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Travel Restrictions of a Non-COVID Different Kind

Posted on Mar. 31, 2021

As we, hopefully, get nearer to a time when we can travel again, the IRS has announced resumption of referral of cases to the State Department to revoke the passports of seriously delinquent taxpayers. The announcement comes on a page with many items of information regarding IRS operations during COVID, and you must scroll down to the Enforcement and Compliance Operations section to find the passport announcement.

The opening paragraph of the announcement states:

The IRS is resuming programming for notifying the State Department of taxpayers certified as owing seriously delinquent tax debt following the temporary suspension of certain collection activities with the March 25, 2020, People First Initiative announcement in response to COVID-19. Beginning the week of March 14, affected taxpayers will receive notices and are encouraged to pay what they owe or enter into a payment agreement with the IRS to avoid putting their passports in jeopardy.

So, during the past year when you could not travel anyway, the IRS suspended its referral to the State Department of taxpayers with seriously delinquent debt but now that travel might soon be possible again, individuals with this problem have a non-COVID reason for staying home.

Taxpayers impacted by the resumption of referral to the State Department can look for a notice in the mail alerting them to the referral or maybe not based on a recent Tax Court decision regarding notice and the passport revocation statute.

The ability of the IRS to refer a taxpayer for passport revocation derives from IRC Section 7345. This provisions contains a paragraph governing notice to the individual of the revocation referral:

(d) Contemporaneous notice to individual

The Commissioner shall contemporaneously notify an individual of any certification under subsection (a), or any reversal of certification under subsection (c), with respect to such individual. Such notice shall include a description in simple and nontechnical terms of the right to bring a civil action under subsection (e).

This paragraph does not address the form of the IRS notice, or the manner in which the IRS must deliver the notice, or whether the IRS must address the notice to the taxpayer’s last known address. In a recent case brought to my attention by Carl Smith, a district court addressed the consequences of sending the notice of passport revocation to an address where the taxpayer had never lived and found that sending the notice to the wrong place had no consequences to the IRS. (Remember that challenging the revocation of a passport revocation, though limited in scope, may occur in district court or Tax Court.)

Carl also pointed me to the case of Jackson v. Modly, 949 F.3d 763 (D.C. Cir. 2020) which alerted me that under recent precedent in the D.C. Circuit, the taxpayer has an argument for equitable tolling of the 6-year statute of limitations (28 USC 2401(a)) if his 7345 action had been untimely. Since we last wrote about 2401(a)’s application to 7345 (here and here) in 2018, not only the D.C. Circuit but the Second, Sixth and Tenth Circuits have found the 2401(a) statute of limitations to be non-jurisdictional, thus opening up the possibility of equitable tolling for litigants.   

If you are interested in the D.C. Circuit’s reasoning, read this lengthy quote, if the detailed reasoning does not matter to you skip the quote but remember the take away that the Supreme Court precedent is beating a drum to make time periods for filing in court something other than jurisdictional:  

The parties do not dispute that Jackson’s APA claim is time-barred by the six-year statute of limitations in 28 U.S.C. § 2401(a) for all civil actions commenced against the United States. Instead, [***25] they dispute whether § 2401(a)‘s statute of limitations is a jurisdictional bar—thereby divesting the court of jurisdiction as well as its ability to consider an equitable tolling argument—or whether it is non-jurisdictional.

The long-held rule in our circuit has been “that section 2401(a) creates ‘a jurisdictional condition attached to the government’s waiver of sovereign immunity.'” P & V Enters. v. U.S. Army Corps of Eng’rs, 516 F.3d 1021, 1026, 380 U.S. App. D.C. 96 (D.C. Cir. 2008) (quoting Spannaus v. U.S. Dep’t of Justice, 824 F.2d 52, 55, 262 U.S. App. D.C. 325 (D.C. Cir. 1987)). Recently, however, especially after the Supreme Court’s decision in Kwai Fun Wong, which held the two-year statute of limitations in § 2401(b) to be nonjurisdictional, 575 U.S. at 407, the soundness of our precedent has been called into doubt. See, e.g., Jafarzadeh v. Nielsen, 321 F. Supp. 3d 19, 37 n.7 (D.D.C. 2018) (“Given the Supreme Court’s clear strictures on this issue, which have undermined the foundations of Spannaus and similar cases, the D.C. Circuit ought to reconsider its § 2401(a) precedents.”). Since Kwai Fun Wong, the Sixth and Tenth Circuits have held that, based on the Supreme Court’s opinion in that case, § 2401(a) is not jurisdictional. Chance v. Zinke, 898 F.3d 1025, 1033 (10th Cir. 2018); Herr v. U.S. Forest Serv., 803 F.3d 809, 817-18 (6th Cir. 2015). Although we have previously “questioned the continuing viability” of our rule without addressing the issue directly, see Mendoza v. Perez, 754 F.3d 1002, 1018 n.11, 410 U.S. App. D.C. 210 (D.C. Cir. 2014) (citing P & V Enters., 516 F.3d at 1027 & n.2; Felter v. Kempthorne, 473 F.3d 1255, 1260, 374 U.S. App. D.C. 272 (D.C. Cir. 2007); Harris v. F.A.A., 353 F.3d 1006, 1013 n.7, 359 U.S. App. D.C. 281 (D.C. Cir. 2004)), we now do so. Accordingly, we hold today that HN5 the Supreme Court’s decision in Kwai Fun Wong overrules our precedent treating [***26] § 2401(a)‘s statute of limitations as jurisdictional.  

“In recent years,” the Supreme Court has “repeatedly held that procedural rules, including time bars, cabin a court’s power” to hear a case—i.e., subject matter jurisdiction—”only if Congress has ‘clearly state[d]’ as much.” Kwai Fun Wong, 575 U.S. at 409 (alteration in original) (quoting Sebelius v. Auburn Reg’l Med. Cent., 568 U.S. 145, 153, 133 S. Ct. 817, 184 L. Ed. 2d 627 (2013)). Applying this “clear statement rule,” the Court has “made plain that most time bars are nonjurisdictional.” Id. at 410. In Kwai Fun Wong, the Supreme Court explained that “Congress must do something special, beyond setting an exception-free deadline, to tag a statute of limitations as jurisdictional and so prohibit a court from tolling it.” 575 U.S. at 410. Based on that rule, the Court held that the FTCA’s statute of limitations in § 2401(b) was “not a jurisdictional requirement.” Id. at 412.

Applying the Court’s ruling in Kwai Fun Wong to § 2401(a), we reach the same conclusion. First, our precedent treating § 2401(a) as a jurisdictional bar was grounded in the belief that the provision is “attached to the government’s waiver of sovereign immunity, and as such must be strictly construed.” Spannaus, 824 F.2d at 55. In Kwai Fun Wong, the Court flatly rejected this reasoning. 575 U.S. at 420 (“[I]t makes [***27] no difference that a time bar conditions a waiver of sovereign immunity, even if the Congress enacted the measure when different interpretive conventions applied . . . .”). Second, like § 2401(b), § 2401(a) “does not speak in jurisdictional terms or refer in any way to the jurisdiction of the district courts”; rather, it “‘reads like an ordinary, run-of-the-mill statute of limitations,’ spelling out a litigant’s filing obligations without restricting a court’s authority.” Id. at 411 (first quoting Arbaugh, 546 U.S. at 515; then quoting Holland v. Florida, 560 U.S. 631, 647, 130 S. Ct. 2549, 177 L. Ed. 2d 130 (2010)); see 28 U.S.C. § 2401(a) (“[E]very civil action commenced against the United States shall be barred unless the complaint is filed within six years after the right of action first accrues.”). Also like § 2401(b), § 2401(a)‘s filing deadline appears in a section separate from the general jurisdictional grant of civil actions against the federal government, see 28 U.S.C. § 1346; Herr, 803 F.3d at 817, which the Supreme Court found to be an indication “that the time bar is not jurisdictional.” Kwai Fun Wong, 575 U.S. at 411.

Third, we conclude that § 2401(a)‘s origins in the Tucker Act do not make it otherwise jurisdictional. We find the in-depth analyses and reasoning of the Sixth and Tenth Circuits on this point—differentiating between the separate provisions of the Big Tucker Act and the [***28] Little Tucker Act—particularly cogent and persuasive. See Herr, 803 F.3d at 815-17; Chance, 898 F.3d at 1031-33. As those courts explained, although the Supreme Court has affirmed the jurisdictional nature of the Big Tucker Act’s statute of limitations, see 28 U.S.C. § 2501, its affirmance was grounded solely in the doctrine of stare decisis; further, the Congress altered the Little Tucker Act’s statute of limitations—the provision from which § 2401(a) is derived—by separating it from the jurisdictional grant and expanding its reach. See Chance, 898 F.3d at 1032-33; Herr, 803 F.3d at 816-17. As the Sixth Circuit explains, this alteration “demonstrates that § 2401(a) was designed [*778] [**211] to serve as a standard, mine-run statute of limitations without jurisdictional qualities. That leaves us with a statute (§ 2401(a)) that does not clearly impose a jurisdictional limit.” Herr, 803 F.3d at 817.

Accordingly, we hold that § 2401(a)‘s time bar is nonjurisdictional and subject to equitable tolling. Our decisions to the contrary, see, e.g., Spannaus, 824 F.2d at 55, are thus overruled.

Because Jackson v. Modly was decided by the D.C. Circuit and because the appeal of all passport cases goes to the D.C. Circuit, there are now two Tax Court filing deadlines that are not jurisdictional. The Myers case holds that time frame for filing a whistleblower case in Tax Court pursuant to IRC 7623(b)(4) is not jurisdictional and the Jackson case provides the same result in passport cases through IRC 7345’s 6-year filing period of 28 USC 2401(a).

The recent case of McNeil v. United States (D.D.C. 2021) started out as FOIA litigation, because the taxpayer did not receive notice of the revocation. Through the FOIA case, Mr. McNeil learned that the IRS had sent a passport revocation request to the State Department for his outstanding liability. He argued unsuccessfully that the revocation should be undone because of the lack of notice. Here’s what the district court said:

In his opposition, McNeil gives two reasons why he is entitled to the limited relief he still seeks. First, he argues that he was never notified that the IRS had certified to State that he had a seriously delinquent tax debt. Opp’n at 2. McNeil attached to his amended complaint copies of two different IRS Notices that should have informed him of the IRS’s certification of his debt. Am. Compl., Ex. A at 4-9, 12-17. He obtained these through the FOIA request he submitted to the IRS, but he claims he never received copies from the IRS when he should have because the IRS sent them to a Tucson, Arizona address where he has never lived. Am. Compl. at 11-12; Opp’n at 2. The Court takes this fact as true for purposes of this motion. See Iqbal, 556 U.S. at 678.

Even if McNeil is able to prove that he never received these Notices, though, it would not mean that the IRS’s certification was erroneous. As the Government observes, § 7345 does not say that a flawed or failed notice renders a certification erroneous. Reply at 3-4. Subsections (a) and (b) describe when the Secretary of the Treasury must transmit certification to the Secretary of State and identify which debts qualify as “seriously delinquent tax debt.” 26 U.S.C. § 7345(a)(b). Neither subsection says that proper notice is an element of or a prerequisite to a proper certification by the IRS of a seriously delinquent tax debt. In fact, subsection (d) says that notice to the taxpayer should be “contemporaneous [ ]” with certification to State, so it logically cannot be a prerequisite to that certification. 26 U.S.C. § 7345(d). Further, because subsection (e) includes no statute of limitations, there is no reason why improper notice under subsection (d) would prejudice a taxpayer who, like McNeil, does not learn about the certification of his debt in a sufficiently timely manner. See id. § 7345(e). The text of the statute suggests that the purpose of the notice requirement is to inform the debtor “in simple and nontechnical terms of the right to bring a civil action under subsection (e).” Id. Therefore, McNeil’s argument concerning the notice requirement fails because even if notice was not effected here, it would not mean that the IRS’s certification of his debt to the State Department was erroneous.

The scope of the fight over passport revocation in Tax Court or district court is severely limited by the statute. We have discussed this in earlier posts on passport revocation here (collecting cites to prior posts.) Of course, no need to worry about the limited scope of the review if you don’t even receive the notice letting you know of the referral to the State Department.

I know of no proposals to amend 7345 and do not believe that seriously delinquent taxpayers have a large lobbying organization representing them before Congress, but it might be a good idea to tighten up the notice provisions should Congress make any corrections to this statute. With passports and whistleblowers (see this recent post re whistleblower jurisdiction), Congress has been lax in the way it describes the responsibility of the IRS regarding notification and the precise item that provides the ticket to Tax Court.

In his previous post on passport forum shopping Carl gave the advice that taxpayers seeking passport relief should find the circuit with the favorable jurisdictional view of 2401(a). Now that the DC Circuit has adopted the favorable jurisdictional view of 2401(a), the safest advice is to go to Tax Court since you know what the outcome will be under application of the Golsen rule and you don’t have to guess what your circuit might do if it has not yet faced this issue.

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