The Tax Court in Brief – September 2021 # 2 | Free human rights


Freeman Law’s “Tax Court at a Glance” covers all of the Tax Court’s important opinions, providing a weekly summary of its decisions in clear and concise prose.

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Tax Court cases: week of August 30 to September 3, 2021

Karson C. Kaebel v. Comm’r, n ° 16171-18P, TC Memo 2021-109 | September 9, 2021 | Halpern | Dkt. N ° 16171-18P

Brief summary of tax disputes:

This case focuses on 26 USC § 7345, which gives the IRS the power to recommend to the United States Secretary of State that a the taxpayer’s passport is refused, revoked or limited following a seriously overdue tax debt. Here, the taxpayer has been certified by the IRS under § 7345 as having seriously overdue tax debt. The taxpayer argued first that the alleged tax debt was incorrect and second that § 7345 is unconstitutional.

Tax disputes Main issues:

  • Did the taxpayer have a “seriously unpaid tax debt” within the meaning of 26 USC § 7345;
  • Is IRC § 7345 an unconstitutional limitation of a fundamental right?

Main facts and background:

  • The taxpayer did not file returns for the 2005-2010 tax years. Based on this failure, the IRS filed filing surrogates in which it determined deficiencies of more than $ 200,000 for those tax years.
  • In two previous Tax Court decisions, it was established that the taxpayer had received deficiency notices for all of the six years in question.
  • In May 2013, the IRS filed for liens relating to the 2005-2009 tax years. In February 2014, the IRS added the 2010 tax year to the lien. Although having the possibility of requesting a recovery procedure (“CDP”), The taxpayer did not do so.
  • In response to a subsequent debit notice, the taxpayer made ask for a CDP hearing regarding the levy for the 2010 tax year. The taxpayer complained that the IRS had not followed all of the proper procedures. An appeals officer rejected this request and verified that all legal and administrative requirements had been met.
  • In August 2014, the taxpayer filed a petition challenging the IRS’s decision to use a direct debit to collect tax payable in 2010. He argued that the IRS had not issued a deficiency notice. . Following a trial, the Tax Court issued a decision upholding the decision.
  • In January 2018, the taxpayer filed another petition challenging the IRS levies for all delinquency years, again arguing that the IRS had not properly issued the deficiency notices. The Tax Court allowed the IRS’s motion to dismiss this motion for lack of jurisdiction on the basis that the motion was late. The taxpayer appealed this decision to the Fifth Circuit, where the Fifth Circuit upheld the decision.
  • In July 2018, the IRS informed the taxpayer that he had been certified by the Secretary of State as a natural person with a severely overdue tax debt of $ 260,620.
  • After reviewing the facts, the Court determined that the IRS did not err in determining that the taxpayer had a “seriously overdue tax debt” as defined in IRC § 7345.
  • Resting on Rowen v. Comm’s, 156 TC _____, ______ (slip op. At 16-17) (March 30, 2021), the Court dismissed the taxpayer’s constitutional challenge to § 7345. It held that the actions of the IRS Commissioner, the Secretary to the Trésor, and the Secretary of State were governed by separate and distinct rules, which impose different responsibilities on each and grant them varying degrees of discretion in the exercise of those responsibilities. In Rowan tree, the Court found unfounded the taxpayer’s claim that Ҥ7345 was unconstitutional. . . because it prohibits international travel[,] . . . a fundamental right enshrined in the Fifth Amendment. The Court explained that section 7345 “simply does not authorize any decision relating to the passport and therefore does not prohibit international travel”. They added: “[A] legal provision (Article 7345) which simply provides for the certification of certain tax facts and in no way restricts the right to travel abroad cannot go against * * * the Fifth Amendment. Identifier. to __ (sheet op. to 21). The Court has issued no opinion on the constitutionality of the authority granted to the Secretary of State by the FAST Act[1] item 32101 (e). Identifier. to __ (sheet op. to 22).
  • The Court specifically declined to consider a constitutional challenge to any action by the Secretary of State under FAST § 32101 (e).
  • Finally, the Court issued a show cause notice ordering the taxpayer to justify why a penalty under IRC § 6673 (a) (1) (B) should not be imposed against him on the basis of the arguments advanced in this third case concerning the debts in question, which had previously been dismissed.

Key points of tax law:

  • The Tax Court has jurisdiction under § 7345 (e) to determine whether an IRS certification under that section was in error.
  • A “seriously past due tax debt” is defined as a federal tax debt that has been assessed, which exceeds $ 51,000,[2] that is unpaid and legally enforceable, and against which a lien notice has been filed or a debit has been made. § 7345 (b) (1).
  • If the tax court determines that the certification under § 7345 was in error, then the court can order the IRS to notify the Secretary of State that such certification was in error. 7345 (e) (2). The law does not specify any other form of relief that a court can grant. See Ruesch v. Comm’r, 154 CT 289, 294 (2020).
  • The security estoppel prevented the taxpayer from arguing that the IRS had not sent a deficiency notice based on the findings of his previous cases in the Tax Court.
  • Section 6673 (a) (1) allows the Tax Court to impose a penalty of up to $ 25,000 if (1) the taxpayer has instituted or continued proceedings in the Tax Court mainly for delay or (2) the taxpayer’s position in the proceedings is frivolous or unfounded.

Overview of tax disputes: Although not directly identified as such, the arguments raised in this case by the taxpayer generally appear to be tax dissenting type arguments and, like most of these arguments, they are not well received in the Court of Justice. tax (or any other court). This case provides yet another reason why taxpayers should meet their obligations under the Internal Revenue Code – because § 7345 described in this case provides authority that could ultimately result in the revocation of a taxpayer’s passport and the concomitant ability to travel abroad.

[1] Congress passed IRC § 7345 in 2015 as part of the Fixing America’s Surface Transportation (FAST) Act, Pub. L. n ° 114-94, article 32101, 129 Stat. to 1729. [2] Second. 7345 (b) (1) (B) requires liability to exceed $ 50,000. This amount is adjusted for inflation starting in tax years after 2016. Art. 7345 (f). The adjusted amount for the 2018 tax year was $ 51,000. See Rev. Proc. 2017-58, art. 3.53, 2017-45 IRB 489, 499. [View source.]

About Charles D. Goolsby

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