One of the questions arising in the much-debated Kress gift tax case is how much precedent value the court’s decision has. Valuators want to know whether and how they can use this specific court’s acceptance of S corp tax affecting in future similar cases.

Helpful guidance on the differing authority among the three different types of federal courts appears, of all places, in the U.S. Citizenship and Immigration Services (UCIS) website page.

In its Adjudicator’s Field Manual, the agency explains:

The decision of a court has precedent value only within the court’s territorial jurisdiction. For example, the opinions of the Supreme Court have precedent value nationally because all lower courts must follow its decisions. The decisions of a court of appeals bind the courts within the circuit’s jurisdiction. However, decisions of a federal district court are not binding on federal courts in any other district.

District courts are the trial bodies of the federal court system. Some states have only one district court while other states have several district courts. Decisions by judges within the same district can influence rulings in similar cases.

Appeals from a district court are taken to the courts of appeal in 13 circuits. Again, decisions by one of these courts are binding only upon the district and circuit court judges within that circuit. While an interpretation of law is binding only on judges in that circuit, judges can look to other circuits for decisions which are similar to cases being decided within their circuit. (emphasis added)

The Kress case was tried in federal court in the Eastern District of Wisconsin in front of the chief judge. We don’t know yet whether the government will appeal the decision with the U.S. Court of Appeals. Typically, when appealing a district court ruling, a party has 30 days to file a notice of appeal. When the government is a party to the case, as is the case here, notice of appeal must be filed within 60 days from entry of the judgment. The judgment was filed on March 26.

As it stands, the court’s opinion is precedent in the Eastern District of Wisconsin. However, don’t underestimate its importance as persuasive authority on judges in other circuits.

Stay tuned: A digest of Kress v. United States, 2019 U.S. Dist. LEXIS 49850;2019 WL 1352944 (March 26, 2019), and the court’s opinion will be available soon at BVLaw.