HR 1485: Opening the Doors to the US Tax Court

By Brinker, Thomas | The National Public Accountant, January 1996 | Go to article overview

HR 1485: Opening the Doors to the US Tax Court


Brinker, Thomas, The National Public Accountant


Congressman Leon Panetta (D-CA) introduced H.R. 1485 in 1991 to "amend the Internal Revenue Code of 1986 to provide that certified public accountants and enrolled agents may represent taxpayers in Tax Court cases involving $10,000 or less." Responding to concerns expressed by the National Society, Congressman Panetta sponsored this legislation to inject a modicum of fairness into the U.S. Tax Court system.

In introducing H.R. 1485, Congressman Panetta stated that "this legislation is needed to provide fairness to taxpayers who have disputes with the Internal Revenue Service in cases involving $10,000 in tax or less. Current law denies them an opportunity for the least expensive, most effective possible representation before the Tax Court in these cases."

Despite the efforts of several Representatives who co-sponsored H.R. 1485, the proposed legislation died in 1992. An analysis of Congressman Panetta's bill of 1991 shows a direct correlation between his bill and the Congressional purpose behind establishing the U.S. Tax Court's small tax case procedure.

The purpose of this article is to explain fully the intent and benefits of H.R. 1485. In addition, I hope to urge all practitioners to contact their representatives in order to resurrect H.R. 1485.

As part of the Tax Reform Act of 1969, Congress established Internal Revenue Code (IRC) Section 7463, which created a new class of Tax Court cases. This new class of Tax Court cases are commonly known as "small tax cases." According to the Staff of the Joint Committee on Taxation [General Explanation of the Tax Reform Act of 1969], Congress intended Section 7463 to provide "simplified and relatively informal" procedures by which the taxpayer could represent himself in the Tax Court without incurring prohibitive costs and without impairing the Court's ability to handle cases before it. In laying the groundwork for Tax Court Rules (TCR) 170-179, Congress established that the small tax case decision be based on a brief summary opinion instead of formal findings of fact. These decisions have no precedential value and are final when rendered. Small tax case decisions may not be appealed. In addition, the amount in controversy may not exceed $10,000 in any taxable year where the controversy involves gift or income taxes, nor $10,000 for any single taxable estate where the controversy involves estate taxes [IRC Section 7463(a); TCR 171(a)].

To accommodate taxpayers in small tax cases, the Court deemphasizes legal issues. The technical rules of evidence are not followed in a small tax case and briefs are not required. The Court has discretion to conduct a trial as informally as possible in assisting the taxpayer in self-representation. In addition, pleadings are simplified with no answer required unless there is an issue on which the Internal Revenue Service (IRS) has the burden of proof or unless the Court orders the filing of an answer. Similarly, a reply is not required unless the Court orders it [TCR 175].

Tax Court statistics indicate that approximately 90% of all small tax cases involve pro se litigators or self-representation [Tax Court 1986-91 Annual Report]. The Wall Street Journal reported in May 1995 that over 7,300 small tax cases are pending before the U.S. Tax Court where taxpayers have no representation. However, self-representation is always a risky venture.

Table 1: Tax Court Examination Statistics

Year             Applicants          Successful Applicants

1943                12                         2
1944                25                         3
1945       No examination given
1946                43                4 (two exams given)
1947                36                         3
1948                26                         4
1949                30                         7
1950                21                         4
1951                22                         9
1952                19                         6
1953                20                         6
1954                 7                         0
1955                 7                         2
1956                 5                         1
1957                 8                         1
1958                13                         3
1959                 9                         3
1960                 7                         1
1961                 4                         2
1962                10                         1
1963                15                         0
1964                18                         5
1965                16                         4
1966                15                         1
1967                21                         6
1968                 9                         2
1969                 9                         0
1970                16                         0
1971                15                         2
1972                19                         3
1973                23                         8
1974                29                         6
1975                46                         7
1976                49                         6
1977                40                         3
1978                37                         3
1979                47                         1
1980                51                         6
1981                67                         4
1982                38                         4
1983                43                         4
1984                24                         4
1985       No examination given
1986                80                         1
1988                59                        12
1990                99                        12
1992                73                         9
1994               127                        13
Total            1,409                       188

Source: Christiana O. … 

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