Supreme Court Ruling To Lift Tax Court’s Veil Of Secrecy

by Mike Godfrey, Tax-News.com, Washington

09 March 2005

The United States Supreme Court has ruled that the US Tax Court does not have the justification to withhold vital documents from individuals and appellate judges, ruling that factual recommendations in proceedings must be disclosed.

Unusually, while the official opinions of the tax court are made public, the recommendations of specially appointed judges who hold trials in cases involving more than $50,000 are kept secret. This is because since the early 1980s, the court deems such material as confidential internal documents.

However, in a 7-2 decision, the Supreme Court ruled that neither federal law nor the tax court’s own rules authorized the concealment of these documents, noting that the initial findings of magistrate and bankruptcy judges in other proceedings are open.

"In comparison to the nearly universal practice of transparency in forums in which one official conducts the trial (and thus sees and hears the witnesses), and another official subsequently renders the final decision, the tax court's practice is anomalous," Justice Ruth Bader Ginsburg wrote in an opinion for the majority.

The case in question has its origins in a $30 million tax deficiency case dating back to the 1970s involving the now deceased tax lawyer Burton Kanter. While the latest ruling does not overturn the 1999 judgement against Kanter by the tax court, the basis for the court’s decision must now be disclosed.

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