Anaya Nolan
The US Supreme Court is the court of last resort for tax cases, which can reach the Supreme Court when controversies arise over issues such as the scope of income, exclusions, deductions, income assignment, capital assets, and accounting methods. The Supreme Court hears cases involving constitutional challenges and those involving statutory interpretation. For example, in Moore v. United States, the Supreme Court heard a case that challenged the constitutionality of the mandatory repatriation tax enacted in 2017. In another case, the Supreme Court refused to reach the merits of a case in which a federal taxpayer-plaintiff challenged a federal law allowing the Central Intelligence Agency (CIA) to withhold information about the Agency's expenditures.
| Characteristics | Values |
|---|---|
| Court of last resort for tax cases | U.S. Supreme Court |
| Court that hears cases involving constitutional challenges and statutory interpretation | U.S. Supreme Court |
| Court that hears cases involving income tax disputes | U.S. Tax Court |
| Court that hears cases involving tax disputes without requiring payment of the disputed amount prior to litigation | U.S. Tax Court |
| Court that hears appeals from the three trial courts that decide tax cases (U.S. Tax Courts, U.S. Federal District Courts, and U.S. Courts of Federal Claims) | Federal Circuit Courts of Appeal |
| Court that hears cases involving tax disputes after payment of the disputed amount and suing for a refund | U.S. Federal District Courts |
| Court that hears cases involving tax disputes that have been appealed from the lower-level trial courts | U.S. Court of Appeals for the Federal Circuit |
| Court that hears cases involving tax disputes after a deficiency has been determined by the IRS | U.S. Tax Court |
| Court that hears cases involving tax disputes for amounts of $50,000 or less | U.S. Tax Court's Small Cases division |
| Court that hears cases involving tax disputes in bankruptcy cases | U.S. Bankruptcy Courts |
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![Decisions of the United States Supreme Court in Corporation Tax Cases and Income Tax Cases, with Dissenting Opinions 1912 [Leather Bound]](https://m.media-amazon.com/images/I/617DLHXyzlL._AC_UY218_.jpg)
What You'll Learn
Statutory willfulness
In the United States, the Supreme Court has ruled that a good-faith misunderstanding or a good-faith belief that one is not violating the law negates willfulness, even if the belief is irrational or unreasonable. This was demonstrated in the case of Cheek v. United States, where the Court reversed the conviction of John L. Cheek, a tax protester, for willful failure to file tax returns and tax evasion. The Court held that Cheek's good-faith belief that his wages were not income under the Internal Revenue Code was a valid defense, even though the belief was not objectively reasonable.
However, it is important to note that there is a distinction between civil and criminal tax cases regarding the definition of willfulness. In civil cases, the broader definition of willfulness has a lower standard, where IRS attorneys only need to show that tax law violations are true "by a preponderance of the evidence". On the other hand, criminal tax charges carry higher stakes, and prosecutors must prove guilt beyond a reasonable doubt.
When federal tax crimes are involved, the definition of willfulness becomes stricter. Government prosecutors must demonstrate that the defendant acted with the specific intent to violate a known legal duty, regardless of their awareness of the specific law being violated. This distinction was highlighted in the case of United States v. Severino, where Manuel Severino was convicted of multiple criminal tax crimes, including aiding and assisting in the preparation of false tax returns.
Ultimately, the concept of statutory willfulness aims to balance the protection of citizens from undue prosecution with the enforcement of tax laws and the punishment of intentional violations.
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Income scope
The US Supreme Court is the court of last resort for tax cases. While the US Tax Court, a federal trial court established by Congress, reviews income tax disputes, controversies over issues such as the scope of income, exclusions, deductions, income assignment, capital assets, and accounting methods sometimes reach the Supreme Court.
The Supreme Court hears cases involving constitutional challenges and those involving statutory interpretation. The Court has generally barred federal courts from entertaining cases in which a plaintiff relies solely upon their status as a taxpayer to establish standing. The principal exception to this rule arises in the context of the First Amendment.
In Moore v. United States, a case heard in 2023 and decided in 2024, petitioners asked the Court to find that Congress’s power to tax income under the Sixteenth Amendment extends only to “realized” income. The Court rejected the petitioners' theory, deciding that Congress could tax the Moores on their share of income realized at the corporate level.
In another case, the Supreme Court refused to reach the merits of a case in which a federal taxpayer-plaintiff challenged a federal law allowing the Central Intelligence Agency (CIA) to withhold from the public detailed information about the Agency’s expenditures, alleging that it violated the Statement and Account Clause of the Constitution. The Court determined that the plaintiff’s claims raised a generalized grievance, not about Congress’s exercise of its taxing and spending power, but rather Congress’s exercise of power to regulate the CIA through a statute governing disclosure of information.
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State income tax schemes
The US Supreme Court is the court of last resort for tax cases. Three federal trial courts decide tax cases: US Tax Courts, US Federal District Courts, and US Courts of Federal Claims. Most tax cases are litigated in Tax Court as taxpayers can be heard without paying the disputed amount first.
From 2021 to 2024, several states shifted from graduated-rate individual income tax structures to single-rate income tax structures. During this period, Arizona, Iowa, Mississippi, Georgia, Idaho, and Louisiana enacted flat tax legislation. In Kansas, various flat tax bills passed the House and Senate but were vetoed by the governor. Missouri and Oklahoma, which already had nearly flat bracket structures, also considered moving to a single-rate system.
Some states tie their standard deductions and personal exemptions to the federal tax code, while others set their own or offer none. The federal Tax Cuts and Jobs Act of 2017 increased the standard deduction, which reduces a taxpayer's taxable income by a set amount.
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The Defense of Marriage Act
The US Supreme Court is the court of last resort for tax cases. While most tax cases are litigated in the US Tax Court, a federal trial court established by Congress to review income tax disputes, some tax controversies do reach the Supreme Court.
DOMA specifically stated that:
> "the word 'spouse' refers only to a person of the opposite sex who is a husband or a wife"
And that:
> "the word 'marriage' means only a legal union between one man and one woman as husband and wife".
This meant that same-sex couples were denied many benefits and recognition that opposite-sex couples enjoyed. These included over 1,000 federal protections and privileges such as access to a spouse’s employment benefits, the recognition of the marriage itself, the rights of inheritance, joint tax returns and exemptions, and the right to cohabit together in college or military housing.
Supporters of DOMA believed that opposite-sex marriage was the only appropriate method for family formation and procreation. They argued that same-sex marriage could lead to alternative family formations and could even result in incestuous relationships and polygamous marriages. On the other hand, opponents of DOMA claimed that the Act was discriminatory on the basis of sex and equated homosexuality with incest and polygamy.
In 2013, in United States v. Windsor, the US Supreme Court struck down DOMA’s definition of marriage as only between one man and one woman. In 2015, in Obergefell v. Hodges, the Supreme Court struck down the section of DOMA that allowed individual states to not recognize same-sex marriages performed in other states.
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Taxpayer standing
The initial case that established the doctrine of standing, Frothingham v. Mellon, was a taxpayer standing case. In this case, the Court declined to reach the merits of an individual federal taxpayer’s Tenth Amendment and Due Process challenges to the disbursement of federal funds to states under a federal appropriations law, determining that the plaintiff lacked Article III standing. The Court wrote that deciding the case on the merits would not decide a judicial controversy but would rather assume a position of authority over the government.
The United States Supreme Court has held that taxpayer standing is not by itself a sufficient basis for standing against the United States government. The Court has consistently found that the conduct of the federal government is too far removed from individual taxpayer returns for any injury to the taxpayer to be traced to the use of tax revenues, e.g., United States v. Richardson. In DaimlerChrysler Corp. v. Cuno, the Court extended this analysis to state governments as well. However, the Supreme Court has also held that taxpayer standing is constitutionally sufficient to sue a municipal government in a federal court.
In Hein v. Freedom from Religion Foundation, Inc., the Court added that, "if every federal taxpayer could sue to challenge any Government expenditure, the federal courts would cease to function as courts of law and would be cast in the role of general complaint bureaus." Taxpayers were found to have standing, however, in Flast v. Cohen, to contest the expenditure of federal moneys to assist religious-affiliated organizations. The Court asserted that the answer to whether taxpayers have standing depends on whether the circumstances of each case demonstrate that there is a logical nexus between the status asserted and the claim sought to be adjudicated.
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Frequently asked questions
Yes, the U.S. Supreme Court hears tax law cases.
The Supreme Court hears cases involving constitutional challenges and those involving statutory interpretation. The Court has also heard cases involving income tax disputes, the Defense of Marriage Act, and the mandatory repatriation tax.
Some examples of tax law cases heard by the Supreme Court include Moore v. United States (2024), South Dakota v. Wayfair, Inc. (2018), U.S. v. Windsor (2013), and Jones v. Flowers (2006).
No, taxpayers cannot request a jury trial in tax law cases heard by the Supreme Court. The United States District Courts are the only tax trial courts where a jury trial can be requested by a taxpayer.
