In This Section:
Tax Court Jurisdiction
Small Case Procedures
Electing the Small Case Procedure
Discontinuance of “S” Case Proceedings
Small Case Procedures: Answer
Small Case Procedures: Appeals Jurisdiction
Small Case Procedures: Trial Memorandum
Trial and Decisions in Small Tax Cases
Small Case Settlement Procedures
Non-Appeal of Tax Court Cases Important References
Web Links
Tax Court Jurisdiction
The United States Tax Court is established as a court of record under Article I of
the Constitution by I.R.C. § 7441. In accordance with statutory authority, the
court has promulgated the “Rules of Practice and Procedure of the United States
Tax Court” under which it operates. The rules of evidence applicable in the Tax
Court are the “rules of evidence applicable to trials without a jury in the United
States District Court of the District of Columbia.” I.R.C. § 7453.
Primary jurisdiction is provided to the Tax Court to redetermine whether
deficiencies determined by the Commissioner are correct. Other jurisdictional
grants include the determination of interest on deficiencies redetemined by the
Tax Court; the reasonableness and appropriateness of a jeopardy assessment
where taxpayer has previously petitioned the Tax Court to redetermine a
deficiency; enforcement of overpayment decisions by the Tax Court if not
refunded by the Service within 120 days after the decision; sales by the Service
of seized property pending decision by the Tax Court in a deficiency proceeding;
and modification of a final decision in an estate tax case to reflect interest paid
pursuant to I.R.C. § 6166. The Tax Court also has jurisdiction to enjoin a
premature assessment or collection of the deficiency which is the subject matter
of a notice of deficiency. Tax Court jurisdiction also exists under certain
circumstances in disclosure actions; actions for administrative costs; for relief
from joint and several liability on joint returns; and for due process in IRS
collection actions.
Small Case Procedures
The Small Tax Case (“S” case) procedures instituted by the Tax Court implement
the Tax Reform Act of 1969 which established a procedure to handle disputes
over small amounts quickly, efficiently, and as informally as possible in a judicial
determination of tax liabilities. Many small tax case petitioners appear pro se
and the issues in the cases are usually factual. Section 3103 of the IRS
Restructuring and Reform Act of 1998 (RRA ’98) amended I.R.C. § 7463 by
increasing the amount in dispute eligible for small case treatment from $10,000
to $50,000 effective for proceedings commenced after July 22, 1998. Small tax
cases traditionally are decided under relaxed evidentiary and trial preparation
procedures and decisions in such cases may not be appealed by either party.
Electing the Small Case Procedure
A qualified petitioner who wishes to have a case handled under the “S” case
procedures may so elect at the time of filing the petition or at any time prior to
trial. Cases classified as “S” cases will be assigned the letter “S” after the docket
number.
Discontinuance of “S” Case Proceedings
If the taxpayer requests to have the proceeding conducted under I.R.C. §7463,
the case will be docketed as a small tax case. However, respondent may move
under Tax Court Rule 172(c) for an order directing that the small tax case
designation be removed and that the proceedings not be conducted under I.R.C.
§ 7463. The motion to REMOVE "S" case designation under Tax Court Rule
172(c) must be distinguished from a motion to DISCONTINUE "S" case
proceedings pursuant to Rule 173. This latter motion is appropriate only after the
"S" case trial has begun but before the decision becomes final.
The court, on its own motion or on the motion of a party, may enter an order
directing that the "S" case designation be removed at any time prior to trial. If no
order is entered prior to trial the court shall be deemed to have concurred in
petitioner's election. See Tax Court Rule 172(c).
After the beginning of a trial of an "S" case, but before the decision becomes
final, the court may order that the proceedings be discontinued under I.R.C. §
7463, and that the case be tried as a regular case. Such order under the Tax
Court rules will be issued only if there are reasonable grounds for believing that
the amount of the deficiency, or the claimed overpayment, in dispute will exceed
$50,000 and the court finds that justice requires the discontinuance of the
proceedings under I.R.C. § 7463, taking into consideration the convenience and
expenses for both parties that would result from the order.
Small Case Procedures: Answer
Under Tax Court Rule 175 of the Tax Court, no answer is required to be filed in
an "S" case by IRS Counsel except where there is an issue on which the Commissioner
bears the burden of proof or where the court otherwise directs. Where an answer is filed,
the provisions of Tax Court Rule 36 shall apply. In a case where no answer is
filed, the allegations of error and fact relating to it set forth in the petition shall be
deemed denied.
Small Case Procedures: Appeals Jurisdiction
Pursuant to Revenue Procedure 87-24, cases are referred to Appeals for
settlement for a period of six months but no later than fifteen days before
calendar call in "S" cases.
Appeals will secure the administrative file, and immediately send IRS Counsel a
copy of the statutory notice if one was not attached to the petition. IRS Counsel
are instructed to immediately examine the petition and the statutory notice to determine
whether a jurisdictional motion or a motion to deny "S" case procedure should be
filed.
Small Case Procedures: Trial Memorandum
In those "S" cases involving substantive, technical or complicated factual issues,
a trial memorandum stating a party’s position and citing authorities should be
prepared and ready for filing at calendar call. A trial memorandum
should always be prepared and filed in accord with the direction of
the court when the court directs the filing of trial memoranda in a standing order
or otherwise. The Court may also direct the filing of a post-trial memorandum.
In all other "S" cases neither a "memorandum in lieu of answer' nor a trial
memorandum will be necessary if IRS Counsel's letter to the taxpayer (the
“Branerton letter”) clearly sets forth the issues in the case. In this connection, a
statement of the issues need not be in the body of the “Branerton letter” but may
be listed on an attachment. In any event the issues should be clearly stated and
the taxpayer should be apprised of the matters which are in dispute. A copy of
the Branerton letter (including any attachments) is to be furnished to the special
trial judge during the calendar by IRS Counsel, so that the court will be able to quickly
grasp the issues and facts in dispute. IRS Counsel are encouraged to send the
Branerton letter as early as practicable in order to promote settlement and/or to provide a
timely and appropriate foundation for a dismissal.
Trial and Decisions in Small Tax Cases
Trials of small tax cases will be conducted as informally as possible consistent
with orderly procedure and any evidence deemed by the court to have probative
value shall be admissible. The hearing will be recorded but a transcript normally
should not be ordered. A brief is not required under Tax Court Rule 177(c) but
may be permitted or requested by the court.
Small Case Settlement Procedures
The purpose of the “S” case procedure is to reduce the time involved in
preparation, execution, and filing of settlement documents in small cases. All
small cases may be settled on the basis of a specific dollar amount agreed upon
by both parties to approximate the amount that would have been reached if
formal computations had been made. It is intended that this approach be utilized
in simple cases where the finalization of decision documents would clearly be
better facilitated because of the presence of the taxpayer. It is no longer
necessary to await a formal transcript of account. Microfilm transcripts may be
utilized for making Tax Court Rule 155 computations.
Non-Appeal of Tax Court Cases
A decision entered in a case conducted under the small tax case procedure shall
not be reviewed in any other court, and shall not be treated as precedent for any
other case. See I.R.C. § 7463(b).
Important References
I.R.C. § 6166
I.R.C. § 7441
I.R.C. § 7463
I.R.C. § 7453
Revenue Procedure 87-24 1987-1 C.B. 720
Web Links
Title 26 – Internal Revenue Code
Tax Court Small Tax Case Pamphlet and Prototype Petition
United States Tax Court Rules of Practice and Procedure