| ||Deferential Review of Tax Court Decisions: Taking Institutional Choice Seriously |
David F. Shores
Professor of Law, Wake Forest University School of Law; University of Iowa, B.B.A., 1965; University of Iowa, J.D., 1967; Georgetown University Law Center, LL.M. in Taxation, 1969.
For approximately the last 50 years, Tax Court decisions on questions of law have been subject to de novo review by the court of appeals for the circuit in which the taxpayer resides. Prior to that time, decisions were governed by a standard of deferential review adopted by the Supreme Court in Dobson v. Commissioner. The author has argued that the shift from deferential review to de novo review was the product of judicial misinterpretation of legislation intended only to affect the characterization and review of factual determinations, not legal determinations. Since the de novo standard was adopted by judicial error, the courts have it within their power to correct the error. Others have agreed that greater deference is available for the appellate courts, now or in the future, if they so choose.
Whether courts should do so, or, alternatively, whether Congress should explicitly adopt a standard of deferential review, is another matter. Professor Steve Johnson has argued that deferential review of Tax Court decisions likely would lead to an increase in forum shopping, a decrease in the percentage of cases tried in the Tax Court, and an increase in decisional inconsistency both within and across circuits. He concluded that "such deference is a poor idea as a matter of policy," and that it would "lead to a worse situation than doing nothing."
The author has responded to these arguments elsewhere, demonstrating through empirical evidence that a shift to deferential review would be unlikely to have any material impact on the percentage of cases tried in the Tax Court, or on the taxpayers' choice of forum. Furthermore, deferential review would almost automatically lead to fewer reversals of Tax Court decisions and to greater uniformity in the decisional law of taxation. It therefore would represent a significant improvement in the tax adjudication system. Drawing upon the administrative law experience, the author has proposed a model for deferential review of Tax Court decisions. As is generally the case with legal commentary, most prior debate of this issue has been abstract. In this article, however, the primary focus will be on empirical analysis. Through an examination of the results in decided cases, this article explores what experience tells us concerning the ability of the Tax Court and the appellate courts to correctly decide issues of tax law.