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New Tax Court Rules

Posted on Apr. 8, 2016

On March 28, 2016, the Tax Court promulgated  new interim and proposed rules in response to the legislation Congress passed at the end of 2015.  Congress had trained us that it did not really legislate anymore and suddenly it had a burst of activity passing the Bipartisan Budget Act of 2015, The Fixing America’s Surface Transportation Act and the Protecting Americans from Tax Hikes Act of 2015.  Embedded in each piece of legislation was something, or many things, that impacted the Tax Court.  The announcement from the Court included notification it was adopting certain interim rules without giving the opportunity for public comment because of the immediate need for rules while it also announced proposed amendments on which it invited comments.  This post will briefly touch on most of the rule changes and follow the order in which the changes appear in the rules.

Rule 13 relating to the Court’s jurisdiction is changed to reflect the inclusion of innocent spouse and collection due process (CDP) cases in the types of cases impacted by the automatic stay in Bankruptcy Code 362(a)(8).  In 1978 when Congress created the current bankruptcy code it imposed the stay on Tax Court proceedings singling out the Tax Court among all courts for this treatment.  I covered this issue previously in discussing the legislation.  At that time Congress created BC 362(a)(8) the Tax Court did not have standalone innocent spouse jurisdiction and did not have CDP jurisdiction.  The reference in BC 362(a)(8) did not include these types of cases and the scope of the stay regarding these cases was unclear.  In the PATH legislation, Congress extended the stay to these types of cases and the Court rules now include this change.  So, starting on December 18, 2015, a taxpayer cannot bring a Tax Court proceeding to determine innocent spouse status or to challenge a CDP determination if the taxpayer is in a bankruptcy proceeding in this the automatic stay is in existence.  Similarly, if a Tax Court proceeding under the innocent spouse or CDP provisions is ongoing at the time the taxpayer files a bankruptcy petition and creates the automatic stay, the Tax Court proceeding will be suspended until the stay terminates by operation of law or by bankruptcy court order.  This change creates a parallel structure for different types of Tax Court proceedings stopping all of them when a bankruptcy occurs

Rule 143 changes as a result of a PATH act provision because Congress changed the applicable rules of evidence for Tax Court cases.  Guest Blogger Joni Larson discussed this change.  See her post here.

Rule 255.1-.6 address changes to partnership actions brought about by Bipartisan Budget Act.

Rule 280 changes to address the new path to Tax Court jurisdiction created by the PATH act.  Taxpayers seeking interest abatement now have an ability to get into Tax Court that follows the path some taxpayers take to District Court in refund suits.  Instead of waiting for a notice from the IRS as a ticket to Tax Court, the failure of the IRS to act on the interest abatement request within 180 days after the filing of the claim opens the doors of the Tax Court to judicial review of the issue.

Rule 281 sets out the information a petitioner seeking interest abatement should include in the petition

Rules 350 through 351 address the new Tax Court jurisdiction to rule on the revocation of passports.  See our post by guest blogger Ken Weil on this issue here.   We wait anxiously to see the first one of these petitions.  Because petitions to reverse the revocation of a passport present an entirely new basis for jurisdiction of the Tax Court, the procedures set out in the proposed rule change and the proceedings brought under the new code provision will create a whole new body of case law.  It may take the next couple of decades for this to fully play out just as the CDP legislation in 1998 is still creating new wrinkles for the Court to address.

Congress seems to want to load the Tax Court with more and more types of cases.  When will it decide that the Tax Court can handle refund cases?

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