Court Opinion

ID: 9460774
Source: CourtListenerOpinion
Date Created: 2023-08-04 22:00:06.677205+00
Date Added: 2024-06-11T17:36:46.748527
License: Public Domain

BOREMAN, Senior Circuit Judge
(concurring in part and dissenting in part);
Somewhat reluctantly and not without ■ some hesitation I concur and join my brothers in the decision to overrule our earlier holding in Pridemark, Inc., v. Commissioner, 345 F.2d 35 (4 Cir. 1965). However, I respectfully state my disagreement with the majority in its denial of prospective application of the change in the rule.
Rule 35 of Fed.R.App.P. provides that an appeal may be heard by the Court of Appeals in banc and a party may suggest the appropriateness of a hearing in banc. This Circuit has deemed it unseemly, presumptuous and an unacceptable practice for one panel to assume to overrule a decision of another panel of this court; the decision of a panel becomes the law of the Circuit until it is overruled by the court sitting in banc.
Until 1970 the Tax Court of the United States had not followed automatically the decisions of the Court of Appeals to which its determination would be appealable. But that practice was abandoned by the Tax Court in its decision in Golsen v. Commissioner, 54 Tax Court 742, 757 (1970):
[W]e think that where the Court of Appeals to which appeal lies has already passed upon the issue before us, efficient and harmonious judicial administration calls for us to follow the decision of that court.
Consistent with that pronouncement the Tax Court, while criticizing Pridemark, recognized that decision as representing the law of this Circuit and admittedly felt bound to follow it.
The Government, too, recognized the fact that Pridemark represented the law of this Circuit but it was obvious from the Government’s approach to the prosecution of its appeal that its real objective was to persuade this court that Pridemark had been incorrectly decided, that it was against the weight of authority and that it should be overruled. It now appears that the Government has been successful in attaining its objective.
But at the same time the Government interposes strenuous objection to prospective application of the the new rule. It would fault the taxpayer for following the law of the Circuit as determined and established by this court. Ordinarily, where there has been a division of the Circuits on a question with which the Government is concerned it properly seeks resolution of the conflict by the Supreme Court of the United States.
In this court’s positive indication of its willingness to overrule a prior decision in a tax matter adverse to the Government, in the absence of a clearly supervening determination by Congress or the Supreme Court, the effect of the determination will be to drastically accord weight on the side of the Government in the process of negotiation and settlement of tax cases, even including cases where the Circuit in question has declared clearly controlling law adverse to the Government’s position. All questions in tax cases in which there is a split among the Circuits (and there are *761many which develop under the Internal Revenue Code) will be considered open with respect to the affairs of all taxpayers, including those residing in Circuits which have already passed upon the question. The Government will be encouraged to use the possibility of such overruling of decisions in this Circuit, as it has in this instance, as a means to discourage the Supreme Court from resolving such conflicts among Circuits. Additionally, the possible availability to the Government of such overruling decisions in the Circuits (as a practical matter not available to private parties) will serve as an inducement or invitation to the Government to refrain from seeking resolution of these questions by Congress.
The Government’s approach to the precedential force of decisions in tax cases is strange, indeed. It has now been successful in its effort to have this court effectively hold that once a division of opinion arises between and among Circuits the rule announced in those Circuits rejecting the Government’s position should be open to attack in connection with each case that may subsequently arise in such Circuits.
This procedure favored and adopted by the Government opens up only a one-way street. Few, if any, taxpayers who are confronted with a pre-existing decision in their particular Circuit which supports the Government, will be intrepid enough or financially strong enough to carry a case seeking an overruling decision through the Tax Court, through a regular panel, and through the Court of Appeals in banc. In the instant case the Government could have sought initially a hearing of the appeal in banc, but it elected not to do so. Thus, the taxpayer has been subjected to a three-level proceeding with all the attendant delays, burdens, costs and expenses. I venture to say that the costs and expenses are times greater than the amount of tax liability in controversy.
Counsel for the Government has opposed the proposal that, if this court were to overrule Pridemark, its judgment should be prospective only, apparently considering that the additional tax and the costs and expenses of the litigation here and in the Tax Court appropriately penalize the taxpayer for its intransigence in relying upon an unreversed decision of this court which established the law of this Circuit.
■ It is my individual opinion that changing the established rules in the middle of the game is unjust, unfair, and inconsistent with the operation of a viable system of legal precedents, particularly to a taxpayer such as this one with a relatively small amount at stake. The controlling law of this Circuit, as it existed at the time of taxpayer’s transaction, should be applied and taxpayer should have the right to any tax benefit available to it under Pridemark. It is unconscionable to hold otherwise. In all fairness and justice I cannot be persuaded to join in placing the taxpayer in such an unfavorable and unreasonable position by a denial of prospective application of our decision which definitely changes the rules of the game.