jurisdiction and automatically permits the Tax Court to impose a filing fee for new types of actions resulting from the filing of a petition. It should be noted that the frequently asked questions (FAQ) page of the U.S. Tax Court states that “a case is commenced by filing a petition.” According to Rule 20(b), payment of the filing fee can be waived if the Court is presented with an affidavit containing specific financial information regarding the petitioners inability to pay. This change became effective on August 17, 2006.

Section 855 of the 2006 Pension Act provides that a person may appeal an Internal Revenue Service (IRS) Collection Due Process (CDP) determination to the Tax Court within 30 days of a CDP hearing determination. In addition, the Tax Court will have jurisdiction over the matter. This change, which becomes effective for determinations made after the date which is 60 days from August 17, 2006, gives the Tax Court sole jurisdiction over all judicial appeals of CDP hearing determinations.

For Tax Court actions or proceedings for which no final decision had been made before August 17, 2006, Section 858 of the 2006 Pension Act provides that the Tax Court may apply the doctrine of the equitable recoupment to the same extent that it is available in civil tax cases heard before U.S. district courts and the Court of Federal Claims. The Tax Court is prohibited from determining whether the tax for any period not before the court has been overpaid or underpaid. No implication is intended as to whether the Tax Court has the authority to continue to apply other equitable principles in deciding matters over which it has jurisdiction.

Section 860 of the Pension Protection Act provides that providing services to pro se taxpayers is a permitted use of the periodic registration fee collected from practitioners who are admitted to practice before it. The fees could be used for programs which are intended to assist pro se taxpayers, including educating pro se taxpayers on the procedural requirements of contesting tax deficiencies before the Tax Court. This Section became effective on August 17, 2006.

For non-attorney applicants, the next written examination for admission to practice for applicants will be held on Thursday, November 9, at 12:15 p.m., in the U.S. Tax Court Building in Washington. The examination will cover the following subjects, with emphasis reflected in weighted percentages of the exam:

  • Tax Court Rules of Practice and Procedure (25 percent)
  • Federal Taxation (40 percent)
  • Federal Rules of Evidence (25 percent)
  • Legal ethics, including the American Bar Association (ABA) Model Rules of Professional Conduct (10 percent)

Two Sections of the Pension Protection Act apply to Tax Court special trial judges. Section 857 clarifies the authority of the Tax Court chief judge to assign any small case employment tax proceedings to special trial judges and authorize the special trial judges to decide those cases. Small case employment tax proceedings are those where the amount of employment taxes placed in dispute is less than $50,000 or less for each calendar quarter involved. In addition, under Subsection 856(a) of the Pension Protection Act, a retired special trial judge can be recalled by the chief judge of the Tax Court to perform judicial duties with the Tax Court for up to 90 days a year. Both of these changes became effective August 17, 2006.

Finally, in addition to these measures, the Tax Court may pay increases in employee premiums under the Federal Employee Group Life Insurance Program for Tax Court judges over the age of 65, according to a statement by Thelen Reid & Priest.

The modernization of the Tax Court was not a primary objective of the Pension Protection Act of 2006, nonetheless, it was used to make significant, if relatively few changes how the Tax Court operates. The ultimate impact of these changes on the courts decisions, if any, may take some time to be recognized.

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