Does the Failure to Appoint Collection Due Process Hearing Officers Violate the Constitution's Appointments Clause?
Carlton M. Smith
Yeshiva University - Benjamin N. Cardozo School of Law; New York University School of Law
Journal of Tax Practice and Procedure, October/November 2008
Cardozo Legal Studies Research Paper No. 245
By the IRS Restructuring and Reform Act of 1998, Congress enacted what it called the Collection Due Process (hereinafter, CDP) provisions of the Internal Revenue Code, sections 6320 and 6330. These provisions allow taxpayers to request hearings at the IRS Appeals Office level either shortly before or shortly after the IRS takes either of two potentially devastating collection actions: levy or filing a notice of federal tax lien. In such hearings, the hearing officer must evaluate the appropriateness of collection actions, and taxpayers can propose collection alternatives - such as an offer in compromise, an installment agreement, or being placed into currently not collectible status. In the hearings, taxpayers may also request relief from joint and several liability on joint returns and, in certain circumstances, even raise challenges to the underlying tax liability.
The IRS has staffed CDP hearings to date with Settlement Officers and, to a lesser extent, Appeals Officers. Elsewhere, the author has argued that the IRS made a big mistake in using Settlement Officers, both for policy reasons and because Congress did not statutorily authorize anyone but Appeals Officers to hold the hearings. In this article, he points out what he believes to be even a bigger error: The unconstitutionality of anyone holding CDP hearings who has not been properly appointed by the President with the advice and consent of the Senate. The current system violates the Constitution's Appointments Clause (Art. II, 2, cl. 2), since the position of CDP hearing officer (however named) is now one established by law and exercising significant authority pursuant to the laws of the United States. Thus, any such hearing officer is an Officer of the United States who must be appointed under the Clause to render a legally binding ruling.
This article explains how CDP notices of determination are issued and compares CDP hearing officers to other government employees who have been required to be appointed under the Clause. It also explains the likely consequence for taxpayers who already have received CDP notices in the event that the argument is held to be correct. Finally, this article sets forth suggestions for a prospective statutory fix of the Appointments Clause problem that dovetails with the position expressed elsewhere by the author that Settlement Officers should not be allowed to hold CDP hearings in any event.
Number of Pages in PDF File: 38
Keywords: appointments clause, officers of the united states, advice and consent, tax procedure, collection due process, CDP
JEL Classification: H24, H25
Date posted: October 6, 2008 ; Last revised: January 26, 2009