Paul L. Caron

Friday, October 24, 2014

Hoffer, Lederman & Walker Debate Tax Court Exceptionalism Today at Kentucky

HLWStephanie Hoffer (Ohio State), Leandra Lederman (Indiana), and Christopher Walker (Ohio State) debate Tax Court exceptionalism at Kentucky today as part of its Faculty Workshop Series (blogged here):

Hoffer & Walker, The Death of Tax Court Exceptionalism, 99 Minn. L. Rev. ___ (2014):

Tax exceptionalism—the view that tax law does not have to play by the administrative law rules that govern the rest of the regulatory state—has come under attack in recent years. In 2011, the Supreme Court rejected such exceptionalism by holding that judicial review of the Treasury Department’s interpretations of the tax code is subject to the same Chevron deference regime that applies throughout the administrative state. The D.C. Circuit followed suit by rejecting the IRS’s position that its notices are not subject to judicial review under the Administrative Procedure Act (APA). This Article calls for the demise of another instance of tax exceptionalism: the United States Tax Court’s longstanding view that it is not governed by the APA.

In addition to presenting the legal case against Tax Court exceptionalism, the Article explores administrative law and tax policy considerations that favor the Tax Court following traditional administrative law, including consistent application of the law, efficient allocation of resources, horizontal and vertical equity, comparative agency expertise, and a proper separation of powers. Moreover, by following administrative law principles that may be more deferential to the IRS in a particular case, the Tax Court can establish a richer dialogue with the IRS to improve agency procedures and decision-making—thus advancing tax policy’s interest in protecting less sophisticated taxpayers while increasing economic efficiency. With a growing circuit conflict as to whether the Tax Court is bound by the APA, the Tax Court should reverse course now before the Supreme Court intervenes to declare the death of tax exceptionalism in yet another area of tax law.

Lederman, Restructuring the U.S. Tax Court: A Reply to Stephanie Hoffer & Christopher Walker's 'The Death of Tax Court Exceptionalism', 99 Minn. L. Rev. Headnotes ___ (2014):

Stephanie Hoffer and Christopher Walker’s excellent Minnesota Law Review article, The Death of Tax Court Exceptionalism, analyzes the topical and important question of whether the Administrative Procedure Act (APA) governs the standard and scope of review the Tax Court applies to Internal Revenue Service (IRS) decisions. The APA contains provisions for court review of agency decisions but the Tax Court has repeatedly stated that the APA does not apply to it. As a result, the Tax Court has accorded less across-the-board deference to the IRS than APA standards call for.

Professors Hoffer and Walker argue that the Tax Court should cease taking this exceptional position and instead apply the APA. I have long advocated for the abandonment of tax insularity, and the Tax Court’s history makes it of particular concern in this regard. As an Article I court that at one time was an independent agency, it is unclear even in which branch of government this tribunal belongs. The Tax Court is isolated from other courts and judicial institutions such as the Administrative Office of U.S. Courts and the U.S. Judicial Conference, although it is no longer subject to the provisions that govern administrative agencies.

As a result, the question of whether the APA’s “reviewing court” provisions apply to the Tax Court is not as doctrinally obvious as one might imagine, as this Reply demonstrates. Yet, this is primarily a symptom of the larger problem of the Tax Court’s insularity and unclear position in the federal government. Although it would be helpful for the Tax Court to implement APA procedures even without making other structural changes, a piecemeal approach is not particularly efficient. Recent case law suggests that litigants will continue to raise issues about the Tax Court’s unusual structure as long as it is different from other courts. The broad point of this Reply is therefore that it is past time to classify the Tax Court’s place in the federal scheme and treat the court like the judicial body that it is.

Colloquia, Scholarship, Tax | Permalink