Source: https://procedurallytaxing.com/category/passport-revocation/
Timestamp: 2019-04-20 18:10:24+00:00

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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).
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).
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.
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.
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.
7 action shall have sole jurisdiction.’’.
“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 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.
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.
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.
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.
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.
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.
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.
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.

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