I am enjoying reading and watching “The Game of Thrones.” I have reached the point in the show in which Arya Stark enters the House of Black and White.
Recently, I wrote about the Solicitor General’s brief recommending against cert in the Mallo bankruptcy case. The Solicitor General’s decision made me think about the battles that take place within the government concerning whether to appeal a case. The name of the house Arya Stark entered made me think about my name for the room where the battles concerning appeals take place – The Room of Lies. The name sprung from trying to turn failure into humor and has no significance beyond the effort to make light of our inability to carry the day in the process discussed here.
Telling the story of the Room of Lies really involves explaining the decision making process for appealing a case. I had the opportunity to observe the process fairly closely from three different perspectives in Chief Counsel’s office. First, I observed it as a brand new attorney just out of law school when I worked in what was then known as the Refund Litigation Division for 18 months. Then I had the ability to observe it in much greater detail almost 10 years later as a Branch Chief in what was then known as the General Litigation Division for about four years. Finally, I had the opportunity to observe it briefly as the temporary head of the General Litigation Division about 10 years after that. Each perspective and the time spent in between the observations brought a greater appreciation of the process.
Of course, the room where the decisions concerning appeal of tax cases by the government, or at least where the parties debate the decisions, does not involve actual lies. The parties engaged in making the decision of whether to appeal a government loss at the trial level all come with honorable intentions and a great deal of knowledge. I will explain later how I gave the room this name but I want to dispel any notion that the name bears any relationship to what actually happens. To understand what happens in the room, it is necessary to understand the process and the parties involved in making a decision to appeal a tax case. I will focus my discussion on the decision to appeal a case from a trial court, either the Tax Court or the District Court, to the Circuit Court and not on discussions on whether to seek cert although the process for the latter is relatively similar.
On the IRS side of the decision to appeal are the field attorneys who tried the case and the National Office attorneys primarily in Procedure and Administration. Since I last had personal involvement in an appeal while working in the National Office, Chief Counsel reorganized and created headquarters of divisions located in Washington. I am uncertain exactly how much the headquarters personnel get involved in appeals and suspect it may depend on the specific case. I will describe the players as though headquarters has little or no involvement but that could vary. I will also describe the situation as if other divisions of Chief Counsel’s national office have little or no involvement; however, depending on the issue in the case, the involvement of other divisions could range from significant to non-existent where the issue involves a matter solely within the purview of Procedure and Administration such as collection, disclosure or procedure.
In this description of the appeals process, the discussion focuses solely on cases the government has lost. While appeals conferences can occur for cases which the government won at the trial level, this discussion of the process will focus solely on whether to appeal the loss at the trial level.
The attorney who tried the case starts the process. A Chief Counsel field office attorney will work on the matter whether the decision came from the Tax Court or from a District Court. Because the Chief Counsel field attorney serves as the trial attorney in Tax Court cases, I will first focus on an unfavorable Tax Court decision. Not surprisingly, trial attorneys almost always think the trial court made a mistake in holding against the position argued by the trial attorney and these attorneys almost always want to appeal. The rest of the process seeks to dampen their fervor.
The trial attorney will make an initial recommendation concerning appeal. This recommendation goes to their supervisor. In most cases it will go from the supervisor to Division Headquarters on the way to the National Office (see generally IRM 36.1.1). As the recommendation moves from the trial attorney to others less vested in the specific outcome and more interested in a balanced treatment of the issue, the tone gets dampened down and the desire for appeal grows smaller. The recommendation makes its way into Chief Counsel’s national office to someone in the Procedure and Administration division who is the docket attorney there tasked with preparing the recommendation that will go over to the Department of Justice. As mentioned above, depending on the issue involved, other parts of the National Office may also get involved and could potentially play a large role.
The National Office docket attorney, a position I held in 1977-8, makes a recommendation. This attorney generally has all of the cases involving the issue in this appeal no matter where the cases exists around the country and this person may have technical expertise on the tax issue that the trial attorney did not. The National Office docket attorney makes a recommendation that goes to their branch chief and on to the front office of Procedure and Administration. Depending on the importance of the case, one or more staff attorneys in the front office of Procedure and Administration, usually attorneys with significant experience in appeals, will also review the case. Perhaps a meeting will be held within the division to discuss the appeal. Perhaps the National Office docket attorneys or others in the National Office will discuss the case with the field attorney, the filed attorney’s supervisor or someone at headquarters.
Procedure and Administration makes a decision whether to recommend an appeal. Most of the cases the IRS loses in Tax Court will receive a negative recommendation regarding appeal from Procedure and Administration. The trial attorney will learn from members of Chief Counsel’s office that the case does not merit appeal. Once the decision is made within Procedure and Administration, a letter is sent to the Department of Justice transmitting the recommendation. A recommendation not to appeal coming out of this process with Chief Counsel’s office almost surely means the government will not appeal the case. Such a recommendation generally also means that the case does not necessitate a trip to the Room of Lies.
You can see from this discussion that the intra-agency decision making process regarding appeal of an adverse case involves numerous individuals. The discussion may also involve the client in an effort to gather data on the administrative impact of the adverse decision since administrative impact can make a difference in deciding whether to purse a legal argument. For that minority of cases that successfully run this gauntlet, the battle to appeal has just begun. All of this takes place within a relatively short time period because the government must generally decide whether to appeal within the time to appeal – 90 days (see IRM 220.127.116.11.4).
While Chief Counsel’s office worked on its recommendation concern an appeal of the adverse decision, the Department of Justice was working as well. In the next post about the Room of Lies, we will look at the process at the Department of Justice and get to the Room.