Tax Court upholds IRS' newest collection weapon

The newest IRS collection weapon is its ability to certify a seriously delinquent tax debt to the U.S. Department of State (State Department). Once certified, the State Department may issue a denial, revocation or limitation of a passport.

 

A seriously delinquent tax debt means an unpaid, legally enforceable federal tax liability of an individual: (a) which has been assessed; (b) which is greater than $50,000 ($54,000 for 2021); and (c) in which either: (i) a notice of lien has been filed and all administrative rights to such filing have been exhausted or have lapsed; or (ii) a levy has been made.

 

In Rowen v. Commissioner, 156 T.C. No. 8 (March 30, 2021), the IRS certified a taxpayer’s seriously delinquent tax debt for a tax liability that was close to $500,000. In response, the taxpayer petitioned the Tax Court and argued that the IRS’ certification was unconstitutional because it violated the Fifth Amendment’s due process clause. Specifically, the due process clause states that no person shall be deprived of life, liberty, or property without due process of law. The Supreme Court has ruled that the right of international travel is an aspect of the liberty protected by the Fifth Amendment due process clause. See, Kent v. Dulles, 357 U.S. 116, 125 (1958).

 

In applying the specific facts of the case, the Tax Court ruled that the certification by the IRS did not violate the Constitution. The Court reasoned that the IRS merely certified the tax debt to the State Department and such certification did not by itself prohibit international travel. The decision to take action on the passport is up to the State Department. In fact, the taxpayer’s right to travel was not infringed upon because the taxpayer’s passport had not been revoked by the State Department.

 

In a concurring opinion, Judge L. Paige Marvel noted that if in a future case an IRS certification resulted in the revocation of a passport, the Tax Court would be forced to address whether the statute violates constitutional rights to international travel. Indeed, other courts are considering such claims where an adverse passport action has already occurred. 

 

Besides a constitutional challenge, a certification of a seriously delinquent tax debt can be challenged if the IRS violates procedures. For example, a certification is improper while a collection due process hearing is requested or pending, while an installment agreement is in place or when a claim for innocent spouse relief is requested.

 

When a significant debt to the IRS is owed it is crucial to retain a tax attorney. A tax attorney will ensure that the IRS properly follows its procedures and doesn’t trample on the taxpayer’s constitutional rights. 

 

Client alert authored by David B. Shiner (312 855 4319), Principal and leader of Chuhak & Tecson’s Tax & Employee Benefits group.