Tax Court S Cases: Does the 'S' Stand for Secret?

Every year, many cases docketed in the U.S. Tax Court are heard by its small tax case division. [1] The "small tax case" procedure is currently available for cases with less than $10,000 in dispute for each tax year, and may soon be available for cases with even more in dispute. [2] The special trial judges [3] who hear these "S" cases write "summary opinions," [4] yet the opinions are never made available to the public. A request to the Tax Court's Public Files office to see a small tax case file is similarly unavailing. Thus, opinions and evidence in small tax cases currently amount to a secret body of law. [5] In fact, summary opinions currently have the status that Internal Revenue Service private letter rulings did before they were disclosed as now required by the Internal Revenue Code: [6] The only taxpayer given access to the opinion is the one whose tax liability the decision affects, but the IRS is entitled to a copy of each one.

Small tax cases are decided by a division of the Tax Court. [7] The division is subject to supervision by a Tax Court judge. [8] The code requires the Tax Court and its divisions to make reports of its proceedings, [9] and to include findings of fact and opinion in the reports. [10] In small tax cases, "[a] decision, together with a brief summary of the reasons therefor" satisfies the "report" requirements. [11] Presumably, that is why special trial judges write summary opinions. [12] However, the code also requires, with limited exceptions, such as to protect trade secrets, [13] that "all reports of the Tax Court and all evidence received by the Tax Court and its divisions, including a transcript of the stenographic report of the hearings, shall be public records open to the inspection of the public." [14]

The Tax Court has not explained its departure from the code's requirements. In fact, there is no reasonable explanation for its distinction between small tax case files and reports and regular case files and reports. It is true that summary opinions have no precedential value. [15] However, nonprecedential opinions can be helpful in understanding a judge's thinking. The Tax Court's memorandum opinions also have no official precedential value [16] but are nonetheless released to the public (and privately published). The files in those cases are also available for examination in the Public Files office.

It is also true that most taxpayers who elect the small tax case procedure are pro se litigants. [17] However, that is also true of many taxpayers who do not elect (or are not eligible for) the small tax case procedure. [18] In cases other than small tax cases, the Tax Court makes the opinions and files available to the public regardless of whether the taxpayer proceeded pro se. Most importantly, the code makes no distinction between the public nature of small tax reports and files [19] and other Tax Court reports and files, on these bases or any other.

Interestingly, the government's recovery rate, computed as a percentage of the deficiency determined by the IRS, is much higher in small tax cases than in regular cases. [20] The secrecy surrounding small tax cases precludes us from knowing why. Perhaps many small tax cases are substantively different from regular cases, or perhaps the small tax case procedure affects outcomes. Answering questions raised by the small tax case procedure requires public access to summary opinions and the underlying case files. The time has come for the Tax Court to make them publicly available. [21]

Footnotes:

[1] For example, for the fiscal year ended September 30, 1994, the Tax Court had 7,653 small tax cases docketed, and these cases represented $33,777,717. Both the sheer numbers and the aggregate dollar figure exceeded regular cases with under $10,000 in dispute. United States Tax Court Judicial Conference, Baltimore, Maryland, November 1994, at 4. For 1985-1994, 25.9 percent of all Tax Court opinions were summary opinions. An additional 8.8 percent were bench opinions in small tax cases. United States Tax Court Fiscal Year Statistical Information, Issued by the Statistics and Reports Section, United States Tax Court, December 1994. The number of small tax cases would presumably increase if current proposals to raise the dollar limits are adapted. See note 2, infra.

[2] Section 7463(a) (neither the amount of the deficiency placed in dispute nor the amount of any claimed overpayment can exceed $10,000). (Section references are to the Internal Revenue Code of 1986, as amended, except as otherwise noted.) Current proposals would increase the jurisdictional dollar caps to $25,000 or even $50,000. See 105 H.R. 2676 (1997); 105 S. 1096 (1997); "Roth Releases Comprehensive Outline of IRS Reform Bill," Doc 98-10629 (4 pages).

[3] Special trial judges are appointed by the chief judge of the Tax Court. Section 7443A(a). They are authorized to hear small tax cases as well as other cases. See section 7443A(b); Tax Court Rule of Practice & Procedure 180.

[4] For the 10-year period 1984-1993, for example, 3,693 summary opinions were issued, and the other 1,301 small tax case opinions were bench opinions. United States Tax Court Fiscal Year Statistical Information, Issued by the Statistics and Reports Section, United States Tax Court, November 1993.

"Summary opinions" comply with the requirement of section 7460 that a judge make a report of his determination, and with the requirement of section 7459(b) that the report include its findings of fact or opinion. Section 7463(a) ("A decision, together with a brief summary of the reasons therefor, in any such case shall satisfy the requirements of sections 7459(b) and 7460."). Tax Court Rule 182 also requires that, except for bench opinions, a summary of facts and opinion in a small tax case be submitted by the special trial judge to the chief judge. Tax Court Rule of Practice & Procedure 182(a).

[5] It is unusual to see in print even a reference to a summary opinion. However, in a group of related cases, the parties alerted the court to two summary opinions, and the court responded as follows:

Our attention was called to two summary opinions, Cook v. Commissioner, T.C. Summary Opinion 1980-752, and Atnip v. Commissioner, T.C. Summary Opinion 1980-761, which petitioner believes to have involved employment on the Bellefonte project. In each case the taxpayers were allowed travel expense deductions. Neither opinion sets forth the facts of this particular case so we cannot compare those cases to any of this group of six cases. However, those were summary opinions and they are not precedent for any other case, although we of course recognize that all of our opinions should be consistent.

Weeks v. Commissioner, T.C. Memo. 1985-417 n.6. Despite the citations of the small tax cases, those opinions are not publicly available. However, a few petitions in cases in which the taxpayer had counsel who elected the small tax case procedure were made available to Tax Analysts and can be located in the PETEXT file of the FEDTAX library on Lexis by searching for petitions citing section 7463.

[6] See section 6110.

[7] Tax Court General Order No. 2 (Sept. 1, 1970), 54 T.C. VI (1970).

[8] See id.

[9] Sections 7459(a), 7460(a).

[10] Section 7459(b).

[11] Section 7463(a).

[12] In a way, it is strange that special trial judges author summary opinions at all. Since there is no appeal allowable from a decision in a small tax case, section 7463(b), and the court withholds them from the public, no one may ever see those opinions except Tax Court personnel and the parties to the particular case. Of course, the code requires the authorship of summary opinions, but then the code also requires those opinions and the underlying files to be available for public inspection, and that has not stopped the Tax Court from withholding them.

[13] Section 7461(b)(1). This section also permits the Tax Court to allow removal of "originals of books, documents, and records, and of models, diagrams, and other exhibits, introduced in evidence. . . ."

[14] Section 7461(a) (emphasis added). Tax Court rules also provide that after a decision in a case is entered, copies of documents, records and other papers can be obtained by applying to the Tax Court's Copywork Office. Tax Court Rule of Practice & Procedure 12(b).

[15] Section 7463(b).

[16] See Nico v. Commissioner, 67 T.C. 647, 654 (1977) ("We consider neither revenue rulings nor Memorandum Opinions of this Court to be controlling precedent."); see also Newman v. Commissioner, 68 T.C. 494, 502 n.4 (1977).

[17] "International Conference on Courts with Tax Jurisdiction: Conference Discussion Agenda: Responses and Materials Provided by the Participants in the International Conference of Courts with Income Tax Jurisdiction," 8 Va. Tax Rev. 259, 325 (1988) ("90 percent of taxpayers in small tax cases handle their own cases.").

[18] William F. Nelson and James J. Keightley, "Managing the Tax Court Inventory," 7 Va. Tax Rev. 451, 460 (1988) ("While "S" cases are disproportionately pro se, petitions in regular cases are also filed pro se at a forty-one percent rate."); see also The Honorable David Laro, "The Evolution of the Tax Court as an Independent Tribunal," 1995 U. Ill. L. Rev. 17, 26 ("Approximately forty-three percent of the filings in the Tax Court are pro se litigants.").

[19] Small tax case opinions may be bench opinions, see supra note 1, but so may other Tax Court opinions. Section 7459(b).

[20] Aggregate figures for the 10-year period 1984-1993 reflect an overall 23.6 percent IRS recovery rate in all cases, and an overall recovery rate of 44.5 percent in small tax cases. Most surprisingly, the recovery rate in cases that did not settle (opinion decisions) in all cases was 25.6 percent, and in small tax cases was 74.7 percent. United States Tax Court Fiscal Year Statistical Information, issued by the Statistics and Reports Section, United States Tax Court, November 1993.

[21] It is possible that summary opinions can be obtained from the IRS pursuant to a Freedom of Information Act (FOIA) request. Cf. United States Department of Justice v. Tax Analysts, 492 U.S. 136 (1989) (court decisions in tax cases in the possession of the Department of Justice are "agency records" not subject to an exemption under FOIA, and must be turned over on request). However, the possible availability from the IRS of copies of summary opinions that it has chosen to retain does not excuse the Tax Court from failing to comply with code requirements that both the opinions and the underlying files be available to the public.

Leandra Lederman is a visiting associate professor of law at George Mason University School of Law and an associate professor of law at Mercer University, Walter F. George School of Law.

Originally published: April 13, 1998