Implications of the U.S. Burden of Proof System in Tax Litigation

In this article, the burden of proof in U.S. tax litigation was examined. Starting with the general theory of the burden of proof in the United States, it then discussed the allocation of the burden of proof in tax litigation. Unlike Korea, where there is a unified administrative litigation law, the U.S. relies primarily on civil procedure principles for burden of proof in tax-related civil litigation. Since the U.S. system is based on self-assessment taxation, the taxpayer generally bears the burden of proof; however, through legislative efforts and judicial precedent, there has been an attempt to appropriately allocate this burden between the taxpayer and the tax authorities. In U.S. tax litigation, there is no concept of administrative disposition by the tax authorities. If there is a tax deficiency, additional collection occurs through the tax authorities’ audit process, whereas in cases of overpayment, the taxpayer initiates tax appeals via refund claims and related litigation. In Korea, tax appeals are three-tiered, involving the National Tax Service, the Tax Tribunal, and the Board of Audit and Inspection. In contrast, the U.S. system has a three-tiered court system comprising the Tax Court, Federal District Courts, and the Federal Claims Court. Each of these U.S. courts has distinctive characteristics in handling tax appeals, making strategic selection with the aid of legal experts critical. It is also notable that evidence collection for the burden of proof in U.S. tax litigation is conducted through discovery, with specific discovery rules applying uniquely to tax cases. What insights can be drawn from U.S. tax litigation? In Korea, the peculiar nature of administrative litigation places the primary burden of proof on the tax authorities, which differs from the U.S. approach. As long as the concept of administrative disposition exists, this principle is likely to remain stable. However, if a taxpayer deliberately files an inadequate tax return under a self-assessment system in Korea, complications may arise. In such cases, the tax authorities would need to initiate a request for correction; however, if the tax authorities lack adequate documentation, they may lose the case due to the burden of proof issues. The distribution of the burden of proof in self-assessment tax systems remains an important issue, and the U.S. tax litigation system offers valuable insights for Korea in this regard. Unlike criminal litigation, where “doubt favors the taxpayer,” this principle does not apply in tax litigation, allowing legislative discussions on how best to allocate the burden of proof.