TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Saturday, February 4, 2017

Tax Court Upholds President Trump's Authority To Fire Judges

Tax Court (2017)Battat v. Commissioner, 148 T.C. No. 2 (Feb. 2, 2017):

Ps filed a motion to disqualify all Tax Court Judges and to declare unconstitutional I.R.C. sec. 7443(f), which authorizes the President to remove Tax Court Judges “after notice and opportunity for public hearing, for inefficiency, neglect of duty, or malfeasance in office, but for no other cause.”

In the Tax Reform Act of 1969 (1969 Act), Pub. L. No. 91-172, sec. 951, 83 Stat. at 730, Congress deleted from I.R.C. sec. 7441 the designation of the Tax Court as an independent agency within the executive branch. In 1971 we said that under the 1969 Act the Tax Court is no longer within the executive branch. Burns, Stix Friedman & Co. v. Commissioner, 57 T.C. 392 (1971). Ps also adopt the view that the Tax Court is not within the executive branch and contend that, as a result, the President’s limited removal authority violates separation of powers principles. In Kuretski v. Commissioner, 755 F.3d 929 (D.C. Cir. 2014), the Court of Appeals held that the Tax Court is within the executive branch. The following year Congress amended I.R.C. sec. 7441 because of concerns about statements made by the Court of Appeals in Kuretski.

Held: Under the Rule of Necessity, it is proper for a Tax Court Judge to rule on Ps’ contention that I.R.C. sec. 7443(f) is unconstitutional.

Held, further, Presidential authority to remove Tax Court Judges for cause does not violate separation of powers principles. We so hold because, while Tax Court Judges exercise a portion of the judicial power of the United States, Freytag v. Commissioner, 501 U.S. 868, 890-891 (1991), its Judges exercise no portion of the judicial power reserved to Article III judges. Thus, Presidential removal authority cannot interfere with the Article III judicial power regardless of the Tax Court’s placement in the branches of Government.

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I don't like this, on several levels. First of all, the fact that the law is sufficiently vague that there could be any doubt of which branch of government the tax courts are in is very disturbing. Such an uncertainty could be the source of serious mischief. Beyond that, all judges should be in the Judicial Branch, article III judges.

Posted by: Michael | Feb 4, 2017 12:59:04 PM

When hauled into tax court the beginning presumption is that you are liable for the taxes and penalties the IRS says you are, and your burden is to prove otherwise -- an exception to the normal Article III presumption of innocence. Without overturning that, considering the tax courts true Article III courts would be a very, very grave mistake.

Posted by: McG | Feb 5, 2017 6:11:58 AM

They are "Administrative Law" not "Statutory Law" based from the constitution. Roosevelt instituted administrative law as a progressive Communist overthrow of the Constitution.

If you don't show up..... unless you already signed, you are not participatory. Then it is up to you ex if you see your children or not. If you ask the administrative court for visitation "rights" you play ball under their rules outside the Bill of Rights. But you have to sign


ALL administrative

Posted by: RE:Michael | Feb 5, 2017 8:04:34 AM

Welcome to admin law. ALJs aren't part of article III, they're part of the bureaucracy. I'm actually relieved to learn they're Article II employees because that at least means they can be fired by the president, which makes them way more accountable than 99 percent of agency personnel.

Posted by: Jim W | Feb 5, 2017 9:12:39 AM

Egads, the CPAs have taken over!!! Obviously none of these commenters have ever passed the bar.
1. There are numerous Article I courts, including the U.S. Tax Court and the U.S. Court of Federal Claims, among many others.
2. “When hauled into tax court . . “ No taxpayer gets hauled into Tax Court. In the U.S. Tax Court, the petitioner is ALWAYS the taxpayer. The case is filed by the taxpayer, who hauls the Commissioner into court.
3. The “normal Article III presumption of innocence” applies to CRIMINAL cases. “Innocence” is not an attribute of civil litigation. There is no “presumption of innocence” in a civil case.
4. In the U.S. district courts—Article III courts—taxpayers bear the burden of proof in civil cases except in a few instances defined by statute. In criminal cases and in civil cases the U.S. bears the burden of proof.
5. Last, Tax Court judges are not ALJs; ALJs do not hear federal tax cases (although many states assign their tax disputes to state ALJs).

Posted by: Publius Novus | Feb 5, 2017 3:04:42 PM

Regardless of these nuanced machinations on the Tax Court's place in the constitutional hierarchy, the quip from a colleague still holds true: "The Tax Court is a wholly-owned subsidiary of the IRS Office of Chief Counsel."

Posted by: TexEcon | Feb 6, 2017 7:27:15 AM

My bad, I never did tax law. I assumed this was something to do with firing ALJs at the treasury department or something.

Posted by: Jim W | Feb 6, 2017 11:47:55 AM

What was the point in filing this suit in the Tax Court? The petitioners are still facing a deficiency, and if all the Tax Court judges are disqualified won't they have to pay the deficiency and litigate the issue in District Court or the Court of Federal Claims?

Posted by: guy helvering | Feb 6, 2017 2:28:38 PM

Mr. helvering: Makes ya wonder, don't it?

Posted by: Publius Novus | Feb 7, 2017 6:35:08 AM