On September 11, 2015, the IRS, responding to the Tax Court's request for suggested revisions to the Tax Court's Rules of Practice and Procedure, proposed changes to help improve tax court procedures and enhance efficiencies for both the Tax Court and litigants. The Tax Court has posted the proposals to its website and has requested comments be sent to Chief Judge Michael B. Thornton. The proposals cover a wide variety of procedural rules, including recommendations related to trial subpoenas, depositions and inadvertent disclosure of privileged material.

Trial Subpoenas

Under the current Tax Court rules, trial subpoenas are made returnable at the call of the calendar for the trial session on which a case has been calendared. This can be problematic if a subpoenaed party does not produce documents in response to the subpoena duces tecum until the first day of trial, which limits the party's ability to examine the documents and prepare for trial. To prevent this from occurring, the IRS has proposed that the Tax Court modify Tax Court Rule 147 to allow for the return of a subpoena duces tecum directed to third party custodian of records in advance of the trial calendar. The IRS has suggested the subpoena be returnable at least 30 days prior to trial to permit review of the documents, and, if objections raised, the Court time to consider scheduling a hearing.

Disclosure of Privileged Material

The IRS has proposed that the Tax Court adopt Fed. R. Civ. P. 26(b)(5)(B) followed by federal district courts, which covers the inadvertent disclosure of privileged material. Rule 26 provides that if information mistakenly produced in discovery is subject to a claim of privilege or of protection as trial preparation material, the party making the claim may notify any party that received the information of the privilege claim and the basis for it. After being notified, the receiving party is obligated to promptly return, sequester or destroy the specified information and any copies it has; must not use or disclose the information until the claim is resolved; must take reasonable steps to retrieve the information if the party disclosed it before being notified; and may promptly present the information to the court under seal for a determination of the privilege claim. The producing party must preserve the information until the claim is resolved. As an alternative to requiring that the subject documents be filed under seal, the Court may allow the parties to petition the Court for a determination of the privilege or work-product claim.

Deposition of Party Witness

Currently, Tax Court Rule 74 imposes restrictions and requirements for deposing party witnesses. In Tax Court litigation, deposing a party witness is considered an extraordinary method of discovery only available when other means of gathering information fail, and either consent of the parties or leave of the Court is required. The IRS explained that this may be a result of the Court's desire and objective to have the parties informally exchange information, as well as a recognition of the extensive fact gathering available during the examination stage. The concern is that in large, complex cases that are extremely factual and where a party may restrict even informal access to significant fact witnesses, the restrictions/limitations imposed by this rule may hinder the preparation of a case for trial. Accordingly, the IRS has recommended that the Court allow non-consensual depositions of party witnesses upon notice to the party without requiring leave of the Court by motion.

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