Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.
The Anonymous Taxpayer: What the Tax Court Failed to Reveal in Anonymous v. Commissioner
Meghan M. Walsh
Typically, when a taxpayer brings a case to the Tax Court, any documents submitted as part of that case become a matter of public record. As a result, potentially sensitive and otherwise private information, including tax returns and financial documents, are available for public inspection. Additionally, the record of the Tax Court proceeding is available on the Internet via the Tax Court’s website, legal databases, and search engines. In 2002, Congress passed the E-Government Act, aimed at using the Internet to increase public access to government information. Section 205 of the Act requires federal courts to maintain websites containing, among other things, copies of documents filed at the court. While the Tax Court is not listed among the courts required to establish such websites under the Act, the Tax Court has announced an intention to comply voluntarily and to post documents filed at the Tax Court online. With tax returns and other financial documents submitted to the Tax Court so readily available to the public, it is important for taxpayers and the lawyers representing them to know what the options are for protecting the financial and personal privacy of taxpayers who choose to litigate in Tax Court.
In Anonymous v. Commissioner, the Tax Court took what appears to be an unprecedented step toward protecting taxpayer privacy by allowing a taxpayer to litigate anonymously. Upon a grant of anonymity, no personal identifying information about the taxpayer is included in the record and available to the public. Only the Tax Court and the Commissioner of Internal Revenue, as the opposing party, know the taxpayer’s identity. Following the Tax Court’s first decision allowing a taxpayer to proceed anonymously, it is to be expected that future Tax Court litigants will seek to take this additional step to protect their own privacy. The Tax Court’s opinion should have provided detailed reasoning and analysis to make clear to future Tax Court litigants and their lawyers when and how they might proceed anonymously. However, rather than providing detailed reasoning and analysis, the Tax Court’s opinion leaves open questions about what constitutes a sufficient need for anonymity in tax proceedings and what presumptions a taxpayer who wishes to proceed anonymously must overcome.This Note attempts to fill in the gaps left by the Tax Court and provide taxpayers and practitioners with a better sense of what one must argue to convince a court to allow anonymous litigation. Part I of the Note discusses the facts and holding of Anonymous v. Commissioner in detail and examines the Tax Court’s limited reasoning and analysis on the issue of anonymity. Part II discusses the flaws in the Tax Court’s opinion and argues that the court should have provided a more thorough and reasoned analysis to support its decision. Part III suggests a more systematic approach for the Tax Court to follow in deciding future cases regarding taxpayer anonymity based on the approaches taken by other federal courts in deciding anonymity cases. This Note argues that the factors considered by other federal courts in cases regarding anonymity should be similarly applied in cases regarding taxpayer anonymity and, if so applied, would result in a greater tendency to grant anonymity for taxpayers who wish to protect their financial privacy in Tax Court proceedings. Finally, Part IV discusses a recent step the Tax Court has taken towards protecting taxpayers’ privacy—an amendment to the Rules of Practice and Procedure allowing for redacted filings—and argues that, while the amendment is a move in the right direction, it does not remove the need for anonymity to protect the privacy of taxpayers litigating in Tax Court.