Updates From The Tax Court: Post-COVID Plans And New Funding

U.S. Tax Court Chief Judge Kathleen Kerrigan discusses the court’s post-COVID transition and case management system, and how the additional funding from the Inflation Reduction Act may be used.

This transcript has been edited for length and clarity.

David D. Stewart: Welcome to the podcast. I’m David Stewart, editor in chief of Tax Notes Today International. This week: meeting the chief judge.

Earlier this year, Kathleen Kerrigan began her term as chief judge of the U.S. Tax Court, taking over for Judge Maurice Foley, who we interviewed at the end of 2020.

Since then, the court has transitioned into its post-COVID era and is looking forward to additional funding from the Inflation Reduction Act. We’ll hear more about the court under Judge Kerrigan from Tax Notes legal reporter Nathan Richman. Nate, welcome back to the podcast.

Nathan Richman: Thanks for having me.

David D. Stewart: I understand you recently talked to Kerrigan, but before we get into that, could you give us a bit of background on the judge?

Nathan Richman: Well, she spent a fair amount of time working on Capitol Hill, serving in Rep. Richard Neal (D-Mass.) and Sen. John Kerry’s (D-Mass.) offices before and after a stint at BakerHostetler. And then in 2012, President Obama nominated her for a 15-year term on the Tax Court.

David D. Stewart: Now how does one become chief judge of the court?

Nathan Richman: The judges serving Senate-confirmed terms vote for the chief judge for two-year terms.

David D. Stewart: Before we get to the interview, could you tell us a bit about what you talked about?

Nathan Richman: We discussed further court action related to the evolving pandemic, the rollout of the court’s new case management system, and what the court expects to see from the Inflation Reduction Act.

David D. Stewart: All right. Let’s go to that interview.

Nathan Richman: Judge Kerrigan, welcome to the podcast and thanks for joining us.

Kathleen Kerrigan: You’re welcome.

Nathan Richman: Let’s just start off pretty straightforwardly. Tell us about your journey to the Tax Court. What got you started in tax, and how did you end up nominated to the court?

Kathleen Kerrigan: I’ve been with the court for over 10 years now. I started in tax. Out of law school, I first worked for Neal, and at that time he was on the Banking Committee. I wasn’t sure what I was going to do, and then he got on the House Committee on Ways and Means.

I do not have my LLM, but I did take a couple classes at night in the LLM program when he got on Ways and Means. I switched over to doing his tax work, and that’s when I started doing tax policy work. I worked for him for about seven years. Then I went to BakerHostetler and was there for about seven years.

From there I went to work for Kerry and did his Finance Committee work. I guess it’s a theme — I think I was there about seven years. While I was there I was nominated by Obama for the Tax Court.

Nathan Richman: Sounds like quite a journey. What’s your favorite part about being a Tax Court judge?

Kathleen Kerrigan: I think some people wonder how somebody who didn’t have a practice in the courtroom could wind up being a Tax Court judge. But I think being on the Hill doing work for a member of the taxwriting committees is very valuable training. It covers a plethora of issues.

When you’re doing that type of work, you can’t become an expert in one type of area because you’re always working all over the code. Often tax bills aren’t very focused on just one section of the code; they’re a little bit everywhere. I feel like that is good training for the Tax Court because no one judge specializes in any particular cases.

My shortest trial was 20 minutes, and my longest trial, I think, was six and a half weeks. I’ve gone from $200 of a deficiency to over a billion.

Nathan Richman: Don’t the judges come from a wide range of backgrounds? You’ve got a legislative background, and some people come from litigation focused on one or planning focused on other tax topics. It’s a plethora.

Kathleen Kerrigan: We have a wide range of backgrounds. We also have some people who in themselves have a wide background, who have done a bit of everything. We have people who’ve been on the Hill. One person who’s been on the Hill, IRS, and private sector. We also have people who have come from the Department of Justice.

Nathan Richman: And you’ve got one internal candidate: Judge Alina Marshall?

Kathleen Kerrigan: Yes. And we also have Judge Travis Greaves, who was also a former clerk.

Nathan Richman: Is the trial work your favorite part?

Kathleen Kerrigan: I don’t know. I think the trial work is what I find the most interesting. I could take it from the beginning to the end. You start with your pretrial motions all the way through to your opinion. That covers a lot of ground.

Nathan Richman: And only some of that you have had to give up since your election as chief judge?

Kathleen Kerrigan: I do much less cases. I am traveling some. A couple previous chief judges have done that, and sometimes if a new judge comes along — I don’t expect one in the fall sessions I have scheduled — but you go do that as a training session.

But we had a very busy fall, and one of the things the chief judge does is the schedule. To make the schedule work, I thought, “Oh it would help if I take two sessions.”

Nathan Richman: You needed one more hand?

Kathleen Kerrigan: Right.

Nathan Richman: OK. When last I spoke to Foley, it was before the COVID-19 vaccines had come out. It’s been an eventful couple of years. I also see that the court just posted a webcast on the pandemic and how it’s been changing.

How has the court dealt with the evolving pandemic since the beginning of 2021?

Kathleen Kerrigan: Well, Foley might have given you some of these statistics, but in 2020 we did 12 remote trials, and then in 2021 we did 122 remote trials. And in 2022 we’ve switched — starting in the winter session, we do a mix.

I think if you look on the court’s website you’ll see we still stream the remote trials, but it’s a lot less than we used to have.

I was trying to calculate the numbers, and then it was off a little bit, because a couple times a judge will at the last minute change a session to a remote session. A few times that’s happened: COVID in the spring. There were some areas of the country where COVID was high and there was hardly anything left on the calendar, so it wasn’t really worth going to that session.

We’ve had other times where the sessions, most all the cases have settled. We’ve had a variety, but we really are back in person to some extent. We’ve had some special sessions in person, so we’ve been moving along.

I thought that was good timing I was here. I’ll give a plug for the Tax Court’s webinar — you can register on our website. I’ll be moderating it, and I’ll be joined by Judges Cary Douglas Pugh and Emin Toro.

We’ll be joined by two attorneys from the IRS and an attorney from the private sector who’s active in the American Bar Association tax practice section. Another attorney from the private sector, who’s very active in our low-income tax clinics. Right now, we work with about 133 low-income tax clinics.

What we’re going to talk about is lessons learned from COVID, what we can improve on, what we should continue to do, and how we keep moving forward as we’re still living with COVID.

Nathan Richman: Even in 2020, as you were starting with the first of these remote trials, there was some discussion about these pandemic tools and how they might be useful afterwards. What is the court planning on keeping?

Kathleen Kerrigan: We haven’t made any final decision on that. This webinar will help us learn — not only is it going to help the public, it’s also going to help the court learn. That’s on Wednesday, November 16, at 12 p.m.

The important part is the court is trying to figure out what works best for the taxpayer to make sure all taxpayers are having access to justice and are able to avail themselves of a court remedy. What I think what we’re looking at is, if the parties both agree that there can be a remote trial and the judge is OK with it being a remote trial, we’re still allowing remote trials to go forward.

We have at least one remote session each calendar year in which we’re assigning cases that need to be remote, so they’re really not done by region. There’s still some places where we borrow space. Sometimes, because courts are behind, we’re not able to get the space. So a few cities, we did it remote this fall in those types of situations.

Nathan Richman: Have you heard much from petitioners requesting these remote sessions? Is there a large uptake there?

Kathleen Kerrigan: There’s some, but I think there’s some people who still like to have their day in court.

Nathan Richman: Feels more official.

Kathleen Kerrigan: Or I think sometimes they’d rather be in person.

Nathan Richman: Does the court have any other COVID-related changes in mind at the moment?

Kathleen Kerrigan: I think we think things are working the way they are — that we were able to switch to remote relatively quickly. We were able to keep trying cases and moving along. We have a backlog, but that’s a different issue.

Because our normal number of case sessions is, rough estimate, about 170 a year, I’d say we’re probably going to be back on target closer to that number by the end of 2022.

But I think we’re just staying the course for now.

Nathan Richman: There’s been a lot of headlines about the Inflation Reduction Act and the IRS funding, but I understand that you guys are getting about $153 million extra over the next 10 years. What do you plan to do with that money?

Kathleen Kerrigan: I think the court’s looking into it and wants to make sure that they provide prudent stewardship of taxpayers’ dollars. At this time, we’re making sure that anything we do is improving on what we do [em dash here? these clauses seem distinct] that taxpayers are able to access justice. Anything that we do do would be in our congressional budget justification, but it wouldn’t be until next year’s. But we haven’t made any final decisions yet.

We are also going to have to see how our caseload changes because of the increased money that the IRS has. I think that’s a factor we have to look at.

Nathan Richman: So you’re not yet decided between more clerks, more staff, more technology, or even more special trial judges — anything like that?

Kathleen Kerrigan: No.

Nathan Richman: OK. So finally with Boechler v. Commissioner, there’s some clarity and finality on how Tax Court jurisdiction and the Supreme Court’s new views on filing requirement statutes interact. But that’s only collection due process cases. What else needs to be clarified?

Kathleen Kerrigan: Well, there has been a motion filed in a case on deficiency, and the court is addressing that in due course.

Nathan Richman: While that happens you’re building up a list of cases that will follow whatever that decision is?

Kathleen Kerrigan: Right. On the general docket, we’re waiting on cases until that opinion comes out.

Nathan Richman: There’s also been some development in whistleblower jurisdiction recently. For one thing there was Myers v. Commissioner, which even before Boechler settled jurisdiction for whistleblower cases. But there’s also now Li v. Commissioner, which questions what’s actually even a reviewable case. What cases actually can be brought? What is the court doing?

Kathleen Kerrigan: We’re waiting to see what happens with the litigation in Li until it’s settled law and monitoring it very closely and seeing how that impacts our whistleblower jurisdiction.

Even though it seems like we’ve had some whistleblower cases lately, of our number of petitions that came in for 2021, only about 0.2 percent were whistleblower.

Nathan Richman: What’s that calculate out to?

Kathleen Kerrigan: About 50 cases.

Nathan Richman: As compared to what?

Kathleen Kerrigan: 96 percent is deficiency cases.

Nathan Richman: Oh wow. It sometimes seems like a two-to-one deficiency-to-collection-due-process.

On to the update that was just in the offing when last I had a Tax Court judge to talk to: your new case management system. It’s been almost two years since that’s been live. How’s that been going for you guys so far?

Kathleen Kerrigan: It’s going. For the first aspect of it, we did a lot with the public interface. Now we’re doing a lot with the internal interface.

A lot of features are now coming to help the judge. In our old system, we were able to grant and stamp deny orders. We were not able to do that in the new system until the last month. We’re getting improvements.

The next improvement that’s going to be on the private sector side is going to be consolidated cases, making it easier to file a consolidated case. But we keep moving along and having improvements.

I think we’re past the stages where there’s some glitches. Overall I think it’s been a good change for the court and provides more access. We’re hoping electronic petitions increase, and that’s something we’re trying to encourage.

Nathan Richman: What’s the uptake been so far?

Kathleen Kerrigan: I think it’s been about 18 percent.

Nathan Richman: And you’re hoping to end up somewhere closer to, say, 80 percent?

Kathleen Kerrigan: I’m not sure how realistic 80 percent is, but we’d just like to see a steady increase. Until we had DAWSON, we didn’t take petitions electronically.

Nathan Richman: What sorts of feedback have you guys been getting from the public, the IRS representatives, etc.?

Kathleen Kerrigan: I think we’ve gotten positive feedback. There’s been a few glitches, but we’ve been able to address them, and I think people are just getting used to the system. I think overall it’s been a success.

Nathan Richman: I’m sure I’m not the first one to ask about the court’s stance on electronic access to files. But where does the court stand on electronic access to documents, especially compared to what’s available on PACER?

Kathleen Kerrigan: This is something the court’s looked into and tries to make as much available as possible. But the problem is the taxpayer identification information — bank accounts, Social Security numbers. As you can imagine, looking at the exhibits in a Tax Court case, you have a lot of that information. We’re just trying to seek the right balance.

Nathan Richman: Any thoughts on using DAWSON or some of the pandemic tools to tweak that balance? Can DAWSON segregate types of documents in a way that would be useful?

Kathleen Kerrigan: I’m not sure if it can. One of the problems we have is the parties not redacting information.

Nathan Richman: Yes, I recall Judge Buch’s presentation from shortly before the pandemic showing all the different parties that failed their redaction. Any thoughts to running another study like that?

Kathleen Kerrigan: I think it’s something we all still see. Right now we’ve been focused on getting the necessities of DAWSON and working through the pandemic before we go back and tackle this issue again.

Nathan Richman: Unfortunately, this might be considered a luxury?

Kathleen Kerrigan: I wouldn’t call it a luxury, because we’re always striving to make sure we have as much information available to the public as possible, and we are always seeking to strike the right balance.

Nathan Richman: One glitch that got a lot of attention was — you can correct me if you don’t think of it as a glitch — where whole case dockets were getting sealed for any one sealed document in those cases. What happened there, and how has that been resolved?

Kathleen Kerrigan: It’s still being resolved, but great progress has been made to resolve it. I think there’s a few closed cases which it hasn’t been addressed in. Most judges, including myself, have gone through and, with the help of our docket staff, have made sure the documents that were supposed to be sealed are sealed and the rest of the case is available.

Nathan Richman: You’re doing the manual sealing of the individual documents before you unseal the whole dockets?

Kathleen Kerrigan: What happened in DAWSON was when something was sealed, it triggered the whole case file to be sealed. We’re making sure that the proper documents are sealed.

Nathan Richman: That when you undo that whole sealing, it doesn’t unseal the thing you would actually like to be sealed?

Kathleen Kerrigan: Yes.

Nathan Richman: Any ETA on the last stragglers of that resolution?

Kathleen Kerrigan: Hopefully by the end of the year. But mostly those, as I said, are closed cases.

Nathan Richman: Thank you very much for joining us. It’s been an entertaining and illuminating discussion.

Kathleen Kerrigan: Thank you.

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