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The Un-Precedented Tax Court: Bench Opinions

Posted on May 19, 2015

In part three of his series on Tax Court cases and precedent, guest blogger Andy Grewal looks at bench opinions.  I wrote about bench opinions in a post earlier this year and I expanded on the information provided in the post by writing an article published in the Journal of Tax Practice and Procedure.  Like the memorandum opinions discussed in Andy’s second post, bench opinions do not create precedent.  Unlike memorandum opinions, bench opinions can result from regular or small cases.  For example, in my research of 222 bench opinions issued from 6/1/2011 to 1/1/2013, 92 cases were small cases and 130 were not.

Setting aside the issue of precedent, it makes good sense to me for the Tax Court to issue bench opinions in routine type cases.  It allows the parties to quickly learn the outcome and move on.  Bench opinions in small cases make perfect sense because both bench opinions and small case (summary) opinions by statute do not carry the weight of precedent.  To encourage more bench opinions in small cases, the Tax Court could change its rules to allow judges to issue bench opinions within some relatively short specified time after the close of the trial session.  The current rules can make it difficult to use this quick resolution method because of the requirement that the opinion be issued before the session ends.  Unless the judge of a small trial calendar has down time during the session, issuing a bench opinion will prove very difficult and it may not make sense to stay in a remote location and hold a session open just to issue a bench opinion.   Bench opinions in regular cases can also provide quick feedback on routine cases but for the reasons Andy discusses, may need more oversight.

Division and Memo opinions each follow the procedures described in Sections 7459 and 7460. Those provisions generally require that, for each Tax Court proceeding, a judge issue a report (i.e., a draft opinion) and provide that report to the Chief Judge. Unless the Chief Judge determines that the entire court should review it, the draft opinion leads to a “decision of the Tax Court.” Consequently, each opinion type (Division or Memo) goes through a statutorily mandated review process and each carries the weight of the Tax Court’s decisional authority, not merely that of a single judge.

The final sentence of Section 7459(b), added in 1982, provides an exception from these general procedural requirements. Under the provision, statutory requirements will be “met if findings of fact or opinion are stated orally and recorded in the transcript of the proceedings,” subject to any limitations the Tax Court prescribes. Under Tax Court Rule 152(a), a judge may, “in the exercise of discretion,” issue a so-called oral or Bench opinion if she is “satisfied as to the factual conclusions to be reached in the case and that the law to be applied thereto is clear.” Although they may be appealed, Bench opinions, unlike Division or Memo opinions, do not receive further review from the Chief Judge. Instead, the authoring judge will read the opinion into the record prior to the close of the relevant trial session and promptly send transcripts to the parties.

Bench opinions apparently have not given rise to the same level of controversy as Memo opinions. The case law reflects some occasions where a judge may have incorrectly decided a case via the streamlined Bench opinion process, but these circumstances seem rare. Also, Tax Court Rule 152(c) flatly denies precedential status to Bench opinions, and this substantially limits taxpayer confusion as compared to Memo opinions, regarding which taxpayers must grapple with various conflicting statements. Perhaps most importantly, Bench opinions historically have not been published or posted online. Opinions can’t cause a lot of confusion if no one can find them.

Expanded search capabilities for Tax Court opinions could change this. The court’s website now allows users to search recent Bench opinions. It’s possible that a litigant will find a favorable opinion and rely on it, notwithstanding the prohibitions contained in the Tax Court rules.

Any taxpayer reliance on Bench opinions would seemingly implicate the same constitutional issues related to Memo opinions. Just as some litigants challenged the appellate rules denying precedential status to unpublished appellate opinions, some litigants might challenge the Tax Court rules denying effect to Bench opinions.

Bench opinions, however, seem qualitatively different from Division or Memo opinions. The latter opinions follow a statutory review process and eventually lead to a “decision of the court.” Bench opinions do not actually follow any review process and, though they reflect a decision of the Tax Court, they are only deemed to satisfy the Section 7459 and 7460 procedural requirements. They thus seem roughly analogous to opinions issued by federal district judges, which do not establish any “law of the district.” Consequently, even if the Constitution mandates the precedential effect of Division or Memo opinions, it seems unlikely that that mandate would apply to Bench opinions.

Putting constitutional issues aside, functional concerns militate against the precedential status of Bench opinions. Sections 7459 and 7460 establish procedures under which the Tax Court will “decide all cases uniformly, regardless of where, in its nationwide jurisdiction, they may arise.”  Lawrence v. C.I.R., 27 T.C. 713, 718 (1957).  The statutory review provisions, which might independently establish a stare decisis requirement, do not apply to Bench opinions, which were authorized only recently.  If those opinions nonetheless bound the entire court, it’s hard to see how uniformity could be achieved.

That’s not to say that Bench opinions raise no concerns. In a recent article, Keith Fogg surveyed more than 200 such opinions and found that their use varied widely among Tax Court judges. One judge disposed of 60 cases via Bench opinion, employing them more than twice as frequently as any other judge, but several judges rarely issued them.

Given the breadth of Rule 152, under which a judge can issue a review-free Bench opinion in almost any case, some further guidance on Bench opinions would be helpful. As it stands now, the Rule leaves the decision to issue an opinion solely within the discretion of the authoring judge. Given their new accessibility, the significance of Bench opinions will likely rise, especially if practitioners uncover prior decisions addressing key issues. However, these concerns remain speculative, and practitioner feedback would be helpful on these issues.

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