Opinion ID: 852380
Heading Depth: 2
Heading Rank: 2

Heading: Preclusion in Tax Cases

Text: Presumably reflecting these considerations, the Tax Court has previously held that issue preclusion is not generally applicable in tax cases, but this Court did not address the issue on review of that decision. Farm Credit Servs. v. Ind. Dep't of Revenue, 705 N.E.2d 1089, 1091 (Ind. Tax Ct.1999) (as a general rule, issue preclusion (particularly with respect to questions of law) is not applicable to tax cases in Indiana), rev'd on other grounds by Dep't of State Revenue v. Farm Credit Servs., 734 N.E.2d 551 (Ind.2000). It is frequently said that issue preclusion should be sparingly applied in tax cases that involve different tax years, particularly in those instances where the taxable events and transactions are by their nature fluid and subject to change from year to year. Gillespie v. C.I.R., 151 F.2d 903, 906 (10th Cir.1945); cf. Albert S. Mazloom III, Note, Collateral Estoppel in the Tax Court: Hudson v. Commissioner, 47 Tax Law. 827, 831 (1994). Thus, the Tax Court has stated that issue preclusion generally does not apply in tax appeals because each assessment and each tax year stands alone. Glass Wholesalers v. Ind. Bd. of Tax Comm'rs, 568 N.E.2d 1116, 1124 (Ind. Tax Ct.1991) (quoting Foursquare Tabernacle Church of God in Christ v. State Bd. of Tax Comm'rs, 550 N.E.2d 850, 853 (Ind. Tax Ct.1990)). This view has for the most part been expressed in property tax cases where the issues are typically fact sensitive. Income tax cases, on the other hand, often refer to the equitable policy of uniformity among taxpayers. See Anderson, Clayton & Co. v. United States, 562 F.2d 972, 992 (5th Cir. 1977) (We start from the proposition that strong policy considerations favor confining narrowly the scope of collateral estoppel in tax cases.... perpetuation of an erroneous tax decision over a number of years would prejudice the losing party and violate the policy of tax uniformity among taxpayers); Adolph Coors Co. v. Comm'r, 519 F.2d 1280, 1283 (10th Cir.1975), cert. denied 423 U.S. 1087, 96 S.Ct. 878, 47 L.Ed.2d 97 (The doctrine of collateral estoppel is strictly applied in tax cases). The Tax Court identified this consideration in its denial of summary judgment in this case, noting that, it stands to reason that while issue preclusion may be appropriate in certain property tax cases, it is generally not applicable in revenue cases. (Appellant's App. at 15.) Issue preclusion has nevertheless been applied against the tax collector in some cases. In Wilmington Trust Co. v. United States, 221 Ct.Cl. 686, 610 F.2d 703 (1979) (a consolidated case including McMullan v. United States ), the Court of Claims held that the plaintiffs were entitled to report certain timber sales as capital gains and could deduct the related expenses against ordinary income, and that the Government was not entitled to offset plaintiffs' income tax recovery by the resulting decrease in estate tax deductions for 1964-1970. The Court of Claims refused to address these issues in a subsequent suit regarding 1972, finding that they had already been litigated and actually decided, there had been no change in the facts or the governing law, and there was no other principle of equity that foreclosed the application of issue preclusion. McMullan v. United States, 231 Ct.Cl. 378, 686 F.2d 915, 917, 919-20 (1982). In Lindemann v. Wood, 799 N.E.2d 1230, 1231 (Ind. Tax Ct.2003), the County Board denied an appeal of the local assessment of the plaintiffs' property for 1995. While the plaintiffs' appeal to the State Board of Tax Commissioners was pending, the County Board issued a revised order and lowered the assessment. Id. Nearly three years later, the assessment of the same property was raised and the County and State Boards both affirmed the raise. Id. at 1231-32. The Tax Court reversed, noting some additional considerations relevant to the preclusive effect of an administrative decision and holding that the County Board's 1996 determination barred any subsequent litigation on the same cause of action by the same parties until the next general reassessment, absent any changed circumstances. Id. at 1233.