Tax Court Update: Welcome to the Future- The Court Adopts Procedures for Remote Proceedings by JONATHAN KALINSKI
Like much of the country, the Tax Court is taking its business online, adopting procedures for remote proceedings on May 29 by issuing Administrative Order No. 2020-02. Since March 11, when the Tax Court started cancelling trial sessions, court business has virtually stopped. The Tax Court building in Washington, D.C. itself has been closed since March 18. Trial sessions have already been cancelled through June 30. The new procedures are in effect until further notice. The Tax Court’s Administrative Order includes some sample documents such as a Standing Pretrial Order.
- The primary questions remote proceedings raise are what effect will this have on taxpayers’ ability to have their cases heard This is all new to all of us and care needs to be taken that the traditions of the Tax Court for effective and fair resolution be maintained. Don’t trust any practitioner who claims to know the answer. We are all making educated guesses here. We can, however, focus on some specific areas of court practice and procedure and see whether the impact will be negative, positive, or neutral. One must understand that most taxpayers before the Tax Court are pro se and most cases are relatively small dollar cases. What may be good for small cases or lower income taxpayers may not be good for larger cases where seasoned lawyers are involved.
The Court conducts trial sessions in 74 cities, visiting large cities like Los Angeles and New York many times a year, but smaller cities like Lubbock, TX at most only once a year. The order doesn’t make clear whether the Court intends to stick with geographic based sessions, but in theory remote proceedings allow the Court to decrease the time it takes to hear a case by hearing cases from around the country at once. Quick resolution is generally best for all parties.
The Court generally does not hold trial sessions during summer months so it may not be until September (when remote proceedings may not be necessary) for us to see what effect this has on the time to resolve cases.
Tax Court judges travel around the country holding trial sessions. Including Senior Judges and Special Trial Judges there are currently 31 Tax Court judges. Remote proceedings obviously save money on travel, hotel, meals, etc. for judges and the trial clerks that typically accompany judges on sessions. Some taxpayers do not live that close to any location the Tax Court holds sessions. These taxpayers will save time on travel and the costs of getting to court. The cost of legal fees should remain largely the same.
Here is where we might start seeing significant differences. The Tax Court will use Zoomgov (Zoom approved for government use basically) to conduct video proceedings but will also allow phone access. Access to reliable high-speed internet is not equal and low income and older taxpayers will be disproportionately affected. Although high-speed internet is widely available, statistics show that those who are older, lower income, and less well educated have less access. If a taxpayer has an unreliable connection making picture or audio quality poor, it’s possible their case will be harder to present. If the taxpayer is calling in over the phone and the judge and IRS Counsel are using video conferencing it could impact the outcome. It shouldn’t and hopefully won’t. I would be very interested to hear from the many excellent low-income taxpayer clinics on this issue.
The sample standing order has a few notable differences from the traditional standing pretrial order. Although the Tax Court requires the parties to stipulate as much as possible, the regular pretrial order does not set a timeline. The new sample requires parties to file a Stipulation of Facts no later than 14 days before trial. This forces the parties to meet a little earlier to finalize a stipulation, which should reduce trial time. As a Counsel attorney, as much as I tried to have a signed stipulation weeks ahead of time, it was often a last minute endeavor because getting a hold of taxpayers is more difficult that most probably realize. As long as the parties file a status report updating the court on their efforts this shouldn’t create much of a problem.
The new sample also requires parties to file a proposed stipulated decision, pretrial memorandum, motion to dismiss for lack of prosecution, or a status report no later than 21 days before trial. Generally, a pretrial memorandum is due 14 days before trial for regular cases and 7 days for small tax cases. A separate sample standing order was issued for small tax cases that requires 21 days before trial for a pretrial memorandum. These changes, assuming the sample is representative of what all pretrial orders will look like, will mostly affect IRS Counsel. Counsel lawyers will have less time to prepare pretrial memorandums. Many, if not most, pro se taxpayers do not file pretrial memorandums. For practitioners, the difference is probably negligible.
IRS Counsel will not be able to continue the longstanding tradition of bringing a stack of motions to dismiss for lack of prosecution to calendar call. If IRS Counsel starts filing motion to dismiss cases 21 days before trial because they are unable to reach taxpayers, this may have a negative impact on pro se taxpayers. As a Counsel attorney it was common for taxpayers to show up at calendar call having never responded to a letter or call before. This could be because of a language barrier, lack of reliable telephone service or mail, or just because they were hoping the case would go away. If the new rule leads to more cases getting dismissed, it will likely disproportionately fall on pro se and lower income taxpayers.
These changes are all designed to reduce the time needed for trial and make the schedule more predicable for the Court.
At the end of the day if taxpayers and practitioners cannot effectively conduct a trial remotely, the system will not work. . I am optimistic that for most cases, there will be no quality loss. Remember, Tax Court trial are bench trials, not jury trials. Judges will be understanding of technical issues and get to the heart of the matter. For most cases where there is no witness aside from the pro se taxpayer and not many exhibits, the lack of an in-person trial might not matter.
For larger cases, those with several witnesses, expert testimony, and hundreds of exhibits, remote proceedings will present challenges. Witnesses may struggle to hear questions or could even pretend not to hear to try to gain an advantage. How will exhibits be displayed? By sharing screens or uploading the exhibits prior to trial? The technology exists to make this seamless, but it remains to be seen how this will work. The Supreme Court (and many other courts) have been conducting remote proceedings and the Tax Court will make the necessary adjustments to achieve its important mission.
Jonathan Kalinski is a principal at Hochman Salkin Toscher Perez, P.C. and specializes in both civil and criminal tax controversies as well as sensitive tax matters including disclosures of previously undeclared interests in foreign financial accounts and assets and provides tax advice to taxpayers and their advisors throughout the world. He handles both Federal and state tax matters involving individuals, corporations, partnerships, limited liability companies, and trusts and estates.
Mr. Kalinski has considerable experience handling complex civil tax examinations, administrative appeals, and tax collection matters. Prior to joining the firm, he served as a trial attorney with the IRS Office of Chief Counsel litigating Tax Court cases and advising Revenue Agents and Revenue Officers on a variety of complex tax matters. Jonathan Kalinski also previously served as an Attorney-Adviser to the Honorable Juan F. Vasquez of the United States Tax Court.