United States Tax Court – The Article I Court
By Michael Kearney

In representing a client in a tax matter that may result in tax litigation, the advisor should keep in mind certain procedural rules that preserve client rights. Tax litigation can be a very expensive proposition for an individual or small business. The government has an awesome arsenal of weapons designed to coerce collection of the tax at its disposal. For the average client, the choice of contesting a disputed tax issue oftentimes comes down to this simple formulation: "Should I pay an attorney to contest this matter when, if I lose, I will have to pay not only the tax and interest, but also penalties, my own attorneys’ fees and the costs of the case." Moreover, even in a "good case" (i.e., the client needs only to substantiate deductions and has the documentation to do so, or the taxpayer has taken a return position which has a high probability of success), if the actual tax deficiency is small, it may not be cost effective to incur the legal fees to sustain the taxpayer’s position.

From an overall cost effectiveness standpoint, preserving a taxpayer’s right to contest a deficiency in the United Stated Tax Court (Tax Court) is of paramount importance. If the taxpayer and her advisors are not able to resolve a dispute with the Internal Revenue Service (IRS) prior to the issuance of the notice of deficiency, the accountant must, if possible, take the steps necessary to preserve the Tax Court as a forum. The reason for this is quite simple: a taxpayer may contest the underlying deficiency in the Tax Court without first having to pay the tax. Parties who contest the imposition of a tax may also bring an action in U.S. District Court or the Court of Claims, but in order to do so, must pay the full tax due and file a claim for refund with the Internal Revenue Service (IRS). Note that Tax Court can not be used by a taxpayer simply to delay the payment of the tax. The Tax Court has the authority to award up to $5,000 in damages against a taxpayer if it should determine that a proceeding has been instituted or maintained merely for delay, or where the taxpayer’s position is frivolous or groundless. See I.R.C § 6673.

The Tax Court is a federal court established by Congress under Article I, Section 8 of the U.S. Constitution and is not an Article III court like U.S. District Courts. The Tax Court is formally a part of the legislative branch of the United States government. Tax Court judges are appointed for a term of 15 years. Decisions of the Tax Court are reviewed by the applicable geographical U.S. Court of Appeals. Hence, there may be "splits" among the circuit courts of appeals on substantive tax law interpretations that result in conflicting legal authority depending upon where a taxpayer resides. Tax Court judges essentially "ride a circuit" and hold calendars at least once a year in both Reno and Las Vegas. The United States government is represented in the Tax Court by the Chief Counsel of the IRS, usually through IRS District Counsel—local or regionally-based, full time, IRS employed lawyers who specialize in Tax Court litigation.

In a case not involving fraud, a substantial omission from gross income, or the failure to file a return, the IRS has three years from the date of filing of the return to issue the notice of deficiency (the 90-day letter). In the case of fraud or a failure to file, there is no limitation on the time in which the IRS must issue the 90-day letter. In the case of a substantial omission from gross income, the statutory period is extended to six years from the filing of the return. See I.R.C. § 6501. The statute of limitations on assessments must be monitored. Consents waiving or extending the statute of limitations must be taken into account in ascertaining the statutory period.

When a taxpayer and the IRS can not agree on the results of an examination, if time permits, the District Director will send to the taxpayer a preliminary Notice of Proposed Deficiency. This letter allows the taxpayer 30 days to respond and is referred to as the "30-day letter." The 30-day letter will include a copy of the examination report, and will advise the taxpayer to: (1) execute a waiver on the period for assessments if he accepts the report or (2) request an appeals hearing. Accordingly, the taxpayer has three choices in responding to a 30-day letter: sign the waiver, file a protest, or do nothing and await the issuance of the 90-day letter. By executing the waiver, the taxpayer permits the immediate assessment and collection of the tax. See I.R.C. § 6213(a).

The 90-day letter constitutes final notice to the taxpayer that the IRS has determined that a deficiency in tax exists. In response to a 90-day letter, the taxpayer may: sign a waiver agreeing to the deficiency; contest the deficiency by filing a timely petition with the U. S. Tax Court; or do nothing and await assessment and demand for the tax. Once the IRS issues a 90-day letter, the three-year assessment period (the time in which to collect the tax) is suspended during the 90-day period in which the taxpayer has to file a petition with the tax court, plus 60 days if the taxpayer does not file a petition. If the taxpayer files a petition with the tax court, the statute of limitations on collection is further suspended until the tax court decision becomes final and for an additional 60 days thereafter. See I.R.C. § 6213(a).

The Tax Court obtains jurisdiction of a case by the filing of a timely petition by the taxpayer. The 90-day period in which to file a petition runs from the registered or certified mailing date of the 90-day letter. The 90-day period is calculated based upon calendar days, not business days, and excludes the day of the mailing of the deficiency notice.

An individual engaged to represent the taxpayer before the IRS or the Tax Court must be authorized to practice under the separate rules applicable for each entity. Admission to practice before the IRS does not give a representative the right to practice before the Tax Court, and admission before the Tax Court does not give the right to practice before the IRS. Only duly licensed attorneys and persons who have taken an admissions test are licensed to practice before the Tax Court. See Tax Court Rule 24(b). However, if a person who is not licensed to practice prepares and files a petition on behalf of a taxpayer, the petition will still give the Tax Court jurisdiction of the case.

The contents of the Tax Court petition are prescribed by Tax Court Rule 34(b). Error must be assigned with respect to all of the IRS’ adjustments (issues on the examination report) which are placed in controversy. The pleading of affirmative issues such as the statute of limitations, res judicata, and collateral estoppel must be made by way of assignment of error. The Tax Court will not rule on an issue unless it is raised by an assignment of error. Generally, the structure of the assignments of error will mirror the conclusions reached by the IRS in the examination report. In essence, the goal is to deny or state that the IRS erred when it reached the ultimate conclusion in respect to each contested issue raised in the report.

The petitioner is required to set forth the facts upon which the petitioner relies. Oftentimes, not all of the relevant facts are known at the time the petition is to be filed because the 90 day time line compresses the inquiry, especially if the taxpayer seeks counsel late in the 90 day period. Amended petitions that expand upon the relevant facts are common. In preparing the statement of facts, it is always necessary to review the statutory provision or rule of law which sanctions a deduction or credit at issue or which provides for an exclusion of an item from gross income, as the case may be. The factual elements necessary to sustain the treatment proffered by the taxpayer must be asserted

In the case of a deficiency of less than $10,000.00, I.R.C. section 7463(a) permits a taxpayer to proceed under the "small tax case" rules. The petitioner in a small tax case must affirmatively elect to proceed on that basis. See Tax Court Rule 172. The Tax Court has drafted and printed a standard form to be used as the petition on a small tax case. See Appendix 1 to the Tax Court Rules, Form 2. A decision entered in a small tax case is final and may not be appealed. See I.R.C. § 7463(b).

Michael Kearney is a shareholder with law firm of Santoro, Driggs, Walch, Kearney, Holley & Thompson. Mr. Kearney is a graduate of the University of Nevada and received his law degree from the University of Santa Clara. Mr. Kearney also holds a Master of Laws (LL.M.) in taxation from New York University. Mr. Kearney’s practice centers on mergers and acquisitions with emphasis on federal tax issues. Mr. Kearney is a frequent lecturer to business and professional groups on federal tax law issues.

Inside the Immigration Court System

By Rolando Rex Velasquez

Chief Judge for the U.S. Court of Appeals, Second Circuit, once described the immigration laws in the following way: "We have had occasion to note the striking resemblance between some of the laws we are called upon to interpret and King Minos’s labyrinth in ancient Crete. The Tax Laws and the Immigration and Nationality Acts are examples we have cited of Congress’s ingenuity in passing statutes certain to accelerate the aging process of judges." Lok v. INS, 548 F.2d 37 (2d Cir. 1977). Welcome to the world of immigration law as we try to give you an overview of the immigration court system.

The breakdown of the agency
In general, the immigration courts are administrative courts that actually fall under the Executive Branch of our federal government. They are not Article III courts, but rather a government agency charged with the task of making decisions regarding a respondent’s removability and then relief from removal (if any). The agency, called the Executive Office for Immigration Review (EOIR), falls within the Department of Justice. So, in a way, it is ironic that the government agency that decides if a person is removable and also if a person deserves to remain via an application for relief actually falls under the jurisdiction of the branch charged with enforcing our nation’s laws.

The U.S. Immigration Court is the trial level court for the immigration court system. A single administrative judge presides over the hearing, receives evidence into the record of proceedings, and listens to testimony and arguments before rendering a decision on the merits of the case. There are over 200 immigration judges throughout the United States, sitting in more than 50 immigration courts. If either party to the proceedings does not agree with the decision of the immigration judge (IJ), then she may file an appeal with the Board of Immigration Appeals (BIA) which is the next higher level.

The BIA is the highest administrative appellate level charged with the task of interpreting and applying our immigration laws. Located at EOIR headquarters in Falls Church, VA, there are 15 Board Members who sit on the BIA. The BIA has jurisdiction to hear appeals of decisions by the immigration judges and by district directors for the Department of Homeland Security. Board members review the available record of proceedings de novo before making a decision, and very rarely hear oral arguments in connection with an appeal. BIA decisions are binding on all immigration judges and Department of Homeland Security (DHS) officers unless modified or overruled by the Attorney General of the United States. Published BIA decisions are found in bound volumes called Administrative Decisions Under Immigration and Nationality Laws of the United States. These precedent decisions are available on the EOIR Web site at www.justice.gov/eoir.

Types of hearings
There are three basic types of hearings that take place before the immigration court: bond hearing; master calendar hearings; and individual calendar hearings. A master calendar hearing (MCH) is the immigration court version of an arraignment. It is a preliminary hearing where the IJ will verify that the respondent has received the DHS charging document (called a Form I-862 Notice to Appear), take the plea to the charges, and identify relief from removal, if any. During the MCH, the IJ will describe the various rights of the respondent including the right to counsel at no expense to the government, and the right to appeal the decision of the IJ at the conclusion of proceedings. There are multiple cases scheduled during the master calendar hearing time, and the local IJ will first call cases of represented respondents as a matter of professional courtesy before calling unrepresented respondents. All parties will try to settle as many preliminary issues as possible before the case is finally set for an individual hearing.

An individual calendar hearing is the court hearing on the merits of a respondent’s case. This is usually the final trial hearing on the respondent’s application for relief from removal. An IJ will sometimes also schedule individual hearings on the issue of contested charges of removal before moving into relief. At the conclusion of the individual hearing, the IJ will render his decision on the issues of removability and relief. Both parties have the opportunity to reserve the right to appeal the decision of the IJif he disagrees with the decision.

In a bond hearing, the IJ evaluates the available information provided by DHS and the respondent to reach a decision on the appropriate bond amount for a detained individual. Bond hearings typically take place within 48 hours of request. The original bond determination is set by DHS. The IJ then has the authority to redetermine the bond decision by lowering the amount, raising the amount, or setting an amount when DHS has set no bond. For most detained respondents, the main issue is eligibility for release on bond pending proceedings because many criminal alien respondents do not qualify for release under the immigration laws. Bond redeterminations may be separately appealed to the BIA while the merits of the case continues.

The parties to immigration court proceedings
The IJ is a hearing officer who presides over the court proceedings. A DHS attorney serves as a prosecutor with respect to the charges of removability and then represents the government’s interests in the application(s) for relief. The respondent may be represented by counsel, but at no expense to the government. EOIR nonetheless maintains a list of free or low cost providers for each court to distribute to all respondents.

Nuts and bolts for the local immigration court
The immigration court in Las Vegas is located at 3365 Pepper Lane, Suite 200, Las Vegas, NV 89120. The phone number for the local court is (702) 453-0227. The Court Administrator is Ms. Rachel Newsome. The local court has two resident Judges, Hon. Harry L. Gastley and Hon. Ronald Mullins. A third Judge, Hon. Irene Weiss, recently retired and EOIR is not going to replace that position in the foreseeable future. The judges’ schedules are somewhat predictable in terms of types of hearings: Judge Gastley’s master calendar hearing day is Wednesday and Judge Mullins’ master calendar hearing day is Thursday. Judge Mullins holds his detainee master calendar hearings on Tuesday mornings while Judge Gastley holds his detainee master calendar hearings on Wednesday afternoons. All other available court time slots are used for individual calendar hearings. Both judges typically hold their bond redetermination hearings at 8 a.m.

All attorneys entering an appearance before the immigration court must file a Form EOIR-28 Notice of Entry of Appearance in order for the judge to acknowledge the attorney as counsel of record. A similar form (Form EOIR-27) is required for attorney appearances before the BIA.

EOIR publishes a Practice Manual which is a guideline for practitioners regarding the procedures to follow before the court and BIA. It provides the format to follow for motions, the filing deadlines for motions, evidence, and appeals, etc. The Practice Manual is available for free on the EOIR Web site at www.justice.gov/eoir.

Practitioners can find links to the immigration statutes (the Immigration and Nationality Act) and the immigration regulations (Title 8 C.F.R.) on the USCIS website at www.uscis.gov.

Rolando Rex Velasquez, Esq. is a former INS Trial Attorney who worked in New York for over seven years before "switching sides" to private practice eight years ago. He has taught immigration law as an adjunct professor and continues to speak at national conferences on various topics relating to immigration law.