This article was originally published in Law360 January 16, 2019
The United States Tax Court is one of several specialized judiciaries — e.g., U.S. Bankruptcy Court, U.S. Court of Federal Claims, U.S. Court of Appeals for Veteran Claims, etc. — and was created to provide a forum for taxpayers to seek redress for asserted income tax deficiencies by the Internal Revenue Service. Like all courts, the Tax Court has rules that govern the practice of law before the court, the Tax Court rules of practice and procedure. These rules have evolved over the years, and recent amendments reflect continuing modernization of the court’s administration as well as the continued expansion of the court’s subject matter jurisdiction.
Tax Court Background
The Tax Court’s predecessor was the U.S. Board of Tax Appeals, established by Congress in the Revenue Act of 1924. Congress established the board as an “independent agency in the executive branch of the government.” In 1942, Congress passed the Revenue Act of 1942, renaming the board as the “Tax Court of the United States.” The Tax Court was established by Congress under Article I of the U.S. Constitution.
Although taxpayers can challenge the government’s ability to assess and collect taxes in several forums, the Tax Court is unique in that, unlike other forums, the taxpayer does not have to pay the tax first and then sue for a refund. Since being established, the Tax Court’s jurisdiction has been expanded to reflect the growing needs of the populace to have a prepayment forum to challenge the government’s taxing power. Presently, the Tax Court has jurisdiction to hear cases involving:
- 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;
- Review of certain collection actions;
- Certain whistleblower actions; and
- Passport revocation actions.
- Tax Court Amends its Procedure Rules
On Nov. 30, 2018, Chief Judge Maurice B. Foley announced the adoption of amendments to Tax Court procedure rules. On Dec. 19, 2018, Chief Judge Folely also announced the adoption of interim and proposed amendments to the Tax Court procedure rules relating to the new regime for administrative and judicial review of adjustments to partnership income enacted by Congress in 2015. The amendments reflect the Tax Court slowly embracing the digital age, as well as refinements to the existing procedure rules and the addition of new areas of jurisdiction for the Tax Court. The latest amendments come on the heels of announcements in 2016 relating to the adoption of the Rules for Judicial-Conduct and Judicial-Disability Proceedings and other changes to the Tax Court procedure rules, and in 2012 relating to privilege and discovery rules. We highlight the 2018 amendments that may have the most significance to taxpayers and practitioners.
Payments to the Tax Court
Prior to the amendment, Rule 11 required payments to the Tax Court to be made by cash, check or money order. This is in contrast with payments made to other federal courts, which all permit electronic remittances. The amendment embraces the digital economy, and now taxpayers and their representatives can make payment electronically through Pay.gov.
Historically, to file a document with the Tax Court you would either mail it or serve it personally. In 2010, changes were made to allow most documents to be electronically filed through the court’s eAccess system. The Tax Court has now amended Rule 22 to permit a document to be filed electronically either during or outside of normal business hours, unless the paper relates to an ongoing trial session, in which case it generally must be filed at the session. Like other federal courts, an electronically filed document is timely if filed at or before 11:59 pm, Eastern time, on the last day of the applicable period for filing.
This amendment is a welcome change and may help ameliorate the mad dash to the courthouse that would sometimes occur to ensure timely filing. Additionally, electronic filing promotes a more reliable record of when a document is filed with the Tax Court, hopefully obviating the need to rely on the “mailbox rule” for determining whether a pleading was filed timely.
Likewise, the Tax Court amended Rule 23 to permit an “electronic signature” based upon the electronic filing guidelines published separately by the court. No longer will the court require an old-fashioned, handwritten ink signature. Additionally, an email address must be provided beneath the electronic signature.
Electronic Filing of Petitions
Unlike other federal courts, you cannot file electronically a petition in the Tax Court. Presently, the only way to start your Tax Court case is to mail or personally file the petition. The Tax Court has struggled with how to allow electronic filing of the petition. Not only are there technologically issues, but also many of the documents filed with the court have personal information — e.g., social security numbers — which must be redacted before filing. The amendments to Rule 34 pave the way to allow the electronic filing of a petition to commence a case. Additional information will be furnished to taxpayers on the Tax Court’s website in its electronic filings guidelines.
This is another welcome development. There has been substantial litigation in the past involving whether a petition was timely mailed, or even mailed at all. Given that the failure to timely file a petition is jurisdictional, this amendment may reduce the amount of litigation on this issue and provides certainty for the court and the parties regarding when the petition was filed.
Prior to its amendment, Rule 143 dictated that the Tax Court followed the rules of evidence “applicable in trials without a jury in the United State Court of the District of Columbia.” This rule was premised upon Internal Revenue Code Section 7453. In 2015, IRC Section 7453 was amended to direct the court to apply the Federal Rules of Evidence. The court amended Rule 143 to reflect the change in the statute.
In 2015, Congress enacted IRC Section 7345, which permits the U.S. Department of State to deny issuance, revoke or limit a passport if the IRS certifies to the State Department that a taxpayer has “seriously delinquent tax debt.” IRC Section 7345(e) permits a taxpayer to bring a Tax Court action to determine whether the IRS erroneously issued the certification described in IRC Section 7345, or failed to reverse such certification where reversal is required by law. Rule 350 makes the Tax Court rules applicable to these actions.
In 2015, Congress amended IRC Section 6404(h) to provide that a taxpayer may petition the Tax Court for an abatement of interest if the taxpayer files a claim for interest abatement with the IRS and the IRS fails to issue a final determination on the claim within 180 days after the claim was filed. The Tax Court amended Rule 281 to reflect changes to IRC Section 6404(h).
In 2015, Congress enacted a new regime for judicial and administrative review of adjustments to partnership income in the Bipartisan Budget Act of 2015. The Tax Court has adopted interim and proposed amendments in Tax Court procedure rules 255.1 through 255.7 to reflect this regime. The Court is allowing further opportunity for public comment on these rules.
Since being established, the Tax Court has continually evolved. Congress has regularly expanded its jurisdiction to meet the needs of taxpayers to have a fair and impartial forum to challenge the government’s tax determinations. As the laws change and technology develops, the Tax Court must adapt. The recent amendments to the Tax Court procedure rules show how the Tax Court is endeavoring to keep up with those changes. It is essential for practitioners who regularly practice before the court to review the Tax Court procedure rules each and every time they have a matter before the court.