Courts and executive actions

Dan here…while this kind of post reads esoteric to non-lawyers, it is another example of courts being used to change basic functions of government. In this case on tax court jurisdictions. Lifted from ataxingmatter.

by Linda Beale

Kuretskis Seek Certiorari at Supreme Court about Tax Court
Peter and Kathleen Kuretski submitted a 2007 tax return showing they owed almost $25,000 but they didn’t pay a penny.  In the administrative process within the IRS, they sought approval of an “offer in compromise” where they would pay $1000 of the tax liability over five years and nothing more.  The IRS asked them to pay the full amount over a term of nine years, but they refused.  So they got a Notice of Deficiency and intent to levy, including penalties for nonpayment and interest on late payment.

At that point, they could have paid their tax liability and challenged the I tax liability through a refund action in district court (although on what basis isn’t clear, since their own tax return admitted they owed it).  They chose instead not to pay and to challenge the IRS in Tax Court. They lost. Kuretski v. Comm’r, T.C. Memo 2012-262.

They then appealed the Tax Court decision to the D.C. Circuit Court of Appeals and raised a new argument–that their case should be reheard in Tax Court because their judge might have been biased because the legislation establishing the Tax Court as an Article I court allows the President to remove Tax Court judges for cause.  They lost.  You can read the DC Circuit opinion at this link: 755 F.3d 929(June 20, 2014).

In its decision, the DC Circuit Court considered the taxpayers’ claim (not made in the court below) that the Supreme Court decision in Freytag, 501 U.S. 868 (1991) (summary with links to case on Justia, here) –which considered anAppointments Clause phrase referring to “Courts of Law” and “Department Heads” and concluded that the Tax Court was a “Court of Law” that exercises judicial power for Appointments Clause purposes– requires that the Article I Tax Court must have the same independence from the Executive Branch that Article III courts have.  The DC Circuit looked at a number of other Article I courts and found the Tax Court not so different from them.  It pointedly distinguished Article III courts.

So the Kuretski’s have filed a petition for certiorari which essentially claims that the Tax Court is –in spite of its jurisdictional limitations–equivalent to an Article III court.

If the Kuretski’s win, the result is

  • the President’s removal power set out in IRS section 7443(f) is unconstitutional,
  • the Tax Court’s decision in their case (and presumably in any other Tax Court case) is improperly tainted by that never-exercised section 4773(f) removal power; and
  • the Kuretski’s should get a re-hearing under a judge no longer ‘biased’ by the improper removal power.

The Kuretski case has nothing to do with their expectation that they should not have to pay their tax liability–it is clear that they owe the taxes, the late payment penalty and the interest on the late payment, and they presented no statement for reasonable cause for not paying it (as required by regulations).  A rehearing before a new Tax Court judge (or the same judge who no longer faces the purported intimidation of the presidential removal power) will result in the same holding in that regard that the original Tax Court came to.

Thus, the rationale for these years of litigation (and expense to taxpayers) is something else.  The Kuretski’s will have gained some fame and at least 7 (maybe 8) years of nonpayment (a  time value of money benefit).

But more importantly (and perhaps  more damagingly to the government’s ability to collect taxes), a victory in the suit would appear to bolster use of separation-of-powers arguments to thwart efficient government procedures and eliminate existing differences between Article III courts and Article I executive branch adjudicative determinations, with potentially wide-ranging consequences for adjudication within agencies, turning the full force of zealous advocacy in adversarial proceedings on all agency hearings.

The distinction between Article I and Article III courts certainly must mean something constitutionally.  It appears that a significant difference lies in the fact that Article III judges are protected from executive removal by a requirement for impeachment and conviction.  The Constitution does not seem to provide in its text such absolute independence to Article I courts, and Congress in legislating those courts has not opted to provide that protection to many Article I judges who exercise an executive branch version of judicial power.