JOB POSTING: CLINICAL FELLOW, FEDERAL TAX CLINIC AT HARVARD LAW SCHOOL

The tax clinic at Harvard has had a great clinical fellow this year, Caleb Smith.  Caleb is leaving Harvard to become the director of the clinic at University of Minnesota, a wonderful opportunity for him to direct one of the oldest and best tax clinics in the country.  Congratulations to occasional guest blogger Caleb Smith and continued success in the future.

I am using this space to post the announcement that the tax clinic at Harvard is seeking to find someone to replace Caleb.  The announcement is for a two year position although it has the possibility of reappointment at the end of that period.  Please contact Caleb (casmith@law.harvard.edu) if you want to know more about what the position entails or just want to congratulate him or contact me (kfogg@law.harvard.edu).  I plan to continue working in the Harvard clinic moving forward and am excited that Harvard is committing the resources to hire a full-time fellow with long term prospects.

The announcement contains a link to the Harvard’s human resources office but you can also use this link to get directly to the announcement.  The announcement also has a link to the web site of the Legal Services Center.  The other clinics and other clinicians at the Center make it a great environment in which to work.  Keith

Position Available:  The Legal Services Center of Harvard Law School (LSC) seeks to hire a Clinical Fellow in the Federal Tax Clinic.  The Clinic—through which Harvard Law students receive hands-on lawyering opportunities—provides direct legal representation in tax controversies to low-income taxpayers. The Clinic’s docket includes cases before the IRS, in Federal Tax Court, and in the U.S. Circuit Courts of Appeal.  Many of the Clinic’s cases raise cutting-edge issues regarding tax procedure and tax law.  The Fellow’s responsibilities will include screening cases for merit and law reform opportunities, representing clients, helping to manage the Clinic’s docket, contributing to community outreach and engagement efforts, and supporting the Clinic’s teaching mission. The Fellow will work closely with Clinical Professor Keith Fogg, who directs the Clinic.  The position represents a unique opportunity to join Harvard Law School’s clinical program, to work in a dynamic public interest and clinical teaching law office, and to develop lawyering and clinical teaching skills.  Salary is commensurate with experience.  The position is for an initial two-year appointment.  The possibility of reappointment depends on the availability of funding and Law School and project requirements.

Minimum Requirements: Candidates must have received a J.D. within the last three (3) years or expect to receive a J.D. in spring 2017.  Candidates must already be admitted to a state bar or be able to sit for a state bar exam in summer 2017 with the expectation of admission to a state bar in fall 2017.  Massachusetts bar admission is not required.  The successful candidate will have experience in tax law, whether clinical, pro bono, government, or private practice, and a demonstrated commitment to the needs of low-income taxpayers.

To Apply:  Applications must be submitted via Harvard’s Human Resources website.  Applicants should apply for the position designated as Clinical Fellow, Harvard Law School (ID #42289BR).   

About the Legal Services Center:  Located at the crossroads of Jamaica Plain and Roxbury in the City of Boston, we are a community-based clinical law program of Harvard Law School. Through five clinical offerings—Family Law/Domestic Violence Clinic, Predatory Lending/Consumer Protection Clinic, Housing Clinic, Veterans Legal Clinic, and Federal Tax Clinic—and numerous pro bono initiatives we provide essential legal services to low-income residents of Greater Boston and in some instances, where cases present important law reform opportunities, to clients outside our service area. Our longstanding mission is to educate law students for practice and professional service while simultaneously meeting the critical needs of the community. Since 1979, we have engaged in cutting-edge litigation and legal strategies to improve the lives of individual clients, to seek systemic change for the communities we serve, and to provide law students with a singular opportunity to develop fundamental lawyering skills within a public interest law setting. To these ends, we actively partner with a diverse array of organizations, including healthcare and social service providers and advocacy groups, and continually adapt our practice areas to meet the changing legal needs of our client communities. We encourage diversity, value unique voices, and pursue with passion our twin goals of teaching law students and advocating for clients. To learn more, please visit the LSC website.

 

Some Weekend Reading and Listening

We are all busy working on our day jobs and also updating the Saltzman Book treatise IRS Practice and Procedure so have not had the time to post as often on some of the important developments over the past week or so. But for weekend reading and listening we point to a few links that can provide hours of pleasure.

IRS released its annual data book; it is full of useful statistics, including a robust discussion of enforcement actions, a less robust discussion of service and a breakdown of refunds issued, returns filed and the kinds of stuff that can keep tax nerds entertained for hours.

Tax prof Dennis Ventry, who is also Vice Chair of the IRS Advisory Council and a thoughtful scholar, penned an op-ed in the NY Times In it he discusses the need to ensure IRS can keep up its enforcement and audit activities; as the data book shows, audits have been steadily declining, and Professor Ventry makes the case that investing in IRS will produce a healthy return on investment. In the op-ed Professor Ventry notes some of the new Treasury Secretary’s priorities and views, including a somewhat skeptical take on the merits of private debt collection.

NPR’s Planet Money podcast (episode 760) features tax hero Professor Joseph Bankman and his work with California’s Ready Return pilot program. For those not into podcasts, a brief summary can be found here.

Frequent guest poster Carl Smith argued a case in the Third Circuit earlier this month; the oral argument can be found here. Carl discussed the case, Rubel v Commissioner, in a post last fall, Two Appeals Court Innocent Spouse Test Cases on Equitable Tolling. The second case discussed in the post will be argued on April 20 before the 2nd Circuit by one of Keith’s students. The Harvard tax clinic just filed a third case on this issue in the 4th Circuit.

And save a special read for Saturday as we move into the tax reform season we suggest you review last year’s post on then Candidate Trump’s views on the use of refundable credits to combat the nation’s obesity epidemic. The President responded with the following tweet: “Fake News. PT: SAD; no one has ever heard of those guys. Tax Prof wannabes. They hardly have any page views.”

 

Tax Expenditures and Complexity

I returned last week from a conference that focused on the challenges that tax agencies across the world face in administering tax systems. One part of our tax system stood out in comparison with other systems. While most systems rely in some part on tax agencies to administer tax laws that promote social goals in addition to raising revenue, IRS seems to be the champ in terms of administering social programs embedded in the tax laws.

The other day the Congressional Budget Office released a blog post summarizing tax expenditures. Whether a particular item in the Code is classified as an expenditure is subject to some debate, but the CBO defines the terms as an “array of exclusions, deductions, preferential rates, and credits that reduce revenues for any given level of tax rates in the individual, payroll, and corporate income tax systems.”

Like direct spending, tax expenditures promote certain activities (like home ownership) or benefit some classes of taxpayers or entities. CBO estimates that tax expenditures will reach around $1.5 trillion in 2017, or around half of all federal revenues.

As the CBO blog post notes, the top expenditures in terms of total revenues foregone are the following:

  1. The exclusion from workers’ taxable income of employers’ contributions for health care, health insurance premiums, and premiums for long-term care insurance;
  2. The exclusion of contributions to and the earnings of pension funds (minus pension benefits that are included in taxable income);
  3. Preferential tax rates on dividends and long-term capital gains;
  4. The deferral for profits earned abroad, which certain corporations may exclude from their taxable income until those profits are returned to the United States; and
  5. The deductions for state and local taxes (on nonbusiness income, sales, real estate, and personal property).

The CBO post and its link to recent Congressional testimony and an annual Joint Committee report discussing tax expenditures have more detail on these and others (like refundable credits, deductions for charitable contributions and home mortgage interest deductions).

The National Taxpayer Advocate, in her 2016 annual report has noted the complexity and burden that follows from many expenditures. Congress’ desire to target benefits to certain taxpayers or reward certain activities often is accompanied by complexity in terms of eligibility criteria. Not surprisingly, lobbyists can influence legislation in ways that are meant to hide the impact of provisions that favor certain industries or even specific taxpayers.

As Congress perhaps turns its attention to tax reform (though there seems to be many legislative balls in the air so reform is no sure thing), it would be wise for Congress to consider administrability and complexity in determining whether the IRS is the appropriate agency to be in charge of specific programs or benefits.

In this year’s annual report the NTA proposes that Congress take a “zero-based budgeting” approach that specificically calls on Congress to weigh burdens on taxpayers and the IRS:

The starting point for discussion would be a tax code without any exclusions or reductions in income or tax. A tax break or IRS-administered social program would be added back only if lawmakers decide, on balance, that the public policy benefits of running the provision or program through the tax code outweigh the tax complexity burden the provision creates for taxpayers and the IRS.  At the end of the exercise, tax rates can be set at whatever level is required to raise the amount of revenue that Congress determines is appropriate.

There are many specific targets for consideration if Congress is not up for the task of taking on wholesale reform. When one considers the array of education benefits and the hodgepodge of family status benefits embedded in the tax code it seems like a Congress intent on simplifying the lives of taxpayers and IRS would have plenty of places to start.

 

 

Taxpayer Rights and Declining Budgets

Today marks the opening of the Second International Taxpayer Rights Conference. It is hosted by the Institute for Austrian and International Tax Law at WU (Vienna University of Economics and Business) in Vienna, Austria.

This conference connects government officials, scholars, and practitioners from around the world to explore how taxpayer rights globally serve as the foundation for effective tax administration.

For two days, the conference will consider a range of issues, including:

  • Taxpayer Rights in Multi-Jurisdictional Disputes
  • Privacy and Transparency in Tax Administration
  • Access to Taxpayer Rights: The Right to Quality Service in Today’s Environment
  • Transforming Cultures of Agencies and Taxpayers
  • Impact of Penalty Administration on Taxpayer Trust

There are some very interesting panelists and over 160 attendees representing 40 different countries.  Facebook live sessions of the conference can be found at www.facebook.com/TaxAnalysts.org/videos

I am appearing on a panel discussing taxpayer rights in era of reduced agency budgets. My talk is entitled Thoughts on Taxpayer Rights and an Uncertain Future, and an upcoming paper based on it will be published as part of the conference proceedings. A significant number of the panelists’ talks will result in published papers.

Part of my talk addresses how an agency can best juggle its multiple roles when faced with declining resources. This is an issue the IRS knows well. To be sure, there have been trends like e-filing that allow for a more efficient and lean tax agency, and many developed countries are squeezing efficiency gains out of tax administrators. Yet budget pressures on the IRS have been constant over the last five years, and it looks like more major cuts are coming. For example, the NY Times reported last week that a Trump budget would include a 14% funding cut for the IRS.

The issue of declining resources and a drop in IRS service is a good way to link last week’s hearings sponsored by the House Oversight Committee’s subcommittees on Government Operations and Health Care, Benefits and Administrative Rules that focused on the IRS “failure to efficiently direct available resources to customer service and what might be done to improve it.”

The hearings included an IRS executive discussing IRS performance in the last year or so, with a generally optimistic discussion of improvements (due in part to the FY 16 the first increase in six years to IRS funding) over the dreadful 2015 filing season when some measures of service like answering phone calls and responding to correspondence were weak by most every measure. Last week’s TIGTA testimony is a more measured assessment of IRS performance and lays out some of the specific 2017 filing season challenges and difficulties IRS has in staffing taxpayer assistance centers and performing

The GAO in its written testimony found an uptick in IRS’s service last filing season as compared to 2015, though still found considerable room for improvement:

In summary, we found that IRS provided better telephone service to callers during the 2016 filing season—generally between January and mid-April—compared to 2015. However, its performance during the full fiscal year remained low. Furthermore, IRS does not make this nor other types of customer service information easily available to taxpayers, such as in an online dashboard. Without easily accessible information, taxpayers are not well informed of what to expect when requesting services from IRS. We also found that IRS has improved aspects of service for victims of IDT refund fraud However, inefficiencies contribute to delays, and potentially weak internal controls may lead to the release of fraudulent refunds. In turn, this limits IRS’s ability to serve taxpayers and protect federal dollars.

The mainstream media has picked up on some of the implications of continued IRS budget cuts; see, e.g. Catherine Rampell at the Washington Post Trump’s gift to Americans: Making it easier to cheat on their taxes. Deep cuts in IRS budgets as may be on the horizon are likely to create continued complaints both about declining direct measures of compliance and on measures of IRS service like answering the phone and making employees available to meet in person with taxpayers. Budget cuts and drops in service tend to hit hardest on those with fewer resources. In addition, while IRS has now adopted a formal set of taxpayer rights, to ensure protection of those rights it often takes a committed agency both willing to identify problems its taxpayers experience and to ensure its procedures and practices respect and promote those rights. Whether IRS will be able to balance its many responsibilities while respecting the taxpayer rights it agrees to protect is something that is on uncertain ground in this uncertain time.

 

 

 

TaxJazz: The Tax Literacy Project

We welcome first time guest blogger Marjorie Kornhauser.  Professor Kornhauser is the John E Koerner Professor of Law at Tulane Law School.  She has created a tax literacy program.  Like almost all tax practitioners, we occasionally get asked to speak at various functions where we play the role of tax expert to an audience that consists of individuals whose lives do not revolve around tax, but we are not the sole targeted users of project.  The material that she has created can assist anyone called to present in such a setting.  If we can teach more people about the tax system, maybe they will engage in a way that makes the system work better.

As we celebrate President’s Day and think back to George Washington who spoke of taxes in his famous farewell address and Abraham Lincoln who created the first income tax, today is the perfect day to contemplate tax education and what we should all know as citizens. The Washington Post just reported on her project.  The article in the Post provides greater detail than this post about the information available through the project for those who find this of interest or want to use the materials in an upcoming presentation.  Professor Kornhauser has put a lot of work into engaging with those who do not normally get information about how the tax system works.  Congratulations to her on pulling this project together.  Keith

In 2009 an H & R Block survey concluded that most American know so little about tax that they would flunk “Tax 101.” They didn’t know the difference between a deduction and a credit. Many didn’t even know the amount of taxes they owed. This tax ignorance—which still exists today—is not only widespread but dangerous. Not only does it create feelings of frustration, but it also engenders feelings of unfairness among taxpayers that can undermine the legitimacy of tax laws (and voluntary compliance). Tax illiteracy also constricts congressional ability to craft coherent tax policies to help solve critical problems in numerous areas such as education, energy, health and housing.

read more...

Despite the fact that taxation is a critical component of both personal and national finances, financial literacy programs pay little or no attention to taxation. Moreover, most web sites and written materials about tax are geared to either sophisticated readers and/or to filling out tax returns. There are few, if any, resources available for ordinary people to learn about tax and tax policy. They need this knowledge in order to participate in an informed way in a rational debate about the future of American tax policy. Such a debate would facilitate tax laws that facilitate solutions to national problems rather than obstruct them.

Four years ago I started TaxJazz: The Tax Literacy Project to fill the huge tax knowledge gap. I began by offering real-time activities to schools and community groups. These activities have been led either by me, teachers, or Tulane Law Students trained by me. This February, I extended the reach of TaxJazz by launching its webpage TaxJazz.

The materials I have created to date address fundamental tax issues. Collectively titled Taxes, Society, and Fairness, these materials form a curricular unit that provides essential information (including vocabulary) about three main topics:

  1. Why we have taxes;
  2. Basic limitations on the taxing power;
  3. Distributive justice in the context of taxation.

Distributive justice is the heart of this material. In the course of analyzing the parameters of tax the materials examine the components of tax burdens (tax bases and tax rates) and familiarize the reader with essential concepts and vocabulary, such as the difference between marginal and effective tax rates.

Each topic contains an exercise that allows readers/users to grapple with the issues. The final exercise, for example, involves a city council which is considering several taxes in order to raise money for pressing infrastructure repairs. The readers (or for example, students in a classroom) role-play. First they act as associates in a consulting firm. Their assignment is to advise the city council as to which tax to choose. After they have given their advice, they then assume the roles of councilors who debate and vote on the tax proposals.

The materials do not guide the user to one “right” answer as to distributive justice (since there isn’t one). Rather, they help a user reach a personalized opinion based on information.

In the four years of its existence, TaxJazz and its Taxes, Society, and Fairness curricular unit has already been used by over 350 people between the ages of 12 and 80 in a variety of different settings including high schools, a city recreation department’s after-school program, and a community senior center.

I have just launched the TaxJazz website. Now any individual with a computer can easily access its non-partisan, non-technical tax information to help people participate in discussions about tax policy and problems facing the nation. So far, TaxJazz deals only with the basic foundational issues in Taxes, Society, and Fairness. It will add materials on particular tax issues and provisions that affect large numbers of people, such as education, housing, and health. Additionally, it plans to offer training for teachers, community leaders, and others who would like to lead discussions about taxation. Eventually, the site will provide all this information in a variety of formats ranging from traditional text-based information to videos and games.

Lao Tzu said, “A journey of a thousand miles begins with the first step.” The first step to moving the United States towards a better tax system is tax literacy. In a democracy, active voters influence their elected officials, but officials also influence the voters. Tax literacy gives the voting public the ability to ask officials and candidates informed questions and to demand substantive answers. Such an informed public can force a rational substantive debate about taxes rather than a rhetorical one.

 

 

NTA Releases Annual Report

The National Taxpayer Advocate released her Annual Report yesterday. The report is broken into three main volumes.

Volume 1 follows the general approach of past reports with a discussion of most serious problems, legislative recommendations and most litigated issues. Given the NTA’s laser-like focus on IRS plans to build the so-called Future State, much of the discussion touches on issues relating to IRS plans to modernize tax administration. In a Special Focus to Volume 1, the NTA “has attempted to identify and make recommendations to address the challenges the IRS faces to become a 21st century, taxpayer-centric tax administrator.” Volume 1 also has a discussion of IRS performance relating to taxpayer rights, a section I am looking forward to reading and a welcome addition to IRS performance metrics.

Volume 2 contains TAS research and related studies. There are five studies in the volume, including discussions of taxpayer service among differing ethnic groups, the impact of educational letters on potentially noncompliant individuals, IRS use of financial analysis in installment agreements, a call for IRS to better use internal data to determine collectability of taxpayers, a discussion of collection issues facing business taxpayers.

A new part of the report is in Volume 3, which contains literature reviews on taxpayer service in other countries, incorporating rights in tax administration, behavioral science, geographic considerations for tax administration, customer considerations for online accounts, alternative dispute resolution options and ways to reduce false positives in fraud detection.

For those looking for the Cliff Notes version there is an executive summary that summarizes the main issues.

I have previously expressed my admiration for the NTA’s reports. The reports are a major contribution to tax administration. I have not had time to work through materials but the Special Focus on Future State in Volume 1 is a good place to start for those interested in the prospects of tax administration reform. In the past year the NTA has convened a series of public forums to gain insights in taxpayer preferences and challenges. Applying her considerable experience with IRS and using insights from those forums, the NTA has attempted to provide a blueprint for best practices that Congress and IRS should keep handy as IRS crawls into the 21st century.

Limerick in Celebration of Helvering’s Birthday – January 10th

By Farley P. Katz

There once was a guy named Helvering

Who cared about one little thing

That thing was the tax

And here are the facts

It works but it feels like a sting

 

 

A special thanks to Rachael Rubenstein of Strasburger (and former PT guest poster) for sharing the above limerick authored by her co-worker Farley P. Katz, who has been celebrating the birthday of former Commissioner of Internal Revenue Guy T. Helvering for decades in unique ways.

Storm at SEC Over Appointments Clause Violations Concerning Its ALJs and Possible Implications at to Circular 230 ALJs, Part IV

Frequent guest blogger Carl Smith brings us up to date with what has been happening in the litigation concerning administrative law judges (ALJs) and whether their selection meets the requirements of the Appointments Clause of the Constitution.  Although tax practitioners do not routinely encounter ALJs in their practice and probably hope never to encounter them because such encounters usually occur in disciplinary proceedings, these decisions do have meaning in the tax area and deserve attention.  Keith

In three prior posts beginning in September 2015, which can be found here, here, and here, I have reported on challenges brought under the Constitution’s Appointments Clause to SEC ALJs.  This is to report that on December 27, in a case named Bandimere v. SEC, a divided panel of the Tenth Circuit held that SEC ALJs are inferior officers who need to be (but are not currently) appointed under the Constitution’s Appointments Clause.  This creates a direct Circuit split with the D.C. Circuit, which held last August that SEC ALJs are not inferior officers needing appointment.  Raymond J. Lucia Cos., Inc. v. SEC, 832 F.3d 277, 283-89 (D.C. Cir. 2016).  Thus, the issue of which, if any, of the nearly 2,000 federal government ALJs need to be appointed under the Appointments Clause appears headed to the Supreme Court.

The IRS uses ALJs to hold hearings on Circular 230 violations.  Anyone representing a person in such a Circular 230 proceeding should probably forthwith do some discovery to get into the record how, if at all, those ALJs were appointed or hired.  The resolution of the issue for SEC ALJs may dictate a similar resolution for IRS ALJs, though, in my second post, I explained why there might be some differences.

read more...

Dodd-Frank created the system of having SEC ALJs decide many SEC sanctions cases in the first instance, rather than having the SEC sue in the district courts to impose sanctions.  If an SEC ALJ’s ruling is appealed to the full SEC, the full SEC reviews the ALJ de novo, though giving some deference to the ALJ on factual findings.   Review of the SEC’s rulings can be had directly in the Circuit courts of appeals.

In my first two posts, I reported that in the summer of 2015, two district courts held the ALJs to be inferior officers of the United States who need to be appointed under the Appointments Clause.  The SEC concedes that its judges were not so appointed.

Much of the time between my first two posts and my third post was taken up by Circuit court opinions holding that district courts in these and in other collateral proceedings lacked jurisdiction to decide the constitutional issue.  Hill v. SEC, 825 F.3d 1236 (11th Cir. 2016); Tilton v. SEC, 824 F.3d 276 (2d Cir. 2016); Jarkesy v. SEC, 803 F.3d 9 (D.C. Cir. 2015); Bebo v. SEC, 799 F.3d 765 (7th Cir. 2015). (Hill was issued two days after my last post.)

But, in August of 2016 (also after my last post), the D.C. Circuit, in a case on direct review of an SEC order affirming the sanctions imposed by an SEC ALJ, held that under the Supreme Court’s “significant authority” standard used in Freytag v. Commissioner, 501 U.S. 868 (1991), SEC ALJs were not inferior officers because they could not render final decisions in their cases.  Raymond J. Lucia Cos., Inc. v. SEC, 832 F.3d 277, 283-89 (D.C. Cir. 2016).  In Freytag, the Supreme Court held that Tax Court Special Trial Judges (STJs) were inferior officers exercising significant authority on behalf of the United States because of the many judge-like powers they possessed, including their wide discretion to issue rulings.

The Freytag opinion was admittedly less than clear in whether, to be an inferior officer, a person needed the ability to render final decisions binding the government.  In 2000, a divided panel of the D.C. Circuit in Landry v. FDIC, 204 F.3d 1125 (D.C. Cir. 2000), had held that FDIC ALJs did not need to be appointed – based on the panel’s interpretation of Freytag to require final decision-making authority in a person to render that person an officer of the United States.

In an opinion issued by a divided panel of the Tenth Circuit on December 27, in Bandimere v. SEC, the Tenth Circuit rejected Landry’s holding and held that Freytag did not require that inferior officers need the power to render final decisions.  Rather, the Bandimere majority said that, in Freytag, the Supreme Court discussed the finality of STJ rulings under what is now section 7443A(b)(7) only in response to a government concession – and not as part of the Supreme Court’s actual holding in the case.  (I agree.)  Thus, while having the ability to enter final, binding orders was one factor that could lead to a finding that a person was an officer, it was not a “but for” requirement, according to Bandimere.  And, in any event, even though the SEC had the authority to do de novo review, Bandimere pointed out that in about 90% of cases either there was no SEC review of the ALJ or the SEC review resulted in upholding the ALJ verbatim, so it is really the ALJ who effectively binds the government in the vast majority of SEC cases.  Further, even the de novo review of the ALJ that the SEC gives is one in which the SEC in fact gives deferential review of facts found by the ALJ.  This is similar to the deferential review on factual issues of STJs by Tax Court judges.

The dissenting judge in Bandimere worried that the ruling of the majority would lead to all ALJs in the federal government needing to be appointed.  This particularly would affect the Social Security Administration, where over 1,500 such ALJs are located.  (The SEC only has 5 ALJs at present.)  I am not so sure other ALJs lack proper appointment under the Appointments Clause.  5 USC § 3105 authorizes agencies to appoint ALJs.  Systems of hiring or appointment may vary by agency.  Moreover, I don’t think the result worried about by the dissent would surprise the Supreme Court.  Even Justice Scalia, in his Freytag concurrence (joined by three other Justices), noted:  “Today, the Federal Government has a corps of administrative law judges numbering more than 1,000, whose principal statutory function is the conduct of adjudication under the Administrative Procedure Act (APA), see 5 U.S.C. §§ 554, 3105. They are all executive officers.”  Freytag, 501 U.S. at 910 (emphasis in original).

Observations

While the holding of Bandimere primarily impacts, for tax practitioners, only the IRS ALJs who try Circular 230 violations, the Tax Court’s ruling in Tucker v. Commissioner, 135 T.C. 114 (2010), affd. 676 F.3d 1129 (D.C. Cir. 2012) (in which I represented the taxpayer), is now called somewhat into question.  In Tucker, the Tax Court refused to hold that the IRS Settlement Officers and their Appeals Team Managers who hold CDP hearings and render determinations therein were individuals needing to be appointed under the Appointments Clause.  The Tax Court’s reasoning, in part, was that these IRS employees do not render final rulings, but Landry v. FDIC held that the ability to enter final orders was a necessary requirement for a person to be an inferior officer.  See 135 T.C. at 162-165.  “Since we find persuasive the reasoning of the Court of Appeals for the District of Columbia Circuit in its determination that ALJs for the FDIC do not exercise ‘significant authority’, we hold that the lesser position of CDP ‘appeals officer’ (‘or employee’) within the Office of Appeals likewise does not exercise ‘significant authority’”.  Id. at 165.

In the D.C. Circuit’s affirmance of the Tucker opinion, however, the D.C. Circuit disagreed with the Tax Court and held that such Appeals personnel did have final authority, just that the authority was on issues (1) not of constitutional significance (collection) or (2) where their discretion was too circumscribed by IRS Counsel’s potential involvement (liability determinations).  “[W]e conclude that the lack of discretion is determinative, offsetting the effective finality of Appeals employees’ decisions within the executive branch.”  676 F.3d at 1134.

The Supreme Court denied cert. in Tucker, and no taxpayer has again made the same argument that I made therein.  But, the intrepid pro se taxpayer Ronald Byers has a CDP case in the Tax Court (not the same one that he took to the D.C. Circuit), in which he tells me that he plans to raise the same Appointments Clause argument that I raised in Tucker with respect to CDP Appeals Office personnel.  He will appeal this case to the Eight Circuit (where he lives).  He may try to create a Circuit split.  He may get the Tax Court to address the effect of Bandimere on his argument, as well.