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Tax Litigation in U.S. District Court

The IRS can be merciless when pursuing tax liability from high-net-worth individuals and big businesses that owe substantial amounts. The only way to win against their aggressive tactics is to fight equally hard to challenge a tax dispute.

Brown, PC has lived and breathed tax litigation for more than 25 years and is known as one of the best in the practice. Our partner Lawrence Brown was a Department of Justice Tax Division lawyer before representing taxpayers. He has an insider’s view of DOJ strategies and tactics. His professional contacts with his former colleagues can be especially valuable in U.S. District Court cases, in which the DOJ attorneys represent the IRS as a party to the tax dispute.  This is significantly different than in U.S. Tax Court where the IRS attorneys represent the agency.

A pivotal stage in tax litigation is choosing the correct forum. Each has its own set of rules and procedures that dramatically affect the outcome of the case. Our attorneys conduct a full assessment to determine the most strategic forum for resolving each particular tax dispute. We choose the U.S. District Court when we know that our client will benefit from discovery and a jury trial.

Many of our clients are household names in the sports, entertainment and business fields.  These individuals have a high net worth and a lot to lose if the IRS prevails. Our attorneys are relentless in our pursuit of an equitable solution. When it is in our client’s best interest, we negotiate with the IRS for a fair and reasonable settlement. However, we are ready to take our demands to trial to reach the best possible results. Our high-profile clients often face residual consequences to their reputations, careers and businesses because of their tax issues. Our strategic communications team works hand-in-hand with our tax litigation lawyers to mitigate potential damages. 

Which Types of Cases Do We Litigate in the U.S. District Court?

Choosing the right tax litigation forum is crucial. Each forum has its own specific rules and procedures that can shape the outcome of the case. After conducting a thorough analysis, our attorneys select the forum that offers the greatest benefits to our clients’ long-term goals. We may recommend filing in U.S. District Court in cases in which:

  • Our client can benefit from a jury trial

We can demand a jury trial in the U.S. District Court, an option that is not available in other courts. If the case involves technical, complex issues, our attorneys usually recommend filing in the U.S. Tax Court, where the matter will be heard at a bench trial before a judge who is an expert in tax law. However, a jury trial may benefit clients whose position is based on common sense or equity, or when the IRS has engaged in misconduct.

  • Technical matters are not at issue

Non-technical cases do not require the insight of a judge who is a tax specialist. U.S. district court judges are generalists who preside over a wide range of cases, including civil and criminal matters, and only in rare situations tax disputes. Therefore, a district court forum is not suitable for highly technical cases that require a high degree of tax knowledge. However, the U.S. District Court may be the right forum for cases in which this high level of tax knowledge is not necessary.

  • Discovery is an advantage to our client

In some circumstances, discovery is merely a waste of our client’s time and money and may actually do harm to the case. These cases are best suited for U.S. Tax Court, which engages limited discovery procedures. If, on the other hand, discovery is likely to yield beneficial information, we may elect to engage in the full discovery process that is available in the U.S. District Court.

  • Confidentiality is not a top priority

Our firm represents a number of high-profile individuals and companies for which a tax dispute can damage their reputation or brand. Filing in the U.S. Tax Court in Washington, DC affords more confidentiality to clients who are susceptible to regional or local attention that may arise when  the case is filed with the U.S. District Court in the client’s hometown. However, sometimes even high-stakes tax litigation may not attract much attention, or other factors outweigh the layer of confidentiality.

  • The client opts to pay liability upfront

In the U.S District Court, the taxpayer must relinquish the full amount of liability under protest and then litigate for a refund of the disputed funds. Alternatively, under U.S. Tax Court rules, the taxpayer may elect to withhold payment until conclusion of litigation. Whether the taxpayer is able and willing to pay the tax liability upfront, and if it makes sense to do so, , is a major factor in determining whether the U.S. District Court is the correct forum. 

Key Issues Regarding U.S. District Court Litigation

The U.S. District Court does have some disadvantages compared to other potential tax litigation forums. We fully advise our clients of these issues and discuss why we nonetheless recommend the U.S. District Court and what we plan to do to lessen these unfavorable aspects.

Because the U.S. District Court has a more voluminous docket and more substantial backlogs than the U.S. Tax Court, cases can take months or years to be set on the calendar. In the meantime, the lingering dispute may disrupt business operations, raise uncertainties and cause substantial stress.

Parties engage in extensive discovery in U.S. District Court, which may include depositions, interrogatories and requests for admissions. Although sometimes discovery may benefit the client, the process may also be very intrusive, cumbersome, time-consuming and expensive. 

Consult with a Texas Federal Tax Attorney about Filing a Tax Case in the U.S. District Court

Choosing the correct forum is a vital first step in tax litigation. A Texas federal tax attorney at Brown, PC will determine whether the U.S. District Court is the best place to file your claim and strategize a plan to minimize or avoid tax liability issues.

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