Today, we continue with part two of a multi-part series on Tax Court opinions by guest blogger Andy Grewal. Today’s post explores Tax Court memorandum opinions. As most readers know, you make a choice when you file a Tax Court petition whether you want your case heard as a “regular” case or a “small” case. The opinions in small tax cases will be discussed another day. The opinions in regular cases take two forms of reported opinions one of which is memorandum opinions. Memorandum opinions make up the solid majority of the opinions in regular cases. As you will see, Andy does not like the division of cases in its current form. Keith
In this post on my article, The Un-Precedented Tax Court, I want to discuss some constitutional and practical concerns over the Tax Court’s treatment of Memo opinions.
As most of the readers of this blog are no doubt aware, Tax Court opinions come in various forms. After hearing a case, a Tax Court judge will send her draft opinion to the Chief Judge, who ultimately decides whether a given opinion will be a Division opinion (cited as “T.C.”) or instead a Memorandum opinion (cited as “T.C. Memo”). Division opinions are considered binding precedent, whereas Memo opinions are frequently dismissed as nonprecedential. See, e.g., Nico v. C.I.R., 67 T.C. 647, 654 (1977)). Consequently, the Tax Court essentially chooses which of its opinions will bind it under the principles of stare decisis.
read more...Fairly recently, the federal appellate courts and scholars engaged in a heated debate over the constitutionality of this practice. Numerous circuit courts had adopted rules that prohibited citation to their unpublished opinions and also denied them any precedential value. The Eighth Circuit declared its own such rule unconstitutional, deciding that allowing judges to pick and choose which cases to follow was offensive to the judicial power conferred under Article III. Others took a more functional view, concluding that if every unpublished opinion established precedent, judges would find it impossible to effectively discharge their duties. Eventually, the Judicial Conference stepped in and abolished rules prohibiting citation to unpublished opinions, but a debate rages on regarding their precedential value.
It’s somewhat surprising that that debate hasn’t drawn in the tax community, especially because it was a tax case that triggered the appellate firestorm. The Eighth Circuit’s case related to a technical tax issue — whether the court was bound to follow a prior decision regarding the statute of limitations and refund claims. However, commentary on Memo opinions generally focuses on their precedential value, not on whether it’s constitutional in the first instance for the Tax Court to decide whether it wants to be bound by a decision. Because I side with those who argue that the “judicial power” mandates principles of stare decisis, I would like to see the debate reach Memo opinions.
My article also raises various practical concerns over Memo opinions. Although they are nominally nonprecedential, the Tax Court routinely cites Memo opinions and sometimes expressly cites them for their precedential value. Taxpayers frequently do the same thing.
In theory, Memo opinions are issued in only clear-cut or heavily factual cases, but it’s easy to find ones that deal with controversial issues. Campbell, T.C. Memo. 1990-162, for example, involved the tax consequences associated with the receipt of a profits interest in a partnership. And sometimes an issue that seems minor turns out not to be. Helmer, T.C. Memo. 1975-160, for example, adopted a holding that a couple decades later motivated the Son-of-BOSS fiasco. Circuit courts have also reversed numerous Memo opinions, which calls into question the notion that judges can determine which cases are truly “easy.”
Constitutional or not, Memo opinions sow confusion in the tax law. Even appellate courts adopt inconsistent approaches, with the Fifth Circuit, for example, saying that it would give Memo opinions some weight even though the Tax Court itself apparently doesn’t, and the D.C. Circuit expressly dismissing a Memo opinion that was completely on point.
I would prefer that the Tax Court abandon the “nonprecedential” pretense and simply treat Memo opinions the same way as Division opinions. My article discusses various potential objections to that proposal, which I’ll touch on in a later post.
Andy, your article, “The Un-Precedented Tax Court”, is illuminating. Your suggestion “that the Tax Court [should] abandon the ‘nonprecedential’ pretense and simply treat Memo opinions the same way as Division opinions” makes a great deal of sense.
Yet, despite the Tax Court’s statement in Nico v. Commissioner, 67 T.C. 647, 654 (1977)) that “we consider neither revenue rulings nor Memorandum Opinions of this Court to be CONTROLLING precedent” (emphasis added), isn’t there authority to the effect that Memo opinions have at least limited precedential value, even if less than a Division (regular Tax Court) opinion?
1. The Tax Court web page, http://www.ustaxcourt.gov/taxpayer_info_after.htm, states (after “[a] Memorandum Opinion addresses cases where the law is settled or factually driven”) that “A MEMORANDUM OPINION CAN BE CITED AS LEGAL AUTHORITY” (emphasis added).
2. In United States v. Fior D’Italia, Inc., 536 U.S. 238, 244 (2002), the Supreme Court cited McQuatters v. Commissioner, 32, TCM 1122 (1973) without any qualification.
3. Similarly, in United States v. Papandon, 331 F.3d 52, 55 (2d Cir. 2003). the Second Circuit Court of Appeals cited “Baughn v. Comm’r, 28 T.C.M. (CCH) 1447, 1456 (1969)” without qualification.
4. Also, as a regular reader of “Procedurally Taxing”, I note that Keith Fogg, in “Tax Court Bench Opinions” (1/26/15), http://procedurallytaxing.com/tax-court-bench-opinions/, states “Memorandum opinions do not carry the precedential weight of the opinions”, which I thought implied that these Memorandum opinions still carry at least some weight.
5. Even Nico, supra, stated only that these Memo opinions were not “controlling” precedent, not that these opinions had NO precedential value.
6. “Substantial authority”: Further, Regs. §1.6662-4(d)(3)(iii) states “only the following are authority for purposes of determining whether there is substantial authority for the tax treatment of an item: . . . court cases”. There is no express exception, so far as I can tell, for Memorandum opinions. Could the Nico case be read to mean that Memorandum opinions do not constitute substantial authority?
In any case, I believe the existence of questions like those above adds support to your suggestion that Memo opinions be treated the same way as Division opinions.
Arnold,
Thanks for the helpful citations, especially the SCOTUS one. I will add some of them to my paper. I agree with your sense that Memos in fact receive some weight, and I would prefer an explicit Tax Court rule or reviewed opinion stating as much, as opposed to the jumbled and various statements in the case law.