The Un-Precedented Tax Court

The Un-Precedented Tax Court Amandeep S. Grewal * I. INTRODUCTION ........................................................................... 2065 II. THE NATURE OF THE NONPRECEDENTIAL PROBLEM .................. 2069 A. T HE T HEORETICAL D EBATE ................................................... 2069 B. T HE P ROBLEM IN P RACTICE : M EMO O PINIONS ....................... 2073 C. A P OTENTIAL P ROBLEM : B ENCH O PINIONS ............................. 2079 III. THE PROBLEM COMPOUNDED .................................................... 2082 A. T HE S EPARATION OF P OWERS I SSUE ........................................ 2082 B. T HE P ROBLEM IN P RACTICE : S O PINIONS ................................ 2087 IV. THE PROBLEM FURTHER COMPOUNDED: THE TAX COURT’S JUDICIAL(?) POWER .................................................................... 2091 V. A PROPOSED SOLUTION .............................................................. 2095 A. M EMO O PINIONS ................................................................... 2096 B. S O PINIONS ........................................................................... 2101 VI. CONCLUSION .............................................................................. 2103 I. INTRODUCTION Around the turn of this century, a “highly-charged” debate erupted over unpublished federal appellate court opinions. 1 Some, including most notably Judge Alex Kozinski of the Ninth Circuit, strongly argued that the common prohibition against citation to those opinions posed no constitutional problems, and that the prohibition allowed appellate judges to efficiently discharge their duties. 2 Yet others, including Judge Richard Arnold of the * Professor of Law, the University of Iowa College of Law. The participants at the 2015 Tax Court Judicial Conference provided helpful comments on this Essay, for which I am grateful. 1. Scott E. Gant, Missing the Forest for a Tree: Unpublished Opinions and New Federal Rule of Appellate Procedure 32.1 , 47 B.C. L. Rᴇᴠ. 705, 706 (2006). 2. Hart v. Massanari, 266 F.3d 1155, 1180 (9th Cir. 2001). For a survey of various courts’ citation rules regarding unpublished opinions, see Melissa M. Serfass & Jessie L. Cranford, Federal and State Court Rules Governing Publication and Citation of Opinions , 3 J. APP. PRAC. & PROCESS 251, 2066 IOWA LAW REVIEW [Vol. 101:2065 Eighth Circuit, passionately disagreed, arguing that the no-citation rule eliminated a significant check on the judicial power and consequently violated the Constitution. 3 In 2006, the Judicial Conference of the United States addressed one aspect of this controversy. Under new Federal Rule of Appellate Procedure 32.1, any party may cite unpublished opinions. 4 However, the new rule does not address other fundamental questions related to unpublished opinions, including their appropriate precedential status and their constitutionality. 5 Consequently, an active scholarly debate over these issues continues. 6 This debate might have been expected to reach, but has not yet touched upon, issues related to the purportedly nonprecedential nature of most Tax Court opinions. Although the Tax Court sometimes issues precedential “Division” opinions, 7 most of its opinions come in one nonprecedential form or another. 8 Under court practices, the Chief Judge classifies some opinions as Memorandum or “Memo” opinions, and these opinions, in theory, involve only heavily factual determinations or applications of settled law. 9 Although 253–85 tbl. 1 (2001). 3. Anastasoff v. United States, 223 F.3d 898, 904 (8th Cir. 2000). 4. See FED. R. APP. P. 32.1 (“A court may not prohibit or restrict the citation of federal judicial opinions, orders, judgments, or other written dispositions that have been . . . designated as ‘unpublished,’ ‘not for publication,’ ‘non-precedential,’ ‘not precedent,’ . . . and . . . issued on or after January 1, 2007.”). For a discussion of how the rule changes for unpublished appellate opinions affects Tax Court practice, see Peter A. Lowy et al., Citing Unpublished Opinions in Tax Court Proceedings , 114 TAX NOTES 171 (2007). 5. See FED. R. APP. P. 32.1 committee’s note (“Rule 32.1 is extremely limited. It does not require any court to issue an unpublished opinion or forbid any court from doing so. It does not dictate the circumstances under which a court may choose to designate an opinion as ‘unpublished’ or specify the procedure that a court must follow in making that determination. It says nothing about what effect a court must give to one of its unpublished opinions or to the unpublished opinions of another court. Rule 32.1 addresses only the citation of federal judicial dispositions that have been designated as ‘unpublished’ or ‘non-precedential’—whether or not those dispositions have been published in some way or are precedential in some sense.”). 6. See CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 3978.10 (4th ed. 1998) (discussing controversy and collecting citations to scholarly works). 7. On occasion, after reviewing a draft opinion, the Chief Judge will call for full-court review. See I.R.C. § 7460(b) (2012). The opinions ultimately issued via this procedure are usually referred to as reviewed opinions. 8. According to a search of its website, the Tax Court issued over 500 total opinions in 2014, only 45 of which received the T.C. designation. The remainder were Memorandum or Summary opinions. See Opinions Search, U.S. TAX COURT, http://www.ustaxcourt.gov/USTCInOP/ OpinionSearch.aspx (last visited May 18, 2016) (providing an opinion search field). 9. As described by former Tax Court Chief Judge Mary Ann Cohen, Memo opinions are issued in “cases involving application of familiar legal principles to routine factual situations, nonrecurring or enormously complicated factual situations, obsolete statutes or regulations, straightforward factual determinations, or arguments patently lacking in merit.” Mary Ann Cohen, How to Read Tax Court Opinions , 1 HOUS. BUS. & TAX L.J. 1, 7 (2001). 2016] THE UN-PRECEDENTED TAX COURT 2067 parties may cite them, 10 Memo opinions purportedly lack precedential value. 11 Congress has also denied precedential status to some Tax Court opinions. Under Section 7463(b), 12 so-called Summary or “S” opinions can neither be appealed nor cited as precedent. These opinions relate to cases decided under an essentially elective, streamlined set of procedures and involve relatively small amounts of tax liabilities. 13 The justifications for Memo and S opinions seem straightforward. Like other federal courts, the Tax Court faces a heavy workload, and Memo opinions might allow Tax Court judges to decide clear-cut cases without worrying about the dangers of establishing precedent. S opinions also go hand-in-hand with streamlined case procedures, without which taxpayers could judicially contest their tax liabilities only by following generally cumbersome procedural rules. 14 The nonprecedential status of these Tax Court opinions gives rise to practical problems, however. 15 A judicial exposition of a case is difficult to ignore, and taxpayers frequently invoke Memo or S opinions as authority in connection with their tax disputes, whether in front of the IRS, the Tax Court, or other federal courts. 16 And the Tax Court seemingly cannot ignore its own opinions. 17 Although plenty of cases dismiss Memo opinions as 10. See Press Release, U.S. Tax Court (June 26, 2012), https://www.ustaxcourt.gov/press/ 062612.pdf (providing citation forms for Memo opinions and noting that such opinions “generally address cases which do not involve novel legal issues and in which the law is settled or the result is factually driven”). 11. See, e.g. , Dunaway v. Comm’r, 124 T.C. 80, 87 (2005) (dismissing IRS’s reliance on several Memo opinions, given their limited analysis and because “memorandum opinions of this Court are not regarded as binding precedent”) (citing Nico v. Comm’r, 67 T.C. 647, 654 (1977)), rev’ d in part on other grounds , 565 F.2d 1234 (2d Cir. 1977). 12. Unless noted otherwise, Section references are to the Internal Revenue Code of 1986 (I.R.C.), codified at 26 U.S.C. 13. See I.R.C. § 7463(a) (2012) (prescribing dollar limits for cases eligible for Section 7463 procedures). 14. See S. REP. NO. 91-552 (1969), reprinted in 1969-3 C.B. 423, 614 (explaining how stare decisis and judicial review procedures mandate a degree of formality in Tax Court proceedings, and these procedures may be burdensome to taxpayers litigating relatively small amounts). 15. See Erik M. Jensen, American Indian Law Meets the Internal Revenue Code: Warbus v. Commissioner, 74 N.D. L. REV. 691, 692 n.9 (1998) (“There is a neverending dispute within the Tax Court about the precedential effect of the court’s not-officially-published ‘memorandum opinions . . . .’”). 16 . See infra Part II. Generally speaking, the value of a judicial precedent falls along a spectrum, with some authorities being accorded only persuasive value and others being viewed as binding, unless a justification for abandoning the principles of stare decisis applies. Practices regarding Memo opinions cover the spectrum. 17. Andrew R. Roberson & Randolph K. Herndon, Jr., The Precedential and Persuasive Value of Unpublished Dispositions , 66 TAX EXEC. 83, 87 (2014) (“[I]t is rare to find a non-T.C. opinion that has rejected the reasoning of a prior memorandum opinion.”). Memo opinions also routinely cite prior Memo opinions for their precedential value. See, e.g. , Tilden v. Comm’r, 110 T.C.M. (CCH) 314, 316–17 (2015) (relying on Boultbee v. Comm’r, 101 T.C.M. (CCH) 1031 (2011), which 2068 IOWA LAW REVIEW [Vol. 101:2065 nonprecedential, other cases treat them like persuasive or binding authorities. 18 More troubling still, Memo opinions sometimes address controversial issues of tax law, and not only heavily factual or clear-cut legal issues. 19 The ambiguous weight of Memo opinions thus sows confusion in the tax law. 20...