Tax Court Corner: How a Case Gets to the US Tax Court
In the coming weeks and months, I will be writing a series of articles regarding the US Tax Court. But first, I want to review how a case gets to the Tax Court and the process for filing a case with the court.
First of all, to fully represent your client before the court, you have to have a US Tax Court Bar License. However, if you don’t have that license, it doesn’t mean you can’t participate in the process. For example, if you don’t have a bar license, you can file a petition and appear before the court with your client. You just can’t act on the client’s behalf.
It is important to point out that most cases filed before the Tax Court are just a means to get the case to appeals. For example, one way to get to Tax Court is to file a petition before the court when your client receives a notice of deficiency. Typically, after you file a case based on a notice of deficiency, the case will get kicked down to appeals. Another way to get to Tax Court is after an audit closes, you will receive a 90-day notice to file a petition before the court. Those requests are typically sent back to appeals. The final way to get to Tax Court is to go through an audit, go through appeals, and then file a petition before the court. Those cases will be decided by the court.
After a petition is filed before the court, the court will assess the petition and check to see if it needs to go to appeals first. If it has already been to appeals, the court will then send a notice to appear. When you appear, and before the case is heard, there is a conference where the government tries to settle the case before the court hears it. Typically, 95 percent of all cases are settled before they are heard by the court.
If you don’t have a bar license, you can appear with your client in the settlement phase. The settlement officer will actually appreciate it if you did. If you can’t settle – and I never have not settled – then your case will be heard before the court. If you do not have a bar license, you can work with your client in the proceeding, but you can’t speak in court without permission of the judge.
If I ever have a case that can’t be settled before the settlement division of the court, I would hire an attorney whom I work with. The reason for that is I have a basic understanding of the Federal Rules of Evidence, but to be honest, I didn’t go to law school, and I don’t know the rules inside and out. So, for the client’s sake, I would bring in an attorney who would handle that part of the case. The IRS will present evidence, and your side will present evidence. Then the judge decides the case. Once the case is decided, it becomes public information.
Types of Court Opinions
The following are different opinions the court will issue:
1. Bench opinion. The judge may issue a bench opinion in a regular or S case (small case) during the trial session. In this situation, the judge orally states the opinion in court during the trial session. The Tax Court will send you a copy of the transcript reflecting the judge’s opinion within a few weeks after the trial. A bench opinion cannot be relied on as precedent. All bench opinions delivered after March 1, 2008, are electronically viewable through the Tax Court’s Docket Inquiry system.
2. Summary opinion. A summary opinion is issued in an S case. A summary opinion cannot be relied on as precedent, and the decision cannot be appealed.
3. Memorandum opinion or Tax Court opinion. The chief judge decides whether an opinion in a regular case will be issued as a memorandum opinion or as a Tax Court opinion. This can be used as precedent.
Furthermore, a memorandum opinion is issued in a regular case that does not involve a novel legal issue. A memorandum opinion addresses cases where the law is settled or factually driven. It can be cited as legal authority, and the decision can be appealed. A memorandum opinion is cited as [Name of Petitioner] v. Commissioner, T.C. Memo. [Year Issued – #].
A Tax Court opinion is issued in a regular case when the Tax Court believes it involves a sufficiently important legal issue or principle. It can be cited as legal authority, and the decision can be appealed. A Tax Court opinion is cited as [Name of Petitioner] v. Commissioner, [Volume of Tax Court Reports] T.C. [Page of the Volume] (Year Issued).
This is the basics of the Tax Court and how the process works.
Craig W. Smalley, MST, EA, has been in practice since 1994. He has been admitted to practice before the IRS as an enrolled agent and has a master's in taxation. He is well-versed in US tax law and US Tax Court cases. He specializes in taxation, entity structuring and restructuring, corporations, partnerships, and individual taxation, as well as...