Understanding Tax Courts in the United States

The U.S. Tax Court is a specialized federal court that provides an impartial forum for resolving tax disputes between taxpayers and the Internal Revenue Service (IRS).

As part of the broader U.S. tax court system, the tax court provides a dedicated venue where individuals or businesses can challenge IRS determinations before paying the disputed amount. This makes for a major distinction from the U.S. District Courts and the Court of Federal Claims, where taxpayers must first pay the tax and then sue for a refund. Hence, many taxpayers choose the tax court for tax litigation because it offers a more accessible, less formal process and focuses exclusively on federal tax law.

Tax court cases often arise from IRS audits or appeals, and decisions can influence future tax interpretation. Understanding when and how to use the tax court system is essential for effectively responding to IRS appeals or assessments.

What Is the United States Tax Court?

Established under Article I of the U.S. Constitution by the Revenue Act of 1924, the United States Tax Court serves as a national forum for resolving federal tax disputes in a specialized tribunal below the Supreme Court level. As a specialized trial court, it exclusively hears cases involving federal income, estate, and gift tax controversies, primarily before taxpayers are required to pay the disputed amount.

Originally formed as the Board of Tax Appeals, it was renamed the Tax Court of the United States in 1942 and established as an independent judicial tribunal in 1969, serving as a specialized forum for challenging IRS determinations prepayment.

The tax court's jurisdiction covers federal income, estate, and gift tax controversies, allowing petitions for redetermination of deficiencies without first paying the disputed amount. This bypasses the full-payment rule in other forums.

Headquartered in Washington, D.C., the U.S. Tax Court sits nationally. Judges travel to trial venues in multiple cities across the country to hear cases in local sessions.

Structure and Jurisdiction of Tax Courts

The U.S. Tax Court comprises 19 judges who are appointed by the President and confirmed by the Senate to serve renewable 15-year terms. In addition to these presidentially appointed judges, the court may use senior judges (retired but recalled to serve) and special trial judges to assist with specific matters, especially in smaller cases.

Tax court proceedings fall into two main categories: regular tax court cases, which involve complex or high-dollar disputes, and small tax cases, known as "S-Cases", for disputes involving $50,000 or less per tax year. S-Cases offer a simplified process but cannot be appealed.

The tax court's jurisdiction is limited to specific types of disputes, primarily federal income, estate, and gift taxes. It does not hear state tax cases, criminal tax matters, or disputes over tax refunds after payment, as those are handled by U.S. district courts or the court of federal claims.

How Tax Court Compares to Other Forums

Taxpayers can challenge tax disputes in different courts or forums depending on the type of tax, payment status, and preferred trial features. The table below compares the U.S. Tax Court, U.S. District Courts, the Court of Federal Claims, and state tax tribunals based on structure, prepayment rules, trial format, appeals process, and typical use cases:

Types of Cases Heard in Tax Court

The U.S. Tax Court has broad authority to resolve a wide range of federal tax disputes between taxpayers and the IRS. Although most cases involve individual taxpayers disputing IRS audit findings, the court also hears business-related matters, collection appeals, and specialized petitions. Common case types handled in the U.S. Tax Court include the following:

• Tax Deficiency Cases: Arise when the IRS audits a return and proposes additional taxes; taxpayers can challenge the assessment without first paying it.
• Collection Due Process (CDP) Appeals: Allow taxpayers to contest IRS collection actions like liens and levies after receiving certain IRS notices.
• Innocent Spouse Relief Petitions: Filed by taxpayers seeking release from joint tax liability due to a spouse's error or misconduct.
• Whistleblower Claims: Filed by informants seeking monetary awards for reporting tax underpayments under IRC § 7623.
• Partnership Proceedings: Governed by TEFRA or BBA rules, these cases address IRS adjustments to partnership-level items.
• Typical Tax Controversies: Involve individuals, businesses, estates, and trusts disputing federal income, estate, or gift taxes.

Access to Tax Court Records

Tax court records access is typically public, including case filings, docket entries, and judicial opinions. However, certain sensitive information, such as taxpayer financial details, Social Security numbers, and court-sealed records, are restricted from public view to protect privacy.

Publicly available tax records can be viewed online via the DAWSON (Data and Web Services Online). The public can find regular opinions published in the U.S. Tax Court reports and summary opinions on the DAWSON portal. The portal's advanced search feature allows users to query search tax court records by case number, party name, or keyword.

To retrieve tax court documents offline, requesters must submit a written request to the clerk's office or visit in person. Non-party copy requests usually cost $0.50 per page (with a $3 per-document cap), and certified copies require a request letter and check or money order for the payment. Official transcripts are ordered through the court reporter at current per-page rates (approximately $4.00), with delivery in 60-90 days.

Appeals and Enforcement of Tax Court Decisions

Tax Court decisions may be appealed to the U.S. Courts of Appeals for the federal circuit covering the taxpayer's residence by filing a notice of appeal within 90 days. Under 26 U.S.C. § 7481, decisions become final upon expiration of that period if no appeal is filed, or upon resolution of appeals and denial of certiorari.

Once final, the IRS issues a notice of judgment, assesses any deficiency, and resumes collection activities. Taxpayers must pay the assessed amount with interest computed from the original due date, after which the IRS updates its records to reflect compliance and closes the case. Hence, the tax court itself does not enforce its decisions; the IRS handles post-judgment compliance and enforcement in accordance with federal tax law.

State-Level Tax Courts and Tribunals

Many states operate their own tax courts or tribunals to resolve disputes involving state and local taxes, such as income, property, and sales taxes. Examples include the New Jersey tax court and the Oregon tax court, both of which are dedicated forums for handling state-specific tax matters.

Procedural and jurisdictional differences between State Tax Courts/Tribunals and the U.S. Tax Court:

The table below outlines key procedural and jurisdictional differences between state tax courts/tribunals and the U.S. tax court:

Taxpayers must ensure that they file their tax dispute petitions in the correct forum, based on the type and source of the tax issue in question. It is recommended that petitioners:

• Use state tax courts or tribunals when the issue involves state or local tax matters, such as property tax assessments, state income tax audits, or sales and use tax controversies. These courts have no authority over federal IRS disputes.
• Use the U.S. Tax Court when disputing a federal tax determination, most commonly after receiving an IRS Notice of Deficiency regarding income, estate, or gift taxes under federal law. This court offers a nationwide platform to resolve IRS-related matters without prior payment.

FAQs About Tax Courts

The following are frequently asked questions about tax courts in the United States.