Tax Court Affirms Passport Revocation, Lacks Jurisdiction for Constitutional Challenge
Last month, the U.S. Tax Court considered a pro se litigant’s challenge to the Commissioner’s decision to revoke his passport over $1.2 million in assessed tax liability. Cross motions for summary judgment were filed, with Adams alleging that the tax liabilities assessed were improper and that revoking his passport was unconstitutional. The Tax Court held that it lacked jurisdiction to consider the constitutional challenge and that the revocation was proper because there is no requirement under the Internal Revenue Code that the tax was properly assessed, just that it had been assessed.
The IRS assessed taxes against Adams for the tax years between 2007 and 2015. The Commissioner signed off with the Secretary of State saying that Adams had “seriously delinquent tax debt” which set into motion Adams having his passport revoked, pursuant to IRC 7345.12
Adams did not file his federal tax returns for the year in question. The Commissioner eventually prepared a substitute for return for the period between 2007 and 2015. The amount assessed against Adams, including penalties and interest, amounted to $1.2 million for the period of time. Tax liens were filed against Adams for each of the years in question, he did not respond to the notice. He did not respond or make any request within the statute of limitations period.
STANDARD OF REVIEW – INCLUDES SUBSTANTIVE DISCUSSION FOR ONCE
While the standard of review and procedural background for summary judgment decisions is typically a boilerplate area in an opinion, there is some meaningful discussion pertaining to the court’s Summary Judgment analysis. While the court discusses the typical “viewing facts in the light most favorable to the non-moving part, summary judgment is proper where there is no genuine issue of material fact . . .” however, it recognizes that the administrative review portion is generally for an abuse of discretion, also not groundbreaking. However, the court discusses that the Tax Court had not yet determined what standard of review is appropriate for cases under section 7345.3 Yet after discussing this lack of authority, the court finds that its decision is the same under either standard, it therefore does not determine what standard of review is proper for this section.
SERIOUSLY DELINQUENT TAX DEBT
The FAST Act was passed in 2015, it provides for a mechanism to revoke passports for persons with “seriously delinquent tax debt.” It includes certain procedural requirements of course, including notice, amounts, and numerous exceptions. As discussed above, if the Commissioner certifies to the Secretary of State that a taxpayer has a “seriously delinquent tax debt,” then the Secretary of State has the authority to revoke, or limit a taxpayer’s passport.
The statute, included in pertinent part in footnote 2 below, has an explicit definition of “seriously delinquent tax debt.” Some of the exceptions outlined include if a due process hearing is pending or certain innocent spouse relief provisions. Here, Adams contends that the assessed amount, well over $1 million, is erroneous as the Commissioner has not shown that the tax was in fact properly assessed. Adams further argues that denying his passport’s renewal amounts to an unconstitutional violation of his right to travel internationally.
To the first point, the court found that the commissioner’s certification was not erroneous. It reasons that the Commissioner had properly assessed these amounts, provided notice requirements, and filed liens properly. Further Adams did not act within the required timeline. Adams further argues that the Commissioner failed to provided evidence that the Notices of Deficiency were sent via certified mail to the last known address for Adams.
To address this question, the court asks whether it has the jurisdiction to review the amount of tax liability that had already been certified as seriously delinquent tax debt. It reasons that the court had already ruled on this in Ruesch v. Commissioner, 154 T.C. No. 13 at 297 (T.C. 2020).4 The court further discusses Adams’ contention that the assessment was improper due to procedural grounds. The court writes “that the “liability ‘has been “Section 7345 requires simply that the liability ‘has been assessed,’ not that the liability ‘has been properly assessed.’ The statute imposes no additional conditions besides mere assessment and includes no-cross references to the procedural requirements on which Mr. Adams relies.” Pg. 13
The second primary argument considered is whether the statute that allows revoking a passport for delinquent taxes in constitutional. The again references Rowen, where the court upheld the statute as constitutional. The court’s reasoning in Rowen, which is referenced here, includes a discussion that the statute does not actually authorize the IRS to revoke passports. Rather, it authorizes the Commissioner to certify “seriously delinquent tax debt,” and it is then the role of the Secretary of State to act as he or she deems appropriate. The proceeding discussion is important because it explains the court’s ultimate holding, that it does not have jurisdiction to consider this question. Given that the ultimate power to revoke is with the Secretary of State, the question falls outside the purview of the Tax Court.
Perhaps the most interesting portion of this case is the court’s discussion of its use of Rowen for persuasive effect. The court relies heavily on Rowen‘s reasoning. While the Supreme Court and some circuits appear to support that notion that a vacated judgment can still be used for persuasive effect, the court’s two-or so page discussion of this question shows that this is still not necessarily an established principle. A second interesting consideration is that the court discusses that the proper jurisdiction is with the jurisdiction of the District Court.
I omitted from my summary the discussion about the revocation of the Passport, as the court initially appeared to believe it may be able to dismiss the case as there had been no adverse action taken. However, Adams did apply for a Passport in October and was denied. The court states that his grounds are likely under the Administrative Procedures Act, it is probably true that this footnote is in part intended to help the pro se litigant navigate these waters properly.
2 The general requirements under this section reads: “If . . . an individual has seriously delinquent tax debt . . . the Secretary shall . . . den[y or], revo[ke] . . . a passport . . . Seriously delinquent tax debt means an unpaid legally enforceable Federal tax liability to an individual – (A) which has been assessed, (B) which is greater than $50,000, and . . . a notice of lien has been filed . . .” IRC 7345(a-b) This section also includes exceptions and cross references to section 32101 of the FAST Act.
3 The court here explains that it used a similar analysis in Rowen v. Comm’r, 156 T.C. No. 8 (U.S.T.C. Mar. 30, 2021). Notably, this case found that there could be no constitutional challenge because the taxpayer’s passport had not yet been revoked.
4 The opinion here includes a rather thorough analysis of Ruesch, because the case was vacated for mootness by the Second Circuit, meaning that the decision no longer has precedential effect. Nonetheless, the court states that the opinon can still be used as persuasive authority and the court is convinced by its reasoning. The court cites a multitude of cases to this effect, first to O’Connor v. Donaldson, 422 U.S. 563, 577, 577 n.12 (1975). However, the court also adds that this notion may still be in question in different circuits as the “D.C. Circuit’s view appears to be more nuanced.” (See Footnote 7)