The Un-Precedented Tax Court: Summary Opinions

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In part four of his series on Tax Court opinions and their precedential value, or lack thereof, Professor Grewal discusses the opinions that the Tax Court issues in Small Tax cases. The taxpayer must elect Small Tax case status. Neither the Tax Court nor the IRS imposes this status upon a taxpayer no matter how small the matter may be in terms of dollars at issue. Small Tax cases generally make up about half of the Tax Court’s docket. The Tax Court only began publishing Summary opinions about 15 years ago. Prior to that time only the individual taxpayer in the case, the IRS and the Court knew of the outcome of specific cases and finding prior summary opinions was practically impossible. 

Because the decision to have a Small Tax case essentially belongs to the taxpayer who elects to have the proceeding handled in a slightly less formal manner with a non-appealable, non-precedent setting opinion, I have fewer concerns about the constitutionality of this procedure than Professor Grewal. Still, the issue here is interesting. The other issue I find interesting with Small Tax cases concerns the Tax Court’s application of the Golsen rule to these opinions. I have written before on the possibility of using the Small Tax case procedure as a type of forum shopping within the Tax Court if your circuit does not have precedent on an issue and controlling Tax Court precedent favors the taxpayer; however, I find that applying Golsen to cases not capable of being appealed seems odd to me. If Congress has deemed the Tax Court as the final arbiter of an issue, what difference does it make where the taxpayer lives. Keith

In my prior posts (found here, here, and here) on my recent article, The Un-Precedented Tax Court, I covered some issues related to Memo opinions and Bench opinions.  Here, I want to discuss constitutional and practical concerns related to Summary or “S” opinions, which are issued in connection with small cases decided under Section 7463.


Because S opinions relate only to small cases, this might make them seem unimportant, at least for those concerned principally with big-dollar cases or regular cases.  However, S opinions raise what’s probably the most profound and difficult constitutional issue covered in my article:  Does Congress enjoy the power to deny precedential effect to a class of judicial opinions?

In establishing the S procedures, Congress mandated that S opinions “not be treated as precedent in any other case.”  See Section 7463(b).  Under this provision, the Tax Court cannot make precedent in a small case, nor can any court treat S opinion as precedent.

On its face, Section 7463(b) is an odd provision.  Historically, courts have fashioned rules related to precedent, and stare decisis seems like a doctrine governed exclusively by the judicial power.  Why should Congress have any say in telling courts how to use their prior expositions?  Congress can of course always amend the underlying law, but its intrusion into the decisional process of course triggers separation of powers concerns.

In my article, I discuss different Supreme Court authorities on this subject, although none squarely address the constitutionality of Section 7463(b).  The statute appears unique in the U.S. Code. I’m not aware of any other circumstance where Congress has attempted to deny precedential effect to an entire class of judicial decisions.

Constitutional issues aside, S opinions also raise some practical difficulties.  It’s a bit strange to pretend that a judicial opinion does not exist, and the Tax Court has danced around whether Section 7463(b) displaces issue preclusion doctrines, with one recent opinion simply noting that the matter remains “controversial.”  The statute would not appear to bar the application of res judicata doctrines (whether to treat an opinion as precedent is an issue separate from its effect on the particular parties in the case), but the nonprecedential nature of S opinions, along with the lack of appeal opportunities, has made the Tax Court act cautiously in this area.

Unlike Memo opinions, which the Tax Court routinely cites and relies on, S opinions rarely receive attention in judicial opinions.  In this way, S opinions cause less confusion than Memo opinions, for which taxpayers receive mixed signals.  However, the near-blanket ignoring of S opinions raises its own problems.

Sometimes, an S case will deal with issues of first impression, and taxpayers may wonder whether they can really ignore the related S opinion.  After all, like Division or Memo opinions, S opinions enjoy review from the Chief Judge and, when entered, reflect a “decision of the court” under Section 7459. Can a taxpayer really ignore an S opinion’s detailed exposition of a legal issue, like that contained in Cutts v. Commissioner, T.C. Summary Opinion 2004-8 (dealing with a complex Section 7872 issue and acknowledging that court had “dropped the ball” by allowing case to be decided under S procedures).

Also, like other opinions, S opinions can be searched via legal databases.  One would guess that, if an S opinion provides a helpful exposition, a judge will review that opinion if it is brought to his or her attention, whether by parties or by court staff. In these circumstances, a conflict arises between Section 7463(b) and the common judicial practice of describing the legal authorities that influence the court’s decision.

My article concludes that Congress should repeal Section 7463(b) and explores some potential counterarguments to that proposal.  Failing a legislative repeal, we may eventually see cases similar to those related to unpublished appellate opinions.  That is, because S cases sometimes raise issues of first impression and decide things in taxpayer-favorable way, a subsequent taxpayer might argue that the Tax Court is constitutionally bound to follow the prior S opinion.  Any such litigation would be fun to watch.


  1. Carl Smith says

    I agree with Andy that, at least as a policy matter, since S case opinions can now be viewed by everyone on line, Congress should repeal the statutory ban on S case opinions being treated as precedent. Proposed opinions in S cases are reviewed internally by the Tax Court prior to issuance, so there is some check on their quality. Further, some issues do come up first in S cases — e.g., the issue in Rand of the 6662 penalty in the case of disallowed refundable tax credits came up three times in S case opinions issued between 2001 and 2008 before the Tax Court finally ruled the same way in Rand in 2013.

    I also agree with Keith that it makes no sense for the Tax Court to follow Golsen in S cases, as it does. The whole rationale of Golsen was that the Tax Court would rule the way the Court of Appeals to which the case would be appealed had ruled — but only as a matter of judicial economy (to avoid an instant appeal and reversal), not because the Tax Court thought the Court of Appeals ruling was correct. I am not troubled by possible “forum shopping” in S cases (i.e., electing S status to avoid an unfavorable opinion of a Court of Appeals contrary to the Tax Court’s view), since there is not much money that can ever be at stake in an S case. These are not huge multi-million dollar corporate or estate tax cases. Indeed, since Congress has decided to be taxpayer-friendly in S cases on procedural issues, I have previously proposed that, if there is a split on an issue between the Tax Court and the Court of Appeals to which the case would go absent S status, then, in S cases, the Tax Court should adopt a rule that it will apply the more taxpayer-favorable ruling of either court on the issue. See “Does the Tax Court’s Use of Its Golsen Rule in Unappealable Small Tax Cases Hurt the Poor?”, Vol. 11, No. 1 J. Tax Practice & Procedure 35 (Feb.-Mar. 2009). I understand people’s initial shock at that thought, but think twice about it (as I did). What I propose is not an abdication of law, but simply a choice of law issue between two views that have previously been adopted by judges. Why is that result so terrible? Just because it is novel?

  2. Raymond Cohen says

    The Tax Court doesn’t always follow the law. For example the Tax Court states that since it does a de novo review, determining whether The internal revenue service followed the APA is unnecessary. This is despite the fact of the Mayo Clinic decision and the ninth and 10th circuit rulings to the contrary.

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