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Tax Court Posts New Citation and Style Manual

by and | Feb 3, 2022 | ,

A substantial amount of our practice over the years has involved representing clients before the US Tax Court. And, we both started our tax careers clerking at the Tax Court and working on dozens of orders and opinions. Needless to say, we are familiar with the ins and outs of the Tax Court.

When it comes to the system of citation and style used by the Tax Court in its orders and opinions, it generally endorses use of the Bluebook. Our historic practice in filing documents with the Tax Court involved following the citation and style used in its orders and opinions, even where that citation and style varies from the Bluebook. Based on our clerkships and familiarity with many of the judges, we have always believed that clerks and judges prefer to read filings that use the same citation and style that is used in orders and opinions.

The Tax Court recently issued a new Citation and Style Manual (Manual) for the purpose of providing consistency within the Tax Court and with other federal courts. The policies and procedures in the Manual are intended to serve as guidance for documents issued by the Tax Court to the public, although each authoring judge retains discretion on citation and style. A couple of notable changes include the use of italics rather than underscoring for signals, citations and emphasis, as well as changes in the way Internal Revenue Code provisions and US Department of the Treasury Regulations are cited.

Practice Point: It may seem trivial to some but following the Manual is important for taxpayers and their representatives when filing documents in the Tax Court. Accordingly, we recommend reviewing the Manual and conforming your filings to the citation and style set forth therein. Making your points in filings in a clear, direct manner using the style recognized and accepted by the Tax Court will assist you in being successful in your Tax Court litigation.



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Supreme Court Justice Breyer Announces Upcoming Retirement—A Look Back at His Tax Opinion in Home Concrete

by and | Jan 31, 2022 | , , ,

On January 27, 2022, Supreme Court of the United States Justice Stephen Breyer formally announced his retirement, effective when the Supreme Court breaks for summer recess in June or July later this year—after his successor has been nominated and confirmed. Justice Breyer has served on the Supreme Court since 1994 and is the second-most senior justice after Justice Clarence Thomas.

Although Justice Breyer did not author a substantial number of tax opinions, the ones he did author are extremely important and include:

This post focuses on the Home Concrete case.

Home Concrete involved a challenge to the validity of US Department of the Treasury (Treasury) regulations issued during litigation that purported to overrule existing case law. In a 5-4 opinion authored by Justice Breyer, the Supreme Court rejected both the government’s statutory interpretation of the “substantial omission from gross income” exception to the normal three-year statute of limitations and the interpretation advanced in retroactive regulations issued during pending litigation. In doing so, the Court first applied principles of stare decisis and adhered to its prior opinion in Colony, Inc. v. Commissioner, which interpreted almost identical statutory language from the predecessor statute. It then held that, because it already interpreted the statute, there is no longer any different interpretation that is consistent with that precedent and available for adoption by the agency.

The history and procedural background are fascinating, and some of the issues highlighted in the case, but not directly decided, have been—and continue to be—developed. Further background on the case can be found in our 2012 Tax Executive article, “Home Concrete: The Story Behind the IRS’s Attempt to Overrule the Judiciary and Lessons for the Future.”

Practice Point: Home Concrete remains important today as there are several cases in the administrative and judicial pipeline involving challenges to tax reform and transfer pricing regulations. It is a must-read for any taxpayers who are currently, or are considering in the future, challenging the validity of Treasury regulations.

Andrew Roberson was one of the lawyers representing Home Concrete before the Supreme Court.



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IRS Chief Counsel Signals Increased Tax Enforcement

by , and | Jan 27, 2022 | , , , , ,

The Internal Revenue Service (IRS) Chief Counsel is the chief legal advisor to the Commissioner of Internal Revenue on all matters pertaining to the interpretation, administration and enforcement of the Internal Revenue Laws. In this regard, the IRS Office of Chief Counsel is responsible for litigating cases in the US Tax Court. Such cases can arise from examinations conducted by different divisions within the IRS, such as the Large Business & International (LB&I), Small Business/Self Employed (SB/SE), Tax Exempt & Government Entities (TE/GE) and Wage & Investment (W&I) Divisions.

On January 21, 2022, the IRS Office of Chief Counsel announced plans to hire up to 200 additional attorneys to assist with litigation efforts. The announcement specifically notes that new hires are necessary “to help the agency combat syndicated conservation easements, abusive micro-captive insurance arrangements and other tax schemes.” They will also help the IRS manage its increasing caseload as part of its multiyear effort to combat what it believes are abusive schemes and to ensure that the appropriate taxes and penalties are paid. The new hires will be located around the country and focus on audits of complex corporate and partnership issues.

Additionally, there are a significant number of cases before the Tax Court that involve conservation easements and micro-captive insurance arrangements. The IRS’s attack on the donation of conservation easements is well known in the tax world. To date, the IRS has largely been successful in these cases based on non-valuation arguments that easement deeds do not comply with the applicable regulations. However, in the recent Hewitt v. Commissioner case, the US Court of Appeals for the Eleventh Circuit dealt a significant blow when it held that the IRS’s interpretation of Treas. Reg. § 1.170A-14(g)(6)(ii) was arbitrary and capricious and violated the Administrative Procedure Act because the US Department of the Treasury failed to respond to significant comments submitted during the notice-and-comment process. Many conservation easements are within the Eleventh Circuit’s jurisdiction and other appellate courts are expected to weigh in soon, which could result in the IRS and taxpayers proceeding to trial on valuation issues. Valuation issues are inherently fact intensive and will require the IRS to utilize substantial resources to litigate.

Practice Point: Much has been written about the trend of decreased enforcement by the IRS over the past several years, owing in part to decreased or stagnant funding from US Congress. Tax litigation, particularly in fact intensive cases involving valuation issues and transactions the IRS (but not necessarily the courts) deemed abusive, requires the expenditure of substantial resources by the IRS. The IRS has signaled that it is ready to reverse the trend. All IRS tax controversies start with the examination of the taxpayer’s positions on the return. We have seen an increase in IRS audit activity in the last year or so, especially with medium-sized businesses and high-net-worth individuals. The Chief Counsel is assembling his “army” to litigate positions developed during the examination. It’s a good time for taxpayers [...]

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Tax Court Opinions Are Searchable (Again)

by and | Dec 29, 2021 | ,

The US Tax Court gave taxpayers and tax practitioners a belated Christmas gift when it announced that the Opinion search feature is back. This news comes on the heels of the Tax Court’s reintroduction of the Order search function earlier this month.

The Opinion search function allows the public to search for specific cases by name or docket number or run general searches by a keyword or phrase, judge, date range or opinion type (see here for an explanation of opinion types). Unlike the Tax Court’s prior case management system, the new system allows the public to search Bench Opinions. Guidance from the Tax Court on using the Opinion and Order search functions can be found here.

Results are available for opinions in the Tax Court’s system for cases filed on or after May 1, 1986. Thus, the public will need to use other resources in order to obtain older cases. Opinions are also available for cases where the docket is sealed, which is an improvement over the Order search function which does not return results for sealed cases.

Practice Point: The return of the Opinion search feature is an exciting development. It is extremely helpful in searching for specific opinions and is also a useful tool when searching whether a particular judge has dealt with certain issues in the past. Unfortunately, the Tax Court still has not fixed the issue where its case management system seals the entire docket and not just the specific items ordered sealed, but we are hopeful this issue will be resolved soon.



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Types of Tax Court Opinions and Their Precedential Effect (Updated)

by and | Dec 20, 2021 | ,

At the end of 2016 we posted “Types of Tax Court Opinions and Their Precedential Effect” and added that document to the Resources tab on the blog. We recently updated this resource and, below, we’ve also provided the updated text.

Most tax cases are decided by the US Tax Court, which issues two categories of opinions: formally published dispositions and unpublished dispositions. The first category consists of opinions that are published in the Tax Court Reports and are technically called “division opinions” but are more commonly referred to as “T.C. opinions.” The second category consists of three sets of unpublished dispositions:

  1. memorandum opinions (commonly referred to as “memo opinions” or “T.C. memos”)
  2. summary opinions
  3. orders.

A common question asked by taxpayers relates to the difference between these forms of dispositions in terms of precedential effect.

T.C. opinions are binding in the Tax Court, precedential and published by the Tax Court. They generally address issues of first impression, issues that impact a large number of taxpayers or matters related to the validity or invalidity of regulations. To the extent there is a T.C. opinion on point, taxpayers should cite to it as primary authority in a Tax Court proceeding.

Memo opinions are not officially published but are reproduced by commercial publishers. They generally address cases that do not involve novel legal issues and the law is settled, or the result is factually driven. Although these opinions are technically not precedential, they are often cited by litigants, and the Tax Court does not disregard these opinions lightly. It is rare to find a non-T.C. opinion that rejects the reasoning of a memo opinion. Indeed, the trend in recent years seems to be that the weight afforded to T.C. opinions and memo opinions is not substantially different. This reflects the fact that there are significantly more memo opinions than T.C. opinions each year (approximately 90% of all Tax Court opinions are memo opinions), providing taxpayers with more authority upon which to provide support for their position.

Summary opinions are also not published by the Tax Court but are reproduced by commercial publishers. They are issued in cases where the amount in dispute is less than $50,000 and the taxpayer elects to have their case tried under the small tax case procedures. Most summary opinions involve run-of-the-mill facts, but some provide insightful discussions of the law that may support a taxpayer’s case. By statute, summary opinions are not precedential, however, the Tax Court does not prohibit the citation of this type of opinion and has noted that it may give consideration to the reasoning and conclusions in a summary opinion to the extent they are persuasive. Thus, in the absence of a T.C. opinion or memo opinion supporting a taxpayer’s position or addressing the issue presented, taxpayers may want to consider citing to a favorable summary opinion.

Finally, the Tax Court issues dozens of orders, some of which involve the discussion of substantive issues that may [...]

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Tax Court Orders Are Searchable (Again)

by and | Dec 15, 2021 |

In late 2020, the US Tax Court transitioned to a new case management system, DAWSON (Docket Access Within a Secure Online Network), which was named after the late Judge Howard A. Dawson, Jr.. We previously discussed DAWSON here and here.

Over the past year, the Tax Court has made improvements to DAWSON in order to provide better access to taxpayers and their representatives. One of the helpful features of the old case management system was the ability to search Orders, however, that feature was not present in DAWSON—until now.

On December 14, 2021, the Tax Court announced that the Order search feature is once again available to the public. In addition to searching for Orders by case name or docket number, the public can also search by keyword or phrase, by judge or by date range. The Tax Court’s DAWSON Release Notes page provides the following additional information:

  • Implemented Order search for public users
    • Includes keyword and phrase search
    • Includes ability to find exact matches with “” (quotation marks) ex: “innocent spouse”
    • Includes ability to combine two or more keywords or phrases with the + (plus sign) ex: “collection due process” + remand
    • Includes ability to find documents with one or more keywords or phrases with the | (pipe character) ex: Lien | levy [Note: this search will return documents that contain the words “lien” or “levy”]
    • Includes ability to filter by date, judge, case title, petitioner name, or docket number
  • Petitions and other documents with form fields now upload correctly for all browsers.

Similar guidance concerning searching for documents is also available on the Tax Court’s website. The Tax Court also updated its Public Guide, Self-Represented (Pro Se) Petitioner Guide and Practitioner Guide for DAWSON. The Public Guide indicates that the ability to search court opinions in DAWSON is coming soon. Additionally, cases that migrated from the prior case management system appear as sealed in DAWSON if there were any sealed documents in the case. It remains to be seen whether unsealed Orders in such cases will be searchable in the future.

The Tax Court’s announcement does not indicate how far back the public can go to search for Orders. Using the Order search function and restricting the date range, the earliest Order we were able to find dates back to May 22, 1980. Based on entering different date ranges, it appears that certain Orders are available back to this date but not all Orders dating back to May 22, 1980, are available. This is not surprising given that Tax Court records are sent offsite to storage after a set period of time. Regardless, the ability to search for Orders back to 1980, at least for those Orders that are available on the website, is an improvement over the prior Order search feature, which [...]

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Tax Court Selects Two New STJs

by and | Dec 8, 2021 |

On December 6, 2021, the US Tax Court announced that Adam B. Landy and Eunkyong Choi have each been selected to serve as Special Trial Judges (STJs). They join the existing members of the Tax Court, which include four other STJs, 17 presidentially appointed Judges, and 10 Senior Judges serving on recall.

STJ Landy was previously in private practice in South Carolina from 2010 to 2016 and was a Senior Attorney with the Internal Revenue Service Office of Chief Counsel (in San Francisco and Baltimore) from 2016 until he joined the Tax Court. STJ Choi was also previously in private practice and spent time both teaching and working at low-income taxpayer clinics and serving as the Taxpayer Advocate in the New York City Department of Finance before she joined the Tax Court.

The purpose of STJs is to lessen the workload of the Tax Court and to allow the judges to hear cases with smaller amounts in controversy. The duties of STJs are wide-ranging and include several activities, as reflected in a prior Position Vacancy Announcement.



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Special Trial Judge Receives Tax Court’s Highest Award

by and | Nov 23, 2021 | ,

On November 21, 2021, the US Tax Court announced that Special Trial Judge Daniel A. Guy, Jr., received the J. Edgar Murdock Award for his distinguished service to the Tax Court. The Murdock Award commemorates Judge John Edgar Murdock, who served on the Tax Court from 1926 to 1968 and has been described as probably the most influential person to serve on it. A story recited in the publication referenced below (and which may be more folklore than fact) is that a taxpayer once concluded their argument before Judge Murdock saying, “as God is my judge I do not owe this tax,” and Judge Murdock retorted, “He isn’t, I am, and you do.” Further background on Judge Murdock can be found here.

The Murdock Award is the highest honor bestowed by the Tax Court. It has been presented only 13 times since its creation in 1973, with the most recent recipients being former Chief Special Trial Judge Peter J. Panuthos (2012), former Judge Robert P. Ruwe (2012) and current Chief Special Trial Judge Lewis R. Carluzzo (2020).

The Tax Court is composed of 19 presidentially appointed members and also includes senior judges serving in recall and special trial judges. As explained in the publication “The United States Tax Court: A Historical Analysis” (2d ed. 2014), the Tax Court established a small tax case division following statutory changes made in the Tax Reform Act of 1969. The purpose of special trial judges is to lessen the workload of the Tax Court and allow these judges to hear cases with smaller amounts in controversy. The range of cases that may be assigned to a special trial judge has expanded over the years, and they play an important role in the tax judicial system.

Special Trial Judge Daniel has served the Tax Court in various roles, ranging from law clerk to general counsel, for more than 30 years. He was appointed as a Special Trial Judge on May 31, 2012. Partners Andrew Roberson and Kevin Spencer worked with Special Trial Judge Daniel when they clerked at the Tax Court and saw the invaluable services he provided firsthand. McDermott congratulates him on this well-deserved honor.



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IRS Announces Nonacquiescence in Mayo Tax Regulation Invalidity Holding

by and | Nov 22, 2021 | , , , ,

We previously wrote here and here about decisions made by the District Court of Minnesota and the US Court of Appeals for the Eighth Circuit in Mayo Clinic v. United States regarding challenges to the validity of certain Treasury Regulations promulgated under Internal Revenue Code (Code) Section 170. In that case, the Eighth Circuit held for the taxpayer in part and the government in part and remanded to the district court to further develop the record and address certain issues.

The Internal Revenue Service (IRS) recently announced in an Action on Decision (AOD) that it will not acquiesce in the Eighth Circuit’s holding, which invalidated Treas. Reg. § 1.170A-9(c)(1)’s requirement that the primary function of an education organization described in Code Section 170(b)(1)(A)(ii) must be the presentation of formal instruction. This means that in all cases not appealable to the Eighth Circuit, the IRS will not follow this holding and will continue to litigate the issue.

The IRS’s policy is to announce at an early date whether it will follow the holdings in certain cases, and it does so by making an announcement in an AOD. A nonacquiescence is not binding on courts or the taxpayers but merely signals the IRS’s position that it disagrees with a court decision. (Sometimes the IRS will acquiesce in a decision.) Given that an AOD is published in the Internal Revenue Bulletin, it could be argued that the IRS’s action constitutes published guidance taxpayers can rely on. The IRS’s list of AODs, with links to each action, can be found here.



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Supreme Court Grants Certiorari in One Tax Case, Denies it in Several Others

by and | Oct 6, 2021 | , ,

Historically, the Supreme Court of the United States rarely grants petitions for certiorari in tax cases, and it appears this trend continues in the current term.

On September 30, 2021, the Supreme Court granted the petition for certiorari in Boechler, P.C. v. Commissioner. The case presents the question of whether Internal Revenue Code Section 6330(d)(1), which establishes a 30-day time limit for filing a petition in the US Tax Court to review a notice of determination by the Internal Revenue Service (IRS) in a collection due process matter, is a jurisdictional requirement or a claim-processing rule subject to the equitable tolling doctrine.

On October 4, 2021, the Supreme Court denied petitions for certiorari in Healthcare Distribution Alliance v. James and Taylor Lohmeyer Law Firm PLLC v. United States. The former involved a challenge to a US Court of Appeals for the Second Circuit decision that held that an opioid stewardship surcharge was a tax within the meaning of the Tax Injunction Act. The Court also found that the district court lacked subject matter jurisdiction to rule on the challenge to the payment. The latter case involved a law firm’s challenge to the US Court of Appeals for the Fifth Circuit’s decision that the IRS could use a “John Doe” summons to seek the identifies of taxpayers who it believed may have taken the firm’s advice to hide income offshore.

The Supreme Court also denied petitions for certiorari in the following cases:

  • Perkins v. Commissioner: A case regarding the taxability of income derived from the sale of land and gravel mined from treaty-protected land by an enrolled member of the Seneca Nation
  • Kimble v. United States: A case focused on Report of Foreign Bank and Financial Accounts penalties and
  • Razzouk v. United States: A case involving restitution for tax and bribery convictions

Still pending are petitions in Willis v. United States (which involves the value of collectible coins seized by the government and deposited into an IRS account) and Clay v. Commissioner (which deals with a dispute over whether to follow guidance from the Bureau of Indian Affairs or the IRS).

Practice Point: Although the Supreme Court rarely reviews tax cases, when it does, the decision is usually important because it’s applicable to numerous taxpayers. For example, cases such as Mayo Found. for Med. Educ. & Research v. United States and United States v. Home Concrete & Supply LLC both provided significant guidance for taxpayers regarding the IRS’s scope of regulatory authority. Additionally, non-tax cases from the Supreme Court can contain general principles that are also applicable and impact tax positions taken, or being considered, by taxpayers. Thus, it is important that taxpayers and their representatives stay abreast on what is happening at the Supreme Court.



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