COMPARING THE DECISION MAKING OF SPECIALIZED COURTS AND GENERAL COURTS: AN EXPLORATION OF TAX DECISIONS

Justice System Journal, 2005 by Howard, Robert M

The Internal Revenue Service (IRS) is a unique federal agency because it is subject to the jurisdiction of different trial courts, the two most important of which are the United States Tax Court, a specialized court of limited jurisdiction, and the United States District Court, a court of general jurisdiction. This article offers an exploratory comparison of the tax-case decision-making process of the United States Tax Court and the United States District Courts. Using data from 1996 and 1997, the article examines the differences in decision making of these courts, specifically focusing on expertise and ideology. The United States Tax Court uses its expertise and lack of realistic structural or hierarchical constraints to decide the cases in a far more ideological manner than does the district court; this is consistent with the complexity and political nature of tax assessment and tax collection.

Recently, scholars have devoted attention to the decisions and behavior of specialized courts of limited subject-matter jurisdiction (Baum, 1990, 1995; Hansen, Johnson, and Unah, 1995, 1997); however, there has been little direct comparison of the decisions of specialized and general courts to determine if there are any systematic differences in the respective decisions. In part this is because there are relatively few issue areas that are still subject to the jurisdiction of both types of courts. Bankruptcy matters, for example, even if filed in United States District Courts, are routinely referred to the bankruptcy court.

There is, however, one very important area of policy subject to the jurisdiction of both types of courts, and that is tax policy. Tax policy, like any other law or regulation, is subject to debate, interpretation, and revision as litigants and the government pursue their disputes. The Internal Revenue Service (1RS) is unique among federal agencies in that it is subject to the jurisdiction of both the U.S. District Courts and the U.S. Tax Court, a specialized court of limited jurisdiction and limited independence.

Almost every day the courts make decisions favoring the Internal Revenue Service or the taxpayer, revising and reinterpreting the law. While there has been some scholarly examination of tax decision making (King and Lazarus, 2003; Schneider, 2001, 2002; Maule, 1999) and of specialized courts (Hanson, Johnson, and Unah, 1998; Baum, 1995, 1990), there has been no direct comparison of the decisionmaking process of the U.S. Tax Court and the U.S. District Court as they deal with tax matters. We do so here, using data from 1996 and 1997, and we focus on expertise and ideology.

SPECIALIZED COURTS

Congress creates specialized courts to contribute to policy-neutral goals when there is the need for discretion or judgment in interpretation of intricate issues in specific subject areas (Hansen, Johnson, and Unah, 1995; Legomsky, 1990); the subject matter involves significant technical complexity (Legomsky, 1990); or the caseload would overwhelm courts of general jurisdiction (Hansen, Johnson, and Unah, 1995; Baum, 1990). The judges on such courts often sit for fixed, not unlimited, terms, and the jurisdiction is usually limited to the specific policy.

Expertise is a significant benefit of a specialized court. Courts are often criticized for influencing or making policy without having any particular knowledge in the particular policy domain (Horowitz, 1977; Melnick, 1983). Familiarity with the policy allows specialized courts to offer expertise and skill in the subject matter (Unah, 1977). The specialized court decision confers judicial legitimacy on the result, something that a decision by an administrative law judge is not thought to confer.

Despite these perceived benefits, many have argued that these specialized courts are little better than the agency they supposedly review; that is, critics contend that these tribunals are captured by the agency or under the control of the industry interests (see Posner, 1983; see also Rifkind, 1951). Echoing concerns of other scholars concerned with bureaucratic pathologies (e.g., Gormley, 1989), critics assail specialized courts as biased and afflicted with a narrow outlook (Unah, 1997), and this concern, which led to significant opposition to the Federal Circuit Court of Appeals, has prevented the creation of a tax court of appeals (Posner, 1996; Geier, 1991).

Empirical scholarship has shown that specialized federal courts in other areas, such as the Court of International Trade, the former CCPA, and its successor the Court of Appeals for the Federal Circuit, do not necessarily behave as critics assert. The creation of the U.S. Court of Appeals for the Federal Circuit seems to have brought about consensus in patent law and an end to forum shopping (Posner, 1996:253). Specialized courts are less deferential to agencies than the nonspecialized federal courts of general jurisdiction (Hansen, Johnson, and Unah, 1995; Unah, 1997). With expertise in these areas of law, the courts do not have to rely on agency interpretation. This may extend to their relationship with hierarchically superior courts. Examining the U.S. Court of Customs and Patent Appeals, Baum (1995) found that the court was significantly less likely than the general jurisdiction courts of appeals to rely on Supreme Court authority when making decisions.