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Tag Archive for Judicial Review

Why We Should Repeal The Flora Rule Or Find Another Way To Give Taxpayers Who Cannot Pay The Same Access To Judicial Review As Those Who Can (Part 3 of 3)

Two weeks ago, I discussed how the Flora rule blocks access to judicial review by low income taxpayers and those subject to “assessable penalties.” Last week, I discussed why the policy justification for the Flora rule has faded and why the theoretical ability to petition other courts does not always provide real access to judicial review. In this week’s blog, I discuss the solutions that policymakers should consider. More details are available in my 2018 Annual Report to Congress.

Repeal The Flora Rule

Because Flora is obsolete, I agree with those who have suggested the Flora rule should be repealed (e.g., Steve Johnson here on p. 271). Such a repeal would allow taxpayers to file suit in district court or the U.S. Court of Federal Claims after paying a small fraction of the liability. If Congress prefers a more tailored approach, however, it should consider one or more of the following options:

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Why We Should Repeal The Flora Rule Or Find Another Way To Give Taxpayers Who Cannot Pay The Same Access To Judicial Review As Those Who Can (Part 2 of 3)

Nina Olson- Judicial Review Part 2

In the previous blog post, I discussed how the Flora rule harms low income taxpayers who were not part of the tax system when it was established and sometimes eliminates judicial review for those subject to “assessable penalties,” most of which also did not exist at the time. This week, I discuss the policy justification for the Flora rule, why it has faded, and why the theoretical ability to petition other courts does not provide real access to judicial review for some taxpayers.

The Justification For The Flora Rule Has Faded

As we discussed last week, in 1958 in Flora I and again in 1960 in Flora II, the U.S. Supreme Court held that taxpayers must have “fully paid” an assessment before filing suit in U.S. district court or the U.S. Court of Federal Claims. In Flora I the Court said a policy basis for the full payment rule was to protect the “public purse” and cited dicta in earlier decisions, such as Cheatham, which was decided in 1875. This dictum said the rule was needed to protect the very “existence of government” from a “hostile judiciary.” Although the Flora decisions did not repeat the “existence of government” rationale, it relied heavily on CheathamCheatham is cited seven times in Flora I and 20 times in Flora II.

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Why We Should Repeal The Flora Rule Or Find Another Way To Give Taxpayers Who Cannot Pay The Same Access To Judicial Review As Those Who Can (Part 1 of 3)

Nina Olson Flora Rule

Taxpayers have the right to appeal a decision of the IRS in an independent forum. Consistent with this right, in the 2018 Annual Report to Congress (ARC) I recommended legislation to provide all taxpayers with a realistic opportunity for judicial review of IRS determinations.

The so-called “Flora rule”—named after a Supreme Court case decided in 1960—limits access to judicial review by those who cannot “fully pay” what the IRS says they owe. In this blog, I explain how the rule is obsolete and harms low income taxpayers who were not part of the tax system in 1960. I also explain how the rule sometimes eliminates judicial review for those subject to “assessable penalties,” most of which did not exist in 1960.

What is the Flora rule?

In general, 28 U.S.C. § 1346(a)(1) authorizes a taxpayer to file suit in a U.S. district court or the U.S. Court of Federal Claims to recover “any … tax,” “any penalty,” or “any sum.”  The statute places no explicit limits on how much the taxpayer must have paid before filing suit. In 1958 in Flora I and again in 1960 in Flora II, however, the U.S. Supreme Court held that taxpayers must have “fully paid” an assessment (called the “Flora” or “full payment” rule) before doing so.
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