Types of Tax Court Opinions and Their Precedential Effect (Updated)
At the end of 2016 we posted “Types of Tax Court Opinions and Their Precedential Effect” and added that document to the Resources tab on the blog. We recently updated this resource and, below, we’ve also provided the updated text.
Most tax cases are decided by the US Tax Court, which issues two categories of opinions: formally published dispositions and unpublished dispositions. The first category consists of opinions that are published in the Tax Court Reports and are technically called “division opinions” but are more commonly referred to as “T.C. opinions.” The second category consists of three sets of unpublished dispositions:
memorandum opinions (commonly referred to as “memo opinions” or “T.C. memos”)
A common question asked by taxpayers relates to the difference between these forms of dispositions in terms of precedential effect.
T.C. opinions are binding in the Tax Court, precedential and published by the Tax Court. They generally address issues of first impression, issues that impact a large number of taxpayers or matters related to the validity or invalidity of regulations. To the extent there is a T.C. opinion on point, taxpayers should cite to it as primary authority in a Tax Court proceeding.
Memo opinions are not officially published but are reproduced by commercial publishers. They generally address cases that do not involve novel legal issues and the law is settled, or the result is factually driven. Although these opinions are technically not precedential, they are often cited by litigants, and the Tax Court does not disregard these opinions lightly. It is rare to find a non-T.C. opinion that rejects the reasoning of a memo opinion. Indeed, the trend in recent years seems to be that the weight afforded to T.C. opinions and memo opinions is not substantially different. This reflects the fact that there are significantly more memo opinions than T.C. opinions each year (approximately 90% of all Tax Court opinions are memo opinions), providing taxpayers with more authority upon which to provide support for their position.
Summary opinions are also not published by the Tax Court but are reproduced by commercial publishers. They are issued in cases where the amount in dispute is less than $50,000 and the taxpayer elects to have their case tried under the small tax case procedures. Most summary opinions involve run-of-the-mill facts, but some provide insightful discussions of the law that may support a taxpayer’s case. By statute, summary opinions are not precedential, however, the Tax Court does not prohibit the citation of this type of opinion and has noted that it may give consideration to the reasoning and conclusions in a summary opinion to the extent they are persuasive. Thus, in the absence of a T.C. opinion or memo opinion supporting a taxpayer’s position or addressing the issue presented, taxpayers may want to consider citing to a favorable summary opinion.
Finally, the Tax Court issues dozens of orders, some of which involve the discussion of substantive issues that may arise in other cases. The public can search for orders on the Tax Court’s website by keyword and phrase, as well as by judge, case title, taxpayer name or docket number. The most common substantive orders involve evidentiary questions or the application of the court’s rules. Tax Court Rule 51(f) provides that “Orders shall not be treated as precedent, except as may be relevant for purposes of establishing the law of the case, res judicata, collateral estoppel, or other similar doctrine.” However, similar to summary opinions, there is no express rule prohibiting the citation to orders, and the approach taken by a particular judge in an order may be helpful in identifying tendencies. Thus, if an issue has never been addressed by the Tax Court in an opinion (but has been discussed in an order), taxpayers may want to bring the order to the Tax Court’s attention. One example of this type of situation is the orders issued by Judge Mark V. Holmes in two cases requiring the Internal Revenue Service to serve on the taxpayer all nonparty subpoenas issued in the case, together with all responses and documents that nonparties produced after receiving said subpoenas. For further discussion of that issue, see here. Other examples include standards for seeking to file an amicus brief in the Tax Court, the admissibility of expert reports and supervisory approval of penalties.
When litigating a case in Tax Court, taxpayers and their representatives must research and determine which authority best supports their position. Because they are precedential, T.C. opinions are the strongest form of authority. However, memo opinions, summary opinions and even orders should not be overlooked as additional sources of support. For a more detailed discussion of the precedential and persuasive value of unpublished dispositions, please see our article here.