RESPONDENT: Commissioner of Internal Revenue
LOCATION: Texas State Capitol
DOCKET NO.: 03-184
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Eleventh Circuit
CITATION: 544 US 40 (2005)
GRANTED: Apr 26, 2004
ARGUED: Dec 07, 2004
DECIDED: Mar 07, 2005
Alan B. Morrison - for Public Citizen, Inc., et al. as amici curiae urging reversal in No. 03-1034
Deputy Solicitor General Hungar - argued the cause for respondent in both cases
Scott L. Nelson - for Public Citizen, Inc., et al. as amici curiae urging reversal in No. 03-1034
Stephen M. Shapiro - argued the cause for Petitioners
Steven R. Shapiro - for Public Citizen, Inc., et al. as amici curiae urging reversal in No. 03-1034
Thomas G. Hungar - argued the cause for Respondent
Facts of the case
Under federal law, the Tax Court could appoint special trial judges to hear certain cases and to make recommendations to the Tax Court. The Tax Court judge, under Tax Rule 183(b), had to presume the special judge's fact findings to be correct, but could make the ultimate decision in the case. The special trail judge reports were made public and included in the record on appeal. Only after a rule revision in 1983 did the Tax Court stop making such reports public and exclude them from the appellate record. Whether the final Tax Court's decision deviated from the special judge's recommendations was kept secret. Tax Court Judge Howard Dawson ruled that Kanter was guilty of tax fraud and of illegally diverting money to Claude Ballard, a business associate. In his opinion, Dawson claimed to have adopted the opinion of the special trial judge. Ballard and Kanter separately appealed, objecting to the absence of the special trial judge's report from the appellate record. Two federal appellate courts ruled against Kanter and Ballard.
Could the Tax Court exclude from the record on appeal Rule 183(b) reports submitted by special trial judges?
Media for Ballard v. Commissioner of Internal RevenueAudio Transcription for Oral Argument - December 07, 2004 in Ballard v. Commissioner of Internal Revenue
Audio Transcription for Opinion Announcement - March 07, 2005 in Ballard v. Commissioner of Internal Revenue
Anthony M. Kennedy:
Justice Ginsburg has the opinion of the Court to announce in Ballard versus Internal Revenue Service, 03-184 and Kanter versus Internal Revenue Service, 03-1034.
Ruth Bader Ginsburg:
The Tax Court's employment of special trial judges auxiliary officers appointed of the Chief Judge to assist in the work of the court.
Any case before the Tax Court maybe assigned a special trial judge for hearing.
Ultimate decision in large cases however is reserved of the Tax Court.
Tax Court Rule 183 governs the two-tiered proceedings in which special trial judge hears the case.
But the Tax Court itself renders the final decision.
The rule directs that after trial and submission of briefs the special trial judge shall submit a report including findings of fact and opinion to the Chief Judge and the Chief Judge will assign the case to a judge of the court.
In acting on the report the Tax Court judge, to whom the case is assigned, must give in the words of the rule do regard to the circumstance that the special trial judge has the opportunity to evaluate the credibility of the witnesses.
For other the Rule instructs that fact findings contained in the report shall be presumed to be correct.
The final Tax Court decision again coding from the Rule may adapt the special trial judge's report or may modify it or may reject it in whole or in part.
Until 1983 special trial judge report as submitted to the Chief Judge were made public and were included in the record on appeal.
A rule revision that year dispense with the requirement that the parties received copies of the special trial judge report.
And because the report was to be withheld from the parties the new rule dropped the provision giving parties an opportunity to set forth exceptions to the report.
Once the rule changes were in place, the Tax Court significantly altered its practice in cases referred for trial but not final decision to special trial judges.
In accord with the revised rule the Tax Court now denies public access to the special trial judge report and excludes the report from the record on appeal.
Further, since 1984, Tax Court judges have refrained from disclosing in any case whether the Tax Court's final decision in fact modifies or rejects the special trial judge's initial report all together or in part.
Instead the final decision including the decision at issue in this case invariably begins with this stock statement.
The Tax Court judge agrees with and adapts the opinion of the special trial judge.
Whether and how the published opinion of the Tax Court in fact alter the special trial judge's original report is never disclosed.
Petitioners are taxpayers who unsuccessfully opposed asserted tax deficiencies and fraud penalties in the Tax Court and on appeal.
They object to the concealment of the special trial judge's initial report and in particular exclusion of the report from the record on appeal.
Without access to the special trial judge report, petitioners assert the Court of Appeals cannot tell whether the Tax Court judge as accorded the report the deference required by Rule 183.
We agree with the petitioners that no statute authorizes in the current text of Rule 183 does not warrant the concealment at issue.
It appears that since that the 1983 rule revision the Tax Court has instituted a practice in which it treats the special trial judge's report as it draft to be worked over collaboratively by the regular judge and the special trial judge.
Rule 183 however, does not contemplate a collaborative revision process rather it provides that the report submitted post trial by this special trial judge is the report.
The one and only report the Tax Court judge must review and formally adapt, modify or reject.
The Tax Court practice we think it claimed impedes fully informed appellate review of the Tax Court's decision.
Fraud cases, in particular, may involved critical credibility assessments rendering the appraisals of the judge who presided it trial vital to the Tax Court's ultimate determination.
But without access to the special trial judge's report the Appellate Court will be at a loss to determine whether the special trial judge's credibility and other findings were given due regard and presumed correct or whether they were discarded without regard to those standards.
Indeed, in this very case, two Tax Court judges allegedly informed counsel for one of the taxpayers that the special trial judge, in the post trial report he filed by the Chief Judge, found the deficiency overstated and the fraud penalty inapplicable.