While most taxpayers can resolve their situation with the Internal Revenue Service (IRS) without asking for the assistance of the courts, filing a petition with United States Tax Court (Tax Court) can be the taxpayer’s best option. Some reasons a taxpayer may decide to file a petition with the Tax Court include: the law is unsettled on an issue, the IRS issues an unfavorable determination that can only be appealed to the Tax Court, or negotiations with the IRS employee working on the case have reached a standstill.
For the Tax Court to have jurisdiction to hear income, gift, or estate tax cases, the IRS must first issue a Statutory Notice of Deficiency. This notice allows the taxpayer 90 days from the date of the notice to file a petition in Tax Court. The Tax Court also has jurisdiction to hear certain other tax-related cases, such as innocent spouse cases, excise tax cases, or levy and lien cases. Please review the Tax Court’s Rules of Practice and Procedure for more information. The technical requirements for filing a petition are in Rules 30 through 41 of the Tax Court’s Rules of Practice and Procedure. IRS Area Counsel must file an answer to the petition within 60 days from the date of the service of the petition. It can often take more than one year after the petition is filed before the Tax Court schedules the case for trial.
The discovery process in Tax Court is less formal than other litigation arenas. Tax Court Rule 70(a) provides that the Tax Court expects the petitioner (the taxpayer) and the respondent (the IRS) to attempt to achieve the objectives of discovery through informal communications before utilizing formal discovery procedures, such as interrogatories, subpoenas, and depositions. Informal conferences between the IRS Counsel and the petitioner for discovery purposes are typically called “Branerton conferences.” Branerton Corp. v. Comm’r, 61 T.C. 691 (1974). The Court expects both sides to at least offer the opportunity for a meeting to each other before allowing formal discovery.
Another unique aspect of practicing in Tax Court is the Court’s heavy reliance on the parties agreeing to stipulate to all undisputed facts. The Court treats each stipulation as a conclusive admission. The Court expects the parties to stipulate to all documentary evidence unless either party is questioning the authenticity of the evidence or using it for impeachment. The IRS Counsel typically prepares the stipulations and the taxpayer has the opportunity to accept or object to some or all of the stipulations. The petitioner should work with IRS Counsel to make sure the language of each stipulation accurately represents the facts of the case before signing the stipulations.
A few months prior to trial, the Tax Court will issue a Standing Pretrial Order. This order will include a template for a Pretrial Memorandum, which functions as a report of the status of the case and a synopsis of the factual and legal issues to prepare the Court for trial. The petitioner and respondent must serve a Pretrial Memorandum on each other 14 days prior to trial. The Standing Pretrial Order also includes a Final Status Report, which the petitioner must complete and send to the Tax Court if the status of the case changes after the filing of the Pretrial Memorandum.
Trial in Tax Court is conducted like any other trial under the Federal Rules of Evidence. The parties will have a chance to make opening and closing statements, examine and cross-examine witnesses, and introduce documents. The Court may ask the parties to submit written post-trial briefs outlining the factual and legal issues in the case. The Court will then issue a judgment.
Taxpayers should talk with an experienced attorney to help them weigh the benefits and costs before filing a petition with the Tax Court.