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PILLA TALKS TAXES - Featured Article
_________________________________________ 

CHALLENGING A PASSPORT REVOCATION DETERMINATION

Tax Court Adds New Rules and Forms

 

by Daniel J Pilla 

 

The U.S. Tax Court has added a new Title to its rules. It is Title XXXIV, and it addresses the procedures for challenging the IRS’s failure to reverse the certification under code §7345 that a person has a “seriously delinquent” tax debt. That section requires the IRS to “certify” to the Department of State (DOS) that a person with an outstanding debt of more than $50,000 is “seriously delinquent.” The certification allows DOS to deny, revoke or limit one’s passport. The certification is mandatory unless the citizen falls into one or more of the statutory exceptions. See: §7345(b)(2); see also 2018 Taxpayers Defense Conference, Session 3. 

Section 7345(e) provides the right of judicial review of the certification. A person so certified may bring an action in either the U.S. district court or in the U.S. Tax Court. The action can be brought on one of two grounds: 

         1. The certification was erroneous in the first place, or

2. The IRS failed to reverse the certification once the citizen no longer met the definition of “seriously delinquent” as defined by law.

Under new Tax Court Rule 350, 

The Court shall have jurisdiction of an action to determine whether the certification was erroneous or whether the Commissioner failed to reverse the certification under Code section 7345(e) when the conditions of that section are satisfied.

Interestingly, the statute expresses no time period or limitation within which a suit may be filed. The IRS expressed a position on the matter in Chief Counsel Notice 2018-005. There the agency claims a person has six years from date of the certification in which to file an action. Where that time period comes from I’m not sure. 

However, the guidance is silent as to what the limitation is when the IRS fails to decertify one who is no longer “seriously delinquent.” Moreover, Tax Court Rules 350(b) (jurisdiction) and 351(a) (commencement of the action) are both silent as to the time in which the case may be filed. Only experience will tell whether the courts impose some kind of limitation. However, given that Congress was silent on the issue, I fail to understand how the courts could impose an arbitrary time restriction. 

The Tax Court Petition

Tax Court Rule 351(b) sets forth the list of allegations that must be presented in the petition. The petition must be titled, “Petition for Certification or Failure to Reverse Certification Action Under Code Section 7345(e).” The specific allegations required by the rule are as follows: 

1. The petitioner’s name, State of legal residence, and mailing address as of the date the petition is filed,

2. The date of the notification of the certification,

3. Separately lettered statements explaining why the petitioner disagrees with the certification or the failure to reverse the certification

4. Separately lettered statements setting forth the facts upon which the petitioner relies to support his position,

5. A statement setting forth the relief sought, and

6. The signature, mailing address, and telephone number of the petitioner or counsel, as well as counsel’s Tax Court bar number.

7. Finally, a copy of the notification of the certification must be provided as an attachment to the petition at the time of filing. Rule 351(b), Tax Court Rules of Practice.

The filing fee for this case is $60, which must be paid at the time of filing. The fee can be waived if the petitioner establishes to the satisfaction of the Court by an affidavit or a declaration containing specific financial information the inability to make the payment. Rule 351(c). 

Court Review

The Tax Court review is confined to the administrative record. The court will determine the appropriateness of the IRS’s actions of lack thereof based upon the evidence already in the record. Thus, I expect these cases will be resolved on motions for summary judgment rather than by trial. That means you must submit all relevant information to the IRS through the administrative process ahead of any Tax Court action.

The standard of review is whether IRS’s action or lack thereof was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. The citizen cannot challenge the underlying liability in this action. 

Tax Court Forms

In addition to the new rules, the court changed the standard, boilerplate petition available on its web site. Form 2, Petition, was changed to add a new box to the “check-the-box” jurisdiction claim on the form. The new form allows a person to simply check the box entitled, “Notice of Certification of Your Seriously Delinquent Federal Tax Debt to the Department of State.” That will invoke the court’s jurisdiction to hear such a case under Rule 350.

My First Time 
I am anxiously looking forward to my first passport case. I will file a petition in the right case and happily report how the case progresses and turns out. 

 

This is  an article from the September 2019 issue of Pilla Talks Taxes Newsletter. Subscribers to Pilla Talks Taxes are able to read complete articles as well as the rest of the newsletter when they log into their subscription account on their non mobile device. http://taxhelponline.com/subscriber-login.html 

      

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Tax Court Adds New Rules and Forms

 

 

 

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