The Congressional Revenue Service
University of Iowa - College of Law
September 25, 2012
University of Illinois Law Review, Forthcoming
U Iowa Legal Studies Research Paper No. 12-23
Like many things in Washington, the Joint Committee on Taxation was born of scandal. In the mid-1920’s, Treasury Secretary Andrew Mellon came under fire for allegedly abusing his post to “impoverish the masses and to enrich a favored few.” Uncle Andy, as various legislators derisively called him, allegedly made unwarranted tax refunds to privileged parties, including the Gulf Oil company, which happened to be owned by Mellon.
In response to its concerns, Congress organized a temporary committee to investigate the Bureau of Internal Revenue (today, the IRS). After its investigation, the committee made some troubling findings, concluding that there “appeared to be no system, no adherence to principle, and a total absence of competent supervision” regarding one important area of the tax system. Congress consequently established the Joint Committee on Taxation to oversee the IRS and recommend improvements to the tax laws.
Although the JCT was initially granted the authority typical of a congressional committee, in the Revenue Act of 1928, Congress charged the JCT with another role. Under the statute (now found in IRC 6405(a)), the JCT would review every large refund that the IRS proposed to make. This device would ensure that Mellon could not issue refunds to wealthy taxpayers without giving Congress an opportunity to review the decision.
While Section 6405(a) does not grant the JCT with any explicit veto over refund payments, the IRS today will not issue a refund over the JCT’s objection. Commentators believe that this arrangement is constitutional because (unlike the statute stricken in INS v. Chadha), Section 6405(a) does not provide the JCT with any explicit legislative veto. This article argues, however, that Section 6405(a) nonetheless violates the separation of powers. Specifically, because the JCT refund review function does not facilitate the passage of any legitimate legislation, it goes beyond the legislative power assigned by article I. The JCT refund review function instead reflects the impermissible exercise of executive power by legislative agents.
Given these infirmities, Congress should repeal Section 6405(a), especially because the original concerns motivating the statute's enactment no longer exist. But since this is unlikely to happen politically, the article provides recommendations regarding how the IRS can help protect taxpayers from improper JCT influence over their refund claims.
Number of Pages in PDF File: 52
Keywords: tax, constitutional law, separation of powers, Chada, JCT, joint committee on taxation, refund, 6405(a), BowhserAccepted Paper Series
Date posted: September 25, 2012 ; Last revised: May 1, 2013
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