Notes from Last Week’s ABA Tax Section Meeting in Atlanta

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Christine, Les and I attended the ABA Tax Section meeting in Atlanta from October 4-6. We did a little speaking and a lot of listening. One of the benefits of the meeting is to hear the government speakers to obtain insights on their world. Here is a short post coming from a meeting in which government speakers provided updates.

Comments from Chief Judge of the Tax Court

The Tax Court is developing a new case management system and has signed a contract with the vendor to build the system. No date on when it might be launched.

The Tax Court currently has 175 cases with over $10 million in dispute

The ABA Tax Section submitted a proposal to the Tax Court to allow limited scope representation. The Chief Judge has submitted the proposal to the Court’s Rules Committee, Pro Bono Committee and Admissions Committee for review and a report back. [These comments resulted from remarks by Chief Special Trial Judge Lewis Carluzzo at the Tax Court’s judicial conference back in March of this year. Note that PT’s own Christine Speidel was one of the primary persons responsible for the comment. The ABA comment recommends that the Tax Court adopt limited practice rules especially to cover lawyers assisting with calendar call. This is a positive development that has been discussed for many years.]

There were over 27,000 cases filed in the Tax Court last year and over 29,000 cases closed.

Comments from the Office of Chief Counsel

The comments focused on the implementation of IRC 7345 and the passport revocation program. As of August 31, 2018, 272,656 taxpayers have been certified by the IRS to the State Department. Of those taxpayers, slightly over 17,000 have been decertified or reversed.

A taxpayer cannot just pay the debt under $51,000 and have the passport revocation lifted. Once a taxpayer is selected and referred, full payment must be made to have the IRS decertify the debt.

The Tax Court has chosen to use the letter “P” after the docket number to indicate that a case is a passport case.

The Tax Court is not the exclusive forum for contesting the passport revocation. Chief Counsel takes the position that: 1) a taxpayer cannot raise the merits of the underlying liability in the passport revocation case; 2) an equivalent hearing does not stop a passport revocation from moving forward the same way a CDP hearing would; 3) the scope of review is the administrative record; 4) the standard of review is abuse of discretion; 5) Chief Counsel will not refer these cases to Appeals after the filing of a Tax Court petition; and 6) the appellate venue in these cases is the DC Circuit. The Chief Counsel initial positions on passport revocation can be found in CC-2018-5.

It is not clear how to figure out what the State Department is doing with the information that the IRS sends over. The taxpayer generally will not hear from the State Department unless it revokes the passport or rejects an application for a passport. If a taxpayer applies and the State Department rejects the application because of an IRS certification, the State Department will hold open the application for 90 days for the individual to get the IRS to withdraw the referral. Thereafter, the individual will need to reapply for the passport.

The IRS has no control over what the State Department does with the referrals. It is not clear that an individual has a path to talk to someone in the State Department. It has not yet published procedures for handling these cases. The State Department is held harmless by the statute for the actions it takes (or fails to take) in these cases. The State Department may issue a passport for humanitarian or emergency reasons but does not have a requirement to do so.

Comments from DOJ, Tax Division

It is focusing on three matters this year:

  • Offshore
  • Return Preparer Injunctions – it has brought 40 complaints so far this year
  • Employment taxes – it has obtain 100 permanent injunctions against individuals and businesses pyramiding liability since 2016

Comments from Treasury

It is working hard to publish regulations as quickly as possible. It is not giving commenters additional time to submit comments generally because of the push to get out the regulations. The goal is to publish all of the regulations within 18 months of enactment so that the government gets the benefit of the relation back to the date of enactment rule.

Comments

  1. Norman Diamond says:

    “As of August 31, 2018, 272,656 taxpayers have been certified by the IRS to the State Department. Of those taxpayers, slightly over 17,000 have been decertified or reversed.

    A taxpayer cannot just pay the debt under $51,000 and have the passport revocation lifted. Once a taxpayer is selected and referred, full payment must be made to have the IRS decertify the debt.

    “Chief Counsel takes the position that: 1) a taxpayer cannot raise the merits of the underlying liability in the passport revocation case;”

    Will that be the end of liens and levies? After assessing enough penalties against a taxpayer who doesn’t owe any tax, instead of issuing a notice of lien or intent to levy where the IRS might concede 100% of the penalties after calendar call in Tax Court, just revoke the passport so the penalties don’t have to be conceded.

    I’ve spoken with someone who’s afraid he won’t qualify for Japanese citizenship, who fears he won’t be able to renew his US passport and will be deported. He expects to lose his family. Other people accused him of exaggerating. It looks like Chief Counsel doesn’t accuse him of exaggerating.

    “3) the scope of review is the administrative record;”

    Usually in order to prove how inaccurate the administrative record is, don’t you need to have two separate cases with two separate administrative records?

    “Comments from DOJ, Tax Division

    It is focusing on three matters this year:

    – Offshore
    […]”

    Exactly. There’s no limit to the number of penalties the IRS can trump up against people who can’t afford to fight.

  2. Great update, Keith. Thank you! Christine is awesome! I am so glad she advocates for our work.

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