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During the 1998 general election, the voters of Utah approved a constitutional amendment that re-created a tax court within the district court system in Utah. The
amendment became effective January 1, 1999. At least one case has been tried and decided and several cases are currently pending before the Tax Court. The Tax
Court is important for individual and corporate Utah taxpayers because it should provide an experienced, independent forum, separate from the State Tax Commission,
that can hear tax cases de novo. While the State Tax Commissioners have the background to hear tax cases, the Commissioners also supervise and administer Utah's
tax system. In fact, based on Utah Supreme Court precedent, the only official Tax Commission authority lies in the four commissioners. Accordingly, the Tax
Commissioners themselves are required to handle much of the supervision and administration personally. This creates a situation where the judge and prosecutor are
the same person. In the minds of many taxpayers, this conflict is too great, and for these taxpayers, an "appeal" to the de novo Tax Court presents the first opportunity for a truly impartial tax hearing.
HISTORY OF THE TAX COURT
In 1977, a district court trial de novo system for tax cases was legislatively established in Utah. There was one designated tax
judge, and published tax decisions. Because taxpayers had usually expended significant resources in litigation at the Tax Commission level, often they were able to
stipulate to many facts at the Tax Court. This provided for streamlined cases with little or no new evidence presented. The trials were often a day or less and
frequently resembled a summary judgment hearing more than a traditional trial.
In 1987, the de novo Tax Court took a blow when Judge Tim Hanson ruled that the term "de novo" meant a review of the record, and not the
historically used primary definition of a fresh new trial of the evidence. See Denver & Rio Grande Western Railroad Co. v. Tax Comm'n, C-86-3602 (Dec. 2,
1987). Even though the standard of proof remained a preponderance of the evidence, the ruling strengthened the role of the Tax Commission decisions, and
strengthened the deference paid to those decisions. The Tax Court had no feel for the evidence and testimony, but could only review a cold record and short summary
arguments. It thus became much more difficult for taxpayers to get Commission decisions overturned. At the same time, a series of Utah Supreme Court cases created
a taxpayer-unfriendly environment. The Supreme Court declared that even if Commission findings, as written, were arbitrary and capricious, the findings would still
be upheld if the Supreme Court could conceive of a reason to support the findings.
In 1993, the Legislature statutorily overturned Judge Hanson's decision in part, creating a "new" Tax Court allowing for a limited trial de novo. Evidence
was again allowed but no witnesses or exhibits that were not presented at the Tax Commission could be admitted without a stipulation of the parties or a judge's
order based on the interest of justice. Utah Code Ann. ¤ 59-1-601 to -610 (1993). In 1997, the Legislature broadened the court's de novo authority even more,
reinstating a true trial de novo similar to the initial interpretation and application of the 1977 Tax Court. Utah Code Ann. ¤ 59-1-601 to -610 (1997).
In October 1997, the Utah Supreme Court held in Evans & Sutherland v. Tax Comm'n, 953 P.2d 435 (Utah 1997) that any form of a trial de novo violated the Utah
Constitution by encroaching on the Tax Commission's constitutional authority to "administer and supervise" the tax laws of Utah, and to "adjust and
equalize the valuation and assessment of property among the several counties." Some support for a violation of the Separation of Powers doctrine was espoused
in dicta in the case as well. Attorneys for Evans & Sutherland and other taxpayers affected by the decision asked the court to rehear the case and were denied.
In response to the Evans & Sutherland decision, the 1998 Legislature passed a unanimous resolution allowing the voters of Utah to determine during the November
1998 election whether the Constitution should be amended to allow the Legislature to pass a statute providing for a classic, evidence-taking, new trial de novo
review of Tax Commission decisions. The vote was overwhelmingly in favor of the Tax Court, and the constitutional amendment went into effect on January 1, 1999.
See Utah Constitution Art. XIII, ¤ 11. The 1998 Legislature also passed a bill creating a de novo Tax Court, which bill also went into effect on January 1, 1999.
See Utah Code Ann. ¤ 59-1-601. The statute had retroactive application to any decision issued by the Tax Commission after July 1, 1994 that was still
"alive" in the appeal system on January 1, 1999. Id.
PROCEDURE IN TAKING A CASE TO TAX COURT
When a taxpayer (or an affected county) is unhappy with a decision of the Utah State Tax Commission, the party can
"appeal" the decision to either the Utah Supreme Court (which case may be "poured over" to the Court of Appeals), or to the new Tax Court
division of the district court for a classic trial de novo. See Utah Code Ann. ¤ 59-1-602 (2000). Appeals to the Supreme Court are governed by the same procedures
that have long been in place (the Rules of Appellate Procedure and the Administrative Procedures Act).
Appeals to the Tax Court should be filed through a Petition for Judicial Review which complies with the Utah Rules of Appellate Procedure. See Utah Code Ann. ¤
59-1-602(c). The Legislature chose to use appellate petitions for cases on review from the Tax Commission to minimize cost and because the parties, having already
litigated before the Commission, are presumably familiar with the case. Thus, there is no need to put the opposing party on notice through a specifically pled
complaint and summons. Once the petition has been filed, all further proceedings in Tax Court are conducted pursuant to the Rules of Civil Procedure. There are
some tax cases that may be filed in the Tax Court without being heard first by the Tax Commission, such as "paid under protest" cases brought under Utah
Code Ann. ¤ 59-2-1327, and transitory personal property tax cases brought under Utah Code Ann. ¤ 59-2-402. In these cases, a normal complaint should be filed
rather than an appellate petition. See Utah Code Ann. ¤ 59-1-602(c) (providing that appellate petitions are used only for Tax Commission appeals).
When the Legislature passed the 1997 tax court bill, the Utah Judicial Council implemented judicial rules effective May 1, 1997 establishing procedures for the Tax
Court. See UCJA Rules 6-103, 3-108, 4-508. With the invalidation of the Tax Court in Evans & Sutherland, the rules had to wait for the January 1, 1999
effective date of the constitutionally-sanctioned new Tax Court to again have an application. Under the judicial rules, tax judges are chosen from sitting district
court judges based on the judge's tax expertise. There currently are six sitting Tax Court judges appointed by the judicial council: Guy R. Burningham and Lynn W.
Davis of the Fourth District, L.A. Dever and Ronald E. Nehring of the Third District, and Jon M. Memmot and Glen R. Dawson of the Second District. All six tax
judges will continue to hear non-tax cases, and may resign from the tax panel at any time.
If a party desires to have a district court case assigned to a tax judge, the party should make such a request in the complaint, petition, or first responsive
pleading. The court is then required to grant the request. See UCJA 6-103. If a request for a tax judge is made at a later time, the sitting judge has discretion
whether to transfer the case to the Tax Court. Id. The six tax judges will be assigned to cases on a random basis, with no consideration being given to the judges'
calendars.
Tax Court petitions/complaints should be filed in the taxpayer's own district court. If a case is filed in Third District Court, and assigned to a tax judge in the
Fourth District, all pleadings are filed in the Fourth District, but hearings may be held in the Third District if the parties and judge so desire. If a case is
filed in a district outside the Wasatch Front, the judge may travel to that district to hear the case. All pleadings should be filed in the taxpayer's/county's own
district unless the judge directs otherwise.
When a Tax Court case offers new guidance, the tax judge will issue a published opinion, which opinion may be cited as precedent. See UCJA 4-508.
LEVELING OF THE PLAYING FIELD
The creation of the Tax Court should create an enhanced perception of fairness, level the playing field for taxpayers, and
provide a detached body to hear tax cases with a balanced evidentiary standard. Because the Tax Commission administers and supervises the tax laws and adjudicates
disputes as well, a conflict in duties exists. Moreover, when cases are taken up on appeal from the Tax Commission to the Supreme Court or the Court of Appeals,
the appellate judges are required to grant the Commission great deference on their findings of fact, applying a substantial evidence standard of review Ð even if
the facts are less than rock solid. As long as the findings have some support, even if not stated in the Commission decision, the Court defers to the Commission.
See Utah Code Ann. ¤ 59-1-610. In property tax cases, issues relating to property value are generally factual issues, and thus do not get a full review by the
appellate court. Even on legal issues, the court overturns the Commission only if there has been an error made in the law (a "correction of error"
standard). Id. This is a much more difficult burden for taxpayers than the "preponderance of the evidence" in the new Tax Court, where the district court
is starting with a clean slate (not undoing something already done), and can see and decide upon the evidence for itself.
The Tax Court is a fresh, objective body which will provide many benefits for the taxpayers of Utah for the following reasons:
First, as noted, the tax judges will decide cases based on the "preponderance of the evidence." Thus, the party with the best facts and legal arguments of
law should win. If, after reviewing the evidence, the Tax Court believes the Tax Commission is in error, it can reverse and remand, or can take action itself, such
as redetermining the audit deficiency to comply with the law, ordering a refund, or setting the fair market value of the property in accordance with constitutional
prerogatives.
Second, the tax judges are likely to make independent decisions because they are completely separated from the tax assessment agency. Public perception is enhanced
merely because someone unconnected with revenue hears the case. Enhanced due process to the taxpayer is the result.
Third, the judges should make for better reasoned judicial decisions to serve as precedent for all tax practitioners because they have specialized tax knowledge.
Even though tax cases often dwarf other court cases in dollar amounts, the cases have still been heard by judges who historically confessed they were not qualified
to hear or were not interested in hearing tax cases. In Utah, there are many qualified individuals who can serve as tax judges, beginning with the current sitting
district court tax judges. Furthermore, there is now excellent training available for judges who want to increase their tax knowledge, including an annual
conference each September in Cambridge, Massachusetts for all tax judges throughout the nation.
Fourth, the Tax Court should create uniformity, consistency and predictability in the tax law and reduce litigation in the long run. A qualified Tax Court will
publish reasoned, reported decisions, clarifying the ambiguities that exist in tax laws. Taxpayers, CPA's, lawyers, taxing entities, and tax review departments
will have a clear understanding of what the tax law is which will hopefully lead to easier and less expensive issue and case resolution.
Fifth, the Tax Court will provide a good check and balance to the Tax Commission. With a qualified Tax Court reviewing its decisions, the Commission and staff will
likely be more careful in crafting responses to taxpayer petitions for relief and refunds.
Sixth, the Tax Court will create fewer Supreme Court appeals. As shown by the experience with the United States Tax Court, parties are often content with the
decision of the Tax Court because of the court's qualified judges. This reduces appeals which go up from the Tax Court to higher courts. Losing parties often
realize that if the Tax Court held against them, they are unlikely to gain a reversal on appeal.
Seventh, the new Tax Court will provide fairness to small-town taxpayers, giving them review in their own jurisdiction. These rural taxpayers will not have to come
to the Wasatch Front if it is inconvenient or burdensome to do so.
Eighth, the Tax Court fits in the current court system. The six judges continue to fulfill their roles as district judges, causing few ripples in the current
system. No new money was needed for tax judge appointments.
Ninth, the creation of a Tax Court follows a national trend. Presently, at least 28 of the 50 states have a Tax Court, or an independent body apart from the
department of revenue reviewing tax cases (with several other states considering a Tax Court). The federal government has long operated a successful Tax Court (the
U.S. Tax Court is one of few specialized federal courts), and the states are following suit.
In conclusion, it should be noted that the Tax Commission does an excellent job with its duties, and it is important that the Tax Court does not replace the Tax
Commission. While the Tax Court is important, its existence should not de-emphasize the Tax Commission's administrative hearing role. For the majority of tax
appeals, the Tax Commission will continue to provide an adequate, efficient and effective final resolution. However, because the Tax Commission wears several hats,
an overall perception of fairness is created by having someone unconnected to the assessing function available to review tax cases de novo. The United States was
founded on the principle of checks and balances, with different branches of government making sure other branches act appropriately to ensure fairness for all. The
Tax Court is a check and balance for Utah's tax system, providing an impartial eye to ensure the system runs smoothly and fairly for everyone.
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