Passport Action Appellate Forum Shopping

Frequent guest blogger Carlton Smith discusses the possibility of appellate forum shopping in passport actions, and alerts us to one pertinent Circuit split that will apply to passport actions. -Christine

Keith did a post discussing CC-2018-005, which gives Chief Counsel advice to IRS attorneys in passport actions brought by taxpayers in the Tax Court under section 7345(e).  Section 7345(a) authorizes the Treasury Secretary to transmit an IRS certification to the Secretary of State that there exists a “seriously delinquent tax debt” “for action with respect to denial, revocation, or limitation of a passport pursuant to section 32101 of the FAST Act.”  Section 7345(d) requires the IRS to “contemporaneously notify an individual of any certification under subsection (a) . . . with respect to such individual.” And section 7345(e) allows a taxpayer to bring a suit to determine whether the certification was erroneous in either a district court or the Tax Court.  Apparently, during this winter or spring, the IRS issued or will issue the first notices to taxpayers under section 7345(d).

Before I read Keith’s post, I had not thought of the possible opportunities that this system of passport action litigation in different courts provides for appellate forum shopping.  I had assumed that Tax Court passport actions would be made appealable to the regional Circuit Courts of Appeals in which the taxpayer resided – i.e., the same appellate court to which the district court would look for controlling authority.  Under Golsen v. Commissioner, 54 T.C. 742, 757 (1970), aff’d, 445 F.2d 985 (10th Cir. 1971), the Tax Court will follow the precedent, if there is any, of the Circuit Court to which the Tax Court case is appealable.  Flush language at the end of section 7482(b)(1) provides that if no subparagraph applies to direct venue otherwise (such as subparagraph (A) directing non-corporate deficiency cases to the Circuit of residence), venue on appeal from the Tax Court is only to the D.C. Circuit.  But, as in the case of whistleblower award jurisdiction under section 7623(b)(4), there is no subparagraph of section 7482(b)(1) mentioning passport actions, so the flush language directs all appeals from Tax Court passport actions to the D.C. Circuit.  (The Tax Court has stated that, under that flush language, all whistleblower award actions appear appealable only to the D.C. Circuit.  See Kasper v. Commissioner, 150 T.C. No. 2, at slip op. page 6 n.1 (Jan. 9, 2018).)

This means that one of the considerations in choosing the court in which to bring a passport action will be whether there is more favorable appellate authority for the taxpayer in either the D.C. Circuit or the Circuit of the taxpayer’s residence.  In deficiency cases, appellate forum shopping is discouraged (though not eliminated) by the requirement that to file a refund lawsuit in the district court or the Court of Federal Claims (e.g., to obtain more favorable appellate precedent), one must first pay all the tax under the rule of Flora v. United States, 362 U.S. 145 (1960).  But no full payment rule applies to passport actions.  While the district court filing fee is a few hundred dollars more than the $60 Tax Court filing fee, that will be little discouragement from filing passport actions in the district courts.  So, there may end up quite a lot of passport actions brought in the district courts (by comparison to only about 200 refund suits being brought annually).

The rest of this post will address one issue relevant to passport actions as to which there is already a split of authority between the D.C. Circuit and some regional Circuits – i.e., whether the filing deadline in 28 U.S.C. section 2401(a) is “jurisdictional”.


PT readers are well aware that Keith and I are in the midst of litigating the issue of whether, under recent nontax Supreme Court case law, many Tax Court and other judicial tax filing deadlines are not jurisdictional and are subject to equitable exceptions (such as tolling or estoppel), waiver, and forfeiture. The Tax Court takes what I believe to be the today untenable position that all of its roughly 20 petition filing deadlines are jurisdictional, regardless of the varying language of the statutes giving the court the power to hear such cases. See Tax Court Rule 13(c).

CC-2018-005 notes that section 7345 contains no judicial filing deadline for a passport action after the notice under section 7345(d) is issued.  The Chief Counsel notice states that, absent a filing deadline in section 7435, the courts must apply the catchall federal judicial 6-year filing deadline contained in 28 U.S.C. section 2401(a).  I agree with Chief Counsel’s analysis that section 2401(a) is the relevant filing deadline for passport actions.

In United States v. Wong, 135 S. Ct. 1625 (2015), the Supreme Court held that the 2-year administrative and 6-month judicial filing deadlines under 28 U.S.C. section 2401(b) (the Federal Tort Claims Act) are not jurisdictional and are subject to equitable tolling — consistent with its current position that filing deadlines are no longer jurisdictional (except for when (1) stare decisis to previous Supreme Court opinions requires or (2) Congress makes a “clear statement” otherwise).

Without making an exhaustive search of every Circuit currently, I note that there has long existed a split in the Circuit courts over whether the 6-year filing deadline of 28 U.S.C. section 2401(a) is jurisdictional.  Here’s from a 2015 opinion of the Sixth Circuit (decided shortly after Wong) that explains where the split then stood and holding that under the recent Supreme Court case law the filing deadline is not jurisdictional:

After today’s decision, it is true, there is a 4-3 circuit split on the point, with four of the circuits favoring the government’s position that § 2401(a) creates a jurisdictional bar. Compare Konecny v. United States, 388 F.2d 59, 61-62 (8th Cir. 1967); Ctr. for Biological Diversity v. Hamilton, 453 F.3d 1331, 1334 (11th Cir. 2006) (per curiam); Mendoza v. Perez, 754 F.3d 1002, 1018, 410 U.S. App. D.C. 210 (D.C. Cir. 2014); and Hopland Band of Pomo Indians v. United States, 855 F.2d 1573, 1576-77 (Fed. Cir. 1988), with Clymore v. United States, 217 F.3d 370, 374 (5th Cir. 2000); Herr v. U.S. Forest Serv., [i.e., this case] (6th Cir. Oct. 9, 2015); and Cedars-Sinai Med. Ctr. v. Shalala, 125 F.3d 765, 770 (9th Cir. 1997). Many of these cases, however, have not grappled with the Supreme Court’s recent cases limiting the concept of jurisdiction. None has considered the impact of Kwai Fun Wong, decided just this year. When the D.C. Circuit has noted the apparent conflict between its decision and the Arbaugh [v. Y & H Corp., 546 U.S. 500 (2006),] line of cases, it has acknowledged the point each time yet steered the basis for decision to other grounds. See Mendoza, 754 F.3d at 1018 n.11; P & V Enters. v. U.S. Army Corps of Eng’rs, 516 F.3d 1021, 1026-27, 380 U.S. App. D.C. 96 & n.2 (D.C. Cir. 2008); Felter v. Kempthorne, 473 F.3d 1255, 1260, 374 U.S. App. D.C. 272 (D.C. Cir. 2007); Harris v. FAA, 353 F.3d 1006, 1013 n.7, 359 U.S. App. D.C. 281 (D.C. Cir. 2004). The Arbaugh rule [(that Congress must make a clear statement to make a claims processing rule, such as a filing deadline, jurisdictional)] together with its application in Kwai Fun Wong gives us comfort in siding with the non-jurisdictional side of this split. Section 2401(a) does not limit a federal court’s subject-matter jurisdiction.

Herr v. U.S. Forest Service, 803 F.3d 809, 817-818 (6th Cir. 2015).

Even since the Herr opinion, the D.C. Circuit has noted its prior holdings that the 6-year filing deadline in section 2401(a) is jurisdictional.  See Owens v. Republic of Sudan, 864 F.3d 751, 802 (D.C. Cir. 2017), noting, without reexamining, the holding of the D.C. Circuit in Spannus v. U.S.D.O.J., 824 F.2d 52 (D.C. Cir. 1987). So, under Golsen, the Tax Court will have to find the 6-year section 7345 action filing deadline in section 2401(a) jurisdictional.

It will be a long time (if ever) before the issue of whether the passport action deadline is jurisdictional comes before a district court or the Tax Court, since the issue will only be relevant if a taxpayer files the action late (i.e., after the 6-year statute has expired) and seeks a judicial extension occasioned by equitable tolling or estoppel.  But, this is only one potential Circuit split as to which appellate forum shopping in passport actions may be beneficial.  There may eventually be others – and ones that come about more rapidly.

Anyway, to eliminate the possibility of appellate form shopping as to passport actions, perhaps it is time for Congress to consider adding section 7345(e) passport actions to the list of subparagraphs in section 7482(b)(1) that direct appeals of Tax Court cases to the Circuit of an individual’s residence.

Chief Counsel Guidance on Passport Denials and Recent Legislative Change

On April 5, 2018, the IRS issued CC-2018-005 providing guidance to Chief Counsel attorneys regarding how to handle IRC 7345 cases brought in Tax Court. We reported in a prior post that Deputy Chief Counsel Drita Tunuzi stated at the last ABA Tax Section meeting that the IRS would probably start issuing the notices by the end of February. The timing of this guidance syncs with the timing of the earliest Tax Court cases Chief Counsel’s office might expect based on the issuance of the revocation notices. We are unaware of any pending cases on this issue and welcome comments directing us to filings under this new provision of the code. In addition to discussing the recent guidance, I have copied below, thanks to an alert from Carl Smith, the language of a small amendment to jurisdiction of these cases.


Legislative Change

Congress made a minor change to the provisions on the Tax Court and district court review of passport revocation decisions, taken from the Joint Committee print description of the bill:

Amendments relating to the Fixing America’s Surface Transportation Act (2015)

Revocation or denial of passport in case of certain unpaid taxes (Act sec. 32101). – The Act provides for judicial review of the Secretary’s certification that an individual has a seriously delinquent tax debt, either in a U.S. district court or in the Tax Court. The provision clarifies that the party against whom a Tax Court petition is filed is the Commissioner of the Internal Revenue Service. The provision also provides a tie-breaker rule clarifying that the court first acquiring jurisdiction over the action has sole jurisdiction, and corrects a cross reference.

Here’s the text of the changes, which can be found at pages 2804-2805 of the bill:




24 (1) Section 7345(e)(1) is amended—

1 (A) by striking ‘‘or the Tax Court’’ and in-

2 serting ‘‘, or against the Commissioner in the

3 Tax Court,’’, and

4 (B) by adding at the end the following:

5 ‘‘For purposes of the preceding sentence, the

6 court first acquiring jurisdiction over such an

7 action shall have sole jurisdiction.’’.

8 (2) Section 7345(f) is amended by striking

9 ‘‘subsection (a)’’ and inserting ‘‘subsection

10 (b)(1)(B)’’.

11 (b) EFFECTIVE DATE.—The amendments made by

12 this section shall take effect as if included in section

13 32101 of the Fixing America’s Surface Transportation

14 Act.

New Chief Counsel Guidance

The guidance starts by describing the statute and the IRM provisions that we discussed in our prior post. It provides that the IRS will rely on automated systems to identify

“every module on an individual’s account with an unpaid assessed tax liability that is not statutorily excepted from the definition of seriously delinquent tax debt or otherwise in a category excluded from certification. Once all eligible modules have been identified, the systems will aggregate the amount of unpaid liabilities. If the total is more than the statutory threshold, the taxpayer will be identified as having a seriously delinquent tax debt, and a Transaction Code (TC) 971 Action Code (AC) 641 will post to each module.

The SBSE Commissioner will certify that the identified individuals each have a seriously delinquent tax debt. The Service, under section 7508(a)(3), will postpone the certification of taxpayer serving in a combat zone or contingency operation. The Service will send a list of all certified individuals to the State Department. Once it has received notice from the Service, the State Department will not issue a new or renewed passport to a certified individual and it may revoke a previously issued passport, except for return travel to the United States…. Contemporaneously with the certification, the Service will notify individuals of their certification by sending them a CP508C notice by regular mail. The CP508C notice will list the tax liabilities giving rise to the certification by taxpayer identification number, tax period, and type and will inform the individual of the right to seek judicial review in a federal district court or the Tax Court.”

The Notice anticipates that taxpayers will raise challenges to the underlying liabilities, the period of limitations, and the scope and standard of review. It lays out the responses the Chief Counsel attorneys should make to those arguments.

Judicial Review of the Underlying Liability

The Notice takes the position that IRC 7345 does not provide for judicial review of the liability through this process. This statute does not waive sovereign immunity. A suit seeking to challenge the liability would effectively seek to restrain collection of an assessed tax and that would be prohibited by the Anti-Injunction Act. Section 7345 is not a provision providing an exception to that act.

Time for Seeking Review

IRC 7345 does not provide a period of limitations for bringing a certification action. While many people may rush to Court to avoid having their travel restricted, others may not even receive the notice sent by regular mail or may not appreciate its meaning immediately. The Notice takes the position that the general statute of limitations provided in 28 USC 2401(a) applies. This is a six year period. So, the IRS will not argue that the court lacks jurisdiction if the taxpayer brings a suit contesting certification within six years of issuance of the certification notice. The Notice also provides that taxpayers will have six years from the date grounds for reversal existed to bring an action challenging whether the IRS failed to reverse certification.

Scope of Review

IRC 7345 does not specify the scope or standard of review applicable to certification actions. The IRS takes the position that, in the absence of a statutory standard of review, the review is “confined to the administrative record, and ‘no de novo proceeding may be held. United States v. Carlo Bianchi & Co., 373 U.S. 709, 715 (1963).’” Because the IRS bases its decisions on its computer records of taxpayer accounts, it takes the position in the Notice that review is limited to the computerized records of those modules. The standard the IRS tells its attorneys that the Court should apply is whether the IRS action was “arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law.”


The Notice tells IRS attorneys that the title of the response to the action brought by a taxpayer under IRC 7345 should be “Answer.” The Notice directs attorneys to attach the certification letter to the answer if the taxpayer fails to attach it to the petition. Once the attorney answers the case, it will not be referred to Appeals because of the ”automated nature of the Service’s process for identifying modules and certifying individuals with seriously delinquent tax debts and because the determinations will have been verified by the assigned attorneys in answering the cases.”

This guidance together with the other guidance provided above tells you what the IRS thinks of the scope of judicial review here. The IRS expects the courts to have little to say. I expect the courts may have something to say about that even if they generally agree with the scope of review. It will be interesting to see if someone brings a Facebook-type action seeking to get to Appeals to discuss their passport certification case. The Notice begins to bring into focus the areas where the initial fights over procedure will occur.


The Notices walks the attorneys through five types of motions – Motion to Dismiss for Lack of Jurisdiction, Motion to Change Caption, Motion to Dismiss for Failure to State a Claim or Motion for Judgment on the Pleadings, Motion for Summary Judgment, and Motion to Dismiss on the Grounds of Mootness. I suspect that the IRS will crank out a Motion for Summary Judgment on almost every one of these cases given its view of the standard of review and the issues the taxpayer can raise. The other motions will be used depending on the circumstances of the case. The Notice also talks about what the attorneys should put in a stipulated decision document. It contemplates that the IRS will enter into a stipulated decision if the IRS erroneously certifies a taxpayer, a valid basis for reversing the certification exists or the taxpayer concedes the case.

Who Represents the IRS

The Notice provides the normal breakdown of representation with the Tax Division of the DOJ representing the IRS in cases brought in District Court and Chief Counsel attorneys providing representation in Tax Court. If the case is brought in District Court, Chief Counsel would provide a defense letter and the information the DOJ attorneys would need in order to properly defend the case. The Notice instructs attorneys to always use the settlement classification of “Standard.” The Standard classification in a defense letter means that the DOJ should coordinate with Chief Counsel prior to settling the case. The other classification provided in a defense letter is Settlement Option Procedure which signals to DOJ that it can settle the case without coming back to Chief Counsel. Even in cases classified as Standard, the DOJ has ultimate settlement authority. So, it must contact Chief Counsel if it wants to settle a case but it need not listen to what they say. Because this is a new basis for jurisdiction, the IRS naturally wants to know about and have a voice in any decisions made on these cases. After five or ten years, it will probably revert the process to the normal process in which the issues in the case cause the settlement classification rather than having a blanket Standard classification apply.

Coordination with the National Office

As with the Standard classification, the norm when a new statute is rolling out is to have every case coordinated through the National Office and that is what the Notice provides here. This means that if you have one of these cases it will take longer to get a settled resolution since the local attorney will need to coordinate with their counterpart in the National Office. Coordination is not a bad thing. It will provide uniformity while slightly slowing down the process.


The Notice provides clarity on how Chief Counsel’s office will handle these case. I expect that after a year or so of working with these cases, another Notice might get issued further clarifying the procedures and dealing with the situations that have arisen which no one anticipated or dealing with adverse decisional law.


Data from ABA Tax Section Meeting

February 8-10 the Tax Section held its mid-year meeting in San Diego. Here are a few items of interest from the meeting concerning the Tax Court, the Department of Justice Tax Division, the revocation of passports and the National Taxpayer Advocate’s annual report.


Tax Court

The Court had about 22,000 cases pending at the end of October. It continues to close cases faster than it receives them. There are three openings at the moment to fill the empty seats on the 19 judge roster of the court and there are three nominations pending. I got the impression from a separate conversation that perhaps the nominations would move forward in late March based on the current schedule in the Senate. Tax Court nominations go through the Senate Finance Committee rather than through the Judiciary Committee. In addition to the three current openings, Chief Judge Marvel reported that she anticipates the possibility of three additional openings on the Court this year because one judge will turn 70 – the mandatory age for Tax Court judges and the point at which a Tax Court judge turns into a senior judge or retires altogether – and two judges come to the end of their 15-year terms. Chief Judge Marvel observed that it is possible that the makeup of the Court will change by almost 1/3, depending on how the administration deals with the judges whose terms are expiring, and that would be an extraordinary amount of turnover for the Court. (Some administrations have almost automatically reappointed Tax Court judges as their terms expired and some have almost automatically replaced judges as their terms expired. We will soon find out how the current administration approaches the matter.)

Department of Justice

The Tax Division of the Department of Justice was ably led by Dave Hubbert for many months while it was without a political appointee. Dave continues to serve as the deputy in charge of Civil Matters as he did, since 2012, before he was acting as the head of the Tax Division. On December 17, 2017, Richard Zuckerman joined the Tax Division as the Deputy Assistant Attorney General for Criminal Matters and became the Division’s Principal Deputy in charge of the Division. Read more about him here. The Tax Division has three priorities for the coming year: 1) offshore compliance; 2) employment taxes; and 3) return preparers. These priorities are not especially new but continue as areas of emphasis in enforcing the tax laws.


I attended a panel discussion devoted to the enforcement of the provision which will revoke or deny a passport for individuals with seriously delinquent tax debt. The principal panelist was Drita Tonuzi, the Deputy Chief Counsel for Operations. Drita has held this position for almost one year. So, the panel could hardly have been more authoritative. We have discussed this issue before here and here. The IRS will certify taxpayers to the State Department if the taxpayer owes more than $50,000 and their CDP rights are exhausted, except for taxpayers who fall into certain statutory and administrative exceptions.

The statutory exceptions listed in IRC 7435(b)(2) include debts being paid in an installment agreement (IA) or offer in compromise (OIC) on which the taxpayer is up to date, debts being contested in a Collection Due Process (CDP) hearing and in an innocent spouse request. The manual also notes that the IRS will not refer taxpayers currently serving in a combat zone because of the suspension of action against these individuals in IRC 7508(a). The IRS has created a list of eight administrative exceptions in IRM which it published on December 12, 2017. These exceptions are cases in currently not collectible status; cases involving identity theft; cases in which a bankruptcy case is pending; debt of a deceased taxpayer (the IRM specifically limits this exception to the deceased taxpayer himself or herself and makes me wonder how many of these taxpayers have concerns about their passports but I will refrain from making further remarks on this exception); pending OICs and IAs; pending adjustments that will fully pay the liability and taxpayers residing in a disaster zone.

The panel indicated that the letters would be going to the State Department “soon,” which may mean before the end of February.

When the IRS sends a certification to the State Department that a taxpayer is seriously delinquent, it simultaneously will send a letter to the taxpayer. This letter, which will be sent by regular (not certified) mail to the taxpayer’s last known address will give the taxpayer the opportunity to file a petition in Tax Court to contest the decision. The taxpayer has the right to file a petition in Tax Court or in the District Court. The panel stated that the time to go to court is open-ended. It also speculated that most taxpayers will go to District Court because of the desire for speed that would not be afforded under normal Tax Court procedures. The panel stressed that the IRS is just one part of this process and the State Department is the place where the denial or the revocation of the passport occurs. For IRS procedures, look at IRM

National Taxpayer Advocate’s Report

I was extremely glad that the government shutdown that occurred during the Tax Section meeting lasted only a few hours. Had the shutdown continued, I was slated to attempt to fill in for the National Taxpayer Advocate on a couple of panels and that would not have been good for those attending. Since the shutdown ended, the National Taxpayer Advocate was able to deliver the presentation about her report. This will be a glancing blow on the topics covered and I hope to have some individual posts regarding some of the topics needing a longer discussion.

One of her findings this year concerned the reports we have become accustomed to hearing that the IRS audits less than 1% of the returns filed. In her annual report and her discussion, she debunked this myth by pointing out the actual number of returns on which the IRS makes adjustments approaches 7%. She also pointed out that 76% of audits are done by correspondence and that we should be focusing on not just the number of contacts made by the IRS but the nature of the contacts. The contacts are an opportunity for the IRS to educate and to bring taxpayers into long-term compliance but contacts by correspondence have much less of a chance of accomplishing this purpose.

The IRS has decided that it has authority to do retroactive math error adjustments. In 2017, there were a number of filers who used ITINs without updating them as instructed. Chief Counsel has issued an opinion that nothing prohibits retroactive math error adjustments. The IRS intends to send such notices to the individuals who used invalid ITINs in 2017 and then just summarily assess liabilities against the individuals who received refunds.

The 2017 filing season was the first one in which the IRS held up refunds in which the taxpayer sought refundable credits until February 15th. The purpose of the delay in issuing the refunds until that date was to give the IRS time to match third-party data against the returns to cull out bad refund claims. By February 15th, the IRS still did not have the data it needed in order to perform the match with respect to many taxpayers. If the employer or other third party submitted the information returns by paper, the IRS did not have time to transfer that information into its digital file in order to perform the match. The NTA recommends reducing the number of employees, from 50 to 5, an employer can have and still use paper.

The NTA also talked about the new “Purple Book” that was issued as a part of her report. The color was chosen as a blend of red and blue to signify the bi-partisan nature of the legislative suggestions. The book puts together the suggestions from a compilation of suggestions made during the period of the NTA’s service in that position and it provides the suggestions to Congress in a ready to use format. The NTA credits Ken Drexler, who heads up the legislative liaison work in her office, for the idea but noted that its inclusion caused a lot of additional work for the staff. Two of the provisions in the book were passed by Congress during the Tax Section meeting and I will talk about those provisions in a separate post.


Follow up to Some Interesting Sources on Tax Legislation (and a Little Procedure Too)

We have previously offered some suggestions for readers wanting additional insights on the major tax legislation Congress pushed through and President Trump signed into law last week. Here are some more interesting reads:


An update on the must read The Games They Will Play article that describes how the “final law introduces fundamental—and in our view insurmountable—structural problems to the income tax.” This is I think the most important tax article of the year and an essential read.

Tax and twitter maestro Professor Andy Grewal suggests that 2017 prepayment of 2018 property taxes may not generate a 2017 deduction;

Professor Ellen Aprill explains in a guest post on Medium why the new law imposing a 21% excise tax on highly paid University employees has a hefty technical glitch that seems to unintentionally exclude employees of public universities;

Forbes tax blogger Tony Nitti on the 20% deduction on pass through income, a major source of future game playing (and complexity). This is terrific;

Professor Sam Brunson over at Surly discussing the implications of the repeal of deductions for dependents as well as the trade offs from the law’s boosting the standard deduction and increasing the CTC. An important read for low and moderate income families—the comment exchange is also good;

A Law360 piece on another of the law’s big winners: tax professionals;

Professor Dan Shaviro offering some preliminary thoughts on the international provisions;

And finally on a completely unrelated topic, if you have had enough substance and want some procedure, Frank Agostino and his team have a new monthly tax controversy journal out, and it includes a practical and important discussion of the about to be implemented passport revocation rules.