The DC Circuit Court of Appeals has scheduled oral argument for late November in the case of Kuretski v Commissioner. Kuretski is like one of the many thousands of CDP cases where the parties disagree on some aspect of a collection determination, but also has one very big wrinkle: the taxpayers are using the case as a vehicle challenging the constitutionality of the President’s powers to remove Tax Court judges under Section 7443(f). Most times when you hear about the intersection of constitutional law and tax procedure you may think about constitutionally challenged taxpayers clogging the courts with frivolous issues. But Kuretski’s issue is far from frivolous, and highlights a tension that the Supreme Court exposed in when it last considered the constitutionality of the Tax Court’s use of Special Trial Judges.
Some context follows.read more...
Freytag: The Tax Court as a Court of Law
Tax procedure enthusiasts may recall the 1991 case of Freytag v Commissioner, where taxpayers challenged the authority of Special Trial Judges under the Constitution’s Appointments Clause. In Freytag the taxpayers asked the Supreme Court to hold that Congress improperly vested the power to appoint Tax Court Special Trial Judges in the Chief Judge of the Tax Court, running afoul of Article II, Section 2, Clause 2 of the Constitution, known as the Appointments Clause. That clause requires the following:
[The President] shall nominate, and, by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments
In Freytag, the Court found that the appointment power within the Chief Judge did not violate the Appointments Clause. Writing for the majority in a 5-4 opinion, Justice Blackmun wrote that Article I Courts, like the Tax Court, exercised the judicial power of the United States and were therefore “Courts of Law” for purposes of Article II Section 2. In addition, the Court found that Special Trial Judges were inferior officers, so that there was no Appointments Clause violation (recall that the last part of the Appointments Clause allows Congress to vest the appointment of “inferior officers” in “Courts of Law”).
A separate concurring opinion penned by Justice Scalia took issue with the Court’s conclusion that the Tax Court is a “Court of Law” within the meaning of the Appointments Clause. Despite diverging from the majority’s rationale, Scalia nonetheless found the appointment valid because he concluded that the Tax Court is a “Department” and the Chief Judge is its head.(recall that the Appointments clause allows Congress to vest the appointment of “inferior officers” with “heads of Departments”). To Scalia, the majority’s mistake was equating adjudication with the judicial power. In other words, Scalia felt that the adjudicatory function of the Tax Court was akin to adjudicatory functions that other branches perform, such as the Article I House and Senate powers of indictment and impeachment.
That did not alter the fact that the Tax Court, according to Scalia, performs executive functions:
[The Tax Court] reviews determinations by Executive Branch officials (the Internal Revenue Service) that this much or that much tax is owed — a classic executive function. For 18 years its predecessor, the Board of Tax Appeals, did the very same thing, see H. Dubroff, The United States Tax Court 47-175 (1979), and no one suggested that body exercised “the judicial power.” We held just the opposite:
The Board of Tax Appeals is not a court. It is an executive or administrative board, upon the decision of which the parties are given an opportunity to base a petition for review to the courts after the administrative inquiry of the Board has been had and decided.” Old Colony Trust Co. v. Commissioner
Kuretski: Freytag’s (and Scalia’s) Red Headed Stepchild?
In Kuretski, the constitutional issue focuses not on the Appointments Clause but on whether presidential removal authority over Tax Court judges renders their exercise of the judicial powers subservient to an executive officer. This subservience, the taxpayers argue, violates the separation of powers constitutional principle. The taxpayers originally raised the constitutional issues in a post-decision motion to vacate. The Tax Court declined to address the constitutional issues in an unpublished order finding that the argument was not timely made.
The taxpayers appealed, and the case has been fully briefed. The constitutional issues raise fundamental questions of the Tax Court’s role in our system of tax administration. It is possible, however, that the Court may not reach the issues in this case. The government in its response brief argues that the taxpayers waived their constitutional challenge by raising it too late. In addition, the government argues that the taxpayers have no standing to bring the case because they waived any constitutional separation of powers arguments by bringing the case in the Tax Court in the first instance, as compared to bringing an action in federal district court (though that seems strained given that the Tax Court has exclusive jurisdiction over CDP cases).
I am not sure how the DC Circuit Court of Appeals will resolve the waiver and standing issues, though I hope that it gets to the constitutional issue. The main constitutional argument has its origins in an article written by my and my co-blogger Keith’s colleague at Villanova Law School, Professor Tuan Samahon. Professor Samahon’s 2012 Nevada Law Journal article criticized the majority Freytag opinion:
The way the [Supreme] Court resolved that challenge, however, left the door open for a potential separation-of-powers challenge from a different angle—not as an appointment issue, but as a challenge based on the Tax Court judges’ removability by the President. Title 26,§ 7443(f) authorizes the President to remove Tax Court judges for cause.That provision becomes particularly problematic after Freytag. Blackmun and the majority characterized the Tax Court judges (and their special trial judges) as exercising “the judicial power of the United States,” even though they lack Article III tenure and salary protection and, significantly, are subject to potential presidential removal. This cross-branch removal power confers upon the President a power to control those officers and threatens the independent exercise of the judicial power. This mixing of judicial and executive authorities violates a basic separation-of-powers maxim and courts the attendant danger of tyranny (citations omitted).
Professor Samahon, along with Frank Agostino and Carlton Smith, are the counsel for the Kuretskis, and they have raised the separation of powers argument in their briefs.[update: Note John Miscione, who works with Frank Agostino, is also on the briefs.]
The government places the Tax Court’s powers in a different constitutional light. Its response brief echoes Justice Scalia’s concurring opinion in Freytag. The government brief states that for purposes of Article III of the constitution, the Tax Court exercises Executive functions, and is not exercising judicial power. According to the government, judicial power has different meanings for purposes of the Appointments Clause and Article III. As such, it places the Tax Court powers as squarely within the Executive Branch:
[I]t is well settled that the matters decided by the Tax Court are matters of public right that properly may be decided by the Executive Branch. Murray’s Lessee, 59 U.S. at 284. The fact that the body determining such matters takes the form of a tribunal is not necessarily to the contrary. Executive power may take “‘judicial’ form” while remaining executive power. City of Arlington, Texas v. FCC, 133 S.Ct. 1863, 1873 n.4 (2013). (“Agencies . . . conduct adjudications . . . and have done so since the beginning of the Republic. These activities take . . . “judicial” form[ ], but they are exercises of — indeed, under our constitutional structure they must be exercises of — the ‘executive Power’” (quoting Art. II, § 1, cl. 1)). Cf. id. at 1879 (Roberts, C.J., dissenting) (“[w]hat the Court says footnote 4 of its opinion is good, and true”).
The government’s situation of the Tax Court in the Executive Branch drains the force out of the separation of powers challenge. According to the government, if the Tax Court is performing executive power, there is no separation of powers issue, as the President has broad power to remove executive officers as part of his powers to ensure that laws are faithfully executed. The government also states that even though the independence of Tax Court judges gives them “a quasi-judicial character,” it does not necessarily follow that “they may not be subject to for-cause removal by the President.”
The government is urging the DC Circuit to adopt a rationale that the majority declined to adopt in Freytag, that is, Justice Scalia’s approach that the Tax Court is not exercising judicial power in the constitutional sense of the term. If the DC Circuit reaches the issue, we may see the Supreme Court once again wrestling with the fundamental nature of the Tax Court’s place in our governmental system.
We will revisit this fascinating case closer in time to the oral argument, scheduled for November 26.