through the Freedom of Information Act and are published by some commercial publishers. General Counsel's Memoranda General Counsel's memoranda (GCM's) are legal memoranda prepared by the Chief Counsel's Office. They are written in response to requests from IRS employees for advice in the preparation of revenue rulings, private letter rulings, and technical advice memoranda. General Counsel's memoranda are not officially published, although they may be obtained (with taxpayer specific information expurgated) through the Freedom of Information Act and those of general interest are published by some commercial publishers. B. The Department of Justice The Department of Justice, Tax Division, represents the United States in all civil and criminal litigation arising under the tax laws other than cases before the United States Tax Court. Examples of civil cases in which the Justice Department represents the United States as defendant include cases in which taxpayers claim refunds in Federal district court; suits brought by individuals to foreclose mortgages or obtain quiet title to property on which there is a tax lien; and challenges to the constitutionality or legality of IRS regulations or rulings. Civil cases in which the Justice Department represents the Government as plaintiff includes cases in which the Government seeks to collect unpaid taxes; actions to enforce IRS collection procedures such as jeopardy assessments for tax liens; cases brought under the Freedom of Information Act; suits against employees of the IRS for damages resulting from alleged breach of their official duties; and suits to collect judgments in tax cases. The Justice Department is also responsible for the prosecution of all criminal offenses committed in violation of the tax laws. Criminal offenses under the Internal Revenue Code include: any attempt to evade or defeat a tax; willful failure to pay over a tax; willful failure to file a return or supply information; and various kinds of fraud. For a more complete list of crimes under the Internal Revenue Code see Code sections 7201 through 7216. Section 4. Role of the Judiciary GENERAL Following examination of a taxpayer's return, the Internal Revenue Service (IRS) may determine that a taxpayer's tax liability for a year is higher than that actually paid. If the taxpayer disagrees with the Government's assessment of his or her taxes, after exhausting the administrative appeals process within the IRS, the taxpayer may appeal to Federal court. Which court the taxpayer chooses depends in part on whether or not the taxpayer first pays the disputed tax. If the taxpayer has already paid the disputed tax in full and filed a claim for refund which was disallowed (or on which the IRS did not take action within six months), the taxpayer may take the case to the U.S. district court or the U.S. Claims Court. If the taxpayer chooses not to pay the tax, the claim may be taken to the Tax Court. There are various other jurisdictional differences that might dictate which court would properly decide a particular tax controversy. For instance, the Tax Court, unlike the Claims Court and U.S. district courts, generally does not have jurisdiction over certain types of controversies, such as criminal cases, summons enforcement, and Freedom of Information Act cases. Of these three forums, only the U.S. district court offers trial by jury. Because the district court is a court of general jurisdiction, however, the judge may have little preexisting tax expertise. For this reason, most complex civil tax cases are ordinarily brought in either the Claims Court or the Tax Court. Various additional factors might influence a taxpayer's choice between the Claims Court and the Tax Court. Procedural and evidentiary rules vary between these courts. A trial in the Claims Court generally is conducted in a more formal manner (generally with more discovery permitted) than in the Tax Court. Each court follows its own precedents; for this reason, the taxpayer may view one court as a more favorable forum than another. Appeals from the Claims Court lie with the Court of Appeals for the Federal Circuit, whereas appeals from the Tax Court lie with the respective Court of Appeals. The Justice Department represents the Internal Revenue Service in the Claims Court, whereas the Internal Revenue Service uses its own district counsel in the Tax Court. TAX COURT The Tax Court was created in 1924 as the Board of Tax Appeals, and in 1942 was renamed the Tax Court of the United States. Until 1969, the court was an independent executive agency. In 1969, the court was renamed the United States Tax Court and reconstituted as an Article I court; that is, an independent agency in the legislative branch of the government. The Tax Court shares its Article I status with the Court of Military Appeals. As an agency in the legislative branch, certain of the court's attributes differ from those of courts established under Article III of the Constitution. Its judges are each appointed for a term of 15 years (rather than the lifetime tenure constitutionally required for a judge in an Article III court). The Tax Court is the only court with the power to review determination of tax liability before actual payment of the tax. The Tax Court is comprised of 19 judges appointed by the President, with the advice and consent of the Senate. Judges may be removed by the President for inefficiency, neglect of duty, or malfeasance. The jurisdiction of the Tax Court is confined to tax cases, and consists of the ability to hear taxpayers' petitions for deficiencies determined by the Internal Revenue Service; and to review the qualified status of charitable organizations, the qualification of retirement plans, and the tax-exempt status of municipal bonds. There are a number of strict procedural requirements governing a taxpayer's ability to take a dispute to Tax Court. A taxpayer who wishes to dispute the IRS's determination of his or her tax liability may pursue the case through the administrative channels established by the IRS. If these channels do not resolve the dispute to the satisfaction of the taxpayer and the Government, the IRS sends the taxpayer a notice of deficiency (Internal Revenue Code section 6212). This notice is often called a "90-day" letter because the taxpayer has 90 days following mailing of this letter to file a claim in Tax Court (or 150 days, in the case of notices addressed to persons outside the United States). The Tax Court has no jurisdiction to review deficiencies of taxpayers who do not meet the 90-day (or 150-day) requirement (Internal Revenue Code section 6213). The Internal Revenue Service is not empowered to enforce collection of the deficiency until after the expiration of the 90-day (or 150-day) period. If the taxpayer files a timely petition with the Tax Court, the IRS may not enforce collection until the court renders a final decision (Internal Revenue Code section 6213). APPELLATE REVIEW Either the Government or the taxpayer may appeal the Tax Court's decision to the Federal court of appeals for the circuit in which the taxpayer resides or has his or her principal place of business. Different courts of appeal may reach different decisions on similar cases. In the event of conflict among the courts of appeal, taxpayers are bound by the decision of the circuit court in which they live or maintain their principal place of business. Conflicts among courts of appeal can be settled only by the Supreme Court. A taxpayer's appeal from a decision by a district court is heard by the court of appeals for the circuit in which the taxpayer resides or has his or her principal place of business. That is, whether the taxpayer begins a case in Tax Court or district court, the taxpayer's appeal will be heard by the same court of appeals. A taxpayer who has paid the tax and sues for a refund in the United States Court of Claims, however, may appeal only to the Court of Appeals for the Federal Circuit. PART II. SOURCES OF INFORMATION ABOUT FEDERAL TAXES Section 1. Legislative Support Staffs A. Congressional Research Service The Congressional Research Service (CRS), as the name implies, is the research arm of the legislative branch. The purpose of CRS is to provide Congress with analytical research and reference assistance, without political bias, in support of its legislative, oversight, and representative functions. CRS is organized into seven research divisions (American Law, Economics, Education and Public Welfare, Environment and Natural Resources Policy, Foreign Affairs and National Defense, Government, and Science Policy Research) and two library information divisions (Congressional Reference and Library Services). Generally, tax inquiries of an analytical nature are referred to either the American Law Division (for inquiries of a legal nature such as requests for legal analysis, legislative history, or statutory interpretation) or the Economics Division (for inquiries analyzing economic effect or implications, or statistical analysis). Inquiries in some specific areas which may have a tax component, such as pensions or Social Security, may be referred to analysts in one of the other divisions. CRS attempts to tailor its responses to fit the nature of the inquiry, the congressional need to be met, and any time constraints placed on the request. A response may take the form of a prepared report or issue brief on topics of general interest, or a memorandum or personal briefing on questions of specific interest to a Congressional office. CRS also supplies copies of documents (laws, regulations, court opinions) and articles or other secondary materials. While CRS cannot give individual tax advice to, or for, constituents, it does provide general information to assist in answering this type of inquiry. Information on CRS publications may be found in the Guide to CRS Products, which is published quarterly in January, April, July, and October, and is routinely sent to all Members and committees. A monthly supplement to this publication is also sent to all Members and committees, under the title Update to the Guide to CRS Products. Tax materials are generally indexed under the heading of Taxation or Local Finance. Requests from Congressional offices may be initiated by personal visit, phone call, letter, or electronic mail system. Letters should be addressed to: Joseph E. Ross, Director Congressional Research Service The Library of Congress |