September 3, 2005

US Supreme Court Weighed In On Tax Court Violating its Own Rules – Yet Nothing has Changed

Houston Tax Attorney Blog

Houston Tax Attorney


The US tax court has somewhat of a controversial history, as far as courts go. The court, initially named the board of tax appeals, fell under the aegis of the executive branch of the federal government. The court underwent two subsequent name changes and, in an effort to distance itself from the IRS, the court left the executive branch to become an independent court. It was hoped that an independent court would be more fair and impartial in handling taxpayers cases. The Supreme Court in Ballard v. Commissioner indicated that the tax court may still have some way to go in this regard – the question now is when will the court do so.

The Ballard case essentially involves one judge presiding over a case, siding with the taxpayers, and preparing a report stating the outcome of the case. The case was subsequently reassigned to a second judge who entered a contrary finding, a finding issued four years after the trial and made without even having heard the case. The tax courts own rules specify that the second judge is to adopt, modify, or reject the first judge’s report – not write a new report. When the taxpayers discovered that the second judge had disregarded the first judge’s report, they sought access to the report for appeals purposes. The tax court refused that request; expressly stating that the second judge had given due regard to the first judge’s report. On appeal, the appeals court found nothing wrong with the tax courts actions. However, the Supreme Court was not willing to do the same. The Supreme Court’s observed that:

“It is difficult to comprehend how a Tax Court judge would give [d]ue regard to, and presum[e] to be correct, an opinion he himself collaborated in producing. The tax court, like all other decision making tribunals, is obliged to follow its own Rules.”


“Should the Tax Court some day amend its Rules to adopt the idiosyncratic procedure here rejected, the changed character of the Tax Court judges review of special trial judge reports would be subject to appellate review for consistency with the relevant federal statutes and due process.”

What makes this case particularly troubling is that the tax court disregarded its own rules (for over twenty years!), made an expressly misleading (arguably false) statement, and the court took steps to cloak their rule violation. It appears that none of the judges involved were removed or barred from office or sanctioned in any other way. Moreover, the court has not amended its rules or taken any steps to ensure that taxpayers do not run into the same or similar situations in the future. After reading the Supreme Court’s opinion and considering the tax courts failure to reform its procedures and rules one can only wonder whether the tax court is a fair and impartial forum and whether an attorney can in good faith recommend that his or her client pursue their case in that forum. These are very serious questions.

If the tax court will not reform its own procedures and rules then perhaps it is time for Congressional intervention.

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