Further Discussion of NTA Annual Report (1/17/22)

I recently posted to advise to advise of the NTA’s 2021 Report to Congress. National Taxpayer Advocate Annual Report to Congress and Related Documents (1/14/22), here. The Full Report is here.  I said I would post later on portions that might be interesting to readers of this blog. I focus in this posting on the part of particular interest to readers of this blog – the section on Most Litigated Tax Issues (pp. 183-205.  There is a lot of detail, including statistics and informative graphs in that portion. I can’t cover it all, but summarize key parts here:

1. Ten Most Litigated Issues in Tax Court (pp. 183-188). In identifying the ten most litigated positions in the Tax Court, the Report states that it is transitioning its methodology. The Report explains (p. 183) the transitioning and the methodology used in this Report. The Report then (p. 184)  puts the result in tables for the old method (relying on issued opinions) and the revised method (using issues identified in petitions).

2. Top Issues in Other Courts (pp. 188). The Report discusses lien cases and summons enforcement. The Report does not mention refund suits;  although a staple historically for contesting tax issues, refund suits are relatively rare since most tax issues are litigated in the Tax Court through deficiency jurisdiction and CDP jurisdiction.

3. NTA Recommendations to Mitigate Tax Disputes (apparently this applied to Tax Court and nonTax Court disputes (pp. 189-190).  The recommendations are for §§ 7403, 6751, and 7602.

4. Tax Litigation Overview (pp. 190-195) discussing the “variety of courts [that] share concurrent jurisdiction over federal tax litigation,” including Tax Court, District Courts, Courts of Appeals, Court of Federal Claims, Bankruptcy Courts, and Supreme Court. The Report offers Figure 3.6 (p. 191) that graphs the “Docketed Inventory in Tax Court, District Court, and Federal Court of Claims for BYs 2012-2021. The overwhelming majority (I think well over 90%) are in the Tax Court. And, as I understand it, 95% of the Tax Court cases are deficiency cases. Figure 3.7 (p. 191) shows the “Dollars in Dispute” among those courts for the same period, with the District Court and Court of Federal Claims share of the total increasing, but the majority is still in the Tax Court. Figure 3.8 shows “Portion of Total Dockets and Dollars in Dispute by Amount Category” for FY 2021. The Report says (p. 192) that there has been a decrease in tax cases in the District Court from 788 to 763 but that “0.8 percent of civil tax cases in district courts in 2020 were resolved through trial.”

5. “Tax Court Operations During the Covid-19 Pandemic” (pp. 192-194)  This section includes discussion of suits in the District Courts.

6. “Analysis of Pro Se Litigation” (pp. 194-196). This section includes discussion of the Tax Court Calendar Call Program.

7. “Settlements of Cases Petitioned to the Tax Court (pp. 196-197), with graphs. The Report says that “The parties settled about 82 percent of cases petitioned to Tax Court in FY 2021.”  The discussion offers graphs of cases settled by Appeals and Chief Counsel for FYs 2012-2021 (Figure 3.13) and “Cases Dismissed, Settled, and Tried in the Tax Court, FYs 2012-2021” (Figure 3.13).

8. I infer from the percentage settlements in District Court cases (see par. 4 above) that there is a lot more settling going on in District Courts. JAT War Story:  I remember from the days of yore in DOJ Tax Refund Section when I litigated in District Courts for DOJ Tax in District Court cases, I rarely settled cases. I remember one case where, based on discovery, I had the IRS determine a fraud penalty and the Government counterclaimed in the refund suit for the fraud penalty. The taxpayer then offered what he called a “settlement” whereby he paid the full tax, fraud penalty, and interest. That is a full concession rather than a settlement, but it was presented as a settlement so that the public record was a dismissal without presentation of the terms of the settlement. The case was politically sensitive. I wrote the “settlement” memo shortly after I left DOJ Tax and do not recall any discussion as to why DOJ Tax lent itself to presenting a full concession as a settlement other than the fact that it was politically sensitive. (Long story behind that but can’t get into it here.)

9. Criminal Tax Violations (pp. 198). A brief discussion that includes:  “According to US Courts’ 2020 Federal Judicial Caseload Statistics, there were 367 criminal tax fraud cases commenced in US District Courts in 2020,120 and 374 of 390 (95.9 percent) of criminal tax fraud defendants were convicted or sentenced while only three were acquitted in US District Courts in 2020.”  (JAT Note; Statistics such as these are dicey and, I think potentially misleading as to any inference that can be drawn; that’s a longer discussion, though.)

10. Sources of Cases Petitioned to the Tax Court (p. 198). The graph (Figure 3.15) breaks down sources as “Appeals/Exam/Campus.”

11. Refund Litigation (pp.198-199). This section includes a general discussion of refund litigation that, I  am sure, almost all readers of this blog know. There is a graph showing “Tax Refund Case Inventory Before the District Courts and Court of Federal Claims in FYs 2012-2021 (Figure 3.16).

12. Significant Cases (pp. 199-201). The cases are Boechler v. Commissioner, 967 F.3d 760 (8th Cir. 2020), cert. granted (No. 2020-1472) (Sept. 30, 2021);  CIC Services v. IRS, 141 S. Ct. 1582, 1592 (U.S. May 17, 2021); Grajales v. Commissioner, 156 TC 55 (Jan. 25, 2021; Rowen v. Commissioner, 2021 WL 1197663 (Mar. 30, 2021); Beland v. Commissioner,  2021 WL 777184 (T.C. Mar. 1, 2021).; Fowler v. Commissioner, 155 T.C. 106 (Sept. 9, 2020). (Note I have used the citations as presented in the footnotes; I think there are better reporter citations for some of them but have not retrieved them for this blog entry.)