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The Small-Case Procedure of the United States Tax Court: A Small Claims Court that Works

Published online by Cambridge University Press:  20 November 2018

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Professor Whitford finds that the small-case procedure of the United States Tax Court, unlike most other small claims courts, provides a meaningful avenue of redress for taxpayers contesting small amounts and appearing pro se. The success of this procedure is attributed to the unique dispute “posture” of the Tax Court petitioner and to the extensive resources assigned to the small-case procedure by both the Tax Court and the chief counsel to the IRS. This special Tax Court invention is not likely to be replicated in courts of more general jurisdiction. Lack of political support will prevent allocation of resources sufficient to make pro se litigation work. The expenditure of such resources in the Tax Court apparently reflects a felt need to legitimate the tax system by providing fair disputing procedures.

Research Article
Copyright © American Bar Foundation, 1984 

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1 On the history and purposes of the small claims court movement, see generally Barbara Yngvesson & Patricia Hennessey, Small Claims, Complex Disputes: A Review of the Small Claims Literature, 9 Law & Soc'y Rev. 219, 221–28 (1975); Reginal Heber Smith, Justice and the Poor (memorial ed. Chicago: National Legal Aid and Defender Association, [1919] 1967).Google Scholar

2 Yngvesson & Hennessey, supra note 1, is a very good summary of studies published before 1975. Among noteworthy studies published since then are John C. Ruhnka & Steven Weller with John A. Martin, Small Claims Courts: A National Examination (Williamsburg, Va.: National Center for State Court, 1978); Thomas L. Eovaldi & Peter R. Meyers, The Pro Se Small Claims Court in Chicago: Justice for the “Little Guy”? 72 Nw. U.L. Rev. 947 (1978); Austin Sarat, Alternatives in Dispute Processing: Litigation in a Small Claims Court, 10 Law & Soc'y Rev. 339 (1976).Google Scholar

3 E.g., Ruhnka & Weller, supra note 2, at 46–47; Nat'l Institute for Consumer Justice, Redress of Consumer Grievances, 13–14 ([Washington, D.C.]: National Institute for Consumer Justice, n.d.); John Montague Steadman & Richard S. Rosenstein, “Small Claims” Consumer Plaintiffs in the Philadelphia Municipal Court: An Empirical Study, 121 U. Pa. L. Rev. 1309 (1973).Google Scholar

4 The best-documented study of the plight of unrepresented consumer defendants is David Caplovitz, Consumer in Trouble: A Study of Debtors in Default (New York: Free Press, 1974). That study concerns litigation in the regular courts, but conclusions drawn about litigation in small claims courts are similar. E.g., Yngvesson & Hennessey, supra note 1, at 228–56.Google Scholar

5 Note, 21 Stan. L. Rev. 1657 (1969).Google Scholar

6 26 U.S.C. § 7463 (1982). As originally enacted, jurisdiction was limited to cases in which no more than $1,500 in taxes was in dispute. The jurisdictional amount was increased to $5,000 on November 6, 1978, Revenue Act of 1978, Pub. L. No. 95–600, § 502 (a)(20)(A), 92 Stat. 2763, and to $10,000 on July 18, 1984, Tax Reform Act of 1984, Pub. L. No. 98–369, § 461 (a)(1), 98 Stat. 494, 823. Further details of the small-case procedure will be described at notes 20–30 infra and accompanying text. The legislative history of the original authorization of the small-case procedure, showing that the legislative purposes for the action were the same as those associated with the establishment of small claims courts, is in S. Rep. 552. 91s Cong., 1st Sess. 301 (1969), reprinted in 1969 U.S. Code Cong. & Ad. News 2027, 2340. See also Samuel B. Sterrett, Small Tax Cases, 50 Taxes 624 (1972).Google Scholar

7 See Michael J. Whiteman, The Advantages of Litigating in the Small Case Division of the Tax Court, Prac. Law., Jan. 15, 1983, at 41; Note, The Small Tax Case Procedure: How Does It Work–-Does It Work? 4 Fordham Urb. L.J. 385 (1976); Note, Litigation in the Small Tax Case Division of the United States Tax Court–-The Taxpayer's Dream? 41 Geo. Wash. L. Rev. 538 (1973).Google Scholar

8 26 C.F.R. § 601.105(d). For a brief summary of IRS procedures, see James J. Freeland, Stephen A. Lind, & Richard B. Stephens, Fundamentals of Federal Income Taxation 959–69 (4th ed. Mineola, N. Y.: Foundation Press, 1982).Google Scholar

9 Settlement negotiations with an appeals office differ from those with the auditor because, for the first time, an IRS employee is authorized to consider what are called the “hazards of litigation” in formulating a settlement position. See 4 Boris I. Bittker, Federal Taxation of Income, Estates and Gifts ¶ 112.1.4 (Boston: Warren, Gorham & Lamont, 1981); Richard A. Osserman, Settlement Negotiations After the Agent, 39 Inst. on Fed. Tax'n ch. 39 (1981).Google Scholar

10 26 U.S.C. § 6212 (1982). See 4 Bittker, supra note 9, at ¶ 112.1.6.Google Scholar

11 To be precise, when the 90-day period expires, the proposed deficiency can be “assessed.” 26 U.S.C. § 6213(a)(1982). Assessment creates an automatic lien on much of a taxpayer's property and makes available to IRS a variety of creditor remedies. 26 U.S.C. § 6321 et seq. (1982).Google Scholar

12 The refund claim will be processed within IRS much as a proposed deficiency would, and if denied initially, taxpayer can seek administrative review in the appeals office. 4 Bittker, supra note 9, at ¶ 112.3.4.Google Scholar

13 28 U.S.C. § 1346(a)(1)(1982). See 4 Bittker, supra note 9, at ¶ 115.7. The availability of alternative forums for tax litigation has generated many practitioner-oriented articles on how to choose the proper forum. E.g., Loyal E. Keir, Douglas W. Argue, & Brian J. Seery, Tax Court Practice 23–30 (6th ed. Philadelphia: American Law Institute-American Bar Association Committee on Continuing Professional Education, 1981); John B. Jones, Jr., Choice of Forum in Tax Litigation Revisited, 35 Inst. on Fed. Tax'n373 (1977). Because refund procedures require payment of tax before litigation can occur, however, the vast majority of tax cases are initiated in the Tax Court.Google Scholar

14 26 U .S.C. § 6213(a) (1982). If the taxpayer is outside the United States when the notice is mailed, the appropriate time frame is 150 days. Id. Google Scholar

15 This study was done before the summer of 1984, however, when the jurisdictional amount was still $5,000.Google Scholar

16 Rev. Proc. 82–42. 1982–2 C.B. 761. If the case is called for trial before expiration of the six-month period during which an appeals office has exclusive settlement authority, district counsel will have settlement authority for a 15-day period before trial-calendar call. The district counsel's office, in its discretion, can refer a case to the appeals office, even though it has previously been reviewed there, if it believes further settlement negotiations with that office may be fruitful.Google Scholar

Coordinating the settlement positions of the chief counsel's staff and the appeals office is a major administrative problem for the tax system. During recent years there have been several changes in the rules about when district counsel must consult with or obtain the approval of the appeals office before settling a case. The revenue procedure cited above expanded the district counsel's unfettered discretion to settle cases. This divided settlement authority can affect the strategy of tax practitioners, of course, as they maneuver to arrange a settlement with the office likely to adopt the most sympathetic stance to the taxpayer.Google Scholar

17 The chief counsel's office is not directly under the commissioner of the Internal Revenue Service, though still located in the Department of the Treasury. The chief counsel's office is in turn divided into regional and district offices, which are located in most cities and towns where the Tax Court hears cases. The appeals division is also part of the Office of the Chief Counsel.Google Scholar

18 26 U.S.C. § 7443 (1982). There are also five senior judges who can hear cases.Google Scholar

19 26 U.S.C. § 7460(b) (1982). See 9 Stand. Fed. Tax Rep. (CCH) ¶ 5801.315; Harold Dubroff, The United States Tax Court: An Historical Analysis 354–56 (Chicago: Commerce Clearinghouse, 1979).Google Scholar

20 These instructions are reproduced in 9 Stand. Fed. Tax Rep. (CCH) ¶ 5801.19.Google Scholar

21 Tax Ct. R. 175(a)(2), 20(b).Google Scholar

22 26 U.S.C. § 7463(b) (1982).Google Scholar

23 Tax Ct. R. 172(c). The Tax Court, on its own initiative, can also transfer a case to the regular docket, as can taxpayers who, subsequent to filing, change their minds and request transfer. Tax Ct. R. 172(b), (c). See also Tax Ct. R. 173. Such transfers are also rare.Google Scholar

24 26 U.S.C. § 7456(c) (1982). Tax Ct. R. 3(d) provides that commissioners shall be called special trial judges, and this result was confirmed statutorily in the recent Tax Reform Act of 1984, Pub. L. No. 98–369, § 463(a), 98 Stat. 494, 824.Google Scholar

25 Brief biographies of the special trial judges appear in 9 Stand. Fed. Tax Rep. (CCH), at 66,016–019. The biographies given suggest that prior to appointment all special trial judges had extensive experience in the practice of tax law, either for the government, in private practice, or both.Google Scholar

26 See General Order No. 8, 81 T. C. XXIII (1983). Although there are no specific limits on the kinds of cases special trial judges can hear, this order states: “It is anticipated that, in general [regular] cases assigned [to special trial judges] … will be those involving primarily factual issues and where the taxpayer is not represented by counsel.” Special trial judges also sometimes hear pretrial motions in connection with a regular case to be tried later by a regular judge.Google Scholar

27 Tax Ct. R. 183. The rules provide that small-case hearings are to be recorded, though they need not be transcribed. Tax Ct. R. 178. In my observations the judge always ordered a transcript. Until recently all Tax Court decisions had to be written. A recent amendment authorizes oral decisions. 26 U.S.C. § 7459(b) (1982). See notes 99–100 infra and accompanying text.Google Scholar

28 Tax Ct. R. 175(b). Posttrial briefs, which are usual in regular Tax Court litigation, are also not required in small cases. Tax Ct. R. 177(c). As a matter of practice, IRS counsel will commonly submit a memorandum or stipulation of facts at trial, but no pleading beyond the petition is usually required of the taxpayer.Google Scholar

29 Tax Ct. R. 177(b).Google Scholar

30 Petitioners to the Tax Court can request a place for the hearing when they file the petition. Tax Ct. R. 140(a). The places where small cases will be heard are listed in 9 Stand. Fed. Tax Rep. (CCH) 15801.19.Google Scholar

31 The Office of Chief Counsel for the IRS keeps computerized records on all cases assigned to it, partly to keep track of its caseload and partly to help evaluate the work of individual attorneys on the chief counsel's staff. Mr. Nelson Shafer, district counsel for Milwaukee, generously made these records available to me for all cases closed by the Milwaukee and Chicago district counsel's offices between October 1979 and February 1982. These cases, if tried, were heard primarily in Milwaukee and Chicago, though a few were heard in smaller, nearby cities, such as Green Bay, Wisconsin. The records included much useful information, including a coding of the issues involved, the amount of delinquent taxes stated in the %day letter, and the amount ultimately determined, whether by settlement or by judicial decision.Google Scholar

There is no way to be certain how representative the experience of the Milwaukee and Chicago districts is. One indication of representativeness is the 55% government recovery rate for these 1,119 cases. Comparable national statistics for small-case filings during the same period ranged from 48.1 % to 54.7 % (government recovery as a percentage of amount claimed). See table 7. Also suggesting the representativeness of the Chicago and Milwaukee sample is the settlement rate for the sample, which approximated the national settlement rate provided by the Tax Court. See text accompanying notes 49–50 infra. On the other hand, taxpayers may have been represented in a slightly higher percentage of the sample cases than they are nationally. See text accompanying notes 40–41 infra. And in tried cases in the sample the government completely won a slightly lower proportion than they did nationally. See table 6 and note 67 infra. Google Scholar

32 Seventy-five Tax Court petitioners were selected randomly from the list of cases closed by the Chicago district counsel's office, and another 75 were selected from the list of the Milwaukee office. All the petitioners selected had small cases closed within the year preceding the mailing of the questionnaires. To increase the response rate, many nonrespondents were telephoned and asked to return their questionnaires. In some instances responses were taken over the telephone. The overall response rate was 43 1/3%. The response rate was higher for Milwaukee petitioners (53%) than for Chicago petitioners (33%). Not all respondents answered all questions, of course. The results of the survey are reported as appropriate throughout the article.Google Scholar

33 Tax Reform Act of 1984, Pub. L. No. 98–369, § 461(a)(l), 98 Stat. 494, 823.Google Scholar

34 See Treasury, Postal Service, and Government Appropriations for Fiscal Year 1983, Hearings Before Subcomm. on Treasury, Postal Service, and General Government Appropriations of the House Comm. on Appropriations, 97th Cong., 2d Sess., pt. 3, at 245 (1982) (testimony of Tax Court's Chief Judge Tannenwald); Wall St. J., Oct. 20, 1982, at p. 1, col. 5.Google Scholar

35 These data are broken down by more discrete time limits in the table below, suggesting that this variation between Milwaukee and Chicago is stable over time.Google Scholar

36 In general, members of the wealthier social classes are more likely to respond to a mail survey. Consequently it is likely that the proportion of responses I received from lower demographic classes is less then their actual rate of participation in small tax cases.Google Scholar

37 26 U.S.C. § 7463(b)(1982).Google Scholar

38 Small-case decisions are reviewed by the chief judge of the Tax Court or the chief judge's delegate before issuance. See note 27 supra. The primary purpose of the review process is to ensure uniform decisions. The review process, therefore, should enhance the reliability of a small-case decision, the statute notwithstanding.Google Scholar

39 Nonattorneys may also represent parties before the Tax Court, but to obtain permission to practice before the court, they must pass a written examination administered by the court. Tax Ct. R. 200. Thus, some petitioners under the small-case procedure may be represented by accountants or by other tax advisors. I use the term attorneys to include all professional representatives of taxpayer petitioners, unless the context clearly indicates otherwise.Google Scholar

40 These data, which are not published, were provided to me by Chief Judge Dawson by telephone conversation (Aug. 27, 1984). The data are collected by the Tax Court for internal management purposes. Chief Judge Dawson indicated that the percentage of represented cases had been creeping upward in recent years and was 12% for the first six months of 1984. With the recent increase in the jurisdictional amount for the small-case procedure, the percentage of represented cases can be expected to increase further.Google Scholar

41 The computer records of 1,119 cases supplied by the district counsel's office did not indicate whether the taxpayer was represented. I was able to obtain this information for many but not all of these cases from the Chicago and Milwaukee trial calendars over the period covered. Cases for which information is not available are primarily those settled soon after filing and that therefore did not appear on a trial calendar. There is very likely bias in this subsample of cases for which I know whether an attorney appeared; this may account for the somewhat higher percentage of represented cases in the subsample as compared to the national data.Google Scholar

42 I attempted to use my data on Chicago and Milwaukee cases to test the hypothesis that representation became more likely as the amount in dispute increased. Of the cases in which I could determine whether the taxpayer was represented, the amount of deficiency asserted by the IRS was higher for cases in which there was representation ($1,502) than for cases in which there was none ($1,263). Though this difference is in the direction I had anticipated, it is not large enough to be statistically significant by the standard measures for testing the significance of a difference between means. Moreover, the average deficiency asserted in cases for which I could not determine whether there was representation was $1,497, nearly identical to the mean for cases in which 1 know there was representation. It is highly unlikely that representation existed in a large percentage of this indeterminate group, since most were settled shortly after filing. Consequently, I must conclude that the Chicago and Milwaukee data failed to confirm a hypothesis that representation will be more likely as the amount claimed by the IRS increases.Google Scholar

43 In my mail survey I asked whether respondents would have filed in the Tax Court if the small-case procedure had not been available. Of 65 responding, 40 said they would have filed, 17 indicated they would not have, and 8 were unsure. It is permissible to file pro se under the regular procedure, of course. I have made no systematic attempt to determine how feasible pro se representation is under regular procedure. The procedural rules are clearly not designed to facilitate pro se litigation as they are under the small-case procedure. In interviews, I have received conflicting reports about the practicality of pro se litigation under the regular-case procedure.Google Scholar

44 See sec. 1II.H of text.Google Scholar

45 A majority of cases presented more than one issue, and I have no way of knowing which issues in multi-issue cases were deemed most important. Conclusions from table 3 respecting possible causal relationships between issues presented and taxpayer representation are especially tenuous as a consequence.Google Scholar

46 See 4 Bittker, supra note 9, at ¶ 114.3.4. The decision by IRS to pursue penalties is normally made before the statutory notice of deficiency (90-day letter) is issued, and when the IRS pursues major penalties, the cases are unlikely to be eligible for small-case procedure. Still I hypothesized that if penalties were a real possibility, taxpayers would be more likely to retain attorneys during the administrative stages of the proceeding, with those attorneys continuing to represent the taxpayers even if the cases were ultimately litigated under the small-case procedure. The data support that hypothesis.Google Scholar

47 See note 16 supra and accompanying text.Google Scholar

48 My interviews revealed considerable variation between different district counsel's offices with respect to how often they exercised this discretion to refer cases to the appeals office. Many district counsel's offices rarely refer a case to an appeals office if that appeals office had reviewed the case before the statutory deficiency notice was issued, but others may refer such cases, particularly if new issues not previously considered by an appeals office appear. Until 1982 the appeals division had no formal authority over a case which it had considered after a protest of a 30-day notice. Rev. Proc. 79–59, 1979–2 C.B. 573. Compare Rev. Proc. 82–42, 1982–2 C.B. 761.Google Scholar

49 In testimony supporting a budget request, the chief judge of the Tax Court revealed the following data. In fiscal year 1980, 14,470 Tax Court cases were closed, of which 10,723 (74%) were settled. For fiscal year 1981, the comparable figures were 18,906 cases closed, of which 13,647(72%) were settled. Testimony of Tannenwald, in Hearings, supra note 34, at 248. The testimony does not indicate whether cases that were dismissed for failure of the taxpayer to prosecute them were included as “settled” cases. Neither the Tax Court nor the IRS regularly publishes settlement statistics. Recent studies indicate that about 70% of cases filed in general civil courts are disposed of by settlement. David M. Trubek et al., The Costs of Ordinary Litigation, 31 U.C.L.A. L. Rev. 72, 89 (1983). Tax Court experience seems comparable.Google Scholar

50 In the past year or two, responding to increased concern about Tax Court case backlog, the IRS and the chief counsel's office have placed great emphasis on case settlement. See Commissioner and Chief Counsel IRS, 1983 Annual Report 29. This emphasis has resulted in an increased settlement rate for all Tax Court cases (regular and small-case procedure combined) by the appeals division, as revealed by the table in note 52 infra. It is likely, therefore, that the findings from my sample understate the current settlement rate for small tax cases.Google Scholar

51 Indeed, during this study the appeals division did not appear to have jurisdiction over a case that it had considered before the statutory deficiency notice was issued. A few referrals from district counsel to an appeals office may nonetheless have been made. See note 48 supra. Google Scholar

52 If under established settlement procedures a Tax Court petition should be referred to the appeals division for settlement, the referral will be made by the clerks filing the petition. District counsel staff will not see the case until the period of appeals division's exclusive settlement authority expires or the case is set on a trial calendar, whichever first occurs. There are also many regular Tax Court cases referred to and settled by an appeals office, but this pattern appears much more often in small-case procedure matters. Data supporting this conclusion are contained in the appendixes to the annual reports of the commissioner of IRS. Each year, statistics appear there on the receipt and disposition of cases by the appeals office, distinguishing for these purposes the cases that were already docketed in Tax Court. The following table, constructed from these data, shows the percentage of all Tax Court filings that were referred to an appeals office and the percentage of cases that an appeals office settled (referral back to district counsel is the appeals office's other method of disposition). The product of the two percentages should be an estimate of total Tax Court filings that are settled by an appeals office. The data indicate that the percentage of all Tax Court cases settled by an appeals office has increased sharply in recent years, but remains well below the 60% rate in my sample of small-case filings.Google Scholar

53 See 4 Bittker, supra note 9, at ¶ 112.1.4.Google Scholar

54 Tax Ct. R. 175(a)(2).Google Scholar

55 To discourage such behavior, the interest rate on deficiencies was increased in 1982. 26 U.S.C. § 6621 (1982). As recently amended, this section now provides for redetermination of the interest rate every six months so that it equals the prime rate.Google Scholar

56 See Caplovitz, supra note 4, at 221.Google Scholar

57 Until recently, statute required that Tax Court decisions be written; a recent amendment authorizes oral decisions. 26 U.S.C. § 7459(b) (1982). It now appears that no more than 20% of the cases are being decided this way. See note 100 infra and accompanying text.Google Scholar

58 The rules do not require a transcription. Tax Ct. R. 178.Google Scholar

59 The taxpayer designates a place of trial at the time the Tax Court petition is filed. The IRS can move to change the place of trial but in small cases almost never does. Tax Ct. R. 140(c).Google Scholar

60 See note 30 supra and authorities cited therein.Google Scholar

61 I observed one small-case trial in which the young IRS attorney assigned to the matter had traveled over 60 miles for the hearing. The hearing lasted approximately ten minutes. In an informal interview after the trial, the IRS attorney said that in her opinion the whole event had been largely a waste of time. She believed the taxpayer's case was without substantial merit and could have been decided on the pleadings, which would have obviated her need to devote an entire workday to a needless hearing.Google Scholar

62 When a special trial judge travels to a locality to hear small cases, the first courtroom proceeding is a “calendar call.” All cases are called that have been listed by the clerk's office for trial during that trip by the special trial judge. In the calendar calls I observed, attorneys on the district counsel's staff report which cases had been settled on the eve of trial, and in many of the other cases reported an agreement on a trial time. The judge accepted these agreements, and the taxpayer did not appear at calendar call. In the remaining cases the taxpayer or a representative usually responded when the case was called. The judge inquired as to the status of settlement negotiations and, if appropriate, set a specific time for trial during his stay in that locality. Considerable effort was made to find a convenient time for the taxpayer and any witnesses. Evening hearings were not scheduled, however, meaning the taxpayer usually had to miss work for the hearing.Google Scholar

63 Letter to author from Special Trial Judge Buckley (May 24, 1984). In the small-case hearings I observed, when a taxpayer failed to respond at calendar call or sent a last-minute request for a continuance, the judge usually refused to dismiss the case for nonprosecution unless there had been a similar occurrence earlier. A similar reluctance to dismiss cases on procedural grounds was observed in an earlier study of the small-case division. Note, The Small Tax Case Procedure, supra note 7. I have been informed by Judge Buckley, however, that other judges take a less liberal attitude toward the granting of continuances.Google Scholar

64 Similar descriptions of the courtroom process are given in earlier accounts of the workings of small-case procedure. E.g., Notes, supra note 7.Google Scholar

65 See note 57 supra and accompanying text.Google Scholar

66 26 U.S.C. § 7463(b) (1982).Google Scholar

67 The comparable data from my sample of Chicago and Milwaukee small tax cases are 43% of tried cases decided entirely for the government and 16% decided entirely for the taxpayer. The results were mixed in the remaining 41% of the cases.Google Scholar

68 See table 4 supra. Google Scholar

69 One IRS informant gave still another reason for a lower government recovery rate in regular cases. He suggested that parties represented by attorneys in Tax Court were more likely than pro se small-case procedure litigants to have been represented both when the tax return was filed and when the underlying transactions in question were planned. An attorney who has been involved throughout the process can structure the transaction and return so that the taxpayer has a plausible argument for whatever tax benefit is claimed. My informant suggested that careful tax planning of this nature increases the likelihood of a favorable settlement.Google Scholar

70 The government recovery rate for 1982 regular-procedure cases is curiously low. A congressional assistant who asked Treasury personnel to explain this figure was told that it did not reflect a general change in settlement policy, but rather a very low settlement in one large case for reasons peculiar to that case. Interview with Stuart Applebaum, legislative assistant to U.S. Rep. Robert W. Kastenmeier. The return in 1983 of the government's recovery rate in regular cases to historically prevailing levels supports this explanation.Google Scholar

71 Moreover, there were only 15 cases in my sample in which a represented case went to trial. As still further evidence of the pro se taxpayer's ability to cope successfully, 20% of pro se users of small-case procedure in my sample won complete victories–-i.e., the government claim was abandoned or, at trial, the decision was that the taxpayer owed no further taxes. Only 23 % of represented users of small-case procedure in my sample won complete victories.Google Scholar

72 See authorities cited in notes 4–5 supra. Google Scholar

73 In labeling the small-case procedure a success, I am not asserting that it rectifies all or even most injustice in the collection of disputed taxes from individuals. Most obviously, the small-case procedure does nothing for taxpayers who are not assertive enough to challenge an auditor's finding of a deficiency. Studies from other dispute-settlement contexts suggest that many such taxpayers must exist. See, e.g., Trubek et al., supra note 49, at 85–87; David M. Trubek, The Construction and Deconstruction of a Disputes-focused Approach: An Afterword, 15 Law & Soc'y Rev. 727 (1980–81); William C. Whitford, Law and Consumer Transaction: A Case Study of the Automobile Warranty, 1968 Wis. L. Rev. 1006, 1045.Google Scholar

74 Filing a petition in Tax Court postpones the time when the IRS can resort to coercive collection remedies, for there can be no coercive collection without an assessment, and there can usually be no assessment while a Tax Court proceeding is pending. 26 U.S.C. § 6213(a) (1982). No doubt, therefore, some small-case petitioners are merely seeking the benefits of delay–-the filing fee, after all, is only $10–-and have no intention of going to trial. One should not assume, therefore, that all Tax Court petitioners have put aside feelings of inadequacy about litigating pro se.Google Scholar

75 One important article identified the complexity of consumer disputes and the inability of consumers to articulate their grievances in legal terms as probably the two most important reasons that small claims courts have failed to become viable forums for pro se litigation. Yngvesson & Hennessey, supra note 1.Google Scholar

76 Ruhnka & Weller, supra note 2, at 46–47 (1978); Eovaldi & Meyers, supra note 2; Yngvesson & Hennessey, supra note 1, at 253–54; Steadman & Rosenstein, supra note 3.Google Scholar

77 No separate budget is kept for the operation of the small-case procedure. The salary of a special trial judge in 1983 was $57,500. Hearings, supra note 34, at 299. Each special trial judge has a secretary and a law clerk. Thus, for salaries and fringe benefits alone it must have cost at least $100,000 to fund a special trial judge position in 1983. Special trial judges hear matters other than small cases, though that is the bulk of their workload. In 1983 there were ten special trial judges, and it has been estimated that there would be 1,820 written opinions issued in small tax cases in that year. Id. at 289. That means, on average, each judge prepared 182 opinions. If I conservatively estimate that only one-half the workload of a special trial judge is occupied by hearing and deciding small tax cases–-the other half being occupied by cases that are dismissed or settled or by matters other than small tax cases–-then the cost in salaries alone for the special trial judge and personal staff is about $275 per written opinion in a small tax case. When overhead, travel costs, and costs of a court clerk and reporter are included, the cost per opinion to the Tax Court alone must be over $500. For comparison, in my sample of 1,119 small tax cases from Milwaukee and Chicago, the average deficiency asserted by IRS was $1,370.Google Scholar

78 Recent legislation authorizes oral bench decisions in small tax cases. Note 100 infra and accompanying text.Google Scholar

79 As might be expected, this public solicitude did not always reflect private feelings. See note 61 supra. Google Scholar

80 For a perceptive account, see Tim Murphy, D.C. Small Claims Court–-the Forgotten Court, D.C. B.J., Feb. 1967, at 14.Google Scholar

81 Testimony of Tannenwald, in Hearings, supra note 34, at 248–49.Google Scholar

82 A taxpayer can choose to appear pro se in a regular Tax Court proceeding, of course. Special trial judges customarily hear pro se regular cases as well. Cf. General Order No. 8, 81 T.C. XXIII (1983).Google Scholar

83 In my mailing I asked the respondents whether they would have filed a Tax Court petition if the small-case procedure were unavailable. Of 65 respondents, 17 said they would not have, and another 8 were unsure. The filing fee under the regular procedure is $60, but only $10 under the small-case procedure. Google Scholar

84 U.S. General Accounting Office, Pub. No. GAO/CGD-84–25, Report to the Chief Judge, United States Tax Court, Tax Court Can Reduce Growing Case Backlog and Expenses Through Administrative Improvements (1984). The report estimates that without increasing the number of trial days, in 1981 the Tax Court could have more than doubled the number of cases it in fact scheduled for trial. The extra cases could have been heard when the special trial judge was not otherwise occupied because a trial finished early or was mooted by settlement. Id. at 9–11.Google Scholar

85 The chief judge's responses to the GAO recommendations are included in the published report. They include a commitment to increased scheduling of small cases. Id. at 41–63.Google Scholar

86 In turn, judges may begin to rely more on bench opinions than on written opinions. The implications of this change are discussed in the text accompanying note 100–102 infra. Google Scholar

87 Cf. Gideon v. Wainwright, 372 U.S. 335 (1963). Provision of free counsel to one “accused” of nonpayment of a private debt has never been deemed necessary.Google Scholar

88 In his testimony in favor of the Tax Court's 1983 budget, Chief Judge Tannenwald stated: “I think we must recognize that there seems to be such widespread dissatisfaction with the tax system on the part of tax-payers that, even with the most flexible settlement policy, our case load will continue to increase.”' Testimony of Tannenwald, in Hearings, supra note 34, at 252. See also Elizabeth F. Loftus, To File, Perchance to Cheat, Psychology Today, Apr. 1985, at 35.Google Scholar

89 Comptroller General of the United States, U.S. General Accounting Office, Pub. No. GGD-81–83, Illegal Tax Protestors Threaten System (1981). The Tax Court itself has begun handling tax-protestor cases in a summary way. See McCoy v. Commissioner, 76 T.C. 1027 (1981). Few small cases involve tax protestors, since the latter usually wish to preserve their right to appeal.Google Scholar

90 See, e.g., Ann D. Witte & Diane F. Woodbury, What We Know About the Factors Affecting Compliance with the Tax Laws, ed. Phillip Sawicki, 1983 A.B.A. Sec. of Tax'n, Income Tax Compliance 133, 142.Google Scholar

91 Herein lie the many current concerns about the “underground economy.” See, e.g., Terri Schultz, The Untaxed Millions, N.Y. Times, Mar. 16, 1980 (magazine), at 42.Google Scholar

92 See Richard L. Abel, Introduction in id., ed., 1 The Politics of Informal Justice 1–13 (New York: Academic Press, 1982).Google Scholar

93 The relationship between the perceived fairness of judicial procedure and the acceptability of case outcomes to the participants has been the subject of a series of recent applied psychology experiments and articles. The results tend to confirm my speculations. E.g., Tom R. Tyler, The Role of Perceived Injustice in Defendants' Evaluations of Their Courtroom Experience, 18 Law & Soc'y Rev. 51 (1984). For an article by a tax lawyer exhibiting deep respect for the ability of a perceived fairness in the dispute-settlement mechanism to legitimate the tax system, see Douglas H. Walter, Changes in Strategic Positions Between the IRS and Tax Practitioners: Impact of the Disclosure of Information, 58 Taxes 815 (1980).Google Scholar

94 See note 25 supra. Google Scholar

95 See Abel, supra note 92.Google Scholar

96 The Tax Court estimates that ten special trial judges will issue 1,820 smallcase written opinions in 1983, an average of 182 opinions per judge. See note 77 supra. This is not the entire workload of special trial judges, though it is the bulk. I have no counterpart figures for small claims court judges, but I would be very much surprised if they decided only 182 cases annually.Google Scholar

97 Much work remains to be done on what aspects of a judicial procedure contribute to a perceived legitimacy. The psychological literature suggests that perceived fairness of procedure contributes to the legitimacy of the outcome but does not fully explore what accounts for a perceived fairness of the procedure. Perhaps a modest degree of formality contributes to such a perception. See generally Tyler, supra note 93, and the authorities he cites.Google Scholar

98 See text accompanying notes 53–55 supra. Google Scholar

99 Miscellaneous Revenue Act of 1982, Pub. L. No. 97–362, § 106(b), 96 Stat. 1726, 1730, amending 26 U.S.C. § 7459(b).Google Scholar

100 Telephone interview with Mr. Casazza, chief clerk to the United States Tax Court (Feb. 6, 1984). Mr. Casazza's estimate is based on his statistics for the first nine months of experience under the legislation authorizing bench decisions. That legislation (amending 26 U.S.C. § 7459(b)) became effective on March 1, 1983. It is possible, of course, that over time the frequency of bench decisions will increase.Google Scholar

101 Text accompanying notes 84–86 supra. Google Scholar

102 I would not be surprised to see bench decisions delivered principally in cases where the cooling out and legitimating functions of the small-case procedure cannot practically be achieved. This would include cases in which the taxpayer has petitioned the Tax Court largely to delay, motivated either by an instrumental desire to postpone the inevitable date of payment or by an ideologically based conviction to resist the tax system in every possible way (i.e., a tax protestor). The prevailing custom of written decisions would be reserved for taxpayers filing in Tax Court with a good-faith belief they might win.Google Scholar

103 Trubek et al., supra note 51, at 90.Google Scholar

104 As noted earlier, pro se plaintiffs already do reasonably well in small claims courts. Sources cited note 76 supra and accompanying text.Google Scholar

105 E.g., National Institute for Consumer Justice, supra note 3, at 19.Google Scholar

106 The Better Business Bureaus of the country, affiliated generally with chambers of commerce, run many consumer complaint mediation and arbitration programs, and they receive a good deal of support, both financial and vocal, in these endeavors. Sometimes trade associations have established seemingly independent arbitration panels to hear consumer complaints, but with the industry retaining substantial authority over the appointment of panel members. A good example is the Major Appliance Consumer Action Panel (MACAP), which arbitrates complaints against cooperating appliance manufacturers. Quite often, large manufacturers establish internal complaint-handling divisions and advertise their existence. The message is that a company that welcomes complaints and sets up special procedures for handling them must be trying to deal fairly with its customers. See generally National Institute for Consumer Justice, Staff Studies on Business Sponsored Mechanism for Redress ([Washington, D.C.]: National Institute for Consumer Justice, n.d.); Whitford, supra note 73, at 1015–24.Google Scholar

107 See Lon L. Fuller, Collective Bargaining and the Arbitrator, 1963 Wis. L. Rev. 3.Google Scholar

108 The organized bar might also be expected to oppose vastly expanded opportunities for pro se litigation of civil cases, given the implications such a development could have on the financial interests of many attorneys.Google Scholar