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IRS Plays Cat and Mouse With Tax Court on Its Constitutional Status

Posted on May 13, 2015

Frequent guest blogger Carl Smith provides an update on what’s happening at the Tax Court and the Supreme Court in Kuretski. Keith

The Supreme Court is scheduled to first consider whether to grant cert. in Kuretski v. Commissioner, 755 F.3d 929 (D.C. Cir. 2014), at its internal conference tomorrow, May 14.  Cases are often relisted for later conferences, so there is no certainty that tomorrow’s conference will definitively determine Kuretski‘s fate.  Kuretski is the case where the D.C. Circuit held that the President’s removal power over Tax Court judges at section 7443(f) does not violate the Separation of Powers because the President traditionally has the right to remove Executive Branch officers, and the Tax Court is an Executive Branch agency, not a court holding a portion of the judicial power of the United States.  That ruling is clearly in some tension with — perhaps even irreconcilable with (if you agree with the taxpayers’ lawyers, of whom I am one) — the Supreme Court’s ruling in Freytag v. Commissioner, 501 U.S. 868 (1991), that the Tax Court is one of the “Courts of Law” for purposes of the Appointments Clause because it has no Executive functions and exercises a portion of the judicial power of the United States.

As I noted in two posts from January of this year (found here and here), attorney Joseph A. DiRuzzo, III and his colleagues at Fuerst Ittleman David & Joseph, PL in Miami decided not to wait to see whether the Supreme Court grants cert. in Kuretski, and instead sought Tax Court vehicles to create a possible Circuit split on the issue presented in Kuretski in the not unlikely event cert. is not granted there. I had previously reported that Fuerst Ittleman lawyers had made pre-trial motions on the section 7443(f) issue in five Tax Court dockets.  As of today, they have made such motions in seven dockets.  This is to report a little gamesmanship going on at the IRS about these seven dockets:  To date, in none of the dockets has the IRS filed a response to the motions, and court-ordered responses are overdue in three dockets.

In four of the Tax Court dockets, the Tax Court judges assigned to the cases have not ordered the IRS to file responses to the section 7443(f) motions.  Perhaps these judges are not eager to address the issue.

But, in three dockets, 14604-12 (Meggs), 17784-12 (Battat), and 24872-14L (Elmes), Chief Judge Thornton had ordered the IRS to file responses to the motions by March 9 (a generous amount of time).  The IRS later sought an additional extension of time to respond until May 8 (this past Friday) — citing the need to coordinate the issue at the highest levels of Counsel.  Judge Thornton granted those motions to extend the time to respond.

On April 2, the Solicitor General filed his opposition to a grant of cert. in Kuretski.  See blog post of April 8 for the text.  In the response, the Solicitor General agreed with the D.C. Circuit that the Tax Court is really still an Executive Agency, not a court holding a portion of the judicial power of the United States.

You would think that, having expressed its position to the Supreme Court, the government would now be willing to state the same position to the Tax Court.  But, you would be wrong.

Last Wednesday (May 6), the IRS filed motions in the three dockets for a second extension to file responses to the taxpayers’ motions concerning section 7443(f)’s constitutionality.  The IRS sought extensions to June 8 — a month.  The ground for the extensions was that the Supreme Court would likely decide on the Kuretski cert. petition later this month — not that the IRS had not yet drafted the responses or needed more time or that the IRS was unaware of the Solicitor General’s position on the Tax Court.

Last Thursday (May 7), Fuerst Ittleman lawyers filed objections to these motions for further extensions of time to file responses.

As of the close of business Friday, May 8 — the due date for the responses, if the extension is not granted — the Chief Judge had issued no order concerning these second extension requests.  You would think, then, that by the close of business that day, the IRS would file its responses in the three dockets — having not yet obtained any further extension of Friday’s due date.  But, you would again be wrong.

Doing something that I have never seen it in my 30 years of practice, the IRS deliberately ignored the fact that it had not obtained a further extension of time to file the responses, and it filed none.  Indeed, as of the time of this post, the Tax Court has neither ruled on the IRS extension request motions nor has the IRS filed the required responses.

What’s going on here?

Obviously, the IRS doesn’t want to face the emotional repercussions of arguing to the Tax Court judges that they are mere appointees of an Executive Agency.  In Freytag and related litigation, the IRS never argued that the Tax Court was an Executive “Department”.  See First Western Government Securities v. Commissioner, 94 T.C. 549 (1990), affd. sub nom. Samuels, Kramer & Co. v. Commissioner, 930 F.2d 975 (2d Cir. 1991), where the IRS argued that the Tax Court was one of the “Courts of Law” under the Appointments Clause, but the DOJ, during the appeal, and in Freytag itself, argued that the Tax Court was, instead, an Executive “Department”. Then, in 2012 and 2013, the IRS refused to make any argument on the merits of the section 7443(f) motion in the Kuretski case (making instead only standing and justiciability arguments).  Only to the D.C. Circuit did the DOJ made the argument that the Tax Court was an Executive Agency.

I will keep you posted on further developments in Kuretski and the Fuerst Ittleman cases in the coming days.

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