Uniformity and Jurisdiction in U.S. Federal Court Tax Decisions - A National Court of Tax Appeals

A National Court of Tax Appeals

A longstanding proposal to address the issue of the lack of uniformity in court interpretations of federal tax law has been to create a national court of tax appeals. Indeed, a federal court of tax appeals appears to be the favored view of many academics who address the subject and some tax attorneys. Under the approaches advocated, tax litigation could begin in the courts of original jurisdiction, as is currently the case, but the appeals would have to be made to a single, specialized court of tax appeals which would develop great expertise on tax law as well as reconcile divergent interpretations from the lower courts so that one consistent set of interpretations would prevail. The perceived advantage of this approach is, as Professor Shores argues, “income realized by a resident of California ought to be taxed in the same way as income realized by a resident of Maine.” Shores sees such consistency not only as sound policy, but as a constitutional mandate.

Despite favoring this position, the preponderant view appears to be that Congress will not support a single appellate court approach. Professor Johnson, a proponent of a national court of tax appeals, for instance, states that, “whatever its desirability, it is abundantly plain that, for the foreseeable future, creation of a national court of tax appeals is a political impracticability. The most recent serious proposal, the 1990 proposal, was a non-starter in Congress.” Johnson attributes this to a view that the generalist judges in circuit courts have a perceived breadth of understanding and greater familiarity with non-tax sources such as state law and non-tax federal statutes, which may be important to the outcome of certain cases. He also notes “an undertone in much of the opposition : a suspicion that a tax appellate court would be pro-government in outlook and tendency.” Professor Andre Smith, however, argues that the perception that the Tax Court has a pro-government bias is a threat to the legitimacy of the tax system. His view is that district court judges have a comparative advantage in sifting facts, and that they and the circuit courts have a substantial advantage on non-tax issues that touch on many tax controversies such as the common law, operation of state law and constitutional questions. He further argues that there is sometimes a constructive debate among the circuit courts upon which the Supreme Court relies if and when it decides to hear a case. Finally, he argues that a national court of tax appeals would exacerbate the existing perception of bias in Tax Court decisions by depriving taxpayers of the option to have their tax controversy adjudicated entirely by generalist judges seen to be impartial or even pro-taxpayer.