University of Chicago Law School Faculty Blog: Tinkering with the Tax Court, by Daniel Hemel:
The House of Representatives voted 318-109 on Thursday to approve a package of tax breaks that will cost an estimated $680 billion over the next decade. ... [O]ne provision in the package that has drawn little attention so far could have significant implications for the United States Tax Court. The provision, buried on page 231 of the 233-page bill, puts the 19-member court in a state of constitutional limbo. The provision is entitled “Clarification Relating to United States Tax Court,” and it amends the Internal Revenue Code to add the following language:
The Tax Court is not an agency of, and shall be independent of, the executive branch of the Government.
The provision appears to have been added in response to the D.C. Circuit’s 2014 decision in Kuretski v. Commissioner.
That case involved a couple, Peter and Kathleen Kuretski, who went to Tax Court to challenge an IRS levy on their Staten Island home. After the Tax Court ruled against them, the Kuretskis launched an attack on the court’s constitutional structure. The D.C. Circuit summarized the Kuretskis’ core argument as follows:
The Kuretskis now contend that the Tax Court judge may have been biased in favor of the IRS in a manner that infringes the constitutional separation of powers. They point to 26 U.S.C. § 7443(f), which enables the President to remove Tax Court judges on grounds of “inefficiency, neglect of duty, or malfeasance in office.” According to the Kuretskis, Tax Court judges exercise the judicial power of the United States under Article III of the Constitution, and it violates the constitutional separation of powers to subject any person clothed with Article III authority to “interbranch” removal at the hands of the President. The Kuretskis thus ask us to strike down 26 U.S.C. § 7443(f), vacate the Tax Court's decision, and remand their case for re-decision by a Tax Court judge free from the threat of presidential removal and hence free from alleged bias in favor of the Executive Branch.
The D.C. Circuit rejected the Kuretskis’ claim. It assumed, arguendo, that “‘interbranch’ removal of a Tax Court judge would raise a constitutional concern.” But it found “no cause for concern in fact.” According to the D.C. Circuit, the Tax Court “exercises Executive authority as part of the Executive Branch,” and “[p]residential removal of a Tax Court judge thus would constitute an intra—not inter—branch removal.” (No Tax Court judge has ever actually been removed by the President.)
This holding evidently unnerved Senator Orrin Hatch, who chairs the tax writing committee in the upper chamber. Senator Hatch introduced a bill this past April with language identical to the “clarification” found in the extenders package. The accompanying report explained:
The Committee is concerned that statements in Kuretski v. Commissioner may lead the public to question the independence of the Tax Court, especially in relation to the Department of Treasury or the Internal Revenue Service. The Committee wishes to remove any uncertainty caused by Kuretski v. Commissioner, and to ensure that there is no appearance of institutional bias.
This “clarification” may be motivated by noble sentiments. But it has the potential to cause much more confusion than it resolves. If the Tax Court isn’t inside the Executive Branch, then where exactly is it? And if the Hatch provision becomes law, how would a federal court of appeals handle a future challenge to the Tax Court’s constitutional structure?
A few possibilities (with thanks to my colleague Will Baude for helping me think through the permutations):
First, the court of appeals might say that the Tax Court is part of the Legislative Branch. ...
Second, the court of appeals might say that the Tax Court is part of the Judicial Branch. ...
A third possibility is that the court of appeals might say the Tax Court lies off in constitutional no-man’s land, apart from all three branches. ...
A fourth possibility is that the court of appeals might say that the “clarification” in the extenders package is itself a nullity. ...
I doubt I’ve thought through all the possibilities. I doubt that members of Congress have either. The hasty addition of the “clarifying” provision to the end-of-year extenders package means that there is little time for lawmakers to debate the measure. Yet it may take courts quite a bit of time to sort through the provision’s potential implications.
And for what? Say the Kuretskis are correct that the Tax Court judge in their case may have been biased in favor of the IRS because he was subject to presidential removal. A congressional declaration that the Tax Court is “independent” of the Executive Branch doesn’t change that: it’s the removal provision that the Kuretskis say is the source of the bias, and the extenders package leaves the removal provision in place. Congress cannot wave a magic wand and make the “appearance of institutional bias” go away. What it can do is create a constitutional quandary for the Tax Court—and an entirely unnecessary one at that.
Prior TaxProf Blog coverage:
- Carlton Smith (Cardozo), The President's Authority to Remove a Tax Court Judge (Oct. 22, 2012)
- Patrick J. Smith (Ivins, Phillips & Barker, Washington, D.C.), Reflections on Kuretski's Holding That the Tax Court Is Part of the Executive Branch (June 22, 2014)
- Kristin Hickman (Minnesota), Kuretski v. Commissioner: A Fun and Fascinating Bit of Academic Folderol? (June 23, 2014)
- Kuretskis' Counsel Responds to Smith and Hickman Op-eds on Treating the Tax Court as Part of the Executive Branch (June 24, 2014)
- Stephanie Hoffer (Ohio State) & Christopher J. Walker (Ohio State), Kuretski, the Tax Court, and the Administrative Procedure Act (June 24, 2014)
- Federalist Society Hosts Teleforum Conference Call Today on Who Judges Who is a Judge? (July 17, 2014)
- Supreme Court Denies Cert. In Case Challenging President's Authority To Remove A Tax Court Judge (May 19, 2015)
- Brant Hellwig (Dean, Washington & Lee), The Constitutional Nature of the U.S. Tax Court (Nov. 3, 2015)