Supreme Court: Tax Court Must Reveal Documents

The Supreme Court on Monday struck down a U.S. Tax Court practice that shields vital documents from participants in cases before the tax court as well as the federal judges who hear tax court appeals, the New York Times reported.

In an unusual move, the Supreme Court overturned rulings of two federal appeals courts, the Seventh Circuit in Chicago and the 11th Circuit in Atlanta. The Supreme Court usually only hears cases in which there is conflict in the lower courts.

Writing for the majority in the 7-2 decision, Justice Ruth Bader Ginsburg addressed the tax court's practice of using "special trial judges," auxiliary judges who conduct trials and make recommendations to the 19 regular judges on how major tax cases should be decided, the Times reported.

While the decisions of the special judges are not binding, their rulings "shall be presumed to be correct," and the regular judges are expected to defer to them, the Times reported. The reports are critical to the tax court's processes, but since 1983, the court has considered them to be confidential internal documents and has refused to provide them to the participants or appellate judges, the Times reported.

Chief Justice William H. Rehnquist filed a dissenting opinion, joined by Justice Clarence Thomas. "The tax court's compliance with its own rules is a matter on which we should defer to the interpretation of that court," Rehnquist said.

The decision was a posthumous victory for a prominent tax lawyer, Burton W. Kanter, who along with two other men was found liable for a $30 million tax deficiency in a case that dated to the 1970's. While the Supreme Court's decision did not overturn the tax court's 1999 finding against Kanter and the two others, the Times reported that the tax court will now have to show the documentation behind the adverse finding and will have to operate differently in the future. Kanter died in 2001.

The National Federation of Independent Businesses praised the decision. "Taxpayers fighting an unfair tax bill should have the tools and information needed to mount a fair fight," Karen Harned, of the business group's legal foundation, said in a statement.

Richard H. Pildes, a professor at New York University Law School who represented the Kanter estate, told the Times that the decision addressed "very, very fundamental issues about the basic structure of a trial."


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