Attorneys Comment on Tax Court's Proposed Rules on Electronic Filing

Dear Mr. Di Trolio:

This letter is in response to your solicitation of comments regarding proposed INTERIM RULE 22A. ELECTRONIC FILING and the related Interim Procedures. We have reviewed the comments of the Taxation Section of the American Bar Association in connection with the preparation of this letter. We fully support the Taxation Section's comments except as specifically noted in this letter.

We applaud the court for approaching the matters of electronic filing and electronic access in a pilot program. With the implementation of a radical change in procedure, there is no certainty all problems will be anticipated. A pilot program will either confirm that no problems were overlooked, or it will provide the data for making appropriate changes.

We fully agree with the Taxation Section's statement of its belief "the rules will work effectively" based on the experiences of the members of the Taxation Section with e-filing in other courts. We also completely agree with the Taxation Section's comments regarding Interim Procedure No. 7(b).

We agree with the Taxation Section's comments regarding Interim Procedure No. 11 to a limited degree. We understand the Taxation Section's suggestion regarding Interim Procedure No. 11 to urge a modification to this interim procedure in order to give individuals, authorized to appear before the Tax Court, access through e-mail to those documents that are accessible at the Tax Court in Washington, D.C.

There is an advantage in litigation before the Tax Court for those whose geographic proximity to the court's physical facility provides them with easy access to the facilities of the Tax Court. The modification suggested by the Taxation Section attempts to partially compensate for geographic disadvantages through the use of e-mail. We agree e-mail access would significantly reduce geographic disadvantages. We disagree with the proposal out of concern e-mail access to court documents will prove to be a burden on the Office of the Court Clerk, particularly if such a procedure is used extensively in lieu of online access.

We note there is no commitment in the NOTICE to a date for implementation of the court's first step toward electronic filing. We also note the Taxation Section did not comment on this point. We encourage the court to immediately implement INTERIM RULE 22A and the Interim Procedures, particularly if the failure to set a date for implementation indicates a hesitation on the part of the Tax Court to move forward with electronic filing.

The Taxation Section's suggestion regarding a modification of Interim Procedure No. 11, as well as its closing reference to public online access, indicates the Taxation Section intends to comment more extensively on Electronic Access at a future date. We have decided to take the opportunity of this letter to go beyond your specific request, and to comment more broadly on the issue of Electronic Access. We also have taken the opportunity of this letter to comment more broadly on the issue of Electronic Filing than requested by the NOTICE because we believe Electronic Filing should become the preferred system of filing for all matters before the Tax Court at the earliest possible date.

We realize there are substantial security and privacy concerns involved both with Electronic Access to court records, and with Electronic Filing. However, we believe the benefits, for the court and for taxpayers, that will flow from Electronic Filing, and from Electronic Access to the court's records, significantly outweigh the costs that may be incurred in the implementation of well-conceived plans for Electronic Filing and Electronic Access as well as any injury that may result from a misuse of either Electronic Filing or Electronic Access.

Electronic Filing and Electronic Access to court records present related, but distinct, problems for the court. Electronic Filing and Electronic Access are intertwined to a degree, but an inability to address all of the privacy and security issues relating to Electronic Access to the court's records by non-parties should not be a consideration in the evaluation of Electronic Filing.

The Tax Court has evolved into a two-tier system for resolving tax disputes in some respects -- one which dispenses justice differently for unrepresented taxpayers as opposed to represented taxpayers. The court expends substantial effort to accommodate unrepresented taxpayers, but it is a largely unappreciated and unrewarded effort, and on occasion the court's efforts are inconsistent.

The Tax Court's effort to accommodate unrepresented taxpayers comes at a significant cost to the efficiency with which the resources of the court are utilized. We believe the court should permit Electronic Filing at the option of a petitioner -- both for represented taxpayers and unrepresented taxpayers -- at the earliest possible date because of the case management benefits that Electronic Filing offers the court.

Electronic Filing offers the court an opportunity to increase the efficiency with which it manages cases. Electronic Filing offers the Tax Court an opportunity to make the court more accessible to taxpayers -- both unrepresented taxpayers and represented taxpayers. Electronic Filing offers the court an opportunity for more assurance that those cases that do proceed to trial are prepared for trial.

Electronic Filing also provides the court with an opportunity for the court to level the playing field between the IRS and taxpayers to a measurable extent. In cases in which the taxpayer is unrepresented, the court wholly relies on Area Counsel, and on the administrative processes of the IRS, to prepare a case for trial with no active participation by the court. Allowing cases to proceed to trial without the active participation of the court is wasteful of the court's resources.

Most Tax Court cases reach trial without adequate preparation. In most instances the lack of preparation results in settlement or dismissal. If Tax Court cases are settled or dismissed as a result of inadequate preparation for trial, a just result may be a mere fortuity. If cases that are not properly prepared for trial are actually tried, the trials are wasteful of the resources of the court.

Electronic Filing offers the Tax Court an opportunity to exercise control over case management -- an ability the court has lacked. The lack of effective case management has long been a deficiency in the functioning of the court. The lack of the ability to quickly communicate with the parties has led the court to adopt practices and procedures that do not use the resources of the court as effectively as they could be used if the parties were immediately accessible to the court.

In order to take advantage of the opportunity Electronic Filing offers, the court will have to adopt rules imposing case management obligations on the parties. The court will have to monitor the litigants' fulfilment of their case management obligations. Such changes in the procedures of the court are a small price to pay for the ability to effectively manage cases.

Participation by the court in the preparation of cases for trial through Electronic Filing will have a salutary impact on the cases that are settled or dismissed as well as on the cases that proceed to trial. The cases that are settled or dismissed as a result of the court's participation in the trial preparation process are more likely to be dismissed because they should be dismissed, or settled where they should be settled, as a direct result of the court's

The utilization of Electronic Filing as a case management tool will allow the court to more effectively manage its docket. Almost weekly the Tax Court conducts calendar calls. The calendar call process is wasteful of judicial resources. All of the business conducted at calendar call could be completed electronically prior to any calendar call for those cases that participate in Electronic Filing.

Mandatory Electronic Filing, with appropriate modifications to the Tax Court's rules to make the court an active participant in the trial preparation process, could entirely eliminate the need for calendar call. The court will know before the date of calendar call what cases are likely to be tried, and the scheduled length of trial. The issues and the evidence will have been disclosed to the court. The parties will have represented to the satisfaction of the court that the case was fully prepared for trial, and that a trial was necessary for specifically described reasons. Trial dates will be set electronically.

Electronic Filing will not eliminate disputes between the taxpayers and the IRS. Even with Electronic Filing the court will continue to be plagued by compliance challenged individuals. The court will still be forced to address revenue raising legislation that was largely honed by the force of special interests that did not include simplicity of analysis, understanding, or administration. However, Electronic Filing is a tool the Tax Court can utilize to make the court more accessible, more efficient, and more effective. We encourage the court to spare no effort to make such changes in the court's rules and practices as are necessary to adopt Electronic Filing as the preferred system for filing, and to utilize Electronic Filing to create an effective case management tool for the court.

The issues associated with Electronic Access which the Tax Court faces are not unique to the Tax Court. The federal bankruptcy courts have already considered, and have resolved to some substantial degree, the privacy concerns the Tax Court faces. We encourage the Tax Court to look to the experience of the federal bankruptcy courts as a foundation for establishing Electronic Access to the court's records.

Regardless of the safeguards that are established, any electronic records that are accessible over the internet are susceptible to unauthorized access. In that regard the access of Area Counsel to copies of records of the Tax Court made by the Office of Chief Counsel exposes the records of the Tax Court to unauthorized access. The system of electronic access to court records that the Tax Court has created for its own convenience is also susceptible to unauthorized access.

The establishment of a system for Electronic Access to the records of the Tax Court for registered users would create a third system which might be accessed for use in an improper or illegal manner, but the risk of improper use is not likely to be the result of authorized access. Authorized access to court records is tracked, and charged. While there is no guarantee that one who meets the conditions the court deems appropriate for access to the court's records will use such information for a proper purpose, an authorized user who uses the records for an improper purpose does so at great risk. There is a clear electronic trail of the authorized user's access to the records.

The Tax Court's cautious consideration of Electronic Access is justified by the inherent sensitivity of the court's records. We agree that the Tax Court may be justified in establishing higher standards for authorized access to electronic records than those established by the CM/EFC system. The Tax Court's records invariably contain financial information, and the proportion of such information is quite high. However, the Tax Court must not let the risk of unauthorized access to the court's records be the reason for not establishing Electronic Access. Improper or illegal use of information in the Tax Court's records is likely to flow from unauthorized access. There are already two systems in operation that expose the court's records to unauthorized access.

For the foregoing reasons we urge the Tax Court to promptly explore the potential benefits of the adoption of Electronic Filing as the preferred method for filing. For the foregoing reasons we also urge the Tax Court to immediately investigate the benefits to the court and taxpayers of the adoption of a system for Electronic Access to the records of the court.