Yesterday, the D.C. Circuit ruled on the Kuretski case in favor of the government finding that the Tax Court is part of the executive branch. We have previously blogged on this case here, here, and here. The case raises the question as to whether presidential removal authority over Tax Court judges under IRC 7443(f) violates the separation of powers constitutional principle. Because the Tax Court possesses judicial powers, described by the Supreme Court in Freytag, the Kuretskis argued that the Presidential removal powers created an impermissible inter branch opportunity for the President to interfere or intimidate the judiciary. The Court found that the statute withstands the constitutional challenge and concluded that the Tax Court is an executive branch tribunal and “is not a part of the Article III Judicial Branch, and that its judges do not exercise the ‘judicial’ Power of the United States” under Article III.” Situating the Tax Court within the Executive branch enabled the DC Circuit to conclude that the removal power of 7443(f) involves intra branch powers, as the government contended, rather than inter branch powers, as the taxpayers contended.
The Court found that even though the constitution argument was raised for the first time on appeal, it was appropriate to decide the issue since it was a non-frivolous constitutional challenge to the statute. The Court found that the argument raised important institutional issues and deserved to be decided on the merits in this case. The Court also found that the Kuretskis had standing to raise this argument because of the potential harm to them from the prospect of IRS collection action upheld by the Tax Court.
Going to the merits, the Court finds that although the Supreme Court’s decision in Freytag adds a wrinkle to what would otherwise be a straightforward intra branch case, that wrinkle does not change the fundamental position of the Tax Court as part of the Executive Branch. It started out there at its formation in 1924 and the changes made to its make up in subsequent legislation, particularly the 1969 legislation establishing the Tax Court under Article 1, did not alter its position as a part of the Executive Branch for purposes of Article III. In Freytag, the Supreme Court’s description of the Tax Court exercising judicial powers did not mean that the Tax Court exercised Article III judicial powers and did not change the location of the Tax Court with the Executive Branch.
Judge Srinivasan, writing for the Court, also rejected the argument that the Tax Court was a legislative court and rejected a challenge to the collection due process procedures.
Professor Tuan Samahon of Villanova Law School who argued the case before the D.C. Circuit had the following initial observations:
“The Court’s opinion does a couple things that will have repercussions.
First, the Tax Court had assumed that it exercised the judicial power of the United States and accordingly had exercised equitable powers it thought were authorized by its status of exercising the judicial power of the United States. Those cases might now be in question.
Second, the U.S. Court of Federal Claims, which wasn’t at issue in the case, is subject to removal by the U.S. Court of Appeals for the Federal Circuit. That would now seem to be the case of an executive entity (potentially) subject to judicial superintendence.”
We hope to publish more about this opinion in coming days.
I re-read The Death of Tax Court Exceptionalism in light of Kuretski. Do you think that after Kuretski the Tax Court opinions will revisit its position as to the appropriate standard of review in innocent spouse and CDP cases?