Internal, external process changes increase Tax Court efficiency, slash case filings

Wentworth

At the end of 2016, there were 101 cases still pending before the Indiana Tax Court, the lowest number pending on Dec. 31 since Judge Martha Wentworth ascended to the bench in 2011. But by the end of 2017, that number had fallen to just 17 pending cases — an 83 percent decrease.

That sudden and dramatic drop in pending cases in Wentworth’s court is the result of three years spent examining the court, looking for inefficiencies and developing an action plan to resolve the defects. Those steps — coupled with Indiana Department of Revenue efforts to be more selective when deciding which cases to appeal — are the reasons Wentworth said she is now able to efficiently hear and resolve cases that raise substantive questions of law, rather than trudging through mounds of discovery and other procedural disputes that she said slowed her down.

“All is well with the Tax Court, and it’s going along quite well,” she said.

Dickson

What was the problem?

After an ad hoc advisory task force released a report in May 2016 that found the median time for Tax Court cases to be decided was roughly 2.6 years, the Indiana Supreme Court formed a Tax Court Advisory Committee to work with Wentworth to decrease that delay. Former Chief Justice Brent Dickson, who sits on the committee, said the first order of business was to examine the workings of the court to determine where the challenges lie.

Wentworth holds a unique place in Indiana’s judiciary in that she is a one-person court who operates as both a trial and appellate judge, Dickson said. That court structure is itself a challenge, he said, which is why the task force was comprised of both trial and appellate judges who could offer perspectives on how they dealt with caseload and other court issues.

There were two overarching issues impeding Tax Court progress, Dickson said. The first was attributable to the state government strategy of litigating “everything,” rather than pursuing settlements.

Kaltenmark

Randy Kaltenmark, a partner in Barnes & Thornburg’s Tax Department, pointed specifically to a DOR philosophy of rigorously litigating every protest that came through the department. That, coupled with a former Attorney General’s office that Kaltenmark said engaged in a significant amount of discovery and pretrial work, would drag out cases.

The second issue also was related to the government’s role in litigating tax cases, Dickson said: facilitating the process of obtaining a government record when a taxpayer initiated an appeal. Securing those records was a process that previously could take months or years, which significantly slowed cases, he said.

External solutions

Krupp

As Wentworth and the advisory committee worked through those issues, the DOR began its own internal review process at the behest of commissioner Adam Krupp, who came to the department when Gov. Eric Holcomb took office in 2017. Acknowledging that DOR’s own protest review process was often lengthy and tedious, Krupp and DOR general counsel Patrick Price implemented an efficiency-driven review process designed around resolving protests within 110 days.

That process offers four options for taxpayers filing protests: audit reviews, administrative appeals with or without hearings, and settlements. The department is now settling more protests than it has historically, Krupp said, but he noted that not every case can be resolved in that manner.

Thus, the DOR is still open to taking their cases to the Tax Court when a settlement is not sufficient, but the number of DOR cases on the Tax Court docket has decreased substantially since the department rolled out its new process in July 2017. As of April 23, there were only seven DOR cases on Wentworth’s docket, compared with 96 at the beginning of 2017.

Price

Wentworth and Dickson praised Krupp and Price as driving forces behind the increased Tax Court efficiency. Though the number of end-of-year pending cases has been steadily declining since 2014, the judge said the dramatic year-over-year drop from 2016 to 2017 is directly attributable to the DOR philosophy change.

Internal solutions

Within the Tax Court itself, Wentworth and the advisory committee have implemented their own policy changes that are contributing to the court’s increased efficiency. One of the first changes was finding ways to leverage modern technology to facilitate the court’s docket, Wentworth said. To that end, she noted her court was among the first to switch to electronic filing and Odyssey.

The most significant change, however, came through amendments to multiple Tax Court Rules, Dickson said. Last year, the court amended Rule 3, requiring the Indiana Board of Tax Review or Department of Local Government Finance to file notice of a completed agency record; Rule 5, eliminating the automatic 30-day extension to file an answer; Rule 7, setting discovery expectations; and Rule 12, allowing teleconference hearings and discretionary oral arguments.

Wentworth specifically praised the adoption of Rule 7, which limits discovery to 25 interrogatories, requires an automatic disgorgement of the record and mandates attorney conferences before filing motions to compel discovery or for protective orders. Discovery disputes were among the leading causes of the Tax Court slowdown, she said, so the new rules were necessary.

Wentworth’s court has also begun generating a weekly report that details when a case was filed, what steps have been taken and when documents were filed, among other information. Further, Wentworth also generates a report for property tax cases that tracks whether various filing and other deadlines have been met. Those reports combined have been helpful in promptly alerting Wentworth to issues that require her intervention, she said.

From a taxpayer perspective, the Tax Court is also in the process of drafting a guide for self-represented litigants. The idea behind the guide is to help pro se taxpayers understand the legalities of filing an appeal to ensure the process proceeds appropriately in both law and speed.

The results

Though many of the internal and external efficiency-driven initiatives are little more than a year old, if that, Wentworth, Dickson and the DOR each agreed that positive changes are already noticeable. For example, Wentworth has only heard two oral arguments in 2018, compared to seven at this time last year. That’s a direct result of fewer DOR filings, she said.

Additionally, Wentworth had only issued one opinion in 2018 as of IL deadline, another byproduct of hearing fewer cases. Right now, the oldest case on Wentworth’s docket dates to May 2016, a delay she said was caused by the fact that an audit was never performed. All other cases were filed in either 2017 or 2018.

As a practitioner, Kaltenmark said he has also noticed positive changes in the way cases move through the Tax Court. Like Wentworth, he praised the new discovery rules as a change that has streamlined the appeals process, and one that is consistent with similar rules at the United States Tax Court.

Going forward, Dickson said the advisory committee plans to watch for the long-term effects of the changes they’ve helped Wentworth implement. Though the committee is not disbanding yet, discussions have begun about when that day might come, indicating that the previous efficiency-related concerns are beginning to evaporate, he said.

“The transformation has been a smashing success, and the statistics prove it,” Dickson said.•