United States Tax Court
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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, because the judges are appointed for a term of 15 years (see #redirect ), 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 (see #redirect ). (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 unique in that it 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, 357 U.S. 63 (1958), aff'd on reh'g, 362 U.S. 145 (1960)).
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 (see #redirect ). 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.Judges
The Tax Court is composed of 19 members appointed by the President and confirmed by the Senate (see generally #redirect (a) and (b)). Law clerks to the Tax Court judges are among the most brilliant and accomplished tax attorneys in the nation. 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" (see #redirect ). 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.
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 (see #redirect ). 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.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" (see generally #redirect ). 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 (see generally #redirect ).
Upon issuance of the statutory notice of deficiency, the taxpayer generally has 90 days to file a Tax Court petition for "redetermination of the deficiency" (see generally #redirect ). If no petition is timely filed, the IRS may then formally "assess" the tax (i.e., administratively and formally record the tax on the books of the United States Department of the Treasury under #redirect through #redirect ). 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 (see #redirect and #redirect ).
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. Although the statute states that the Secretary of the Treasury is represented by the IRS Chief Counsel, the proper caption on a Tax Court petition (where "Mary Jones" is the taxpayer-petitioner) is in the style of "Mary Jones v. Commissioner of Internal Revenue." Neither the Secretary of the Treasury nor the Commissioner are named personally, although the Commissioner is the "respondent." The "Department of the Treasury" and the "Internal Revenue Service" are not proper parties. Suits in Tax Court are 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."
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 (see #redirect ). 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.
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.External links
- [Official Web Site of the United States Tax Court]
- [United States Tax Court Rules of Practice and Procedure]
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