Precedential Passport Case

The Low Income Tax Clinic at Temple Law School in Philadelphia seeks a full time director for its tax clinic.  Temple is an especially good school at which to teach a tax clinic because of its strong tax program which includes an LLM and MLT in tax.  In addition, its location in a neighborhood with significant need for services situates it in a great place for building relationships with community organizations serving the same population of taxpayers.  For persons interested in this position, please read the attached brochure advertising the position and reach out to the appropriate persons at Temple.  Keith

As we have explained previously, this blog started because Les, Steve and I work on updating the treatise “IRS Practice and Procedure” published by Thomson Reuters and available through RIA Checkpoint.  While we try to keep the treatise updated on a regular basis, each year we go through a specific review every four months.  I recently went through that review and in doing so noticed several cases I thought were important that we had not written about shortly after they came out.  The first of those cases I thought I would write about is a precedential opinion involving a pro se taxpayer seeking to contest the seriously delinquent tax debt classification that caused the IRS to send a letter about him to the State Department requesting that it revoke or deny his passport.  The case is Adams v. Commissioner, 160 T.C. No. 1 (2023).

Because the passport revocation provision in IRC 7345 is still relatively new, it’s not surprising that a decision regarding this section would merit a precedential decision.


Like most taxpayers caught up in the passport revocation process, Mr. Adams has not been a model taxpayer citizen.  He failed to file returns for most of the years between 2007 and 2015 which caused the IRS to prepare substitute returns pursuant to IRC 6020(b).  These returns created assessments totaling over $1.2 million which significantly exceeds the amount of liability needed to have one’s passport revoked.  As part of its collection efforts, the IRS filed a notice of federal tax lien.  Following the filing of the notice, the IRS sent the required Collection Due Process (CDP) notice to Mr. Adams.  He did not request a CDP hearing.  The CDP notice meets one of the prerequisites for making a referral to the State Department.

At the time of the case, the State Department had not taken any action regarding Mr. Adams’ passport; however, he reported that he had lost his passport and intended to file for a replacement.  He did make a request for a new passport while his Tax Court case was pending and received a response from the State Department alerting him that the IRS had certified his liability as seriously delinquent and he needed to work out the tax issue with the IRS before it would move forward on issuing a new passport.

The Tax Court described its role in a passport revocation case drawing from its prior case law:

Section 7345(e)(1) permits a taxpayer who has been certified as having a seriously delinquent tax debt to petition this Court to determine “whether the certification was erroneous or whether the [IRS] has failed to reverse the certification.” Our jurisdiction in reviewing certifications of seriously delinquent tax debts is set forth in section 7345(e)(1). If we find that a certification was erroneous, we “may order the Secretary [of the Treasury] to notify the Secretary of State that such certification was erroneous.” I.R.C. § 7345(e)(2). The statute specifies no other form of relief that we may grant. Ruesch v. Commissioner, 25 F.4th 67, 70 (2d Cir. 2022), aff’g in part, vacating and remanding in part 154 T.C. 289 (2020).

The Court quickly agrees with the IRS that the facts here meet the basis for certification.  It knocks down the two arguments made by Mr. Adams.  First, he argued that the IRS lacked admissible evidence that the notices of deficiency giving rise to the assessments were mailed to his last known address.  Second, he argued that the taking of his passport is unconstitutional because it violates his right to international travel.

The Court notes that his first challenge could be read as a substantive challenge to the liabilities.  The Tax Court had previously answered this question in Ruesch v. Commissioner, 154 T.C. 289 (2020); however, that opinion was affirmed in part and vacated in part because of mootness at 25 F.4th 67 (2nd Cir. 2022).  So, the Court goes into an analysis of what happens to an opinion when a judgment is vacated.  It notes that vacature “deprives the underlying opinion of any precedential effect.”  Nonetheless, the vacated opinion can still provide value.  The Court states:

Although an opinion issued in connection with a vacated judgment retains no precedential effect, if the judgment is vacated for reasons unrelated to the opinion’s analysis of an issue, nothing precludes a future court from considering that analysis as persuasive authority. To illustrate, in Seminole Nursing Home, Inc. v. Commissioner, 12 F.4th 1150 (10th Cir. 2021), aff’g T.C. Memo. 2017-102, the U.S. Court of Appeals for the Tenth Circuit recently accepted our Court’s reliance on a previous decision, Lindsay Manor Nursing Home, Inc. v. Commissioner, 148 T.C. 235 (2017), vacated on other grounds, 725 F. App’x 713 (10th Cir. 2018), that had been vacated by the Tenth Circuit for mootness. Explaining its rationale, the Tenth Circuit stated: “[W]e vacated [the Tax Court’s] ruling only because the case had been moot at the time of the ruling. . . . It was hardly an abuse of discretion for the Tax Court to continue to adopt that court’s prior reasoning when no higher court had cast doubt on that reasoning.” Seminole Nursing Home, Inc. v. Commissioner, 12 F.4th at 1160. for the Tax Court to continue to adopt that court’s prior reasoning when no higher court had cast doubt on that reasoning.” Seminole Nursing Home, Inc. v. Commissioner, 12 F.4th at 1160.

The Ruesch opinion was vacated because of mootness similar to the opinion in Lindsay Manor.  So, the Tax Court readopts its opinion in Ruesch.  This means that that Tax Court’s position is that it lacks the ability to redetermine the amount of a taxpayer’s liability.  The readoption of the reasoning in Ruesch, a precedential opinion, is undoubtedly the reason for making the Adams case precedential.  It’s no surprise the Court would readopt its prior position and the opinion provides a useful analysis of what to expect when a Tax Court precedential opinion is vacated at the circuit level for reasons having nothing to do with the underlying analysis.

Because the Court seeks to give the pro se taxpayer the benefit of possible arguments he makes, it looks at another possible facet of his attack on the underlying assessment.  It interprets his argument as stating that the underlying liabilities were not assessed and notes that liabilities must be assessed before the IRS can move forward with passport revocation.  It further refines the argument of Mr. Adams to be that although the IRS did take the steps to record his liabilities on its books, viz., to assess the liabilities, it did so wrongfully because it failed to take the necessary steps make the assessments.  The Court finds that it lacks jurisdiction to consider the correctness of the assessments.  It can merely confirm that the assessments existed at the time of the passport revocation referral.  It notes that he had numerous opportunities to contest the validity of the assessments and passed on those opportunities.  It finds that IRC 7345 does not provide another opportunity for challenging whether the assessments were properly made.

The Court then turns to his constitutional argument in which he urges the Court to reconsider its opinion in Rowen v. Commissioner, 156 T.C. 101 (2021) which held that IRC 7345 authorizes the IRS to send a revocation letter to the State Department.  The IRS does not deprive a taxpayer of the right to international travel by sending the passport revocation letter.  The Tax Court takes the position that it lacks jurisdiction to review the State Department’s determination.

So, Mr. Adam’s gets no relief from his passport or assessment problems through this case.  The Adams case primarily restates the Tax Court’s prior positions regarding IRC 7345 and breaks little or no new ground regarding a petitioner’s right to relief.  If Mr. Adams wants relief, he needs to pay off the taxes or take one of the other steps that will cause the IRS to generate a letter to the State Department requesting it to restore his travel rights.  To end where we began, you can find a deeper discussion of those issues in Chapter 14A-17[2] of IRS Practice and Procedure.

TIGTA Report on Government Contractor Tax Delinquency

In 2014 Congress passed the Consolidated and Further Continuing Appropriations Act prohibiting federal agencies from using appropriated funds to award a contract or grant to a corporation owing any amount of delinquent federal taxes unless it considered suspension or disbarment.  A regulation, which goes by the catchy name Federal Acquisition Regulation (FAR), provides definitions and further guidance regarding this requirement.  We care because this is an easy way for the IRS to collect money. 

This provision follows a host of state and federal provisions linking the receipt of government employment or benefits or services with fulfilling tax obligations.  Over the past quarter century many states have passed legislation tying the receipt or continuation of licenses to the payment of taxes.  Many of my clinic clients came because the state of Massachusetts revoked their driver’s license due to failure to pay their state taxes.  While the revocation of driver’s licenses has the most far reaching impact, states take professional licenses as well.

The federal government does not issue many licenses but it has the ability to exert similar type of pressure for tax delinquency.  In 1998, it passed Section 1203 of the Restructuring and Reform Act (RRA 98).  This off code provision requires IRS employees to timely file their taxes or be fired.  The timely filing provision of Section 1203 is one of the so called 10 deadly sins that cause removal from employment but is by far the most impactful.  I will provide some data on this below.  Section 1203 is not the only federal provision creating an impact for tax delinquency.  Revocation or denial of a passport, passed in 2015 is another example and one which Les wrote about recently.  There has also been a movement to check federal employees outside of the IRS for tax delinquency though not as vigorously as might occur given the benefit of federal employment.

On September 12, 2022, the Treasury Inspector for Tax Administration (TIGTA) published a report regarding payments to federal contractors and federal grantees with delinquent tax situations.  It makes sense to require contractors and grantees to pay their taxes just as it makes sense for employees to pay their taxes.  These entities are receiving a direct benefit from the federal government and in exchange should at least keep current on their tax obligations.  The report talks about the problem and the structure for the solution.


TIGTA found that:

Between October 2018 and December 2019, Federal agencies awarded 2.1 million Federal contracts and grants to more than 83,000 awardees. We identified 3,978 entities that received $32.9 billion in Federal awards while owing $891 million in delinquent Federal taxes. This included 3,040 contractors that received $10.2 billion in Federal contracts while owing $621.8 million in delinquent Federal taxes and 938 grantees that received $22.7 billion in Federal grants while owing $269.2 million in delinquent Federal taxes.

The results can be seen in the following chart:

The TIGTA report indicates that employment taxes constitute most of the unpaid taxes reflected in the chart.  This did not surprise me. This has long been a major collection problem for the IRS.  The TIGTA report cited to a Government Accountability Office report from 15 years ago discussing the problem.  TIGTA produced a chart breaking down the amount of delinquency and the type of entity (corporation or grantee) owing the taxes.  It’s hard for me to get too excited about the entities falling in the lowest category and maybe even the next one or two categories but the high dollar categories contain some large amounts of unpaid tax.

These entities have been self-reporting that they have no tax problems.  The disclosure laws prevent the IRS from affirmatively going to other government agencies and discussing tax delinquencies.  One might hope that the exception to the disclosure law provided by the ability of the IRS to file a notice of federal tax lien might put many of these liabilities into the public sphere but you could see from the TIGTA report I recently wrote about on NFTLs that the IRS does not always file NFTLs on large dollar delinquencies.

Congress appropriated $30 million to the IRS to create an “application through which entities could request from the IRS a certification that the entity did or did not owe seriously delinquent taxes.”  Federal agencies could then require that potential contractors or grantees go to the IRS and obtain and include the certification as part of their application process for the contract or the grant.  TIGTA recommended in the report that the IRS priorities the development of this application and the IRS agreed.  Seems like a simple solution and a way to collect taxes without having to assign scarce Revenue Officer resources chase entities for payment.  Of course, nothing is simple and there will necessarily be situations in which entities will be fighting over the delinquent taxes or glitches in information will occur but the basics of the system should provide a simple collection mechanism.  Read the TIGTA report if you want more details.  This is the type of TIGTA report where I feel like the public is getting its money’s worth.

I mentioned earlier that I would circle back to Section 1203.  This is an off code provision and not a section of the IRC.  Les and I, through Procedurally Taxing, have partnered with the Pittsburgh Tax Review to create a volume on tax procedure which will be published in 2023.  The volume will focus on RRA 98 which will be celebrating its 25th anniversary in that year.  I have written an article for that edition on Section 1203 and wanted to give a little preview of the statistics.  I am troubled by the aspect of Section 1203 that served as symbolic legislation to punish IRS employees and talk about that in the paper.  The legislation, however, was far from symbolic in its impact on IRS employees.  TIGTA puts out stats on Section 1203 in its semiannual reports, though the information is fairly cryptic.  The statistics show that since enactment, an overwhelming majority of removals and mitigations under Section 1203 have been for late returns (8) or willful understatement (9). Since 2001 (the first year TIGTA published data in a semiannual report), IRS employees have also been removed for civil rights/constructive violations (3), concealed work error (4), assault or battery (5), I.R.C./IRM/Reg violation-retaliation (6) and threat of audit for personal gain (10).

As the table below shows, the removals and mitigations for violations other than late returns (8) or willful understatement (9) are rare. Please note in the table, the years 2001 and 2022 have only one semiannual reports worth of data, and in 2010, 2011, and 2012 the data for deadly sin number 8 and 9 were combined by TIGTA.

Using delinquency to deny employment, or licenses or contracts makes sense as an easy and appropriate way for government entities to ensure that everyone pays their fair share of taxes and particularly those directly benefiting from the government.  The use of these mechanisms which deny basic privileges must be accompanied by a robust system that ensures protection of taxpayer rights.  If the government uses an alleged delinquency or failure to file to collect, it must have a system that immediately and appropriately responds to concerns raised by the impacted party.  I applaud the use of these mechanisms to collect but worry that our broken tax system lacks the ability to fulfill its part of necessary bargain when they are used.

Fifth Circuit Upholds Constitutionality of Passport Revocation Statute

Franklin v US is the latest case considering the constitutionality of the IRS and State Department power to restrict international travel when a taxpayer has seriously delinquent tax debt, i.e., legally enforceable federal tax debt totaling more than $55,000 (including interest and penalties).

Franklin failed to report his beneficial ownership of a foreign trust, triggering hefty penalties under Section 6676.  Following assessment and nonpayment, the IRS certified to the Department of State that Franklin had a “seriously delinquent tax debt.” That led the State Department to revoke Franklin’s passport.


I note but will not discuss that in addition to his claim that the passport revocation scheme violated his 5th Amendment due process rights, Franklin raised other challenges to the 6676 penalty. The Fifth Circuit held that those challenges ran afoul of the Anti-Injunction Act.

The main part of the Franklin opinion addresses the claim that the government’s power to restrict travel violated Franklin’s substantive due process rights. Substantive due process “protects individual liberty against ‘certain government actions regardless of the fairness of the procedures used to implement them.’” Collins v. City of Harker Heights, 503 U.S. 115, 125 (1992) (quoting Daniels v. Williams, 474 U.S. 327, 331 (1986)).

The Fifth Circuit disagreed with Franklin. In so doing, it parsed a number of Supreme Court cases that have explored whether there is a fundamental right to international travel. That inquiry is important, because if government action impinges on a fundamental right, the court applies “strict scrutiny” to the legislation, and governmental restriction of a fundamental right must be “narrowly tailored to serve a compelling state interest.” Washington v. Glucksberg, 521 U.S. 702, 720–21 (1997).

In the absence of a fundamental right, typically the court applies a rational basis test, and the “restriction at issue survives as long as it is ‘rationally related to a legitimate government interest.’” quoting  Reyes v. N. Tex. Tollway Auth., 861 F.3d 558, 561 (5th Cir. 2017). The Fifth Circuit held that while there is a fundamental right to interstate travel there is no similar fundamental right to international travel. In so doing, the opinion discusses how courts view whether a right is fundamental:

[W]hether that right is “‘deeply rooted in this Nation’s history and tradition’ . . . and ‘implicit in the concept of ordered liberty,’ such that ‘neither liberty nor justice would exist if [the right was] sacrificed.’” Glucksberg, 521 U.S. at 721 (first quoting Moore v. City of E. Cleveland, 431 U.S. 494, 503 (1977), then quoting Palko v. Connecticut, 302 U.S. 319, 325, 326 (1937)). The Supreme Court has cautioned that, because declaring a right as fundamental “to a great extent . . . place[s] the matter outside the arena of public debate and legislative action,” courts should “exercise the utmost care whenever [they] are asked to break new ground in this field.” Id. at 720 (quoting Collins, 503 U.S. at 125).

For sure there is lots of room for debate on whether something is deeply rooted in history and tradition or implicit in the concept of ordered liberty. And the Fifth Circuit acknowledged some earlier Supreme Court opinions that framed international travel as a fundamental right, though it pointed to later opinions that distinguished travel within the states as compared to travel to differing countries. For example in Haig v Agee, the Supreme Court made that distinction when considering the revocation of the passport of an ex CIA agent who threatened to reveal secrets:

“[T]he freedom to travel outside the United States must be distinguished from the right to travel within the United States.” 453 U.S. 280, 306 (1981).

The Fifth Circuit acknowledged that other opinions that have considered the constitutionality of Section 7345 have applied an intermediate type scrutiny, recognizing the importance of the right to international travel (Keith discussed one of those cases, the 10th Circuit’s Maehr v US, in Passport Revocation Cases Part 2). Intermediate scrutiny requires that the challenged restriction “must serve important governmental objectives and must be substantially related to achievement of those objectives.” Craig v. Boren, 429 U.S. 190, 197 (1976).

In acknowledging the importance of all travel the opinion states that “Franklin is correct in his assertion that the right to international travel is not a new creation unmoored from our past, but instead can be traced through the ages from Magna Carta to Blackstone to the Declaration of Independence to the modern Universal Declaration of Human Rights.”

While declining to decide whether it should be required to apply rational basis or intermediate level scrutiny, the opinion stated that even under intermediate scrutiny it would find the scheme constitutional. The money paragraph in the opinion essentially ties the revocation powers to the essential government interest in collecting revenue:

Even under the higher standard of intermediate scrutiny, the FAST Act’s passport-revocation scheme is constitutional. The government’s interest in collecting taxes, which animates the FAST Act’s passport-revocation scheme, is undoubtedly an important one. See, e.g., Hernandez v. Comm’r, 490 U.S. 680, 699 (1989) (“[E]ven a substantial burden would be justified by the ‘broad public interest in maintaining a sound tax system’” (quoting United States v. Lee, 455 U.S. 252, 260 (1982))); Flora, 362 U.S. at 154 (“It is essential to the honor and orderly conduct of the government that its taxes should be promptly paid[.]”). The passport-revocation scheme is also clearly connected to that goal: delinquent taxpayers will be well-incentivized to pay the government what it is owed to secure return of their passports, and those same taxpayers will find it much more difficult to squirrel away assets in other countries if they are effectively not allowed to legally leave the country.  (emphasis added).

The opinion notes as well that the passport revocation statute targets larger tax debtors and thus “does not sweep beyond what is necessary to achieve Congress’s goal of trying to recoup the $5.8 billion or more in delinquent taxes owed to the government.”

The opinion continues on the theme that the legislation is targeted:

[W]hat Congress provided was an arrow, not a bazooka. Its chosen tool is carefully aimed at the problem, not fired indiscriminately with grave risk of collateral damage to the rights of those not covered by the scheme.


This is the third circuit to uphold the constitutionality of the passport revocation statute, and while it acknowledges that international travel is not to be taken lightly, the opinion is a major government victory for an important collateral tool to collect from taxpayers who have failed to pay sizable liabilities.

Two Circuits Sustain Tax Court’s Inability to Grant Requested Relief

Within the span of a few days the 2nd Circuit and the 4th Circuit each sustained a decision of the Tax Court that it lacked jurisdiction to grant the taxpayer the requested relief.  The cases arise out of different sources of the Court’s jurisdiction and deal with different requests yet provide a common theme regarding the limits of the Tax Court’s authority.  In McLane v. Commissioner, No. 20-1074 (4th Cir. 2022) the 4th Circuit sustains the Tax Court’s decision that it lacks the ability to order an overpayment refund in a Collection Due Process (CDP) case in which the IRS withdrew its notice of federal tax lien.  We blogged the McLane case here following the Tax Court memorandum opinion.  In Ruesch v. Commissioner, Dk. No. 20-3493 (2nd Cir. 2022), the 2nd Circuit sustains the Tax Court’s decision that it lacks the ability to determine the underlying tax liability in a passport revocation case.  We blogged the Ruesch case here following the Tax Court precedential decision.

Neither opinion provides a lot of reasoning and both opinions appear to leave open the question of whether the Tax Court could still decide the issues if the IRS had not withdrawn the lien or reversed the certification.  To the extent the decisions left the door open a crack, that’s the silver lining in cases otherwise disappointing to the taxpayers.


In McLane, the petitioner proceeded pro se in the Tax Court and into the Circuit Court before Daniel Lader of Diruzzo & Company signed on for pro bono representation.  Amicus briefs were filed in support of the petitioner by the American College of Tax Counsel and the Tax Freedoms Institute, signaling an issue of some importance to the practitioner community.  The issue here was first decided by the Tax Court in Greene-Thapedi v. Commissioner, 126 T.C. 1 (2006), a case in which the taxpayer also proceeded pro se.  The 4th Circuit said the case presented a single issue:

whether, after the Commissioner of Internal Revenue conceded that a taxpayer owed $0 and was entitled to the removal of any lien or levy, the United States Tax Court had jurisdiction to determine that the taxpayer overpaid and order a refund.

Although the IRS sent Mr. McLane a notice of deficiency to his last known address, all parties agreed that he never received it.  This fact allows him to contest the liability in a CDP hearing, which he did.  He presented enough information to support the losses claimed on his return and the IRS conceded that he owed no taxes for the year at issue.  He claimed that he had overpaid, and the IRS argued the Tax Court lacked jurisdiction to hear whether he had overpaid.  The Tax Court agreed with the IRS.  The 4th Circuit said it would review this decision de novo.  After reciting the facts, it states:

When as here, the Commissioner has already conceded that a taxpayer has no tax liability and the lien should be removed, any appeal to the Tax Court of the Appeals Office’s determination as to the collection action is moot.

The Court stated that it could not interpret the phrase “underlying tax liability’ in isolation but must read it in “the specific context in which that language is used.”  It then concluded the phrase “does not provide the Tax Court jurisdiction over independent overpayment claims when the collection action no longer exists.”

The glimmer of hope on the issue for future taxpayers seeking a refund in a CDP case is found in a footnote designated with a *.  The court says:

Here, we believe it is unnecessary to decide the “[m]ore fundamental[]” question of whether § 6330 ever grants the Tax Court jurisdiction to determine an overpayment or to order a refund given that § 6330 so clearly cannot confer such jurisdiction when no active collection action persists. 

Not a lot of reasoning in this opinion with which to work.

In Ruesch, the 2nd Circuit issues a per curiam opinion.  Frank Agostino argues the case for the petitioner/appellant.  The taxpayer’s underling problems stem from penalties under IRC 6038 for failure to file information returns concerning controlling interests in foreign businesses.  She received a CDP notice and timely requested a hearing, but the IRS misplaced her request.  Because it thought it had not heard from her, it certified her debt as seriously delinquent tax debt.  She filed a Tax Court petition in response to this determination.  While her Tax Court case was pending, the IRS discovered her CDP request and reversed her certification to the State Department since its policy was not to certify debt while a CDP matter was pending.

Having reversed the certification, the IRS moved to dismiss her Tax Court petition for lack of jurisdiction and for mootness.  The Tax Court granted the IRS motions, determining that IRC 7435 did not authorize it to rule on the merits of the underlying liability and that the case was moot since the IRS had withdrawn certification.  She appealed, arguing that the Tax Court should make a determination on the merits of her liability.  She argued that the voluntary cessation doctrine should apply to keep her passport claim alive.

The voluntary cessation doctrine provides an exception to mootness if a party can prove that the defendant voluntarily ceases the offending conduct in order to evade judicial review “by temporarily altering questionable behavior.” Connecticut Citizens Def. League, Inc. v. Lamont, 6 F.4th 439, 446 (2d Cir. 2021).  The court explains that the doctrine is not absolute.  It’s still possible for a case to be moot even if the defendant concedes if the defendant can demonstrate (1) “interim relief or events have completely and irrevocably eradicated the effects of the alleged violation” and (2) “there is no reasonable expectation that the alleged violation will recur.”  Here, the Second Circuit agrees with the Tax Court that both conditions are satisfied and affirms the dismissal of the challenge to the certification to revoke the passport as moot.  The court indicates that if the IRS, after the conclusion of the CDP hearing, again tries to certify the debt to the State Department for passport revocation, the taxpayer at that time can bring a new Tax Court suit under IRC 7435.

Then, the Second Circuit takes up the issue of the challenge to the underlying liability.  It finds that at the time of dismissal she had already received the only relief available, making her claims on this point moot, but in footnote 3 notes that she

may yet have the chance to challenge her underlying liability in court. That liability is currently the subject of an IRS appeals process that has still to run its course. See 26 U.S.C. § 6320. After receiving a final determination through that process, Ruesch will be able, if necessary, to “petition the Tax Court for review of such determination (and the Tax Court shall have jurisdiction with respect to such matter).” Id. § 6330(d)(1); see id. § 6320(c). If Ruesch continues to object to the IRS’s position regarding her underlying liability, she will eventually have her day in court. For now, however, there is nothing further for our Court or the Tax Court to do.

I am not convinced she will have the opportunity to litigate the merits of her liability in a CDP case.  That’s for another day, however.  The lesson from this case is that the Tax Court is not the place to go to litigate the merits of the underlying liability if you get into Tax Court because your passport was certified to the State Department.

I don’t expect either of these cases to go beyond the circuit stage at this point.  No conflict exists.  The cases do not have high administrative importance, which is not to say they are unimportant.  However, the issue decided in McLane is headed to the Third and Ninth Circuits, which have never ruled on the issue, in Ahmed, T.C. Memo 2021-142, appeal pending (3rd Cir.) and Brown, T.C. Memo 2021-112, appeal pending (9th Cir.).  It will not surprise me to see a few more tries at the appellate level on that issue.

2021 Year in Review – Cases

Despite the ability to access most courts only remotely for much if not all of the year, 2021 still produced a number of important tax procedure decisions.  Perhaps judges could produce more opinions because they did not need to travel or to hold lengthy in-person trials.  This post shows that not all cases are Graev cases.


Supreme Court matters

The Supreme Court handed down a unanimous opinion in CIC Services.  The Court holds that the Anti-Injunction Act does not bar a suit challenging an IRS notice that requires a non-taxpayer to provide information even though the failure to provide the information could result in a penalty.  Posts can be found  here, here, here and here.

The Supreme Court rejected the request for certiorari in Organic Cannabis v. Commissioner seeking a determination that the time period for filing a petition in Tax Court in a deficiency case is a claims processing period rather than a jurisdictional one but granted certiorari in Boechler v. Commissioner regarding the same issue but in the collection due process context.  The Boechler case will be argued before the Supreme Court on January 12, 2022.

Circuit Court matters

Coffey v. Commissioner, –F.3d – (8th Cir. 2021)  – in a case that fractured the Tax Court about as badly as it can be fractured, the Eighth Circuit, after initially projecting harmony and uniformity in its decision, fractured as well, reversing its initial decision which overturned the Tax Court’s fully reviewed opinion.  This action briefly reopened the door on the question of adequate filing of a return for purposes of triggering the statute of limitations, before reinstating the original holding through a new opinion by the panel. That new panel opinion can be found here. 

Taxpayers claimed that they were residents of the US Virgin Islands in 2003 and 2004 and filed returns with the Virgin Islands tax authority.  That taxing authority has a symbiotic relationship with the IRS and sent to the IRS some of the documents it received.  The IRS took the documents it received and concluded that M/M Coffey should have filed a US tax return.  Based on that conclusion, it sent the Coffeys a notice of deficiency.  The Coffeys argued that the notice of deficiency was sent beyond the statute of limitations on assessment since their filing with the US Virgin Islands tax authority also served as a filing with the IRS, starting the normal assessment statute.  The government argued that because the Coffeys did not file a return with the US, no statute of limitations on assessment existed.  After only eight years, the Tax Court sided with the Coffeys.  A mere three years later, the Eighth Circuit reversed in a unanimous three judge panel. 

On February 10, 2021, the Eighth Circuit granted a panel rehearing but denied a rehearing en banc.  Disagreements with the outcome of a circuit court usually result in a request for a rehearing en banc rather than a rehearing with the very panel that entered the decision.  So, this is a bit of an unusual twist in a case with many twists. After the vacating of the original opinion, the same panel issued a new opinion with some minor differences.

The result of the Eighth Circuit’s decision allows the IRS to come in many years later to challenge residence of individuals claiming Virgin Islands residence.  If the Coffeys had succeeded in this case, the procedural issue would have turned into a substantive victory, since the IRS would not have been able to make an assessment against them for the years at issue.

Gregory v. Commissioner, — F.3d – (3rd Cir. 2020) – This case was decided at the very end of 2020 so it is included here as it came out during last year’s end of year review and also because it is a case argued on appeal by the Tax Clinic at Harvard so including it provides another opportunity to showcase the work of the students.  The issue before the Third Circuit was whether the taxpayers’ use of Forms 2848 Power of Attorney and 4868 Request for Extension of Time constituted “clear and concise notice” of a change of address to the IRS pursuant to Treasury Regulation §301.6212-2.  Although filed as a non-precedential opinion, the outcome is a clear example of how the IRS cannot simply ignore the actual knowledge it has of a taxpayer’s address when issuing a Statutory Notice of Deficiency pursuant to I.R.C. §6212(b)(1), even if that taxpayer failed to follow the IRS’ prescribed procedures for changing their address. 

An odd ending to this case occurred when the Third Circuit returned it to the Tax Court.  Rather than simply entering an opinion for the taxpayers, the Court issued an order restoring the case to the general docket.  That order made no sense because the Gregorys unquestionably filed their Tax Court petition late.  This required the filing of a motion to have the court make a determination that the notice of deficiency was invalid, which it eventually did with no opposition from an equally confused government counsel.

In Patrick’s Payroll Services, Inc., v. Commissioner, No. 20-1772 (6th Cir. 2021), the Sixth Circuit upheld the decision of the Tax Court denying the taxpayer the opportunity to litigate the merits of the underlying tax because of a prior opportunity to discuss settlement with Appeals.  Guest blogger Chaim Gordon wrote about this case after the Tax Court’s decision and while the case was pending before the Sixth Circuit.  Chaim pointed out some of the novel arguments the taxpayer was making.  Unfortunately for the taxpayer, the Sixth Circuit was not buying what they were selling.

The 11th Circuit upheld the decision of the Tax Court in Sleeth v. Commissioner, — F.3d — 2021 WL 1049815 (11th Cir. 2021), holding that Ms. Sleeth was not an innocent spouse.  The Sleeth case continues the run of unsuccessful taxpayer appeals of innocent spouse cases following the major structural changes to the law in 1998. The Tax Court found three positive factors and only one negative factor applying the tests of Rev. Proc. 2013-34.  Yet, despite the multitude of factors favoring relief in each case, the Tax Court found that the negative knowledge factor required denial of relief.  This case follows the decision in the Jacobsen case from 2020 in which the Tax Court denied relief to someone with four positive factors for relief and only knowledge as a negative factor.  The pattern developing in these cases suggests that the Tax Court views the knowledge factor as a super factor, despite changes in IRS guidance no longer describing it as such.  Only economic hardship seems capable of overcoming a negative determination on knowledge.  In this post, Carl Smith discussed the Seventh Circuit’s decision in the Jacobsen case.  Both cases were argued on appeal by the Tax Clinic at Harvard.  The clinic also filed an amicus brief in the case of Jones v. Commissioner, TC Memo 2019-139, set to be argued soon before the 9th Circuit.

Lindsay v. U.S. is the latest case to apply the principle that United States v. Boyle essentially stands for the position that taxpayers have a nondelegable duty to be aware of tax deadlines. An agent’s incompetence or willful misconduct will not excuse the taxpayer from delinquency penalties.  Lindsay was incarcerated and executed a POA to Bertelson, an attorney, to manage his affairs, including filing his tax returns.  The attorney assured Lindsay he was doing so for the years 2012-15; instead he failed to file the returns and for good measure embezzled hundreds of thousands of dollars. The actions resulted in Lindsay receiving $705,414.61 in actual damages and $1 million in punitive damages.  Lindsay eventually filed his tax returns and paid over $425,000 in delinquency penalties. He filed a claim for refund; IRS rejected and he filed a suit in district court. The district court, contrary to the magistrate’s recommendation, granted the government’s motion to dismiss, citing Boyle as precluding a claim for relief. Following a timely appeal, the Fifth Circuit affirmed. In so doing, it applied Boyle to Lindsay’s somewhat sympathetic circumstances.

Tax Court

In Ramey v Commissioner, 156 T.C. No. 1 (2021), the Tax Court determined in a precedential opinion that when the IRS issues a notice of decision rather than a notice of determination and the taxpayer has filed the collection due process (CDP) request late, the Court lacks jurisdiction to hear the case.  The taxpayer, a lawyer, represented himself and pegged his arguments to last known address rather than jurisdiction.  Nonetheless, the decision expands the Court’s narrow view of jurisdiction to another setting without addressing the Supreme Court precedent on jurisdiction and its impact on the timing of the filing of documents.

Galloway v Commissioner, TC Memo 2021-24: This case holds that a taxpayer cannot use the CDP process to rehash a previously rejected offer in compromise (OIC).  Mr. Galloway actually submitted two OICs that the IRS rejected.  As an aside, from the description of the OICs in the Court’s opinion, the rejections seemed appropriate strictly from an asset perspective, since he did not want to include the value of a car he owned but allowed his daughter to use. 

The case of Mason v. Commissioner, T.C.M. 2021-64 shows at least one benefit of submitting an offer in compromise (OIC) through a request for a collection due process (CDP) hearing.  As part of his lessons from the Tax Court series, Bryan Camp has written an excellent post both on the case and the history of offers. 

Friendship Creative Printers v. Commissioner, TC Memo 2021-19: This case holds that the taxpayer could raise the merits of delinquency penalties by the backhanded method of challenging the application of payments.  Taxpayer failed to pay employment taxes over an extended period of time and failed to file the necessary returns but at some point made payments on the earliest periods.  In the CDP hearing, taxpayer argued satisfaction of the earliest periods and eventually provided an analysis showing payments equal to the tax paid.

The Court treated this as a challenge to the merits of the delinquency penalties imposed.  Unfortunately, the taxpayer did not designate its payments, which meant that the payments it made were not applied in the manner it expected and argued in the CDP hearing.  Taxpayer also looked at the transcripts without appreciating the impact of accruals not reflected in the assessed portion of the transcript but accruing nonetheless.

Reynolds v. Commissioner, TC Memo 2021-10: This case holds that the IRS can collect on restitution based assessments even when the taxpayer has an agreement with the Department of Justice to make payments on the restitution award.  Taxpayer’s prosecution resulted in a significant restitution order. He agreed to pay DOJ $100 a month or 10% of his income.  At the time of the CDP case he was not working and did not appear to have many prospects for future employment. Citing Carpenter v. Commissioner, 152 T.C. 202 (2019), the Tax Court said that the IRS did have the right to pursue collection from him.  Obviously that right, at least with respect to levy, is tempered by the requirement in IRC 6343 not to levy when it would place someone in financial hardship, but no blanket prohibition existed to stop the IRS from collecting and therefore to stop it from making a CDP determination in support of lien or levy. The case is a good one to read for anyone dealing with a restitution based assessment to show the interplay between DOJ and IRS in the collection of this type of assessment, as well as to show the limitations of restitution based assessments compared to “regular” assessments.

BM Construction v. Commissioner, TC Memo 2021-13: This case involves, inter alia, a business owned by a single individual and the mailing of the CDP notice to the business owner rather than the business.  The Tax Court finds that sending the CDP notice to the individual rather than the business does not create a problem here, since the sole owner of the business would receive the notice were it addressed to the business rather than to him personally.

Shitrit v. Commissioner, T.C. Memo 2021-63, points out the limitations on raising issues other than the revocation of the passport when coming into the Tax Court under the jurisdiction of the passport provision.  Petitioner here tries to persuade the Tax Court to order the issuance of a refund but gets rebuffed due to the Court’s view of the scope of its jurisdiction in this type of case.

The case of Garcia v. Commissioner, 157 T.C. No. 1 (2021) provides clarity and guidance on the Tax Court’s jurisdiction in passport cases as the Court issues a precedential opinion to make clear some of the things that can and cannot happen in a contest regarding the certification of passport revocation.  I did not find the decision surprising.  The Court’s passport jurisdiction is quite limited.  Petitioners will generally be disappointed in the scope of relief available through this new type of Tax Court jurisdiction. 

Other Courts

In Mendu v. United States, No. 1:17-cv-00738 (Ct. Fd. Claims April 7, 2021) the Court of Federal Claims held that FBAR penalties are not taxes for purposes of applying the Flora rule.  In arguing for the imposition of the Flora rule, the taxpayer, in a twist of sides, sought to have the court require that the individual against whom the penalties were imposed fully pay the penalties before being allowed to challenge the penalties in court.  The FBAR penalties are not imposed under title 26 of the United States Code, which most of us shorthand into the Internal Revenue Code, but rather are imposed under Title 31 as part of the Bank Secrecy Act.

The case of In re Bowman, No. 20-11512 (E.D. La. 2021) denies debtor’s motion for summary judgment that Ms. Bowman deserves innocent spouse relief.  On its own, the court reviews the issue of its jurisdiction to hear an innocent spouse issue as part of her chapter 13 bankruptcy case and decides that it has jurisdiction to make such a decision.  The parties did not raise the jurisdiction issue, which is not surprising from the perspective of the plaintiff, but may signal a shift in the government’s position since it had previously opposed the jurisdiction of courts other than the Tax Court to hear innocent spouse cases.

Passport Revocation Cases Part 2

Yesterday, I discussed two recent passport revocation cases, United States v. Hupp and Franklin v. United States. Today, I look at Tenth Circuit and Tax Court cases involving similar issues decided earlier this year.



The Tax Court decision in Rowen v. Commissioner, 156 T.C. No. 8 (2021) addresses the constitutionality of the passport revocation provision from the perspective of the power that IRC 7435 gives to the IRS.  Because it finds that the IRS does not play a decisive role in restricting a taxpayer’s right to international travel, the Tax Court grants summary judgment to the IRS on the constitutional argument.

The Rowen case provides some reason for believing that the taxpayer in Maehr had the right idea to sue the State Department rather than the IRS.  The Tax Court states that Mr. Rowen’s argument that IRC 7345 violates the 5th Amendment right to international travel has no merit because:

The plain text of section 7345 imposes no prohibition on international travel. Section 7345 merely provides a process by which the Commissioner may certify to the Secretary of the Treasury the existence of a seriously delinquent tax debt and the Secretary of the Treasury in turn transmits that certification to the Secretary of State.  Section 7345 expressly leaves all passport-related decisions for “action” by the Secretary of State.

Since the statute does not give the IRS power to revoke someone’s passport, the IRS has not violated anyone’s due process rights by simply certifying a case to the State Department.  The court also notes that on the record of this case there is no indication that the State Department has actually revoked his passport.

Mr. Rowen also argued that IRC 7345 violates the Uniform Declaration of Human Rights.  The Tax Court does not agree that IRC 7345 violates the provisions of this treaty but finds that even if it were to violate that treaty, the section does not impose limits on international travel. 

After addressing two other issues raised in the petition but not argued, the Tax Court grants summary judgment to the IRS.  It’s clear that a constitutional argument will go nowhere at the IRS or the Tax Court.  For taxpayers who want to make a constitutional argument regarding IRC 7435, coming to Tax Court will merely be a way station on the road to a circuit court.


We have not previously discussed Maehr v. U.S. Dep’t. of State, 5 F.4th 1100, 1119 (10th Cir. 2021) decided in July of 2021.  Of the four cases, it takes the most serious look at the constitutional argument and provides, perhaps, the most hope for future litigants.  Rather than suing the IRS, Mr. Maehr sued the State Department for deciding to revoke.  There the 10th Circuit said:

Passport revocation under the FAST Act is thus an example of a species of tax penalties known as collateral sanctions. “Unlike traditional tax penalties that require noncompliant taxpayers to pay money to the taxing authority, collateral tax sanctions require noncompliant taxpayers to forfeit a nonmonetary government benefit or service.” Joshua D. Blank, Collateral Compliance, 162 U. Pa. L. Rev. 719, 728 (2014). They “increasingly apply to individuals who have failed to obey the tax law,” perhaps because they “can promote voluntary tax compliance more effectively than the threat of additional monetary tax penalties.” Id. at 720. States and the federal government impose a variety of collateral tax sanctions, ranging from diminished housing assistance to the cancelling of driver’s licenses. Id. at 739-40. Passport revocation had not been used to thwart tax delinquency until the FAST Act, but it has been used in the context of non-payment of child support. See 42 U.S.C. § 652(k).

The court first addressed Mr. Maehr’s Privileges and Immunities clause argument.  It finds this argument implausible because:

These clauses apply to states, not the federal government, and Maehr can articulate no way around this fact. Even if the clauses could somehow constrain the federal government, no Supreme Court decision has ever interpreted these clauses as at all relevant to a right to international travel.

Next, Mr. Maehr makes an argument based on the writ ne exeat republica.  I discussed this extraordinary writ here.  This writ allows the government to keep someone from departing or sending their assets out of the US.  It’s a form of civil arrest and in many circuits requires the government to meet the four factor test for a preliminary injunction.  Mr. Maehr wants the court to require the same type of finding with respect to passport revocation that is required by case law regarding the writ ne exeat republica.  The court declines, stating:

Writs of ne exeat differ significantly from FAST Act passport revocations in three ways. First, the scope of ne exeat is much broader, restricting freedom of movement domestically as well as internationally. Second, writs of ne exeat can be issued even if the underlying tax debt is contested by the taxpayer, see, e.g., Shaheen, 445 F.2d at 10, whereas the FAST Act requires that the taxpayer’s rights to challenge a contested liability have lapsed or been exhausted prior to passport revocation. I.R.C. § 7345(c). Third, ne exeat is an essentially equitable common law remedy that has been codified in statute, making it sensible that courts have required showings of evidence paralleling those required for preliminary injunctions. Passport revocation under the FAST Act, in contrast, is a purely statutory and legal scheme with built-in due process protections.

Next, Mr. Maehr argued that the passport revocation infringed his right to travel in violation of substantive due process.  The court spends a fair amount of time discussing the history of the right to international travel for citizens of the US as it searches for the appropriate level of scrutiny.  The court states:

My review of Supreme Court precedent discerns a standard that clearly falls somewhere between rational basis and strict scrutiny. As I read it, the rule the Supreme Court has both announced and remained faithful to is as follows: substantial restrictions on international travel must advance a “legitimate and substantial” interest and must not sweep much more broadly than necessary. Aptheker, 378 U.S. at 508, 84 S.Ct. 1659 (quotation omitted). That rule closely resembles the language used to describe intermediate scrutiny.

Neither party argued for intermediate scrutiny and provided the court with a basis for evaluating how it would apply here.  Under those circumstances, the court decides to uphold the decision of the district court which dismissed his claim on this point as well.  So, Mr. Maehr does not come away with a victory.

The 10th Circuit seems to leave the door ajar for an attack on the passport revocation power under intermediate scrutiny.  It did not make a positive decision that the statute passed the test under that scrutiny.  The 10th Circuit’s decision suggests the possibility that if intermediate scrutiny was applied to the State Department’s role under the statutory scheme, the statute may not satisfy the constitutional requirements; however, I think that outcome is unlikely based on the precedent in the unpaid child support cases that formed part of the basis for this statute and because the 10th Circuit’s decision did not crack the door open very far.  The statute is young.  More litigation will occur, perhaps taking the issue to the Supreme Court.  Because most of the litigants present fairly unsympathetic situations, persons interested in advancing these arguments might search for someone who will evoke more sympathy than Mr. Maehr or Mr. Rowen.

Passport Revocation Cases Part 1

We are in the process of the three times a year exercise of updating the Saltzman and Book treatise “IRS Practice and Procedure.”  As we have mentioned previously, the blog started primarily because we must stay on top of procedural cases in order to update the treatise.  Sometimes the blogging of cases informs the treatise and sometimes the treatise informs the blog.  This post is one in which the treatise informs the blog, as there have been passport cases on which we have not blogged but some of which we are inserting in the treatise and some which were previously inserted.  The cases deserve discussion in order to keep you up to date on what’s happening in this area.  Because there are four cases, I will break the post into two parts.



The IRS sued the Hupps to reduce the $1.1 million tax debt to judgment.  While the suit was pending, their son decided to get married in the Dominican Republic.  Naturally, the Hupps wanted to attend the wedding; however, the passport revocation provisions got in the way.  They filed a motion in the suit brought by the IRS seeking to get the district court to issue an order allowing them to obtain their passports so they could travel to the wedding.  Of course, the court does not want to stand in the way of the Hupps attending their son’s wedding, but the procedural hurdles prove too much to allow the trip to take place.  We don’t learn from the opinion whether the son went forward with the wedding in the Dominican Republic or relocated it to a US destination in order to allow his parents to attend.

The Hupps put the court under some pressure because they filed their motion on June 1, 2021 seeking to attend a wedding scheduled for June 12, 2021.  They noted that they had already purchased their tickets and were scheduled to fly out on June 9, 2021.  It turns out that the IRS response revealed it had only sent the wife’s name to the State Department as having seriously delinquent debt even though her husband is jointly liable.  We also do not learn why the IRS chose only to certify her debt to the State Department.  We also do not learn from the case whether the husband chose to go since he did not have the travel restriction (yet).

The first hurdle they encounter concerns the making of their request as a counterclaim to the suit to foreclose:

While the Hupps have undoubtedly chosen the wrong mechanism to bring their challenge before the Court, the underlying issue—if properly brought—is necessarily not barred by sovereign immunity. The Hupps’ motion might be read as challenging the § 7345 certifications as erroneous—that their debt does not qualify as a “serious delinquent tax debt” under § 7345(b). This challenge itself is not barred by sovereign immunity, as § 7345(e) does expressly allow the Government to be sued to challenge the certification. However, the statute is clear that it must bring a new civil action against the Government. The statute cannot be read to authorize a counterclaim against the Government in a tangentially related suit.

The court skirts the procedural problem to look at the merits of their concern.  It notes that they do not argue the certification of the debt was erroneous.  Instead they argue it was unjustified.  In an effort to potentially assist them, the court interprets this argument as one in which they seek to say the statute infringes on their constitutional right to international travel which cannot be deprived without due process.  The court notes that such a restriction must be rationally related to a legitimate governmental interest.  It finds that:

Here, § 7345 passes the rational basis test. The collection of seriously delinquent tax debts is a legitimate governmental interest. See, e.g., United States v. First Nat’l Bank of Chi., 699 F.2d 341, 346 (7th Cir. 1983) (stating that the United States’ interest in collecting taxes “is of importance to the financial integrity of the nation”); Jones, 2021 WL 864954, at *6. Restricting the issuance and renewals of passports is rationally related to this interest for the very reasons the Hupps offer: (1) apply pressure to resolve tax debt; (2) to avoid hiding and then accessing money in offshore accounts; and (3) to limit one’s ability to flee the country to avoid taxes. The Hupps argue that the statute is not justified as applied to them because they intend to pay their taxes, are not hiding money in offshore accounts, and do not intend to flee the country to avoid their taxes. However, that the Hupps claim they will meet their tax obligations even if the Government does not use this tool to pressure collection, does not make the statute unconstitutional.

So, the court denies their motion.  The IRS probably sought to levy on any refund the Hupps claimed from the airline.


In Franklin v. United States, 128 AFTR 2d 2021-6140 (N.D. Tex. 2021) the IRS assessed penalties of over $400,000 based on failure to report income from a foreign trust.  Essentially, Mr. Franklin sought to skirt the Flora full payment rule by bringing a host of actions against the IRS in the hopes that one would allow him to contest the underlying assessment.  He wants to argue that the IRS failed to meet certain procedural requirements, viz. IRC 6751(b), before making the assessment.  The effort to get to an argument about the underlying liability failed.

In total, Mr. Franklin brings a quiet title action under 28 USC 2410, a failure to release lien action under IRC 7432, a wrongful collection action under IRC 7433, a request for declaratory judgment relief, a review under the Administrative Procedure Act, and finally, he throws in a challenge to the revocation of his passport.  The court addresses each in turn, explaining why the government has not waived sovereign immunity for each and why he cannot get anywhere in the suit.  I will provide a discussion of the passport count where he challenged the constitutionality of the statute as violating his procedural and substantive Due Process right to travel internationally.

With respect to procedural due process, the court finds that Collection Due Process gave Mr. Franklin an opportunity to contest the tax debt prior to certification.  With respect to substantive due process, the court finds that the right to international travel is not a fundamental right.  It then finds that the passport statute meets the rational basis test because it serves the legitimate purpose of aiding the government’s revenue stream.  The decision does not break new ground but affirms the decision made in Maehr v. U.S. Dep’t. of State, 5 F.4th 1100, 1119 (10th Cir. 2021).

In tomorrow’s post, I will discuss Maehr and another constitutional challenge in the Tax Court case, Rowen v. Commissioner.

Refining the Tax Court’s Jurisdiction in Passport Cases

The case of Garcia v. Commissioner, 157 T.C. No. 1 (2021) provides clarity and guidance on the Tax Court’s jurisdiction in passport cases as the Court issues a precedential opinion to make clear some of the things that can and cannot happen in a contest regarding the certification of passport revocation.  I did not find the decision surprising.  The Court’s passport jurisdiction is quite limited.  Petitioners will generally be disappointed in the scope of relief available through this new type of Tax Court jurisdiction. 

This is a precedential opinion decided in a case in which the taxpayer was unrepresented.  Precedential opinions in cases in which the taxpayer is unrepresented concern me.  They bind future litigants to a position in which the only arguments to the court may have come from the Government.  Before issuing a precedential opinion, it would seem better for the system if the court would seek an amicus or some voice with the ability to make cogent legal arguments from the taxpayer’s perspective.  In this case, the outcome may not have changed, but maybe arguments on behalf of the taxpayer would have shifted the outcome.


In early 2020, back when a passport had more meaning than it has had during the pandemic, the IRS certified both Mr. and Mrs. Garcia to the State Department for revocation of their passports because of their joint tax debt, which was seriously delinquent as defined in IRC 7435(b).  They filed a Tax Court petition to contest the revocation.  At some point after filing the petition, Mr. Garcia passed away.

In November of 2020, the IRS reversed its certification because they submitted a processable doubt as to liability offer in compromise.  In January of 2021, the IRS filed a motion to dismiss the Tax Court case on the grounds of mootness, arguing that there was no further relief the Tax Court could grant in this case at this time.

Prior to filing the doubt as to liability offer, petitioners had filed an amended return, which the IRS rejected.  That signals petitioners should not get their hopes too high on the likelihood of a positive outcome based on the doubt as to liability offer.  Nonetheless, the acceptance of the offer for processing serves as a basis for decertification of the passport revocation, leaving them clear to travel in the short term.  If the IRS rejects the doubt as to liability offer, it seems likely that at some point, absent payment of the almost $600,000 liability, the IRS would certify the passport for revocation again.

The court first addresses whether a married couple can file a joint petition in the Tax Court based on separate notices of passport revocation stemming from a joint liability.  The court notes that both the statute and the Tax Court Rules are silent on this point.  The IRS did not object to this aspect of the case but, whether or not the IRS cares, the court cares because it is bound to consider whether it properly has jurisdiction and wants to get this right.  It also footnotes that the statute is silent as to a time frame for filing a passport revocation case, as it had discussed in an earlier passport case of Ruesch v. Commissioner, 154 T.C. 289, 295 (2020).

The court looks to Tax Court Rule 34(a)(1) which governs filing a petition in a “Deficiency or Liability Action.”  After describing the rule, the court noted that the Garcias received substantially identical notices of certification and raised the identical question in their Tax Court case.  It finds that equity and common sense support allowing a joint petition.  It points out that causing them to file separate petitions would result in unnecessary delay and expense.  (Petitioners save the $60 filing fee by jointly filing in addition to other costs duplicate filing would entail.)  It points out that had they filed separately, the court would almost certainly have consolidated their cases which, while true, is something that happens with respect to many petitions that cannot be jointly filed.  It finds an appropriate analogy in Collection Due Process (CDP) cases where neither the statute nor the rules discuss joint filing but where it has nevertheless been allowed.  Interestingly, the court cites only to non-precedential CDP cases in support of the analogy.  So, it holds that petitioners may file a joint petition in a passport case.

Next, it looks at the issue of its authority in a passport case.  It finds that:

If we find that a certification was erroneous, we “may order the Secretary [of the Treasury or her delegate] to notify the Secretary of State that such certification was erroneous.” Sec. 7345(e)(2). The statute specifies no other form of relief that we may grant.

As mentioned above, the relief under this provision is very narrow.  Having confirmed the narrow scope of its jurisdiction in these cases, the court moves on to the mootness question raised by the motion to dismiss.

First, the court notes that the husband’s death might render his case moot.  Hard to argue with that conclusion given the narrow scope of relief the court can grant, but the court cites to a non-tax case where the seemingly obvious conclusion of mootness was found inappropriate since certain rights with respect to a passport might survive death:

In Magnuson v. Baker, 911 F.2d 330, 331-332 (9th Cir. 1990), the State Department revoked the passport of a Canadian citizen, “asserting that the passport had been issued in error.” The passport holder filed suit to challenge the revocation, but later died, and the Government urged that his claim had become moot. Id. at 332 n.4. The Ninth Circuit disagreed, ruling that “various legal interests may still turn on whether * * * [he] could retain his passport.”

So, the court moves forward with respect to both parties and finds that the decertification by the IRS moots the Tax Court case:

Although the Tax Court is an Article I court, the “case or controversy” requirement under Article III applies to the exercise of our judicial power. See Battat v. Commissioner, 148 T.C. 32, 46 (2017) (citing cases). Accordingly, we will dismiss a case as moot if the parties’ subsequent actions have produced a situation in which neither party retains any “legally cognizable interest in the outcome.” City of Erie v. Pap’s A.M., 529 U.S. 277, 287 (2000) (quoting Cty. of Los Angeles v. Davis, 440 U.S. 625, 631 (1979)). A case becomes moot when “the court can provide no effective remedy because a party has already ‘obtained all the relief that [it has] sought.’” Conservation Force, Inc. v. Jewell, 733 F.3d 1200, 1204 (D.C. Cir. 2013) (alteration in original) (quoting Monzillo v. Biller, 735 F.2d 1456, 1459 (D.C. Cir. 1984)).

In the case at hand, the IRS certified petitioners as persons owing a seriously delinquent tax debt. Petitioners, believing those certifications to be erroneous, petitioned this Court for review. The relief that they sought–and the relief that the statute authorizes us to grant, if we determine a certification to have been improper–is an order directing respondent to “notify the Secretary of State that such certification was erroneous.” Sec. 7345(e)(2). Here, the IRS has conceded that its certifications were erroneous because petitioners had submitted an offer-in-compromise of their 2012 tax liability, an offer that had been determined to be processable and remained pending.

Petitioners had already received the relief they requested from the Tax Court, removing any controversy from the proceeding.

Petitioners wanted to argue the merits and argue about the processing of their offer, but that is beyond the scope of what the Tax Court will consider in a passport case.  It notes that if the IRS certifies their case again to the State Department, they, or at least Ms. Garcia, can come back to the Tax Court and argue at that time that the certification was erroneous.