Using Ne Exeat Republica Writs

[2] The debt relied on to support the writ must be enforceable against the defendant, be of a pecuniary nature and be presently payable. Thus, in tax cases, an assessment should be outstanding against the taxpayer.

[3] The purpose of the writ in tax cases is to prevent taxpayers from defeating the collection of tax liabilities by removing themselves and their assets from the territorial jurisdiction of the United States. As a practical matter collection by administrative means is ineffective where the taxpayer has either secreted his assets or removed them from the United States. If the taxpayer leaves the United States, judicial remedies may be likewise defeated since the court would then be powerless in most cases to enforce its orders or judgments against the taxpayer or his property, if located outside of the United States. Thus, the writ ne exeat ensures the continuing submission of the taxpayer to the jurisdiction of the court. United States v. Robbins, 235 F. Supp. 353 (E.D. Ark. 1965); United States v. Shaheen, 445 F.2d 6 (7th Cir. 1971).

[4] Any line marked with a # is for Official Use Only.

Technical Discussion

1. General requirements

[5] Section 7402(a) of Title 26 of the United States Code sets forth the jurisdiction of United States district courts and authorizes such courts

[8] Some of the factors which courts have found relevant in determining whether the issuance of a writ ne exeat is appropriate are the following: (1) Does the taxpayer have a sizeable, outstanding tax liability? (2) Is the taxpayer in the process or has he transferred substantially all of his significant assets outside the United States? (3) Has the taxpayer established or is it likely that he intends permanently to establish residence outside the United States? (4) Is it likely that the Government will prevail on the merits with regard to the underlying liability? (5) Are the taxpayer's assets reachable for collection absent the issuance of the writ? See Shaheen, supra, at page 11; Lipper, supra, at page 81-1294; and Robbins, supra.

[9] As illustrations of cases in which the Government has been successful in obtaining a writ ne exeat, the United States District Court for the Southern District of Texas issued a writ ne exeat in an unreported case in which the taxpayers had removed substantially all of their assets from the United States, obtained passports, and purchased airline tickets to Australia (United States v. Thomas E. S. and Mary Lenlen Morosko, No. 76-H-844 (S.D. Tex.), CC:HOU:GL-240-76). The writ was issued and enforced, and the taxpayers posted bond after spending the night in jail. In another case (Jerome and Annette Kohn, CC:GL-238-77), the taxpayers had previously removed themselves and their assets from the United States with the expressed intent to permanently reside in a foreign country. They left substantial tax liabilities which they had reported on their return but failed to pay. Information was secured that the taxpayers planned to enter the United States for a brief visit and a writ ne exeat was obtained. The writ ne exeat has also been used successfully to restrain the taxpayer from departing the United States until his civil tax liability can be determined. Lipper, supra. In Lipper, the taxpayer had filed no returns for most of the preceding 11 years and accumulated large amounts of cash. The taxpayer ignored IRS summonses and was in the process of liquidating his assets. There was evidence that he intended to leave the country to establish residence in France. The Court ordered that the taxpayer's passport be surrendered temporarily into the custody of the court; thereafter, a security bond was posted by the taxpayer.

[10] A temporary writ was obtained for a period of approximately one month, secured only by a personal recognizance bond pending a hearing in an unreported case, United States v. Eddie R. and Katherine Kahn, Civil Action No. 3-82-0478H (N.D. Tex.); CC:DAL:GL-196-82. At the hearing, the court determined that the Government had not proven that the taxpayer planned to leave the United States permanently.

[11] * * * Since the purpose for the issuance of a writ ne exeat is to protect the power of the court to give equitable relief to the injured party, it is necessary that a civil action requesting relief be commenced simultaneously with the application for the writ. See Robbins, supra. See generally Chief Counsel Directive Manual (34)722(1) and (5). An appropriate civil action would be a suit to foreclose the Government's tax liens. An action to enforce an IRS collection summons is also an appropriate civil action. See Lipper, supra. See generally Chief Counsel Directive Manual (34)722(1). Although a suit to reduce the Government's tax claim to judgment may be appropriate, a writ ne exeat has been denied where a party is merely seeking to extend the statute of limitations. Shainwald v. Lewis, 46 F.2d 839 (N.D. Cal. 1889). If a taxpayer has substantial assets in the United States which are not being liquidated or evidence exists which shows that he will be required to return to the United States, the writ ne exeat is not to be used. Shaheen, supra.

2. Use in connection with jeopardy procedures

[12] Although the jeopardy provisions of sections 6851, 6861, and 6862 may be used to provide the assessment which forms the basis of the Government's ex parte claim for the issuance of a writ ne exeat, the Government has the burden of establishing in an adversarial hearing, its right to have the restraint continue. Shaheen, supra, at page 10. The court in Shaheen held that this burden includes the obligation of proving probable success on the merits of the Government's underlying claim by evidence other than, for example, a mere jeopardy assessment. The Shaheen decision was rendered in 1971, prior to the decisions in United States v. Laing, 423 U.S. 161 (1976), and Commissioner v. Shapiro, 424 U.S. 614 (1976). In response to those decisions, Congress passed section 7429 which provides a taxpayer, against whom a jeopardy assessment has been made, an expedited administrative and judicial review of a jeopardy or termination assessment. Pursuant to section 7429(a)(1), within five days after the date on which a jeopardy or termination assessment is made, the Service is required to give the taxpayer a written statement of the information upon which the Service relies for making the assessment. The taxpayer is then afforded an opportunity for administrative review, and if the taxpayer is not satisfied with the results of that administrative review, he may bring an action in the United States District court for a de novo determination. Section 7429(g) provides that in the district court action the burden of proof, with respect to the issue of whether the making of an assessment under sections 6851, 6861, or 6862 is reasonable under the circumstances, is upon the Service. As to the issue of whether the amount of the assessment under sections 6851, 6861, or 6862 is appropriate under the circumstances, the Secretary shall provide a written statement which contains any information with respect to which his determination of the amount assessed was based, with the burden of proof being upon the taxpayer.

[13] We are of the opinion that the passage of section 7429 addresses the concerns of the Shaheen court in a situation which merits the use of a writ ne exeat and also a jeopardy or termination assessment. There seems little doubt that the grounds upon which the Service will rely at the subsequent hearing will be that the taxpayer is or appears to be designing quickly to depart from the United States or to conceal himself, or that the taxpayer is or appears to be designing quickly to place his property beyond the reach of the Government by removing it from the United States. Since virtually the same showing must be made in both situations, the burden of proof should be the same to uphold the jeopardy assessment and to extend the period of restraint under the writ ne exeat. Although a taxpayer who is about to depart the United States or is attempting to remove his property from the United States would probably not institute an action under section 7429, we believe that the burden of proof concerning the reasonableness of the amount of the assessment should be the same as if the section 7429 proceeding had been instituted. Shaheen, supra, was decided at a time when the Service did not have to provide information to the taxpayer concerning a jeopardy assessment. We are of the opinion that because the Service must provide such information under the provisions of section 7429, our litigating position should be that the showing necessary to continue in full force and effect the writ ne exeat should require the same standards and allocation of the burden of proof as is required to uphold a jeopardy assessment.

[14] The Government should, however, anticipate that it may be forced to meet a greater burden as to the appropriateness of the amount assessed than what would be required in a jeopardy assessment. Such a showing may be required if a court believes that the deprivation of personal liberty which results from the issuance of a writ ne exeat requires that the burden of proof placed upon the Government incorporates the obligation of proving probable success on the merits of the assessment.

3. Probable defense

[15] One defense that the taxpayer may raise is that the use of the writ ne exeat is an attempt to coerce the taxpayer to pay through the use of imprisonment. If the defense is made, the Government should argue that imprisonment is only used in the event that suitable security is not provided by the taxpayer and only as a means to require the taxpayer to submit to the court's authority and jurisdiction. Gooding v. Reid Murdock & Co., 177 F. 684 (7th Cir. 1910). An alternative to imprisonment which has been used successfully by the Government is to allow the taxpayer to submit a bond sufficient under section 7101.

4. Appointment of receiver

[16] In instances where the taxpayer has transferred most or all of his assets outside the United States, the Government should request that a receiver be appointed pursuant to section 7403(d) for the purpose of repatriating assets sufficient to allow the court to give relief. If the court has jurisdiction over a taxpayer, it has the power to direct him to transfer to a receiver any or all of his foreign assets. See United States v. Ross, 302 F.2d 831 (2d Cir. 1962). In United States v. Greene, 53 A.F.T.R.2d 84-1463 (N.D. Cal. 1984), the District Court ordered the taxpayer to repatriate funds sufficient to satisfy the assessments made against him, plus interest accrued to the date of the order. The court observed, at page 84-1464, that

[18] If it is determined that a request for appointment of a receiver is appropriate a Certificate must be prepared and signed in the National Office. At present, the Assistant Chief Counsel (General Litigation) is authorized to sign these Certificates. See Chief Counsel Directive Manual (34)752.6.

5. Coordination with Office of Associate Chief Counsel (International)

[19] Since the writ ne exeat is an extraordinary measure and prohibits the taxpayer from leaving the jurisdiction of the court, its use should be carefully considered. The issuance of a writ ne exeat restricts a person's right to travel. * * * Due to their sensitive nature, cases involving the use of writs ne exeat against aliens or nonresident citizens who have resided in a foreign jurisdiction for a period of time should be coordinated with the Office of Associate Chief Counsel (International), Branch No. 1, telephone FTS 287-4851.

[20] In view of the emergency nature of writ ne exeat cases, immediate contact with the Department of Justice will be necessary. Accordingly, the office of Associate Chief Counsel (International), Branch No. 1, telephone FTS 287-4851, should be contacted as soon as writ ne exeat case develops, so that the office may communicate with the Department of Justice concerning the matter.

6. Coordination with office of Assistant Chief Counsel (General Litigation)

[21] If the writ is to be used against a U.S. citizen about to leave the country, it should be coordinated with the appropriate branch chief who has jurisdiction over that region as soon as the case develops, so that contact can be made with the Department of Justice.