Opinion ID: 343604
Heading Depth: 2
Heading Rank: 3

Heading: The Denial of Equitable Relief

Text: 26 Prior to the enactment of the Tax Reform Act of 1969 8 the Tax Court did not possess equity jurisdiction. Commissioner of Internal Revenue v. Gooch Milling & Elevator Co., 320 U.S. 418, 421-422, 64 S.Ct. 184, 186, 88 L.Ed. 139, 143 (1943); Rothensies v. Electric Storage Battery Co., 329 U.S. 296, 303, 67 S.Ct. 271, 274, 91 L.Ed. 296, 301 (1946); Vandenberge v. Commissioner of Internal Revenue, 147 F.2d 167, 168 (5th Cir.), cert. denied, 325 U.S. 875, 65 S.Ct. 1556, 89 L.Ed. 1993 (1945). 9 Continental contends that Subtitle D of the Act (Sections 951-962) changed this settled rule by granting the Tax Court jurisdiction over equitable claims. Since we disagree, we do not reach the question whether, assuming that the Tax Court did possess equity jurisdiction, Continental would be entitled to equitable relief. 27 In determining the Act's impact on the breadth of the Tax Court's jurisdiction, our first recourse must be to the statute itself. Although the Act increased the incidental powers of the Tax Court to include those previously given to the district courts, 10 transformed the Tax Court from an independent agency in the Executive Branch 11 into a court of record (established) under article I of the Constitution of the United States, 12 and altered Subchapter C (the Tax Court provisions of the Code) in several other ways, 13 there is no evidence in the text of the Act that Congress meant to expand the Tax Court's jurisdiction to encompass equitable claims. We cannot believe that Congress would modify the powers of the Tax Court in such a significant way without mentioning what it was doing. Moreover, at least one provision of the Act strongly suggests that no major change in the Tax Court's jurisdiction was intended. Section 961 provides: 28 The United States Tax Court established under the amendment made by section 951 is a continuation of the Tax Court of the United States as it existed prior to the date of enactment of this Act, the judges of the Tax Court of the United States immediately prior to the date of enactment of this Act shall become the judges of the United States Tax Court upon the enactment of this Act, and no loss of rights or powers, interruption of jurisdiction, or prejudice to matters pending in the Tax Court of the United States before the date of enactment of this Act shall result from the enactment of this Act. (Emphasis added.) 29 The small portion of the Act's legislative history that pertains to the amendments to Subtitle D corroborates our view. Since the Tax Court provisions originated in the Senate, the Senate Finance Committee's report on the measure is particularly significant. Nothing in the report indicates that any modification of the Tax Court's jurisdiction was contemplated See S.Rep. No. 91-552, 91st Cong., lst Sess. (1969) reprinted in (1969) U.S. Code Cong. & Admin. News, pp. 2340-2344. Similarly, the Conference Committee Report indicates that the House managers of the bill did not believe Subtitle D would affect the Tax Court's jurisdiction. It states that the act is to have no effect on existing litigation, jurisdiction, etc. Conf. Rep. No. 91-782, 91st Cong., 1st Sess. (1969) reprinted in (1969) U.S. Code Cong. & Admin. News pp. 2456-57, supra. 30 It does not follow from the fact that the Tax Court is now an Article I legislative court that it possesses or was intended to possess the full judicial power, extending to all cases, in law and equity, that is vested in constitutional courts created by Congress under Article III, which it had not possessed before. Congress has the authority outside of Article III to create specialized courts that do not have plenary judicial power, and it has often narrowly circumscribed the jurisdiction of the special tribunals it has created in the past. See, e. g., O'Callahan v. Parker, 395 U.S. 258, 89 S.Ct. 1683, 23 L.Ed.2d 291 (1969) (Court of Military Appeals); Williams v. United States, 289 U.S. 553, 53 S.Ct. 751, 77 L.Ed. 1372 (1933) (Court of Claims); Ex Parte Bakelite Corp. v. United States, 279 U.S. 438, 49 S.Ct. 411, 73 L.Ed. 789 (1929) (Court of Customs Appeals); American Insurance Co. v. Canter, 26 U.S. (1 Pet.) 511, 7 L.Ed. 242 (1828) (territorial courts). As the Supreme Court stated in Ex Parte Bakelite Corp. v. United States: 31 While Article III of the Constitution declares, in section 1, that the judicial power of the United States shall be vested in one Supreme Court and in such inferior courts as the Congress may from time to time ordain and establish, and prescribes in section 2, that this power shall extend to cases and controversies of certain enumerated classes, it long has been settled that Article III does not express the full authority of Congress to create courts and that other Articles invest Congress with powers in the exertion of which it may create inferior courts and clothe them with functions deemed essential or helpful in carrying those powers into execution. 279 U.S. at 449, 49 S.Ct. at 412, 73 L.Ed. at 793. 32 Nor does the circumstance that the Act decreased the dissimilarities between the Tax Court and the district courts 14 indicate that Congress intended to obliterate other dissimilarities which it did not explicitly address. Significant differences between the two types of court survived the passage of the Act. 15 33 On the basis of this evidence, the conclusion that the 1969 Tax Reform Act did not grant the Tax Court equitable jurisdiction is inescapable. The courts that have addressed the issue are in agreement without conclusion that the Tax Court still does not possess jurisdiction over equitable claims. Burns, Stix Friedman & Co. v. Commissioner of Internal Revenue, 57 T.C. 392, 1971 CCH Tax Ct. Rep. P 31,114, pp. 3679, 3681; see Musso v. Commissioner of Internal Revenue, 531 F.2d 772, 774 (5th Cir. 1976); Morse v. United States, 494 F.2d 876, 879 (9th Cir. 1974). So is the great weight of the secondary literature. L. Ponder, United States Tax Court Practice & Procedure pp. 19-20 (1976); Note, Procedural and Administrative Changes in the Tax Court created by the Tax Reform Act of 1969, 8 Hous.L.Rev. 395, 403 (1970); see 9 J. Doheny, Merten's Law of Federal Income Taxation § 50.07, pp. 21-22 (rev.ed. 1976); 5 J. Rabkin & M. Johnson, Federal Income, Gift & Estate Taxation (1976) §§ 72.02(1) & 76.06(5); Am.Jur.2d Federal Taxation 1977, P 9303, p. 962; Goldfein & Saltzman, What the Tax Court's new status under the Reform Act means to practitioners, 32 J. Tax. 244, 246 (1970); Note, Recent Legislative Changes in the Constitutional Status of the United States Tax Court and the Courts of the District of Columbia, 1973 Wash. U. L. Q. 381, 382 n.63. 34 The Tax Court's rulings on the three issues raised in the cross-appeal are affirmed. 35 AFFIRMED IN PART AND REVERSED IN PART.