Kuretski, the Tax Court, and the Administrative Procedure Act

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Today we welcome back Professors Stephanie Hoffer (Ohio State) & Christopher J. Walker (Ohio State). Professor Hoffer and Walker previously wrote a two-part post in Procedurally Taxing on their important law review article The Death of Tax Court Exceptionalism (forthcoming Minnesota Law Review), considering the relationship of the APA to the Tax Court. In this post, Professors Walker and Hoffer analyze the recent Kuretski case and respond to Pat Smith’s Sunday’s op-ed and Professor Kristin Hickman’s Monday’s op-ed that appeared in TaxProf. Les

Friday’s decision in Kuretski v. Commissioner is perhaps the first major opinion penned by Judge Sri Srinivasan—a recent Obama appointee considered by many to be on the short list for the Supreme Court. In a well-written opinion, the D.C. Circuit rejects a constitutional challenge to the President’s removal power of judges on the United States Tax Court. To reach this conclusion, the court has to grapple with the Tax Court’s puzzling position in the modern administrative state, concluding that the Tax Court is not an Article III (judicial branch) court but a court established under Article I (legislative branch) that actually exercises Article II (executive branch) powers. Or as Judge Srinivasan writes (at 20) for the court:

 We have explained that Tax Court judges do not exercise the ‘judicial power of the United States’ pursuant to Article III. We have also explained that Congress’s establishment of the Tax Court as an Article I legislative court did not transfer the Tax Court to the Legislative Branch. It follows that the Tax Court exercises its authority as part of the Executive Branch.

No doubt many tax and administrative law professors will weigh in on the constitutional issues (early coverage here, here, and here). Here, however, we focus on Kuretski’s impact on the relationship between the Tax Court and the Administrative Procedure Act (“APA”). Patrick Smith, for instance, worries that Kuretski could open the door for the argument that “APA judicial review provisions simply do not apply in Tax Court proceedings.” But we agree with the contrary position reached by Kristin Hickman (Minnesota) and write separately to show our math for this conclusion.


At the outset, it is important to underscore that Smith’s worry is already a reality. As we explain in a forthcoming paper, the Tax Court has declared that “[t]he APA has never governed proceedings in the Court (or in the Board of Tax Appeals).” In other words, the Tax Court refuses to apply the APA’s default standard (abuse of discretion) and scope (administrative record) of review. Instead, it considers the default in both contexts to be de novo, and only departs from de novo review when it determines that the Internal Revenue Code suggests more deferential review.

This approach contradicts the text of the APA. As we explain in Part II of our paper, the APA establishes the default standards for judicial review of federal agency action. The APA defines “agency” as “each authority of the Government of the United States, whether or not it is within or subject to review by another agency, but does not include” among other entities Congress and “the courts of the United States” (5 U.S.C. § 701(b)(1)).   The APA judicial review standards apply to any “reviewing court” of agency action (5 U.S.C. § 706). The IRS, an executive agency within the Treasury Department, is plainly an “agency” for purposes of the APA. And while the Tax Court used to be an agency before the enactment of the APA, as of 1969 it is a “court of record” “established[] under article I of the Constitution of the United States” (26 U.S.C. § 7441). For purposes of the APA, it is thus “a court of the United States” (5 U.S.C. § 702; accord 5 U.S.C. § 701(b)(1)) and, for its review of IRS agency actions, a “reviewing court” subject to the APA’s judicial review provisions (5 U.S.C. § 706).

Although the statutory language appears plain, an argument could be advanced that only Article III courts—not Article I courts—can be “reviewing courts” for purposes of the APA. After all, the Constitution vests “judicial power” in life-tenured Article III judges, not term-limited Article I judges. The text of the APA, however, makes no distinction between Article I and Article III courts, and the APA governs other Article I courts—including the Court of Federal Claims—when they review agency action.

The Supreme Court ‘s decision in Freytag is illustrative. There, the Court rejected an Appointments Clause challenge to the Tax Court Chief Judge’s ability to appoint special trial tax judges. The Appointments Clause allows Congress to vest appointment powers of such inferior officers in one of three entities: “in the President alone, in the Courts of Law, or in the Heads of Departments” (U.S. Const., Art. II, § 2, cl. 2). The parties in Freytag advanced competing interpretations: the Tax Court is an executive department where the Chief Judge as Department Head has power to appoint inferior officers or, alternatively, neither an executive department nor a court and thus constitutionally forbidden from appointing inferior officers. The Freytag Court rejected both positions and instead held that the Tax Court is a “Court[] of Law” under the Appointments Clause. Importantly, the Court noted that “[t]he text of the Clause does not limit the ‘Courts of Law’ to those courts established under Article III of the Constitution” and that “[t]he Tax Court exercises judicial, rather than executive, legislative, or administrative, power.”

Similarly, although Kuretski’s conclusion (at 20) that the Tax Court “exercises its authority as part of the Executive Branch” may be in tension with Freytag, it should have no bearing on the APA’s definitions of “agency” and “reviewing court.” Indeed, Kuretski’s reasoning suggests as much (at 20-21): “[W]e conclude that the Tax Court’s status as a ‘Court of Law’—and its exercise of ‘judicial power’—for Appointments Clause purposes under Freytag casts no doubt on the constitutionality of the President’s authority to remove Tax Court judges.” As a matter of statutory interpretation, Congress can define “court” differently for APA purposes than the Constitution does for appointment or removal purposes. “After all,” as Hickman points out, “if the Affordable Care Act penalty can be a tax for constitutional purposes and yet not a tax under § 7421(a) of the Internal Revenue Code (see NFIB v. Sebelius), then the Tax Court surely can bear varying labels for different purposes as well.”

If there were any lingering doubts about the impact of Kuretski on the Tax Court’s relationship to the APA, Judge Srinivasan puts them to rest—albeit in dicta—near the end of the opinion. Citing a district court decision that held that the Tax Court is a “court of the United States” and not an “agency” for purposes of the APA, he notes (at 26) that “Congress, in establishing those entities [the Tax Court and the Court of Appeals for the Armed Forces] as a ‘court’ rather than an ‘agency,’ perhaps also exempted them from statutes that apply solely to executive ‘agencies.’”


  1. Raymond Cohen says

    Below is the writ of Cert that I submitted under 13-1415 which is less than 1500 words. The decision will be announced on 6/30/14. The DC Circuit originally ordered oral argument, cancelled them and issued a summary judgment on the issues not raised. If Cert is not granted, would any attorney help me appeal since I feel that not being represented by an attorney reduces my chance of success. This decision would hopefully change the way the Tax Court decides cases.


    In Joseph A. Insinga v. Commissioner 4609-12W. Judge Gustafson in his order of July 31, 2012 succinctly states the following:
    Respondent’s (IRS) objection to the NWC’s moti-on for leave states (at 3) that ‘there is long-standing jurisprudence in the Tax Court rejecting the application of the APA in Tax Court proceedings.
    Respondent’s response to NWC’s brief shall include an explanation of how his position can be reconciled with Mayo Foundation v. United States 131 S.Ct 704, 713 (2011) which in a context different from this case held that– we are not inclined to carve out an approach to administrative review good for tax law only. To the contrary, we have expressly “[r]ecogniz[ed] the importance of maintaining a uniform approach to judicial review of administrative action.
    The question presented is as follows:
    Prior to determining whether an agency’s decision or determination is correct, must the Tax Court conduct a distinct inquiry as to whether the notice or actions of the agency are arbitrary, capricious, an abuse of discretion or otherwise not in accordance with the law, and thus a violation of the Administrative Procedures Act?

    Petitioner, Raymond Cohen respectfully prays that this Court grant a writ of certiorari to review the judgment and opinion of the United States Court of Appeals entered on January 7, 2014 and Petition for Rehearing denied on February 24, 2014.
    The October 9, 2012 decision of the Tax Court 139 T.C. No. 12 is set out at pp.1a-12a. The Court of Appeals decision Case 13-1075 is set out at pp. 13a-14a.
    The final decision of the court of appeals for the DC Circuit was entered on February 24, 2014.
    Administrative Procedure Act (APA) 5. U.S.C. secs. 551-559, 701-706 (2006).
    Petitioner filed a Whistleblower Case with the Internal Revenue Service which was rejected. Petitioner then appealed to the Tax Court. On page 10a of the Tax Court’s decision, it states that “The APA, however, does not create a right of action or expand our jurisdiction.” Commentators stated that

    the Tax Court was confused over the application of the APA. Their position was made crystal clear by in Qinetiq U.S. Holdings, Inc. & Subsidiaries v IRS Docket No. 14122-13 which quotes Ewing v. Commissioner, 122 T.C. 2 “As a statute of general application the APA does not supersede specific statutory provisions for judicial review.” In Porter v. Commissioner, 130 T.C. 115, 117 (2008), “The APA has generally not governed proceedings in this Court or in its predecessor, the Board of Tax Appeals.”
    The Supreme Court in Mayo Foundation v. United States 131 S.Ct 704, 713 (2011) and the 8th and 9th Circuits have all held that all agencies are subject to the APA and that the court should inquire as to the compliance by the agency to the APA. Commentators have stated that the IRS has reduced its deficiency notice to several lines in order to be given latitude in Court Proceeding and have thus violated the APA’s rule about adequately explaining the assessment. Commentators have argued that this is a violation of the APA because the basis for the deficiency must be stated, and based on Mayo Foundation, petitioner can argue that the APA was violated. The Tax Court has rejected this. In Qinetiq U.S. Holdings, Inc. & Subsidiaries v IRS, the Tax Court stated the following: “Courts have held repeatedly that a notice of deficiency is valid if it notifies the taxpayer that a deficiency has been determined and gives the taxpayer the opportunity to petition the Tax Court for redetermination of the proposed deficiency.

    In Robinette v Commission (439 F.3d 455 (8th Cir. 2006) the Court stated that “no subsequent legislation shall be held to supersede or modify the provisions of this Act (APA) except to the extent that such legislation shall do so expressly.” 12, 60 Stat. 244, 5 U.S.C. 559.
    In Wilson v Commissioner 10-72754 39-40 (2013), the 9th Circuit stated the following:
    “The APA is a uniform approach to judicial review of administrative action and any departure from the APA’s guidelines must be clear. Additional requirements not contained in the APA must be imposed by statute or otherwise recognized by law. Exemptions from the terms of the APA are not lightly to be presumed in view of the statement in 5 U.S.C. 559 that modifications must be expressed. . . .The Supreme Court squarely rejected the notion that anything less than a clear or express statement would suffice to create an exception to the APA. In a field full of variation and diversity, it would frustrate the purpose of the APA to permit divergence on the basis of a requirement recognized only as ambiguous. In sum, the IRS (as well as the Whistle blower Office which is part of the IRS) is an agency for the purposes of the APA.”

    Prior to any de novo consideration of whether a Notice’s determination is correct, a court must conduct a distinct inquiry as to whether the Notice itself is an arbitrary and capricious agency action. Bowman Transp.. Inc. v. Arkansas-Best Freight System Inc., 419 U.S. 281, 284 (1974) (the “provisions of 5 U.S.C. §706(2) are part of six which are ‘separate standards.’” Although an agency’s action may satisfy one standard, “it may nonetheless reflect arbitrary and capricious action”) (quoting Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 413 (1971).
    The Mayo holding reaffirmed the Supreme Court’s earlier guidance in this regard. Other courts have similarly recognized the applicability of the APA to the Agency. See, e.g., Dickinson v. Zurko, 527 U.S. 150, 154–55 (1999) (noting the “importance of maintaining a uniform approach to judicial review of administrative action”); Skinner v. Mid-America Pipeline Co., 490 U.S. 212, 223 (1989) (rejecting application of a different level of scrutiny to cases involving the delegation of Congress’s taxing authority).
    Stated even more clearly, Justice Scalia, while serving on the Court of Appeals for the District of Columbia Circuit, recognized in Data Processing that The ‘scope of review’ provisions of the APA, 5 U.S.C. § 706(2), are cumulative. Thus, an agency action which is supported by the required substantial evidence may in another regard be ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law….” Ass’n of Data Processing Serv. Org. Inc. v. Bd. of Governors of the Federal Reserve System, 745 F.2d 677, 683 (D.C. Cir. 1984) (Scalia, J.)

    Litigants are able to challenge a deficiency notice under the APA only in District Court and not in Tax Court. Having 2 courts arrive at different results stymies the intent of Congress and is fundamentally flawed and unfair. Accountability is a critically important for any justice system and shortcuts undermine procedural fairness. The United States Tax Court is not subject to Administrative Office of U.S. Courts or the U.S. Judicial Conference which are institutions that oversee the federal judiciary. In addition, since the Tax Court is not an administrative agency, it is not covered by the Administrative Procedure Act or the Freedom of Information Act. The principal source of oversight of Tax court actions is appellate review, and the Tax Court has decided not to follow the 8th Circuit, 9th Circuit, and the Supreme Court.

    For the above reasons, a writ of certiorari should be issued to review the judgment and opinion of the Court of Appeals for the District of Columbia Circuit.

    Respectfully submitted,

    Raymond Cohen
    Pro Se
    758 Walnut Street
    Paramus, NJ 07652
    Raymond. Cohen.WG68


  2. Raymond Cohen says

    The DC Circuit Court of Appeals originally ordered oral arguments for me, a pro se party, despite having a discriminatory policy against oral argument for a pro se party (citation provided upon request). Subsequently, oral argument was cancelled and a summary judgment (by Garland, Henderson and Griffith) issued on the issue that oral argument was NOT based on.

    This gets even better. I filed an ethics complaints against Chief Judge Garland claiming that pro se parties were discriminated against. I could have also filed the complaint against Judge Henderson and Judge Griffith as well, but arbitrarily chose Chief Judge Garland. Do you know who heard the ethics complaint? Judge Henderson, and she found no violation. When I appealed to the Judiciary committee, would it surprise you to know that Judge Griffith also voted that there was no violation. I am only a pro se party, but doesn’t this violate the Federal Judiciary’s Code of Conduct which requires judges to to avoid a conflict of interest or the appearance of a conflict of interest? If Judge Henderson had found that Chief Judge Garland had violated the Code of Ethics, she would have found herself guilty as well.

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