To maintain legitimacy and stability, a government must have access to a reliable source of revenue. Taxes are the lifeblood that sustains a government. Therefore, as far back as 1931, the United States Supreme Court has enforced the principle that the executive branch of the federal government must be unimpaired in its ability to collect taxes owed; otherwise, the government could be undermined by citizens who attempt to delay or evade their obligation to pay taxes.
Taxpayers have always been permitted to dispute the amount of their liability; however, until recently, taxpayers had little opportunity to dispute the method employed by the IRS to collect a tax. In 1998, Congress enacted the Internal Revenue Service Restructuring and Reform Act which represents a dramatic departure from this principle. The Act provides that taxpayers may demand a hearing before the IRS as to the proposed collection method. A dissatisfied taxpayer can then appeal the IRS’s determination to the U.S. Tax Court. Unfortunately, the collection due process statute is short on details and the IRS and the court have struggled to create procedures that comport with the spirit of the law within the confines of their respective authorities.
The Tax Court is an Article I court created by Congress to provide taxpayers with a forum to protest some tax deficiencies prior to their payment. The Tax Court is not comfortable with its new appellate role and has tried to create a judicial review process by analogizing collection due process appeals to the Tax Court’s deficiency procedures. However, when the Tax Court hears deficiency cases it acts as a trial court and hears the matter de novo. When the Tax Court hears collection due process appeals it acts as an appellate court reviewing agency action to determine its propriety, a different role and process from deficiency cases.
Commentators have urged the Tax Court to fill in the gaps in its statutory authority by turning to traditional administrative law jurisprudence, including the Administrative Procedure Act. In the absence of legislation specifying how a court is to review agency action, these bodies of law step into the breach and provide structure for the court’s review process. As a result, participants in the process are assured of consistency and predictability regarding the review process, thus rendering the process fairer. However, the Tax Court insists that it has never been subject to administrative law jurisprudence or the APA, nor could it be. The Tax Court thwarts participants’ legitimate expectations when it creates its own rules of procedure and evidence when acting as a reviewing court. An exploration of both the Tax Court’s and the Administrative Procedures Act’s history reveals that, in fact, the Tax Court is not exempt from traditional administrative law jurisprudence.
- Administrative Procedure Act,
- Administrative Law,
- Collection Due Process,
- Tax Court
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