Appeals Court Says Tax Court Is Not a Real Court

The U.S. Court of Appeals for the Sixth Circuit issued an opinion in a tax dispute that found the U.S. Tax Court is not a court as defined by law.

The case, Mobley v. Commissioner of Internal Revenue, involved an IRS audit of a couple's 2000 tax return in which the IRS increased their tax liability by $32,554. The Mobleys consented to the increased assessment and collection, then filed an amended tax return for 2000, claiming a refund of $27,715. The IRS audited that return as well and disallowed the claim because the couple failed to respond to requests for evidence supporting their claim.

The couple filed a petition with the Tax Court, seeking a redetermination of their income tax for 2000 and asking for the audit to be reopened so they could produce supporting evidence. After changing residence several times, the Mobleys said they had never received actual notice of an audit and never had an opportunity to produce evidence supporting their claims. The Tax Court dismissed the petition, concluding that it lacked jurisdiction because "no notice of deficiency had been issued to petitioners for their taxable year 2000."

The Tax Court also rejected the Mobleys' request to transfer the case to the U.S. District Court for the Eastern District of Kentucky pursuant to 28 U.S.C. Section 1631. It agreed with the appeals court, reasoning that the section "by its terms applies only to a 'court' as defined in 28 U.S.C. Section 610" and that the "Tax Court is not included among the courts listed in 28 U.S.C. Sec. 610."

At stake is whether the Tax Court has authority to transfer a case over which it lacks jurisdiction to a federal district court that otherwise would have jurisdiction over the dispute. The Tax Court was originally known as the Board of Tax Appeals, and was within the Bureau of Internal Revenue, before it became known as a court.

"No one disputes that the Mobleys established at least three of the requirements for a transfer," wrote the appeals court. "The Tax Court lacked jurisdiction over the dispute; a transfer would serve the interest of justice; and the court to which the Mobleys want the case transferred is a court as defined in Section 610-namely, a 'district court of the United States.' The question is whether they satisfied the fourth element: Is the Tax Court, where the claimants initially filed the action, a court as defined in Section 610?... To our knowledge (and counsel's knowledge), every other court to address the issue has agreed that the Tax Court is not a 'court as defined in Section 610.'"

The appeals court ended up agreeing with the Tax Court on the jurisdictional question, saying, "Because the Mobleys do not challenge the Tax Court's jurisdictional ruling and because the Tax Court correctly concluded that it lacked authority to transfer the case under Section 1631, we affirm."