The Phoenix and the Perils of the Second Best: Why Heightened Appellate Deference to Tax Court Decisions is Undesirable

In our judicial structure, both courts of general jurisdiction and specialized courts are empowered to adjudicate federal income tax controversies. A proper relationship among those courts has proved difficult to forge and maintain. Absent an enduring intellectual and political consensus, institutional arrangements have been subject to recurring question and challenge. This Article has four parts. Part I is foundational. It describes the current structure for the litigation of federal tax controversies. Part II discusses the enduring attractiveness to many of enlarging the role of specialist courts in the federal tax adjudication system. It sketches proposals for a national court of tax appeals and proposals for increased deference to the Tax Court. Part II concludes that deference proposals are likely to be tenacious and recurring. Part III explains why additional deference to Tax Court decisions is a “second best” approach compared to creation of a national court of tax appeals. It also explores the disadvantages of this second best approach. In particular, Part III argues that increased deference, superimposed on the current fragmented tax litigation system, would (1) chill resort to the Tax Court with respect to cases of first impression, thus minimizing the benefits of the Tax Court\u27s expertise in tax matters; (2) increase rewards for forum shopping, allowing taxpayers to game the system to the consistent disadvantage of the government; (3) create intracircuit non-uniformity; and (4) exacerbate, not reduce, intercircuit non-uniformity by adding procedural non-uniformity on top of substantive non-uniformity. Part IV considers the effect of the Supreme Court\u27s decision in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. on the question of appellate deference to the Tax Court. It concludes that Chevron is not likely to be significant in this regard and, in any event, militates against, not for, deference to Tax Court decisions