The Golsen Rule and Parties' Ability to Stipulate Appellate Venue from Tax Court Decisions (5/21/24; 5/24/24)

Readers of this blog are (or should be) familiar with the Tax Court’s Golsen rule requiring the Tax Court to apply directly in point precedent of the Circuit to which an appeal may be taken in the case. See On the Tax Court's Golsen Rule (Federal Tax Procedure Blog 12/3/23; 12/5/23), here; for an interesting discussion of the Golsen this rule with respect to a Tax Court precedent which had been reversed by one Court of Appeals so that the Tax Court precedent would not apply to appeals to that Circuit but remained as Tax Court precedent for application in other Circuits that had not yet addressed the issue, see Tax Court Again Declines to Reconsider Its Holding that the Preparer's Fraud without the Taxpayer's Fraud Invokes Unlimited Statute of Limitations (Federal Tax Procedure Blog 1/25/24; 2/5/24), here.

Section 7482(b) here, titled “Courts of Review,” prescribes venue for appeals. For individuals, under § 7482(b)(1), the default venue is in the Court of Appeals with jurisdiction over the “legal residence of the taxpayer.” For example, if A resides in Houston, TX, appeal venue is in the Fifth Circuit Court of Appeals. Under § 7482(b)(2), the parties may stipulate venue in another Circuit (including, of course, the Circuit in which the taxpayer resides, even though the stipulation is meaningless).

These rules are why the Tax Court is careful to note the residence of the individual taxpayer early in the findings of fact and, if the parties have stipulated to a different appellate venue, state the stipulation. (In most cases, there is no stipulation, so the Tax Court usually does not state that there is no stipulation, and addresses the issue in the opinion only if there is a stipulation.) Not only does the finding get the facts into the opinion as to appellate venue, it assists the Court in applying its Golsen rule.

In Anderson v. Commissioner, 2024 U.S. App. LEXIS 11966  (10th Cir. 5/17/24) (Nonprecedential), CA10 here and GS [to come], an opinion otherwise not noteworthy for this blog, the Court said (slip op. 6 n. 2) that “The parties stipulated to review in the Tenth Circuit. See 26 U.S.C. § 7482(b)(2).” That was a repeat of the same finding in the Tax Court. Anderson v. Commissioner, 2023 TC Memo 42, *2. (“The parties have stipulated that venue for any appeal in this case is the U.S. Court of Appeals for the Tenth Circuit. See § 7482(b)(2).”) Today’s blog is about the § 7482(b)(2) provision for stipulating appellate venue.

I discuss that straight-forward provision in the text and footnote in my Federal Tax Procedure Book (2023.2 Practitioner Edition), here, at p. 573 text and footnote at n. 2508. In thinking further about § 7482(b)(2), I decided to expand the footnote discussion in the working draft for the 2024 editions that will be published on SSRN in August. I provide here the discussion as I have revised it today (note (i) this draft may be further revised by publication and (ii) the footnote number will be different) with the additions indicated in red): 

   n2508 § 7482(b)(2).  Generally, if a party wants to stipulate to a different Circuit Court of Appeals than designated under the rules discussed in the text, it will be because that chosen Circuit has better precedent. Presumably, either party motivated only to win will stipulate only to a Circuit with favorable precedent or at least away from the default Circuit with an unfavorable precedent. I suppose that direct precedent may not be the only concern but also the Circuit’s general approach (attitude) not amounting to direct precedent. I suppose also that the IRS might agree to venue in an unfavorable Circuit to contest the precedent or to a Circuit that has not spoken (which might be a way to erode the validity of a precedent in another Circuit). For an odd case in which normal venue was in the Eleventh Circuit but the parties apparently stipulated to venue in the Sixth Circuit and the taxpayer attempted unsuccessfully to assert that precedent from Eleventh Circuit controlled the outcome, see Maloof v. Commissioner, 456 F.3d 645, 652 (6th Cir. 2006) (“That he volitionally filed this challenge to the Tax Court's decision in the Sixth Circuit, not the Eleventh Circuit, makes this something of a bewildering argument.”). The stipulation must be filed in the Tax Court before the notice of appeal is filed and, logically, should be filed before the opinion is rendered so that the opinion can properly apply the Golsen rule. E.g., New Phoenix Sunrise Corp. v. Commissioner, 132 T.C. 161, 173 (2009). This means, as Maloof suggests, that the parties should weigh the effect of the Golsen rule before stipulating venue. The IRM is not as clear (to me) as it could be, but I infer that DOJ Tax controls the issue of whether to stipulate venue, so that if the request is made to the IRS before the notice of appeal is filed and before DOJ Tax can act, “the [IRS] attorney should advise the taxpayer's attorney to file an appeal both to the circuit of proper venue and to the circuit of preferred venue. After an examination of the law in both circuits, the attorney then makes a venue recommendation to the Department of Justice.” IRM 36.2.5.8.1 (08-11-2004), Stipulating to Venue. The IRS generally will advise DOJ Tax it has no objection to stipulating “where there is no decision adverse to the Commissioner on the issue in the circuit where the taxpayer seeks to stipulate venue, and no decision favorable to the Commissioner in the court of proper venue.” IRM 36.2.5.8.1 (08-11-2004), Stipulating to Venue. 

Note: The foregoing was revised 5/24/24 3:00pm to add the portion beginning with "The IRM contemplates."