The Tax Court's Jurisdiction Over Due Process Collection Appeals: Is It Constitutional?

Abstract

In 1997 and 1998, the Senate Finance Committee held highly publicized hearings on purported abuses by the Internal Revenue Service. The hearings led to the enactment of the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA of 1998). The RRA of 1998 added I.R.C. sections 6320 and 6330 to the Internal Revenue Code, the so-called "due process" hearings for collections. I.R.C. sections 6320 and 6330 entitle taxpayers to demand pre-collection hearings before the Internal Revenue Service to review the propriety of its proposed collection action. A taxpayer dissatisfied with the pre-collection hearing is now permitted to appeal the Internal Revenue Service's determination to the United States Tax Court. Congress's enactment of I.R.C. sections 6320 and 6330 represents a dramatic departure from firmly established practice that, after assessment of a tax, any judicial review to which a taxpayer is entitled must be rendered post-collection. Further, prior to the enactment of I.R.C. sections 6320 and 6330, taxpayers had little right to judicial review of the Internal Revenue Service's collection actions.

The Tax Court is a specialized court created by Congress under Article I of the U.S. Constitution; therefore, the Tax Court is a court of limited jurisdiction. The Tax Court's primary function has been to serve as a trial court reviewing determinations of deficiencies in income, estate and gift, or certain excise taxes allegedly owed by the taxpayer. In vesting the Tax Court with jurisdiction over collection appeals, Congress changed the Tax Court's traditional role. When the Tax Court reviews appeals from proposed collection actions by the IRS, the Tax Court serves as an appellate court. Unfortunately, Congress failed to specify in the legislation what powers the Tax Court has when reviewing collection due process appeals. The Tax Court has attempted to fill in the gaps by turning to its authorized jurisdiction and powers with regard to deficiency hearings.

Congress needs to amend the legislation to define the Tax Court's jurisdiction and powers. The Tax Court may consider the propriety of the IRS's proposed collection action without violating an individual's right under the U.S. Constitution to an impartial and independent adjudicator or raising separation of powers concerns. However, Congress must be careful not to provide the Tax Court with jurisdiction and powers that are overly broad or Congress risks violating the principle of separation of powers and encroaching upon the authority of the Article III courts.

Keywords: Tax Court, United States Tax Court, U.S. Tax Court, Internal Revenue Service, IRS, Internal Revenue Code, Article I courts, legislative courts, tax procedure, collection due process appeals, tax collection, judicial review