Discovery in the U.S. Tax Court is more limited, and more informal, than in many other federal courts. The Court expects the parties to exchange information cooperatively before using formal tools, and those tools come with limits and deadlines tied to the trial calendar. This article explains how a taxpayer can obtain documents and information from the IRS, and what the IRS can request in return.
Informal Consultation Comes First
Tax Court Rule 70 states that the Court expects the parties to attempt to attain the objectives of discovery through informal consultation or communication before using the formal discovery procedures. In practice, that means asking the IRS attorney for the information or documents needed, in writing, and discussing the issues before serving formal requests.
The Court’s standing pretrial order also requires the parties to cooperate in preparing for trial. Among other things, each side provides the other with copies of documents it intends to use at trial, and the parties agree in writing to facts and documents that are not in dispute. The Court notes that, most often, the parties agree to documents in this stipulation process.
Timing
Under Rule 70, formal discovery generally may not begin, without the Court’s permission, until 30 days after joinder of issue. Discovery must be completed, and any motion to compel filed, no later than 45 days before the date set for calling the case from a trial calendar. Because that deadline is keyed to the trial calendar, discovery requests should be served well before trial approaches.
The Formal Tools
Interrogatories (Rule 71)
A party may serve up to 25 written interrogatories, including all discrete subparts. Each must be answered separately and fully under oath within 30 days after service, unless it is objected to. Interrogatories may also be used to require the other side to identify the expert witnesses it expects to call and the substance of their expected testimony.
Requests for production (Rule 72)
A party may request documents, electronically stored information, and tangible things in the other party’s possession or control. A written response is due within 30 days after service, and any objection must state its reasons.
Requests for admission (Rule 90)
A party may ask the other to admit the truth of specified matters. Without the Court’s permission, requests may not be served until 31 days after joinder of issue. A matter is deemed admitted unless the receiving party answers or objects within 30 days. Admitted matters are conclusively established for the pending case unless the Court allows the admission to be withdrawn or modified.
Depositions (Rule 74)
Depositions for discovery are available with the consent of the parties. A deposition without consent is described in the rules as an extraordinary method of discovery, available only if the information practicably cannot be obtained through informal consultation, interrogatories, document requests, or a consensual deposition.
Subpoenas (Rule 147)
When a third party will not cooperate, a Tax Court subpoena can require a witness to appear and testify at trial or at a deposition, and to produce documents. The party serving the subpoena must pay the witness’s attendance fee and mileage.
Scope and Limits
Discovery may reach any matter that is not privileged and is relevant to the subject matter of the case, and it must be proportional to the needs of the case. Facts and opinions held by an expert who will not testify generally cannot be discovered absent exceptional circumstances.
Under Rule 103, a party or other affected person may ask the Court for a protective order for good cause, for example to limit discovery or to require that a trade secret or other confidential information be disclosed only in a designated way.
Enforcement
If a party fails to respond, the other party may move to compel. Under Rule 104, if a party disobeys a discovery order, the Court may treat designated facts as established, bar the party from supporting or opposing certain claims or introducing certain evidence, strike pleadings, dismiss the case, or enter a decision by default. The Court may also require payment of reasonable expenses, including counsel fees, unless the failure was substantially justified.
Discovery works in both directions. The IRS may use the same tools to obtain the taxpayer’s records and positions, and the same deadlines and sanctions apply.
Practical Considerations
Many Tax Court cases turn on the taxpayer’s own records and testimony, so organizing those records early is often as important as obtaining information from the IRS. Requests to the IRS work best when they are specific and tied to the issues in the notice. Written records of informal requests also help if a motion to compel becomes necessary.
Preparing a Tax Court case?
Tax attorney Cassra Minai, Esq. can discuss discovery and trial preparation for your case in a confidential consultation.