Les, Samantha, Caleb, and I recently returned from the ABA Tax Section’s Fall Meeting in Dallas. Among the excellent sessions I attended was a Recent Developments program of the Court Procedure & Practice committee on October 14. The panelists were Judge Lewis T. Carluzzo, Chief Special Trial Judge, United States Tax Court; Cynthia Messersmith, Chief, Southwestern Civil Trial Section, U.S. Department of Justice, Tax Division, Dallas, TX; and Melissa Avrutine, Special Counsel, IRS Office of Chief Counsel, Procedure & Administration. The moderator was Kandyce Jayasinghe, Covington & Burling LLP. This post will focus on the Tax Court updates provided by the panel, grouped by topic.
General Tax Court Updates
Chief Special Trial Judge Carluzzo began the session with updates from the Tax Court. He first offered a tribute to former Tax Court Judge Herbert Chabot, whose passing was announced by the Court that same day.
Judge Carluzzo announced that the court will hold a webinar on November 16, moderated by Chief Judge Kerrigan. The flyer is here, and you can register here.
From the flyer:
Please join the United States Tax Court for an informative webinar panel discussion moderated by Chief Judge Kathleen Kerrigan. The program will highlight changes to Tax Court practice made in response to the COVID-19 pandemic, including lessons learned, best practices, and practical implications for ongoing controversy matters and trial calendars.
The webinar participants are Chief Judge Kathleen Kerrigan, Judge Cary Douglas Pugh, Judge Emin Toro, Sheri Dillon of Morgan Lewis & Bockius LLP, Michael Garrett and Andrew Titktin of the IRS Office of Chief Counsel, and myself. Experience with both large and small cases is represented on the panel.
Judge Carluzzo also addressed mail irradiation, which was recently a topic of discussion on the ABA’s Low-Income Taxpayer Clinic listserv and in the news. The judge explained that irradiation of mail to the Court is not within the Tax Court’s control – it is conducted by the U.S. Postal Service. Some types of ink do disappear in the process. Kelly Philiips Erb wrote about the issue, and her search for a pen whose ink would not be affected, here ($). There does not seem to be an easy way to tell if your ink will disappear. This provides another reason to use DAWSON and pay.gov whenever possible.
Case Statistics and Filing
Judge Carluzzo reported that the Tax Court continues to receive a high volume of petitions, approximately two thousand per month. The Court has received over 20 thousand petitions so far this calendar year. However, the Court is closing more cases than it is opening, and the majority of cases are disposed by stipulated decision. The Court is pleased that many cases are settling earlier in the process. This past August 1,300 cases were closed that had never been calendared.
Electronic filing of petitions has been at a consistent level of around 35%. This indicates that some self-represented petitioners are using the e-filing system, but the Court would like to see that number rise. The Court encourages practitioners to make clients aware of DAWSON when consulting with people who may petition pro se.
As of October 14, 2022, the Tax Court had 31,831 cases pending, of which 8,295 were assigned to a judicial officer. Of those, 250 cases are fully submitted and awaiting an opinion. The Court does not track the time it takes cases to move from submission to opinion, or the time from petition to decision. There is no average figure available for either timeframe.
Later in the session, Melissa Avrutine offered additional case figures from the IRS Office of Chief Counsel. As of 6/30/22, the Office of Chief Counsel records showed 40,400 dockets open in Tax Court, representing $30.1 billion in dispute. Ms. Avrutine noted that this is $10 billion more in dispute than any of the years from 2012 to 2020; however the 2022 numbers are down from 2021. In the first three quarters of FFY 2022, 28,100 dockets were opened (of which about 25,000 had self-represented petitioners), and 20,400 dockets were closed.
Post-Boechler Issues
Judge Carluzzo noted that the Supreme Court’s Boechler opinion has impacted the court’s case processing, in that the court will no longer scrutinize CDP petitions for late filing. He acknowledged that the Court will need to develop law on equitable tolling, but cautioned that the Court may not have occasion to reach the issue in very many cases. For equitable tolling to come before the Court, (1) the answer must raise late filing as a defense; and (2) petitioner’s reply to the answer must raise equitable tolling.
Judge Carluzzo noted that post-Boechler challenges to the jurisdictional nature of filing deadlines are pending in the Hallmark (deficiency) and Frutiger (innocent spouse) cases. Ms. Avrutine also commented on the Hallmark case, referring attendees to Respondent’s filing of June 22 (linked in Carl’s post here; the taxpayer’s reply is linked in another of Carl’s posts here). She noted that the government believes the Ninth Circuit opinion in Organic Cannabis is controlling under the Golson rule. Notably, in the Frutiger case Judge Buch has invited motions for leave to file an amicus brief.
Keith and Carl recently blogged on the impact of Boechler and pending litigation here, here, and here.
Tax Court Rules
As PT readers know, last March the Tax Court released proposed amendments to its Rules of Practice and Procedure. Judge Carluzzo said that the Court is still in the process of finalizing its rule changes. All of the public comments can be found on the Court’s website here.
Ms. Avrutine highlighted some of the comments from the IRS Office of Chief Counsel on the proposed rules. In particular, Ms. Avrutine noted the government has concerns about the proposed requirement for it to locate and file the statutory notice with the Court if a petitioner fails to attach the notice to their petition. At least 8 different offices issue jurisdiction-granting notices, and it is difficult for the Office of Chief Counsel to find the notice by the Answer deadline. If the rule is finalized as proposed, Respondent will often have to move to extend the deadline. Ms. Avrutine stated the government’s position is that the Court should treat such filings as imperfect petitions and order petitioners to supplement with the statutory notice within 60 days. Presumably, the case could be dismissed if the petitioner is unable to find the notice, or a complete copy of the notice. Such a position would cause many more cases to be dismissed.
Regarding proposed rule 92, Respondent supports the proposal for the parties to stipulate to the administrative record but believes 60 days after the notice setting the case for trial would be more administrable than the proposed 30 days, and 90 days would be appropriate for whistleblower cases. Ms. Avrutine further stated that the administrative record should have a uniform definition across all cases where the validity of a rule could be challenged under the APA.
Subpoena Procedures
Perhaps the most positive development to emerge from the pandemic has been the availability of remote hearing sessions for the purpose of receiving subpoena responses before the calendar call. Pre-pandemic, the inability to serve a subpoena returnable in advance of trial was a longstanding source of practitioner frustration. Samantha Galvin wrote about the anomaly of Tax Court subpoenas here, and William Schmidt wrote about the new procedures here.
Judge Carluzzo stated that the Court intends to continue regular remote motion and subpoena sessions indefinitely as long as standalone remote calendars continue to be scheduled. He commented that the Court’s remote subpoena procedures have been well received on all sides, and generally occur weekly on Wednesdays. Although the document is titled “Subpoenas for Remote Proceedings,” I understand that attorneys are currently requesting and receiving remote subpoena hearings for cases that will be tried in person.
A subpoena returnable only at the calendar call is much less useful to the parties and the court and needlessly prolongs litigation. However, Judge Carluzzo noted that there is a pending case before Judge Lauber in which petitioner challenges the remote subpoena hearing process as a violation of the Tax Court rules and the statute (presumably rule 147 and IRC 7456). As the Court finalizes its next round of rule changes, perhaps remote subpoenas will be formally incorporated.
Trial Sessions
Judge Carluzzo reported that all trial sessions are now being scheduled in person, except for some smaller cities. However, the calendar may be changed to a remote format at the discretion of the trial judge, or by order of the Chief Judge.
I recently experienced this in Philadelphia, where on September 20 we were notified that the September 26 trial calendar would be heard on Zoomgov. I can understand the Court’s decision. The docket was down to 5 unresolved cases, all with unresponsive petitioners. I understand that two of the petitioners appeared at the remote calendar call, notwithstanding the late format change.
National Virtual Settlement Week October 24-27
Ms. Avrutine announced the upcoming national Virtual Settlement Week, happening October 24 -27 as part of National Celebration of Pro Bono Week. This event is a partnership between the IRS Office of Chief Counsel and the ABA Section of Taxation. Practitioners can learn more and sign up for a shift here.
Whistleblower Litigation
Ms. Avrutine alerted attendees to an important new appeal to watch, Whistleblower case Docket 972-17W, concerning disclosure of nonparty return information under IRC 6103(h)(4)(A). The Tax Court opinion held that respondent is authorized under the statute to submit the unredacted administrative record to the Court, and that the Court had jurisdiction over the case, consistent with the D.C. Circuit’s opinion in Li v. Comm’r. Keith most recently blogged about the jurisdictional issue here. The disclosure issue is significant in these cases, and we will follow the issue in the D.C. Circuit.