Wednesday, October 16, 2013

Is the Tax Court Constitutional? (10/16/13)

My fellow tax procedure bloggers over at the Procedurally Taxing Blog have posted this item.  Potential Storm Over Removal Power of Tax Court Judges (Procedurally Taxing Blog 10/16/13), here.  It is not often that credible (not necessarily the same as winnable or persuasive) constitutional issues are presented in tax cases, so maybe we should savor them when they come along.  This particular issue is interesting.  I cannot speak to whether it is winnable or persuasive.

So what is it about?  The specific argument is in the context of the statute permitting the president to remove a Tax Court judge for cause.  See Section 7443(f), here. Quoting from a law review article (co-authored by a colleague), the complaint seems to be:
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).
The Government argues that there is a judicial-type role for the Tax Court outside Article III, which could include the power to terminate judges for cause.

In conclusion, the blog states:
The government is urging the DC Circuit to adopt a rationale that that the majority declined to adopt in Freytag [a prior case about the role of Special Trial Judges in the Tax Court], 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.
Well, I probably have muddied the issue up, so I will quit.  At least, I hope readers can ask the right questions even if I don't provide the answers.

I wonder, though, whether there is a straightforward larger issue here.  The issue may be presented in a type of syllogism.  The Constitution exclusively vests judicial power Article III courts.  The Tax Court, which is not an Article III court, exercises judicial power.  It is, therefore, unconstitutional.

And, I think there have to be issues swirling around all of this.  If the Tax Court is really exercising Executive Branch authority rather than Judicial Authority, are the everyday judicial authority analogs used for the Tax Court's role appropriate.  For example, is it appropriate to treat, on appeal, Tax Court decisions the same as district court judgments -- e.g., review for clear error.  Alternatively, since Tax Court decisions are authority in other cases, should the review be a type of Chevron review?  I know you are asking by now what, exactly, am I smoking?  Well, nothing, but I do think I need a cup of coffee.

Addendum 10/16/13 6:30 pm:

Leslie Book, a co-blogger at Procedurally Taxing, advises that Leandra Lederman, a prolific tax commentator and author, has discussed in an article some of the questions raised above.  The article is Tax Appeal: A Proposal to Make the United States Tax Court More Judicial, 85 Washington Univ. L. Rev. 1195 (2008), and is on SSRN here.  Professor Book cites particularly Professor Lederman's discussion around page 1206 and notes 80 and 81 (and the sources she cites, such as the Fahey piece).  I quote from the article (footnotes omitted):
Although Congress declared the Tax Court to be a court in 1969, it did not make it part of the judicial branch, even for administrative purposes, and did not clarify where it fits within the federal government. The Tax Court’s Article I designation has itself been an important source of questions about its status, including a question as fundamental as whether its structure is constitutional. Nonetheless, although the literal language of Article III vests the “judicial Power of the United States” in courts in which judges have life tenure and compensation that cannot be reduced, it is generally accepted that the Tax Court’s Article I status is constitutionally acceptable.
There is more there than I quote.  I just wanted to whet readers' appetites.  Read the article and, of course, the blog that started this discussion.

Thanks to Professor Book for calling the article to my attention.  Thanks also to the bloggers on Procedurally Taxing for the quality and quantum of their output.

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