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Tax Court Answers

Posted on Mar. 8, 2022

The listserv for the Low Income Tax Clinic and Pro Bono Committee of the American Bar Association Tax Section recently had a burst of discussion regarding answers in small tax cases in the Tax Court.  This issue has come up before. Professor Rob Nassau of Syracuse Law School, and long-time director of the tax clinic there, started the discussion concerning answers in Tax Court cases with the following post:

Has anyone ever received a TC Answer that had anything useful in it?

It just wastes time.

Instead of getting the case to an AO immediately, several months are wasted while IRS Counsel submits an Answer that says nothing.

It’s time the TC eliminated this requirement in S Cases.



P.S.  I recall that back in the day there was no Answer Requirement for S Cases.  I feel like the TC should look at some of the Answers and realize they add nothing.

I am sure anyone from Chief Counsel’s office reading this post did so with glee since that office hates the answer requirement in small tax cases.  The concern expressed by Professor Nassau raises several issues which merit a discussion in the community of Tax Court practitioners that goes beyond the utility of the current answer process.


I posted recently on cases in which taxpayers come to Tax Court but get dismissed prior to a merits determination.  As I mentioned in that post, I am unaware of empirical data tracking the reasons that taxpayers fall away before obtaining a merits determination.  Yet, I strongly believe that the current system fosters a portion of the melt.  Significantly delaying the time between the petition and engagement on the merits causes taxpayers to give up.

The system is slow.  While perhaps extraordinary, see the recent post on the Hicks case in which it took eight years after the tax year at issue for the Tax Court to render an opinion on a dependency exemption case in which no continuance for trial or any taxpayer-induced delay occurred.  The system is impersonal.  Most taxpayers arrive at the Tax Court’s doorsteps never having had the opportunity to engage with a human assigned to their case.  A high percentage of Tax Court cases result from correspondence audits as discussed here.  Once they file the petition, these taxpayers receive a response from the Tax Court verifying receipt and providing other useful information but hear nothing from the IRS for about 6-8 weeks (not counting the delays existing in 2021 when that period stretched to 4-6 months.)  What they hear from the IRS is an answer formed with legal words suggesting the IRS denies everything the taxpayer has said.  Many taxpayers don’t understand the significance of the denial (or perhaps the lack of significance.)  They get discouraged and then hear nothing more for months before a communication finally arrives from Appeals.  Some have concluded by this point that their case is over.

A Suggested Solution

We should at least experiment with building a better system.  In 2015 the tax clinic at Harvard, responding to a proposal from Chief Counsel for a truncated answer, wrote to the Tax Court suggesting a study of what system would work best.  A colleague at Harvard, Professor Crystal Yang and her husband, Professor Will Dobbie at Princeton University where his work focuses on Economics and Public Affairs had recently spoken at a bankruptcy conference just before a presentation by me.  Following their presentation in which they discussed an empirical study of a bankruptcy process, I spoke to them to see if they thought a similar study of Tax Court answer procedure could help identify a best practice.  They thought it could and agreed to do it if asked.  It struck me that having a neutral party of experts help to design a system that would work best for all parties might prove beneficial.  The clinic’s letter to the Tax Court is attached here.  The Court did not respond to the offer.

Since the inception of small tax case procedures in 1969, the Court has installed the answer, removed the answer, and reinstalled the answer.  It did so without consulting those who represent low income taxpayers.  While it did consult with Chief Counsel, or perhaps I should say it agreed to the unilateral proposal from Chief Counsel to remove the answer requirement in the 1980s, it, to my knowledge, has seldom meaningfully engaged the people who represent the taxpayers impacted by the Court’s process or the taxpayers themselves. Although the Court has made significant progress since the 1980s in engaging with tax clinics and pro bono programs through the annual letter process and through opportunities provided through the ABA Tax Section, it has not sought through study and experimentation a means of finding the best way to engage unrepresented petitioners.  It still has an opportunity to do so.

The Current Answers

I agree with Professor Nassau’s point that the answers produced today by Chief Counsel in small tax cases almost always waste time. Little effort seems to be made to carefully review the facts and engage in the type of response required by Tax Court Rules 33 and 36. So, almost all answers do not move the case forward from the perspective of narrowing the facts.

In some cases in some offices, Chief Counsel does carefully read the pleadings and concede the case at the outset. I give kudos to the Boston office for doing this occasionally, and I know it is not the only one. Because it is possible to get a concession at the outset, some practitioners are reluctant to give up the answer and the possibility of a quick resolution. I understand that reluctance but do not think that the solution needs to preclude the opportunity for early resolution.

The Necessary Elements

In 2007 when the Court reversed the decades long experiment with no answer that Chief Counsel had suggested in small tax cases, the Court primarily had concerns, as I understand it, with two things: the need for a review of the timeliness and jurisdictional basis of the petition by Chief Counsel and the need for the petitioner to have a contact about the case other than the Court. These concerns could be addressed by something other than an answer.

Having Chief Counsel focus on the jurisdictional basis of the case and the timeliness of filing the petition could not only benefit the Court but also Chief Counsel.  We know that the Court regularly catches cases at the decisional stage that were not timely filed.  In these instances, the Court issues a show cause order.  This happens at least once a month.  Depending on the outcome of the litigation regarding timeliness and jurisdiction, identifying the timeliness of the filing could become even more important going forward since failure to raise the timely filing of the petition early in the case could result in a deemed waiver of the defense.  So, Chief Counsel’s interest may closely align with that of the Court.  Setting an early timeframe for Chief Counsel to raise these issues in a formally required document could provide a logical mechanism for identifying problems with the filing.

Chief Counsel and the IRS do not need to have a program of referring cases to Appeals and then doing nothing for months.  In district court cases discovery commences immediately after the case is at issue without sitting around for months waiting for an Appeals Officer to finally join the case.  (See F.R.C.P. rules 26(f) and 16(b).)  If Chief Counsel wants to have Appeals involved, it can negotiate a commitment from Appeals to join the case immediately after it is at issue.  That doesn’t necessarily mean Appeals must hold a conference the next day, or the next week or the next month after joinder, but it does mean that Appeals would step forward immediately, giving the taxpayer someone to engage with after filing the petition if Appeals is going to play a role.  We need not be stuck with the present system.  There are ways to devise a better one.

A Better Model for Discussion with the Court

The Court of Veterans Appeals, another Article I Court, has established a Judicial Advisory Committee to discuss issues of common interest to those practicing before it.  Why couldn’t the Tax Court establish a similar board consisting of representatives from Chief Counsel, from clinics and from private practice in order to discuss ways to make the system work best for everyone?  Of course, the Court would have the final say, but this way it has a sounding board for new ideas rather than an ad hoc practice of soliciting comments.

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