Originally published on Forbes.com June 26th, 2014
If you owed the IRS some money and wanted to compromise the balance wouldn’t it be a great thing to have a legal dream team fighting your case? The decision by Judge Srinivasan in the case of Peter and Kathleen Kuretski in the United States Court of Appeals for the District of Columbia Circuit has me thinking maybe not so much. They ended up arguing for a change in a never exercised Presidential power. They lost that argument. Even if they had won, it is hard to discern how the victory on the constitutional challenge would have helped the Kuretskis.
The Tax Court Case
Peter and Kathleen Kuretski did not seem to have the type of case that would lend itself to constitutional significance. The Kuretskis were appealing the result of an IRS collection due process hearing. They had filed their 2007 return showing a balance due somewhat over $22,000. They had not sent in any money. Because of their financial hardships, they requested a collection due process hearing. They offered to pay 200 per month for five months to settle the balance. The IRS settlement officer thought they could do quite a bit better than that and proposed that they pay 250 per month for nine years which would be full payment.
The Kuretskis do have a story that elicits some sympathy. They were taking premature withdrawals from retirement accounts to pay legal defense costs for their son. They also used their residence to secure a release bond for him. The Tax Court backed the IRS on this one. The decision gets into the back and forth between the Kuretskis and the IRS. It is pretty typical of what you will see in the appeal of a collection due process hearing. Remember, there is no question as to the amount of the tax.
The Appeal
It is the appeal where things get extraordinary. The Kuretskis, their legal team actually, argued that the appellate court should send their case back to Tax Court after declaring a portion of the legislation that constituted the Tax Court unconstitutional. The provision in question allows the President to terminate a Tax Court judge for “inefficiency, neglect of duty, or malfeasance in office”. Frankly, this part of the case struck me as kind of ridiculous
The Kuretskis thus ask us to strike down 26 USC 7443(f), vacate the Tax Court’s decision, and remand their case for re-decision by a Tax Court judge free from threat of presidential removal and hence free from alleged bias in favor of the Executive Branch.
My first impression was that this had turned into a tax protester case, since I thought the contention was on the frivolous side. Silly me. Somehow the Kuretskis had ended up with a dream team representing them. The lead attorney, Tuan N. Samahon is a professor at Villanova University School of Law. He has written articles on federal separation-of-powers doctrine with a focus on the powers to appoint and remove. Carlton Smith who recently left the Benjamin N. Cardozo School of Law at Yeshiva University to return to private practice received the 2013 Janet Spragens Pro Bono Award from the American Bar Association. Frank Agostino, who had handled the original Tax Court case, before going into teaching and private practice had been an IRS district counsel and a Special Assistant United States Attorney.
Although Judge Srinivasan of the Court of Appeals for the DC Circuit did not rule in favor of the Kuretskis, he hardly found the contention frivolous.
To our knowledge , this is the first case in court of appeals to present the question of whether 26 USC 7443(f) infringes the constitutional separation of powers.
What is really interesting and has people excited is the reason that he ruled against them.
Even if the prospect of “interbranch” removal of a Tax Court judge would raise a constitutional concern in theory, there is no cause for concern in fact: the Tax Court, in our view, exercises Executive authority as part of the Executive Branch. Presidential removal of a Tax Court judge thus would constitute an intra – not inter – branch removal.
Reactions
Legal scholars are excited about this case.
Patrick Smith has written that the notion that the Tax Court is really part of the Executive Branch has many significant consequences. It opens up the possibility that the Tax Court could not apply provisions of the Administrative Procedures Act to IRS actions such as issuance of regulations.
Kristin Hickman finds the case a bit less exciting questioning whether it is “A Fun and Fascinating Bit of Academic Folderol”.
Stephanie Hoffer and Christopher Walker note in Procedurally Taxing the Judge Sri Srinvasan is considered to be on the shortlist for the Supreme Court. They note:
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 as a ‘court’ rather than an ‘agency,’ perhaps also exempted them from statutes that apply solely to executive ‘agencies.’”
Could The Constitutional Challenge Have Helped The Kuretskis?
What strikes me more than anything about this drama is that it is hard to see how it could be helping the taxpayers. Judge Srinvasan noted that there has never been an instance of a President removing a Tax Court Judge. Judge Robert Wherry Jr., the Tax Court judge who decided the Keretski case was once accused of falling asleep during a trial, but the notion that the threat of President Obama reaching out and firing him over how he decided a collection due process case seems really silly. Were the attorneys really maintaining that was a real potential influence? It seems much more likely that this case was picked as a vehicle for a broader attack on Executive power. Professor Samahon is a contributor to the Executive Branch Review, a project of the Practice Groups of the Federalist Society
An increase in Federal executive branch regulatory activity – whether through executive order, formal or informal administrative agency action – has been noted by many across the country. In launching the Executive Branch Review Project, the Practice Groups of the Federalist Society seek to prompt a national debate about whether there has been an uptick in such regulatory activity, and, if so, with what consequence. The project will provide an objective resource that identifies major government activity, and provides a forum for debate about whether such regulation constitutes a form of legal and regulatory overreach.
I’m trying to think of the conversation I would have had with the Kuretskis, if I had, say, done their return, and they called me excitedly to tell me about their dream team. I would have said something like:
You mean all this legal fire power is going to get your case back in Tax Court before a judge who no longer has to be worried about being fired by the President? And the first judge who is now about seventy years old and whose appointment is up in 2018 has already been accused of sleeping in court, with no apparent fall out.
I guess it’s the principle of the thing. In a comment on the prospect of this decision in October in Procedurally Taxing, Jack Townsend wrote
My question is that, if all the taxpayers get from excising this provision of the Code, what does that do for them — other than being involved in a constitutionally important case?
The other attorneys, in this case, are involved in legal clinics, so my inference is that the Kuretskis were getting all this for free. It is hard to see what good it would have done them, while the interest clock ticks and the statute of limitations on collections remains open. Makes me wonder if maybe getting free legal services can be like getting a free cat.
You can follow me on twitter @peterreillycpa.
Afternote
In originally writing this piece I neglected to include John P. L. Miscione, a professor at Baruch College’s Zicklin School of Business as part of the Kuretski legal team.