03/07/2005
CONTACT: Michael Donohue, (202) 554-9000
WASHINGTON, D.C., March 7, 2005— The U.S. Supreme Court handed the NFIB Legal Foundation its first victory today with its decision in the case of Ballard v. Commissioner Internal Revenue Service. The Legal Foundation filed an amicus brief last August arguing that the U.S. Tax Court's refusal to disclose special trial judge (STJ) reports to litigants violated taxpayers' rights and was unconstitutional. The Supreme Court, in a 7-2 decision, struck down the Tax Court's secretive practice.
“We are thrilled that the Supreme Court agreed with the Legal Foundation that taxpayers fighting an unfair tax bill should have the tools and information needed to mount a fair fight,” said Karen Harned, executive director of the NFIB Legal Foundation. “It is inconsistent with the law and simply not right that in tax cases factual determinations are accepted in secret and without question, making a challenge of those determinations almost impossible. The Supreme Court was right to strike down this unprecedented, unfair and secretive Tax Court practice. This is a victory for small-business owners and all taxpayers, and NFIB welcomes the court’s strong decision.”
The issues under review were of considerable importance to all taxpayers. Similar to many other tax cases, the underlying case started in the U.S. Tax Court where a chief judge appoints a special trial judge to conduct the trial. At the conclusion of the trial, the STJ submits a report to the chief judge who can then accept, reject or modify the report. However, due to a change of direction by the Tax Court in 1983, the STJ reports were not disclosed to the parties, nor were the reports included in the court record.
Currently, the Tax Court is the only forum in which a small-business owner or an individual (nearly 85 percent of small businesses file taxes as an individual) can contest an income tax without first paying the deficiency in full. Accordingly, many small businesses elect to litigate their tax disputes in Tax Court. The inability to review the STJ report severely hampered a taxpayer’s ability to effectively advocate an appeal of the trial court’s decision because he or she had no way of knowing why the trial court made the decision it did without seeing the STJ report.
“This case came down to two simple principles – fairness and transparency – the true benchmarks of our judicial process,” Harned said. “Requiring full-disclosure and transparency for all records is essential to ensuring that small-business owners have the ability to properly challenge decisions by the Tax Court. NFIB’s 600,000 members – indeed, all small businesses – are thankful that the Supreme Court has ended this secretive practice so Main Street can enjoy the same rights in court as others who have cases in the judicial system.”
The NFIB Legal Foundation is a 501(c)(3) public interest law firm created to protect the rights of America’s small-business owners by providing advisory material on legal issues and by ensuring that the voice of small business is heard in the nation’s courts. The National Federation of Independent Business represents the consensus views of its 600,000 members in Washington, D.C., and all 50 state capitals. More information is available at www.NFIB.com/legal.
