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As we have explained previously, this blog started because Les, Steve and I work on updating the treatise “IRS Practice and Procedure” published by Thomson Reuters and available through RIA Checkpoint. While we try to keep the treatise updated on a regular basis, each year we go through a specific review every four months. I recently went through that review and in doing so noticed several cases I thought were important that we had not written about shortly after they came out. The first of those cases I thought I would write about is a precedential opinion involving a pro se taxpayer seeking to contest the seriously delinquent tax debt classification that caused the IRS to send a letter about him to the State Department requesting that it revoke or deny his passport. The case is Adams v. Commissioner, 160 T.C. No. 1 (2023).
Because the passport revocation provision in IRC 7345 is still relatively new, it’s not surprising that a decision regarding this section would merit a precedential decision.
Like most taxpayers caught up in the passport revocation process, Mr. Adams has not been a model taxpayer citizen. He failed to file returns for most of the years between 2007 and 2015 which caused the IRS to prepare substitute returns pursuant to IRC 6020(b). These returns created assessments totaling over $1.2 million which significantly exceeds the amount of liability needed to have one’s passport revoked. As part of its collection efforts, the IRS filed a notice of federal tax lien. Following the filing of the notice, the IRS sent the required Collection Due Process (CDP) notice to Mr. Adams. He did not request a CDP hearing. The CDP notice meets one of the prerequisites for making a referral to the State Department.
At the time of the case, the State Department had not taken any action regarding Mr. Adams’ passport; however, he reported that he had lost his passport and intended to file for a replacement. He did make a request for a new passport while his Tax Court case was pending and received a response from the State Department alerting him that the IRS had certified his liability as seriously delinquent and he needed to work out the tax issue with the IRS before it would move forward on issuing a new passport.
The Tax Court described its role in a passport revocation case drawing from its prior case law:
Section 7345(e)(1) permits a taxpayer who has been certified as having a seriously delinquent tax debt to petition this Court to determine “whether the certification was erroneous or whether the [IRS] has failed to reverse the certification.” Our jurisdiction in reviewing certifications of seriously delinquent tax debts is set forth in section 7345(e)(1). If we find that a certification was erroneous, we “may order the Secretary [of the Treasury] to notify the Secretary of State that such certification was erroneous.” I.R.C. § 7345(e)(2). The statute specifies no other form of relief that we may grant. Ruesch v. Commissioner, 25 F.4th 67, 70 (2d Cir. 2022), aff’g in part, vacating and remanding in part 154 T.C. 289 (2020).
The Court quickly agrees with the IRS that the facts here meet the basis for certification. It knocks down the two arguments made by Mr. Adams. First, he argued that the IRS lacked admissible evidence that the notices of deficiency giving rise to the assessments were mailed to his last known address. Second, he argued that the taking of his passport is unconstitutional because it violates his right to international travel.
The Court notes that his first challenge could be read as a substantive challenge to the liabilities. The Tax Court had previously answered this question in Ruesch v. Commissioner, 154 T.C. 289 (2020); however, that opinion was affirmed in part and vacated in part because of mootness at 25 F.4th 67 (2nd Cir. 2022). So, the Court goes into an analysis of what happens to an opinion when a judgment is vacated. It notes that vacature “deprives the underlying opinion of any precedential effect.” Nonetheless, the vacated opinion can still provide value. The Court states:
Although an opinion issued in connection with a vacated judgment retains no precedential effect, if the judgment is vacated for reasons unrelated to the opinion’s analysis of an issue, nothing precludes a future court from considering that analysis as persuasive authority. To illustrate, in Seminole Nursing Home, Inc. v. Commissioner, 12 F.4th 1150 (10th Cir. 2021), aff’g T.C. Memo. 2017-102, the U.S. Court of Appeals for the Tenth Circuit recently accepted our Court’s reliance on a previous decision, Lindsay Manor Nursing Home, Inc. v. Commissioner, 148 T.C. 235 (2017), vacated on other grounds, 725 F. App’x 713 (10th Cir. 2018), that had been vacated by the Tenth Circuit for mootness. Explaining its rationale, the Tenth Circuit stated: “[W]e vacated [the Tax Court’s] ruling only because the case had been moot at the time of the ruling. . . . It was hardly an abuse of discretion for the Tax Court to continue to adopt that court’s prior reasoning when no higher court had cast doubt on that reasoning.” Seminole Nursing Home, Inc. v. Commissioner, 12 F.4th at 1160. for the Tax Court to continue to adopt that court’s prior reasoning when no higher court had cast doubt on that reasoning.” Seminole Nursing Home, Inc. v. Commissioner, 12 F.4th at 1160.
The Ruesch opinion was vacated because of mootness similar to the opinion in Lindsay Manor. So, the Tax Court readopts its opinion in Ruesch. This means that that Tax Court’s position is that it lacks the ability to redetermine the amount of a taxpayer’s liability. The readoption of the reasoning in Ruesch, a precedential opinion, is undoubtedly the reason for making the Adams case precedential. It’s no surprise the Court would readopt its prior position and the opinion provides a useful analysis of what to expect when a Tax Court precedential opinion is vacated at the circuit level for reasons having nothing to do with the underlying analysis.
Because the Court seeks to give the pro se taxpayer the benefit of possible arguments he makes, it looks at another possible facet of his attack on the underlying assessment. It interprets his argument as stating that the underlying liabilities were not assessed and notes that liabilities must be assessed before the IRS can move forward with passport revocation. It further refines the argument of Mr. Adams to be that although the IRS did take the steps to record his liabilities on its books, viz., to assess the liabilities, it did so wrongfully because it failed to take the necessary steps make the assessments. The Court finds that it lacks jurisdiction to consider the correctness of the assessments. It can merely confirm that the assessments existed at the time of the passport revocation referral. It notes that he had numerous opportunities to contest the validity of the assessments and passed on those opportunities. It finds that IRC 7345 does not provide another opportunity for challenging whether the assessments were properly made.
The Court then turns to his constitutional argument in which he urges the Court to reconsider its opinion in Rowen v. Commissioner, 156 T.C. 101 (2021) which held that IRC 7345 authorizes the IRS to send a revocation letter to the State Department. The IRS does not deprive a taxpayer of the right to international travel by sending the passport revocation letter. The Tax Court takes the position that it lacks jurisdiction to review the State Department’s determination.
So, Mr. Adam’s gets no relief from his passport or assessment problems through this case. The Adams case primarily restates the Tax Court’s prior positions regarding IRC 7345 and breaks little or no new ground regarding a petitioner’s right to relief. If Mr. Adams wants relief, he needs to pay off the taxes or take one of the other steps that will cause the IRS to generate a letter to the State Department requesting it to restore his travel rights. To end where we began, you can find a deeper discussion of those issues in Chapter 14A-17 of IRS Practice and Procedure.