                               T.C. Memo. 2019-74



                         UNITED STATES TAX COURT



                 ALDO V. FONTICIELLA, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 23776-15L.                         Filed June 13, 2019.



      Joseph A. DiRuzzo III, Christopher J. Rajotte, Jennifer Correa Riera, and

Daniel M. Lader, for petitioner.

      G. Chad Barton and H. Elizabeth H. Downs, for respondent.



                           MEMORANDUM OPINION


      GERBER, Judge: Petitioner commenced this case under section 6330(d)(1)1

seeking review of respondent’s proposed collection action. In this opinion we

      1
      Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect at all relevant times, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
                                        -2-

[*2] consider petitioner’s two procedural motions, which do not address the merits

of respondent’s proposed collection action. Petitioner’s motion, filed on

September 15, 2018, seeks to have the Court hold that the Internal Revenue

Service (IRS) Office of Appeals (Appeals) is “unconstitutional” because of an

alleged violation of the separation of powers doctrine (separation motion). In an

earlier motion, filed on September 30, 2017, petitioner seeks to have his case

remanded on the grounds that the Appeals settlement officer is an “Officer of the

United States” who was not appointed in a manner consistent with the

Appointments Clause (appointments motion).2

      The merits of the arguments in petitioner’s appointments motion were

addressed and decided adverse to petitioner’s position in Tucker v. Commissioner,

135 T.C. 114 (2010), aff’d, 676 F.3d 1129 (D.C. Cir. 2012). Further, petitioner’s

arguments in the separation motion address essentially the same underlying facts,

concepts, and legal principles that were considered by the Court and were the

basis for this Court’s holding in Tucker. Petitioner has not advanced precedents

contradictory to the holding in Tucker or controlling legal authorities with respect

to either pending motion. We decline to reverse our holding in Tucker, and we




      2
          Petitioner supplemented his appointments motion on October 5, 2018.
                                          -3-

[*3] will deny petitioner’s motions. The merits of the underlying collection case

will be considered separately.

                                     Background

      The following background is drawn from the parties’ pleadings, motions,

and declarations and exhibits attached thereto. This background is set forth solely

for the purpose of ruling on the motions and is not intended as findings of fact in

this case. See Rule 1(b); Fed. R. Civ. P. 52(a).

      Petitioner is a cardiologist and the sole owner of Heart Associates of South

Arkansas, Ltd. (Heart Associates). He alleges that Heart Associates’ controller

and accountant embezzled from him and his business. Petitioner further alleges

that he incurred personal tax liabilities to respondent for taxable years 2007, 2008,

2009, 2012, and 2013 because his controller and accountant mishandled their

duties in addition to the embezzlement.

      Respondent assigned an Appeals settlement officer to handle petitioner’s

collection due process (CDP) hearing. On August 14, 2015, respondent issued to

petitioner a notice of determination relating to the years in issue. Petitioner, while

residing in Arkansas, timely filed his petition with the Court.
                                        -4-

[*4] Petitioner moves this Court to declare that Appeals is an unconstitutional

de facto independent agency, which violates the separation of powers doctrine,

and separately seeks to have the Court remand his case to Appeals on the basis

that the Appeals settlement officer who reviewed his case was an “Officer of the

United States” and was not constitutionally appointed in a manner consistent with

the Appointments Clause. The facts and analysis presented in petitioner’s motions

are substantially similar to those considered by this Court in Tucker v.

Commissioner, 135 T.C. 114.

                                     Discussion

A. Separation Motion--Independent Agency

      Petitioner argues that Appeals is a de facto independent agency because of

“its unique, independence-promoting structure” that fails to meet the constitutional

separation of powers doctrine. Respondent contends, in agreement with the

Court’s reasoning in Tucker v. Commissioner, 135 T.C. at 134, that “Appeals is a

component of the IRS within the department of Treasury.” Accordingly,

respondent argues that “[t]here is no authority for the position that Appeals is a

‘de facto independent agency.’” We agree.
                                        -5-

[*5] Generally, separation of powers derives from the Constitution’s division of

the responsibilities of governing into three separate branches of Government. See

U.S. Const. arts. I, II, and III. Congress, under certain circumstances, can create

independent agencies to address concerns that go beyond the scope of ordinary

legislation. See generally Humphrey’s Ex’r v. United States, 295 U.S. 602 (1935).

      In Tucker, the taxpayer challenged the constitutionality of the Appeals

settlement officers who conducted his CDP hearing and the team manager who

signed and issued the notices of determination. To answer this question, the Court

provided thoughtful and thorough analysis of the history of Appeals. Tucker v.

Commissioner, 135 T.C. at 126-157. The Court held in Tucker that an Appeals

settlement officer was not an “Officer of the United States” for purposes of the

Appointments Clause, and the issue of whether Appeals is an independent agency

is resolved by its reasoning therein. Id. at 163-165.

      Petitioner’s argument that Appeals is an independent agency because of

references to the term “independent ” in connection with the function of Appeals

exaggerates the meaning of independence in the context of Appeals’ function.

Although Appeals has an independent function within the IRS, it does not mean

that Appeals is inherently an independent agency. We hold that Appeals is not a

de facto independent agency in accordance with the Court’s reasoning in Tucker.
                                         -6-

[*6] Petitioner argues that Appeals is an independent agency because there is no

historical precedent for Appeals and its duties “transcend purely executive

functions”. Independent agencies are created by statute, and Appeals, in its

current form, was not created by statute. See id. at 153-154. Although Appeals’

precursor, the Advisory Tax Board, was established by statute, see Revenue Act of

1918, ch. 18, 40 Stat. 1057, the Internal Revenue Service Restructuring & Reform

Act of 1998 (RRA), Pub. L. No. 105-206, 112 Stat. 685, enacted provisions

addressing the current function of Appeals within the IRS, see RRA secs. 1001,

3401, 112 Stat. at 689, 746. The references to Appeals, including those to Appeals

officers, did not create a new Appeals separate from the IRS but reflected a

reorganization of the existing Appeals function within the IRS.3 See Tucker v.

Commissioner, 135 T.C. at 135-137; see also secs. 6320, 6330. When Congress

enacted the 1998 CDP provisions in sections 6320 and 6330, it used the

preexisting Appeals function within the IRS and Treasury and committed the new

CDP function to that office. Tucker v. Commissioner, 135 T.C. at 153.

      Although petitioner argues that the RRA created Appeals as it is known

today and that its structure (e.g., its independence and the prohibition of ex parte

      3
       Appeals was originally a creature of regulation. See Tucker v.
Commissioner, 135 T.C. 114, 153 n.69, 156 (2010), aff’d, 676 F.3d 1129 (D.C.
Cir. 2012).
                                          -7-

[*7] communications between Appeals officers and other IRS employees) is that

of a de facto independent agency, the RRA explicitly provides for “an independent

appeals function within the Internal Revenue Service.” RRA sec. 1001(a)(4), 112

Stat. at 689 (emphasis added). Petitioner’s argument examines the “independent

appeals function” with little regard to its use in context (i.e., “within the Internal

Revenue Service”). Moreover, while the RRA provides that “[t]he Commissioner

of Internal Revenue shall ensure that an appeals officer is regularly available

within each State”, RRA sec. 3465(b), 112 Stat. at 768,4 and prescribes other

procedures for hearings in Appeals, the requirements of the RRA do not rise to the

level required to establish an independent agency separate from the IRS, see

generally Tucker v. Commissioner, 135 T.C. at 137-138. Although Congress

established an independent function within the IRS and prescribed procedures for

Appeals, the use of the term “independent” to describe Appeals’ function does not

automatically make Appeals an independent agency.5


      4
        Some States do not have a permanent Appeals presence, but Appeals
officers travel circuit to those States. See generally National Taxpayer Advocate,
2018 Annual Report to Congress (Vol. One) 310.
      5
       Notable examples of independent agencies legislatively created by
Congress include the Equal Employment Opportunity Commission and the
Securities and Exchange Commission. See Civil Rights Act of 1964, Pub. L. No.
88-352, sec. 705, 78 Stat. at 258 (codified as amended at 42 U.S.C. sec. 2000e-
                                                                      (continued...)
                                         -8-

[*8] Appeals in its current form exists pursuant to section 7804(a), which

provides:

             SEC. 7804(a). Appointment and Supervision.--Unless
      otherwise prescribed by the Secretary, the Commissioner of Internal
      Revenue is authorized to employ such number of persons as the
      Commissioner deems proper for the administration and enforcement
      of the internal revenue laws, and the Commissioner shall issue all
      necessary directions, instructions, orders, and rules applicable to such
      persons.

      See Tucker v. Commissioner, 135 T.C. at 135, 153.

      Pursuant to this mandate, the Commissioner established Appeals “to resolve

tax controversies, without litigation, on a basis which is fair and impartial to both

the Government and the taxpayer in a manner that will enhance voluntary

compliance and public confidence in the integrity and efficiency of the Service.”

Internal Revenue Manual pt. 8.6.2.1.1 (Aug. 17, 2017). Appeals’ independence

within the IRS was emphasized as a result of the RRA and remains a crucial aspect

of resolving tax controversies. Appeals, however, is not a de facto independent

agency as a result of its independence from other functions within the IRS.




      5
       (...continued)
4(a) (2018)); Securities Act of 1934, ch. 404, sec. 4, 48 Stat. at 885 (codified as
amended at 15 U.S.C. sec. 78d (2018)). In these instances, Congress explicitly
created the agency as an independent agency through statute.
                                         -9-

[*9] Petitioner further argues that Appeals’ structure “exemplifies an

independent agency” and that the structure of Appeals violates the separation of

powers doctrine because the Chief of Appeals is not accountable to the President

or the Commissioner. Relying heavily on a dissenting opinion in PHH Corp. v.

Consumer Fin. Prot. Bureau, 881 F.3d 75 (D.C. Cir. 2018),6 and on Collins v.

Mnuchin, 896 F.3d 640 (5th Cir. 2018), reh’g en banc granted, 908 F.3d 151 (5th

Cir. 2018), and Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S.

477, 483 (2010), petitioner has not cited to any majority opinions or existing

precedents that are contradictory to the reasoning in Tucker.

      In PHH Corp.7 the Court of Appeals for the D.C. Circuit considered whether

the Federal statute establishing the structure of the Consumer Financial Protection



      6
       It is unclear to the Court as to why petitioner cites to the dissenting opinion
in PHH Corp. v. Consumer Fin. Prot. Bureau, 881 F.3d 75 (D.C. Cir. 2018),
throughout his motions and reply. Although the dissenting opinions are generally
on the subject we consider, they are not in any manner dispositive of the specific
issue we consider or contrary to our holding in Tucker v. Commissioner, 135 T.C.
114 (2010).
      7
       The Court of Appeals for the Fifth Circuit reheard the case in Collins v.
Mnuchin, 896 F.3d 640 (5th Cir. 2018) (holding the structure of the Federal
Housing Finance Authority unconstitutional in violation of the Constitution’s
separation of powers principles), reh’g en banc granted, 908 F.3d 15 (5th Cir.
2018), in January 2019. Because the Court of Appeals has not yet filed a decision
on the rehearing, we decline to comment on petitioner’s arguments relating to this
case.
                                       - 10 -

[*10] Bureau (CFPB) violated the separation of powers doctrine. Contrary to

Appeals’ role within Treasury and the IRS, Congress explicitly established the

CFPB to serve as an independent agency, see Dodd-Frank Wall Street Reform and

Consumer Protection Act, Pub. L. No. 111-203, sec. 1011, 124 Stat. at 1964

(2010),8 and as an independent agency, the CFPB was subject to the separation of

powers doctrine. Congress created the CFPB with a single director protected

against removal by the President without cause (i.e., only for “inefficiency, neglect

of duty, or malfeasance in office”), and the Court of Appeals held that there was

no constitutional defect in the protection against removal. See PHH Corp., 881

F.3d at 95.

      While it is well settled that a director, board, or commission of independent

agencies must be accountable to the President pursuant to the separation of powers

doctrine, petitioner mistakenly makes the analogy that the IRS Chief of Appeals is

the equivalent of the single independent agency director of the CFPB. See

generally U.S. Const. art. II; Free Enter. Fund, 561 U.S. at 483. Petitioner argues

that the President’s inability to remove the Chief of Appeals is comparable to the

      8
        For example, Congress established the CFPB by stating that “[t]here is
established in the Federal Reserve System, an independent bureau to be known as
the ‘Bureau of Consumer Financial Protection * * *’.” Dodd-Frank Wall Street
Reform and Consumer Protection Act, Pub. L. No. 111-203, sec. 1011, 124 Stat. at
1964 (2010) (codified at 12 U.S.C. sec. 5491(a) (2018)).
                                       - 11 -

[*11] unconstitutional removal restrictions discussed in Free Enter. Fund. In that

case the Supreme Court held that dual for-cause limitations on removal of

members of the Accounting Oversight Board violated the separation of powers

doctrine because the second layer resulted in a situation where “[n]either the

President, nor anyone directly responsible to him, nor even an officer whose

conduct he may review only for good cause, has full control over the Board.” Free

Enter. Fund, 561 U.S. at 496.

      Appeals, however, is not a statutorily created independent agency, and

consequently the separation of powers doctrine does not apply to Appeals in this

manner. Appeals does not “operate[] * * * virtually free of any presidential

oversight and without accountability to the people” as petitioner argues in his

separation motion. The President retains full oversight of the Commissioner

pursuant to section 7803(a), and the Commissioner, in turn, exercises his

delegated authority under section 7804 to accomplish the duties and mission of the

IRS, including Appeals.

      Petitioner failed to advance in his motion any persuasive argument or

citation that supports his position that Appeals is an independent agency subject to

the separation of powers doctrine. Accordingly he fails to persuade us that

Appeals is anything more than a component of the IRS as was explained in
                                         - 12 -

[*12] Tucker. For the reasons described above, we will deny petitioner’s

separation motion in a subsequent order.

B. Appointments Motion

      In petitioner’s appointments motion he requests that the Court declare the

Appeals settlement officer in his case an “Officer of the United States” and

remand the case to Appeals for a hearing before an Appeals employee appointed in

a manner consistent with the Appointments Clause of the Constitution.

Respondent contends, and we agree, that the Court’s holding in Tucker v.

Commissioner, 135 T.C. at 165, is controlling in this matter.

      Petitioner asks that we overrule Tucker, which was affirmed by the Court of

Appeals for the D.C. Circuit, on the basis of recent decisions involving the

appointment of administrative law judges. See, e.g., Lucia v. SEC, 585 U.S.        ,

138 S. Ct. 2044 (2018); Burgess v. FDIC, 871 F.3d 297 (5th Cir. 2017); Helman v.

Dep’t of Veterans Affairs, 856 F.3d 920 (Fed. Cir. 2017); Bandimere v. SEC, 844

F.3d 1168 (10th Cir. 2016). However, the recent decisions regarding the

appointment of administrative law judges do not require a departure from

established and controlling precedent.

      The Appointments Clause of the Constitution provides the “exclusive means

of appointing ‘Officers [of the United States].’” Lucia, 585 U.S. at   , 138 S. Ct.
                                         - 13 -

[*13] at 2051; see U.S. Const. art. II, sec. 2, cl. 2. Principal Officers must be

nominated and confirmed by the Senate, and in the case of inferior Officers

“Congress may by Law vest” their appointment “as they [in Congress] think

proper, in the President alone, in the Courts of Law, or in the Heads of

Departments.” U.S. Const. art. II, sec. 2, cl. 2; see id. cl. 1; Tucker v.

Commissioner, 135 T.C. at 122.

         In Tucker v. Commissioner, 135 T.C. at 116-117, we held that “appeals

officers” pursuant to section 6320 or 6330 were not “Officer[s] of the United

States” because the position of an Appeals officer was not “‘established by Law’

to which the * * * [Appointments Clause] applies” and “the CDP hearing officer

does not exercise * * * ‘significant authority’”. Reaching the same conclusions

here, the Court will also deny petitioner’s appointments motion in a subsequent

order.

         To reflect the foregoing,


                                                  An appropriate order will be issued.
