Tucker v. Commissoner

• Decision Date: 20 April 2012
• Docket Number: No. 11–1191.,11–1191.
• Citation: 676 F.3d 1129,109 A.F.T.R.2d 2012,2012 USTC P 50312
• Parties: Larry E. TUCKER, Appellant v. COMMISSIONER OF INTERNAL REVENUE, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

109 A.F.T.R.2d 2012-1856

2012-1 USTC P 50,312

676 F.3d 1129

Larry E. TUCKER, Appellant

v.COMMISSIONER OF INTERNAL REVENUE, Appellee.

No. 11–1191.

United States Court of Appeals, District of Columbia Circuit.

Argued Feb. 6, 2012.Decided April 20, 2012.

Appeal from the United States Tax Court.Carlton M. Smith argued the cause and filed the briefs for appellant.

Teresa E. McLaughlin, Attorney, U.S. Department of Justice, argued the cause for appellee. With her on the brief were Tamara W. Ashford, Deputy Assistant Attorney General, and Teresa T. Milton, Attorney.

Before: SENTELLE, Chief Judge, GRIFFITH, Circuit Judge, and WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge WILLIAMS.

WILLIAMS, Senior Circuit Judge:

Taxpayer Larry Tucker appeals a judgment of the Tax Court rejecting two contentions: first, a constitutional claim that certain employees of the Internal Revenue Service's Office of Appeals are “Officers of the United States,” so that their appointments must conform to the Constitution's Appointments Clause, art. II, § 2, cl. 2, and second, an argument that the employees in question abused their discretion in rejecting his proposed compromise of the collection of his tax liability. Tucker v. Commissioner, 135 T.C. 114 (2010) (rejecting constitutional claim); Tucker v. Commissioner, T.C. Memo. 2011–67, 2011 WL 1033849 (T.C. Mar. 22, 2011) (rejecting abuse of discretion claim and issuing judgment for the Commissioner). Because the authority exercised by the Appeals Office employees whose status is challenged here appears insufficient to rank them even as “inferior Officers,” we reject the constitutional claim. And we find no abuse of discretion in those employees' decision in this case.

* * *

Tucker underpaid his federal income taxes by a total of over $24,000 over the period 1999–2003. With interest and penalties, his liability grew to over $35,000 by 2004, when the IRS sent him a “Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320” for years 2000, 2001, and 2002. Joint Appendix (“J.A.”) 7. The hearing in question, called a collection due process or “CDP” hearing, is provided for in the IRS Restructuring and Reform Act of 1998. Pub.L. No. 105–206, § 3401, 112 Stat. 685, 746 (codified at 26 U.S.C. §§ 6320 (lien actions), 6330 (levy actions)). Such a hearing is an opportunity for a taxpayer to challenge the propriety of a pending tax lien or levy, to verify that a collection action against him is appropriate under the law, and to offer alternatives, one of which is a so-called offer-in-compromise or “OIC” (Tucker's preferred outcome). Id. §§ 6320(c), 6330(c)(2)(A). Challenges to underlying tax liability can also be raised at a CDP hearing, but only if the taxpayer did not receive statutory notice of the liability or did not otherwise have an opportunity to dispute it. Id. §§ 6320(c), 6330(c)(2)(B).

The 1998 statute calls for CDP hearings to take place in the Office of Appeals. Id. §§ 6320(b)(1), 6330(b)(1). Although no statute created that office, its existence is now reflected in various provisions of the Internal Revenue Code, such as the ones governing CDP hearings. See Tucker, 135 T.C. at 135–36 & n. 49 (noting additional references). Besides providing for decision by an “officer or employee” of Appeals, the statute, in the interest of assuring a measure of independence between Appeals and other arms of the IRS, see § 1001(a)(4) of the 1998 Act, 112 Stat. at 689, specifies that the decisionmaker will be one with no prior involvement with the unpaid tax at issue, and directs the IRS to adopt rules against ex parte communications. 26 U.S.C. §§ 6320(b)(3), 6330(b)(3); Rev. Proc. 2000–43, 2000–2 C.B. 404 (to be superseded by Rev. Proc. 2012–18, effective May 15, 2012). Despite the word “hearing” and these seemingly trial-like features, the officer or employee does not adjudicate between adversaries, but rather represents the IRS—we discuss the procedures more below. A disappointed taxpayer can challenge the CDP hearing outcome in the Tax Court. See 26 U.S.C. §§ 6320(c), 6330(d)(1).

In Tucker's case the IRS was represented by a “settlement officer” (one of two types of IRS workers who conduct CDP hearings, the other type being “appeals officers”). After the hearing, Tucker proposed an OIC instead of the partial installment plan offered by the settlement officer, but the latter rejected his proposal, and her decision was approved by her “team manager”—a position tasked with overseeing various Appeals functions, including CDP hearings.

Tucker appealed to the Tax Court. That court initially remanded the matter back to Appeals for a supplemental CDP hearing, in which a different settlement officer and team manager again rejected Tucker's OIC. The case then resumed in the Tax Court, which rejected Tucker's constitutional and abuse of discretion arguments.

* * *

The Appointments Clause provides that

[The President] ... shall nominate, and by and with the Advice and Consent of the Senate, shall appoint ... Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.

U.S. Const., art. II, § 2, cl. 2. The clause plainly distinguishes between “principal” and “inferior” officers, and its requirements have no application to employees falling below the “officer” threshold. See Freytag v. Commissioner, 501 U.S. 868, 880–81, 111 S.Ct. 2631, 115 L.Ed.2d 764 (1991) (citing Buckley v. Valeo, 424 U.S. 1, 126 & n. 162, 96 S.Ct. 612, 46 L.Ed.2d 659 (1976)). Although Tucker appeared to argue in his briefs that the clause governed all Office of Appeals workers involved in CDP hearings, at oral argument his counsel limited the challenge to team managers, who oversee the CDP determinations. Oral Arg. at 11:50–12:55. As our analysis applies equally to team managers, settlement officers, and appeals officers, however, we will use the term “Appeals employees” to refer to all in the three groups. We review the Tax Court's decision on this issue de novo.

The Supreme Court has often said that to be an “Officer of the United States” covered by Article II, a person must “exercis[e] significant authority pursuant to the laws of the United States.” Buckley, 424 U.S. at 125–26, 96 S.Ct. 612; see also Free Enterprise Fund v. Public Co. Accounting Oversight Bd., ––– U.S. ––––, 130 S.Ct. 3138, 3160, 177 L.Ed.2d 706 (2010); Landry v. FDIC, 204 F.3d 1125, 1133 (D.C.Cir.2000). In assessing Tucker's claim, we look not only to the authority that Appeals employees wielded in Tucker's case but to all their duties, or at least those to which Tucker calls attention. Freytag, 501 U.S. at 882, 111 S.Ct. 2631 (rejecting government's argument that an Appointments Clause challenger may rely only on authorities exercised over him). Most importantly, these duties include review of taxpayers' underlying tax liability, even though Tucker's liability was never at issue before the Office of Appeals. Because Appeals employees in CDP hearings exercise the most “significant” authority in disposing of liability questions (which of course they commonly address outside the CDP context), we will address the authority involved in liability review first, and will then return to the collection-related aspects of CDP review.

Before discussing how the authority of Appeals employees compares with that of persons found to be “Officers,” we first consider—and ultimately bypass—whether, in the words of the clause, their positions were “established by Law.” Landry, 204 F.3d at 1133. As we have explained, no statute created positions in the Office of Appeals, but the 1998 act entitled taxpayers to a hearing in that office, 26 U.S.C. §§ 6320(b)(1), 6330(b)(1), and called for a determination by the “appeals officer” on various issues relating to a proposed collection and to tax liability, id. §§ 6320(c), 6330(c); see also 26 C.F.R. §§ 601.103(c) (providing taxpayers the general opportunity to contest tax liability before Office of Appeals, outside of CDP context); see generally id. § 601.106 (describing Office of Appeals functions and procedures). Similarly as to regulations: 26 C.F.R. § 601.106 may “establish” the Office of Appeals, and the relevant Internal Revenue Manual provisions do delegate various responsibilities to settlement officers, appeals officers, and team managers, see, e.g., I.R.M. exh. 8.22.2–4, Delegation Order Appeals–193–1 (Mar. 16, 2010) (formerly App. 8–1 (Rev.1)), but the parties have not pointed us to a regulation or other agency authority in which these positions themselves are “established” in any formal sense. Rather, they appear simply to be types of employees used by the Commissioner pursuant to his general hiring power. 26 U.S.C. § 7804(a); see Tucker, 135 T.C. at 116, 119.

Nonetheless, it would seem anomalous if the Appointments Clause were inapplicable to positions extant in the bureaucratic hierarchy, and to which Congress assigned “significant authority,” merely because neither Congress nor the executive branch had formally created the positions. See Appellant's Br. 35–36; Tucker, 135 T.C. at 158. See also DOJ Office of Legal Counsel, Officers of the United States for Purposes of the Appointments Clause, 2007 OLC LEXIS 3, at *118 (Apr. 16, 2007) (“[T]he rule for which sorts of positions have been ‘established by Law’ such that they amount to offices subject to the Appointments Clause cannot be whether a position was formally and directly created as an ‘office’ by law. Such a view would conflict with the substantive requirements of the Appointments Clause.”).

In any event, because we conclude below that Appeals employees do not exercise significant authority within the meaning of the Appointments Clause cases, we need not resolve...