Speaking With The Tax Court docket Chief Decide: A 12 months Of Change

0
50
Talking With The Tax Court Chief Judge: A Year Of Change

United States Tax Court building in Washington DC

getty

U.S. Tax Court Chief Judge Maurice B. Foley discusses his path to the bench, the court’s new case management system, and pivoting to virtual during the coronavirus pandemic.

This post has been edited for length and clarity.

Nathan Richman: Well, thank you for joining us, Judge Foley. It’s a pleasure to have you.

Maurice Foley: It’s a pleasure to be here, Nathan.

Nathan Richman: You were appointed to the Tax Court after serving the federal government for several years. Can you share your journey to the courtroom with us?

Maurice Foley: I became interested in tax when I was in college studying economics and political science. I had a concentration in public policy and Black studies.

In my junior year of college, I took a macroeconomic policy class taught by someone from the political science department and an economics professor. During that class for about a week, they talked about tax policy and tax incentives. At that point, I really realized that tax policy was an amalgamation of all of the things that I really cherished and was studying. I discovered that tax policy was really the nexus between economics and politics. It also involved a heavy element of public policy.

During this class, we studied enterprise zones, which at the time was just a fledgling concept. It had been tried in England and some of the states were starting to adopt it. The federal government was just beginning to explore it. That really fascinated me. It actually gave me an incentive to become a tax attorney.

At that point, I didn’t know much about tax and I talked to my professor who was teaching the class. He was a political science professor, but he was formerly a businessman. He pointed me to a tax case that he actually had when he was in business, back in the 1960s. Curiously enough, his tax attorney was Ted Tannenwald, who actually served on the court and I had the pleasure of serving with him many years later. But at the time I was a 20-year-old looking at this Tax Court case that was actually a section 482 case.

Nathan Richman: Was this the first court case you ever looked at?

Maurice Foley: Absolutely. Little did I know that a couple of decades later I’d be going through section 482 again and dealing with cases like Xilinx, Veritas, and so forth. But at age 20, I was looking at this Tax Court case learning about the Tax Court for the first time. As I tracked through the progression of this case, I realized that before the case went to Tax Court, Tannenwald was appointed to the Tax Court and a new attorney was assigned to his case: Marty Ginsburg.

My tax professor knew a little bit about tax. He also knew a little bit about what it would take to be a really good tax attorney. I began to consult with him and talk to him about what I needed to do to become a tax attorney. At the time, I had planned to go into law. I wasn’t real sure about what area of the law, but I was now sure that tax policy was the route I wanted to take.

After college, I went to law school. I suffered through the first year of law school with criminal law, torts, contracts, and civil procedure. I longed to take my tax classes. In my second year, I was able to start taking tax classes and actually worked for a nonprofit law firm while at the University of California, Berkeley, doing some tax work for community development corporations and things like that. I always had this interest in how the tax code could be used to do some of these social things that I read about when I was studying economics at Swarthmore College.

While I was at UC Berkeley, I did a paper that dealt with the substantial economic effect of certain allocations to limited partners. I was looking at those regulations and there was a part of the regulations where it says, “For further information, contact Joe Smith at 1111 Constitution Avenue, Washington, D.C.” When I saw that, I said, “That’s what I want to do. I want to be the guy who has a sufficient amount of technical expertise to write the regulations.”

I went to the career office. They had this little binder of jobs that were in the chief counsel’s office. I said, “This is what I want to do.” I discovered that there was a division of the IRS called the legislation and regulations division and interviewed for that job. I received a recommendation by my interviewer to go directly to the legislation and regulations division.

IRS building

Sign on IRS headquarter building in downtown Washington, DC

getty

That’s where I started my career. I had always thought I was going to use my tax expertise to do tax planning for athletes and entertainers. I had this master plan where I was going to set up their private foundations and their charitable organizations and that’s how I was going to satisfy my desire to have an impact on communities that I really cared about.

Instead, I went to work for the IRS in the legislation and regulations division. I was in the transfer tax division. For the first six or seven months, I worked on excise taxes and section 4051, the retail tax on heavy trucks. I drafted regulations in that area. It was not very exciting, but it was really good training for me.

I started in 1985, and in 1986, of course, there was tax reform. We had a meeting in our branch and our branch chief asked if anyone would be interested in doing the regulations for the generation-skipping transfer tax, and nobody raised their hand. I raised my hand because I was interested.

In 1986 the GSTT was expanded to include direct skips. There hadn’t been any regulations drafted on that, so I wrote the temporary regulations relating to the modifications in the GSTT. That was a fascinating experience for me because I was responsible for drafting these brand new rules and became an expert in the area. I was traveling around the country doing these continuing legal education and American Bar Association events while working with IRS agents to show them how the rules worked.

Nathan Richman: Is that one of the temporary regs that’s still around?

Maurice Foley: I believe it is. I haven’t gone back to look at it, but I think they’re probably still around.

It was just a fascinating experience because I was constantly fielding calls from the public as they were working on the rules. They would call me with the questions, and it gave me an opportunity to really dig really deep into the rules and to find out where I needed to develop regulation.

That was really a critical part of my development because it really taught me the importance of writing carefully. I discovered that if you put a comma in the wrong place, it can change the entire meaning of a sentence. The proper placement of causes and all of that became became a high priority.

I really had to focus on the written word and I had to be concise. I had to be careful. That was really important training for me. Little did I know it was good training for what I would later be doing.

The other thing about my experience at the IRS was that while I was drafting regulations, I also had the opportunity for the first time to be exposed to the legislative process. At the time, whenever the folks on the Hill were drafting legislation, they would call up someone from the IRS to sit in on the drafting sessions.

Immediately after the 1986 act, they began drafting the technical corrections. As you might suspect, there were a lot of technical corrections for the GSTT , so I had the opportunity to go up on the Hill and sit in on those meetings. That just opened a whole new world for me.

After a brief exchange of pleasantries, the meetings devolved into this amazing, very fascinating discussion that involved all these regulations, different code sections, and citations. Somebody would go on the board and sketch out what transactions they wanted to include and what things they wanted to exclude.

I became fascinated with the legislative process. I was able to bring in some of the questions that I had about the rules and then watch them develop technical corrections to address some of these issues. I was hooked at that point. I was definitely poised and ready to delve into the policy world.

I worked at the IRS for about two and a half years. I was actually starting to look for a job in California and was all set to fulfill my dream of practicing tax law for these athletes and entertainers when I got a call from the chief tax counsel of the Senate Finance Committee. He asked me if I would be interested in working there. This was on a Wednesday. He asked me if I could have my resume by Monday. I wanted to tell him, “I could have it to you today if you’d like it,” but I didn’t want to seem too anxious.

I sent it to him that Friday and ended up getting the job at the Senate Finance Committee, which was interesting because it was just about the time when I finished my LLM. I’d spent two and a half years very narrowly focused on Chapter 13. When I went to the Senate Finance Committee, I was given really broad jurisdiction over a lot of things. I was basically hired to deal with the estate and gift tax.

U.S. Congress - Capitol Building at Capitol Hill in Washington DC, United States - Autumn

Autumn scenery shot of U.S. Congress in Washington DC – United States Politics

getty

There were some issues with respect to a provision in section 2036. Section 2036(c) had estate freeze provisions that were causing a lot of consternation, and the Senate was very interested in modifying those rules. I was hired to take a close look at that and see what could be drafted as an alternative.

But I also had responsibility for all the individual tax items: exempt organizations, cost recovery, penalties, research credit, low-income housing credit, and the earned income tax credit. As the low man on the totem pole, I got what everybody else didn’t want. It really was an exciting time for me because I was able to delve into a lot of areas that I knew nothing about.

After about five years at the Senate Finance Committee, I went to the Treasury department. That again opened up a whole new world for me. I was not interested in doing any regulations at that point. I was pretty burned out from my years working on the GSTT . I wanted to work in the tax legislative counsel’s office, but I didn’t want to do anything dealing with regulations.

They said, “Well, that job doesn’t exist.” They created a new job, the deputy tax legislative counsel for legislation. I was the first person in that position. It allowed me to basically do a lot of the things that I was doing at the Senate Finance Committee.

I loved my time at the Treasury department because I was able to work on some things that actually got into the law. I can look back now and still see a lot of that. Some of those things have gone away, but there are some enduring things like the earned income tax credit. That’s still there. It’s still growing and still providing a lot of assistance to over 25 million people.

I was just blessed to be a part of that. It was a kind of a fulfillment of my dream as 20-year-old, who was kind of a tax nerd interested in policy, to have an impact on a lot of communities that I really cared about.

Nathan Richman: You were selected as the first Black Tax Court judge. Now you’re in your second term as chief judge. What sort of, or were there any, unique challenges in being the first?

Maurice Foley: I was very blessed in that I was raised to really focus on taking advantage of opportunities. I grew up in places like Utah and Minot, North Dakota. My dad was in the Air Force and he worked on Minuteman missiles. We were oftentimes located in places that were pretty out of the way and isolated. It was not uncommon for me growing up to be the one and only. I became quite comfortable being the one and only to the point where it never even dawned on me.

But I was raised by parents who emphasized faith and the importance of education. While there were obstacles, they were never obstacles that I deemed to be very significant because I had a priority. I prioritized my faith and the emphasis on education. I knew, and my father would tell me, that with an education and a blessing, anything is possible. In my life, that’s proven to be the case.

Nathan Richman: There are big things happening at the court at the moment. I hear you’re updating your case management system for managing all the documents that are filed at the court. We’ve been hearing about this since at least last summer. This will include the Tax Court accepting electronic petition filing. What’s the latest?

Maurice Foley: We’re going full steam ahead on the development of our new case management system, which is going to be called DAWSON . It’s named after one of our former judges, Howard Dawson, who was appointed by President Kennedy back in the 1960s.

Our plan is that we’ll have our system online before the end of the year.

We’re very, very excited about it. It’s going to be a web-based system that’s tailor made for us. It’s going to further facilitate our remote operations and really put us in a position to really provide much better service to the public. It’s also going to dramatically change the way we’re able to access our cases and work internally.

A lot of the work the public won’t even see, but it’s going to be a really huge step forward for all of us. 

Nathan Richman: You froze the electronic filing system as it is. Why was that necessary?

Maurice Foley: Well, there’s a lot of work that has to be done. We had an old system that was developed back in the 1980s and now we’re going to a cloud-based system that is dramatically different.

We had to take all of the data, the case information, and the filings that were in our old system and migrate them to a brand new system. That’s a very, very tedious process that takes a significant amount of time.

At this very moment, all Tax Court employees are engaged in the process of going through the data that’s been migrated to make sure that nothing is missing. It’s a process that we can’t delegate to contractors because of the nature of the information. 

We have a very important job and we want the public to be served well. In order for them to be served well, there has to be accuracy. There has to be great care taken to make sure that we haven’t left anything out and that we haven’t made any mistakes.

As you might imagine, when you have a system that was developed in the 1980s, and it was updated so that it could run, when you contrast that with a brand new system, that’s cloud-based —

Nathan Richman: It’s not a one-generation upgrade.

Maurice Foley: It’s a quantum leap forward. It’s interesting because I think we’re going to be at the forefront of institutions in the government that have done this. We have gone from being in the dark ages to being at the forefront of the technological development for managing cases.

US Tax Court

Big Brother style camera over the entrance to the United States Tax Court

getty

Nathan Richman: Ahead of the courts that are on the PACER system.

Maurice Foley: Absolutely. Like I said, we have a system that’s going to be tailor made for the Tax Court. It’s all open source material and an agile software development. As issues pop up, we’re going to be able to develop the software and make changes in the code that are going to allow us to address those changes immediately. That puts us in a very, very good position for the future.

Nathan Richman: A little bit more on the blackout period. The notice says at the latest December 28. I read that as at the latest rather than that’s your ETA. Is there some sort of sooner ETA? How far along in the process are you? Can you update us on that?

Maurice Foley: We’re currently proceeding according to schedule. If we get it finished before December 28, we will go live before December 28. If we can do better than the deadline, we will do so. But my emphasis is to make sure that we don’t go past the deadline.

Nathan Richman: What differences will litigants see in the e-filing process? Will anything be changed for somebody who filed one way already and now their case is still open afterwards?

Maurice Foley: One of the more significant changes is you’ll be able to file petitions electronically. Heretofore we’ve been limited to filing petitions on paper. We’re going from a paper-based system to one that’s almost entirely electronic, which is significant.

One of the reasons why it’s significant is illustrated by the pandemic. The pandemic affected everyone, and we had people who were in a position where they couldn’t leave their homes. In going to a system that’s completely electronic, we are putting ourselves in a position where we can deal with things like that.

By going completely electronic, we’re able to cut through all of that and put us in a position to handle a lot better some of these unforeseen circumstances that have in the past stopped us cold.

Nathan Richman: What sort of testing did you do on this system? I’ve seen it demonstrated and heard a lot of the discussion about how it’s supposed to be so much more intuitive and easy like an Intuit product. But have you had somebody outside the court try to use it? Somebody not tax educated?

Maurice Foley: We’ve had all the stakeholders participate in the process. In testing it, we’ve had average people interface with the system as well as professionals, folks from the clinics, from the IRS, and from the bar to interface with the system and make recommendations.

We wanted to make sure that this is something that is not just accessible, but something that people could understand and they could be very comfortable with. One of the biggest changes is that the interface for individuals using this system is going to be much cleaner and much more modern. It’s going to resemble other websites that people interact with every day.

Some taxpayers come to our court and they’re only there for one time. They’re not frequent flyers. We want to make it comfortable for them. We’ve taken great pains to make sure that just because the tax code is mind-numbingly complex, someone’s interaction with the Tax Court is not difficult.

We wanted to make sure that pro se taxpayers can access our system easily. More than 70 percent of the individuals who have cases in Tax Court do not have representatives. We have always put that as as a priority to make sure that they have not just access, but that they’re able to access it easily and understand it.

Nathan Richman: Speaking of access, I’ve been hearing a lot from the IRS especially on expanding language access. Have you done anything like that with the new system?

Maurice Foley: Well, Nathan, you’re really pushing us. As I tell my staff all the time, I struggle with the English language, so we haven’t explored that. We’re trying to focus on making sure that all of the things that we have to do are being communicated well and clearly. But we’re using the English language.

Nathan Richman: The COVID-19 pandemic has hit us all. The Tax Court, first, of course, had to close its doors and cancel all its spring in-person trial sessions. This summer there’s the announcement of remote proceedings, which started mostly in September. What’s different about these remote proceedings? What sorts of solutions did you have to work through and what sorts of rules did you have to adjust?

Maurice Foley: We knew early on in March, after we decided that everything was going to be remote in terms of our staff, we realized that we were going to have to significantly change the way that we operated.

Businesswoman at home having a video conference with her team

Group of business people working from home, having video conference. Businesswoman having a video … [+] call with her team over a laptop at home.

getty

One of the first things that we did was set up a working group to start to address all of the issues on remote hearings and trials. The working group was benefited by all of the experiences of a lot of the state courts like the Michigan state court and the Texas state courts, which were far ahead of the federal government in terms of doing things remotely. We even looked at what the Alaska courts were doing, since they are constantly faced with geographical challenges that really required a great deal of creativity.

We gathered all the stakeholders together and got the views of the bar, the clinics, and the IRS. What we discovered is that we have some unique challenges because we’re a national court that typically holds cases and court sessions in 74 different cities. But we also had some unique advantages.

First of all, we don’t deal with criminal issues, so we didn’t have to worry about juries. The Tax Court stipulation process, which is the bedrock of Tax Court litigation, is the envy of a lot of courts. The fact that we’re able to focus on stipulations and narrow issues, and really hone in on legal issues and issues where there’s a dispute. That puts us in a position where we were really well suited to doing things remotely.

I’ve been very pleased with how pro se petitioners, IRS counsel, and many law firms have embraced these changes. But it’s different. We’re making use of technology and we’re making it work for us.

One significant thing about the tax code is we have a statutory mandate under section 7446 to provide hearings and trials with as little inconvenience and expense to taxpayers as is practicable. That’s our statutory mandate — to give taxpayers a forum in a way that minimizes their expense and inconvenience.

In a sense, these remote trials are a fulfillment of our statutory mandate. We have instances now where individuals who are on the road 365 days a year can have their trial in a location while they’re on the road, and they don’t have to come back to a particular city in order to have their case resolved.

Nathan Richman: Like a pilot with a foreign source income issue trying to litigate from Singapore?

Maurice Foley: Sure. You’ve got pilots. You’ve got truck drivers. You’ve got people who travel a lot. This has provided wonderful flexibility for them.

The technology is being put to good use. There’s a lot that we can do over the telephone. You’ve got telephone conference calls. We’re using Zoomgov, which is accessible via computer, tablet, and smartphone. There’s no real special equipment needed and it’s free to all participants. We’re seeing that it’s expanded access. I think that it’s making it a lot easier for people.

Nathan Richman: But aren’t there some people who are encountering some problems with technology? Not everybody even has a smartphone.

Maurice Foley: Well, even if you don’t have a smartphone, if you have a landline, we still have conference calls. We still have ways where you can move your case forward.

One of the significant things that we did is we modified our pretrial deadlines. We used to have the pretrial memo sent to us two weeks in advance. We increased that period of time to three weeks. One of the reasons why we did that is we wanted the judges to be involved earlier on in the case so that cases could be resolved earlier.

In the past when we had the two-week period between pretrial memos and the actual trial, what would oftentimes happen is that when you got to calendar call, there were a lot of cases that weren’t resolved because the parties hadn’t met. They hadn’t had any contact with each other, and they were getting together for the first time or having their first conversations at calendar call.

Corona virus

Corona virus

getty

We expanded that period. The judges are engaged earlier on in the process, so that we don’t have those instances where calendar call involves all these people coming who previously haven’t done any work on the case.

Nathan Richman: More of the judges are taking advantage of pretrial conferences?

Maurice Foley: Absolutely. That’s a significant change in how the court as a whole is operating.

Prior to this, I’ve always had a lot of conference calls before the trial session because I found early on in my career that was a way to ensure that the parties were working on their cases. It also results in fewer unresolved issues at calendar call. Under the current procedures, we know before we get to the so-called calendar call what’s going on with most of the cases.

In many instances, calendar call just consists of calling cases where there’s a motion to dismiss for failure to prosecute. But all the cases where there needs to be a trial and all that kind of stuff, prior to calendar call, the trial dates and all that stuff can be set.

We couldn’t have people meeting in courtrooms. It just wasn’t safe. In response to that, we had to come up with a system that eliminated the need for that. By doing things remotely, it provided us with some opportunities to do things more efficiently. Of course, we didn’t want to really replicate exactly what happens at calendar call, because there were some inefficiencies with respect to that.

So, we’ve changed things. Now, a lot of what would typically happen at calendar call happens in that three-week period before the session actually starts. We’ve made other modifications to make that easier.

Nathan Richman: What about documents?

Maurice Foley: Well, the documents are typically received before the trial. We have documents that are stipulated and we encourage all of that to happen before the trial. But then, we also make provisions for things to be filed during the trial. We leave the electronic filing system open so that things can be filed during the trial calendar. That was a change that we made.

We also made some changes with our acceptance of limited entries of appearance. Now we have taxpayers who can get counsel earlier on in the process. If there are attorneys who just want to represent someone during this process prior to calendar call, or just at calendar call, they can enter a limited entry of appearance and represent taxpayers for just pieces of their case.

Nathan Richman: But they used to have to do that at the calendar call?

Maurice Foley: That’s right. Prior to that, the limited entries of appearance started at calendar call and terminated after the trial session. Well, now we’re in a situation where it’s just prudent and reasonable to allow those limited entries of appearance to be filed as soon as the case starts. That’s a huge benefit to the court. More importantly, it’s a huge benefit to individuals who need counsel and the assistance.

Nathan Richman: I saw you recently added limited entries of appearance to the actual rules, so it’s no longer just these announcement documents. It sounds like that’s going to be permanent.

Maurice Foley: I certainly hope so. It’s something that has really been a big improvement to the system.

I must point out that our decision to allow limited inches of appearance, that issue was raised by the bar. After we considered it, we had the various committees on the court take a look at it. Then we decided it was a great idea, adjusted it, and made some changes to the rules to accommodate it. 

I think that the public is better served as a result. I would anticipate that as people get used to it, it’s going to pick up in terms of the number of people who are using it. But it is an important addition to the way that we’ve been operating.

Nathan Richman: Speaking of permanence and getting back more directly to remote trials, what sorts of that stuff do you expect to last after the pandemic? Out of particular interest, the YouTube channel?

Maurice Foley: I think that’s one of the wonderful things in terms of increased access. We have the availability for individuals to listen in on trials via YouTube. If you are a tax junkie, you can listen to Tax Court trials while we’re in session. You can wake up in the morning and listen to a New York trial. Then mid-afternoon, you can listen to something in Chicago and later on, something in Los Angeles. 

But, in general, after the pandemic, remote proceedings are going to be a valuable tool in our toolbox. I mean, it took an amazing amount of effort to put us in the position we’re in today. I don’t want to go backwards. I want to move forward. I don’t want to simply return to the pre-pandemic state of affairs.

We plan to emerge from this pandemic more efficient, more productive, more nimble, more flexible, and better prepared to meet our statutory mandate to provide taxpayers with a reasonable opportunity to appear before us with as little inconvenience and expenses practicable.

I think that as a result of these remote proceedings, we’ve got increased access to taxpayers. They may not live close to a place of trial. In Los Angeles, even if you live close to the place of trial, it takes a while to get there. You have to navigate some serious traffic issues in order to get to the court. By doing it remotely, we kind of addressed that problem.

I would also hope that we’ll see lower default rates as a result of the increased access and ability to sign on via Zoom. I realize it doesn’t have some of the formality. It’s a little different doing it online. But it’s still a court proceeding and with all the rules that accompany it. I think that the fact that it’s online might make it a little easier for people to be comfortable and to present their case.

There’s some cities we only go to once a year like Anchorage, Honolulu, and Pocatello. But now, with remote proceedings, we have the ability to deal with those cases in more than just that one week that we’ve set aside. That’s significant, too. If we’re in Alaska and we’re only there in June, we can set a trial for later on in the year and not have any problems. That’s a big convenience to the taxpayer.

In addition, for us, there’re reduced expenses. There’s greater availability of tax counsel with respect to the clinics. They’re not limited to clinics that are in their area. We can connect them with clinics that are in other parts of the country. In that sense, it’s a major advantage for taxpayers who need help.

There’s also some of the other advantages. One that I particularly enjoy is that it allows the chief judge to on occasion have a trial session. I do have difficulty finding time for it, but it at least opens that opportunity where I, or whoever’s chief judge, can have an opportunity to travel to another location.

Nathan Richman: That’s a perfect segue to basically my last question about feedback. You’ve had a feedback form, and also my understanding is the parties have feedback forms. What sorts of feedback have the judges or have the parties given you?

Maurice Foley: Well, overall the feedback has been very, very positive. But there have been things that you would expect that folks might have some concerns about. We’ve had comments about, “Well, I didn’t hear the judge when he turned his head to the side, and there were incidents where I couldn’t hear very well.”

Nathan Richman: When I’ve been listening, I’ve definitely heard some people are closer to their microphones than others.

Maurice Foley: There are things like that. We’ve had some instances where individuals have had difficulty connecting. We’ve had to walk them through how to connect. There’s standard things that everybody has run into when they’re using Zoom.

But these are all issues that are resolvable. I think that, as we continue, these are things that we can address and address effectively.

Nathan Richman: Well, thank you very much for sharing your time with us. It’s been a very interesting discussion.

Maurice Foley: Thank you, Nathan.