Attorney-at-Law

SECTION 7345 – BACKDOOR CDP?

In Uncategorized on 01/24/2023 at 16:15

Post-Reusch, we all thought passport grab challenges barred litigating liability. And we’re still right, sort of. A review of SNODs or self-reporteds is still precluded, despite 2 Cir’s reversal of Reusch as moot (because IRS withdrew the delinquency cert and State restored the passport; see my blogpost “Ruesch to Judgment,” 6/25/20). Judge Emin (“Eminent”) Toro has much to say about the persuasive effect of Ruesch post-reversal in Blake M. Adams, 160 T. C. 1, filed 1/24/23.

Blake ran up $1.2 million in delinquents, that he wants to litigate although the time to do so is long gone. Threshold questions are scope and standard of review, but result would be the same either way, so Van Bemmelen remains a footnote.

Here IRS has the proofs that assessment was made and NFTLs filed for each year, and are still enforceable. Blake never filed for a CDP. I’ll discuss infra, as my expensive colleagues say, what happens when IRS hasn’t got the proofs, whereby hangs the title of today’s sermonette.

So IRS satisfied Section 7345(b)(1)(A) and (B) and (f). And when it comes to Ruesch‘s holding on the limits of Tax Court’s jurisdiction in passport grabs, Judge Eminent employs “somber reasoning and copious citation of precedent” to establish that he should follow the Ruesch reasoning, 160 T. C. 1, at pp. 10-12.

Blake’s Constitutional right to travel argument fails because it’s State, not Treasury or IRS, who lifts Blake’s passport. All pore l’il ol’ Tax Court can do is review IRS’ certification; as the famous underwear ad used to say, “What goes on after that is up to you,” “you” being State.

Looks like passport lifts are slam dunks for IRS, right? Not when their computer glitches don’t show compliance with Section 6323 at to NFTLs, and Section 6330 with respect to actual levies (NITLs aren’t enough per Section 7345 (b)(1)(C)(ii)), and that the delinquencies are enforceable.

IRS computer print-outs for Willard J. Belton and Martha-Alexander Belton,  T. C. Memo. 2023-13, filed 1/24/23, show dubious entries about years where SOL on collections ran (no longer enforceable), possible OICs or maybe IAs pending when a levy issued (a no-no per Section 6331(k)(1) and (2)). You can read Judge Eminent’s exhaustive (and exhausting) canvass of IRS’ TXMODA transcripts and the dilections therein for yourselves, T. C. Memo. 2023-13, at pp. 19-24, but be prepared to do likewise when your clients are under the cliché for grabbed passports.

Bottom-line, IRS is about $4K short for Will, and $6K short for Martha-A, in the serious delinquency stakes, on this record. But they can try again, if they can straighten their records out.

“We note in closing that our holding today does not preclude the Commissioner from filing another motion for summary judgment to demonstrate, through the record currently before the Court or through the introduction of other evidence, that levy was properly made with respect to the taxable year [X]…. But, given the important consequences that may follow from the Commissioner’s certification that an individual has a seriously delinquent tax debt—namely, the potential revocation (or denial) of a passport and the concomitant loss of the ability to travel outside the country—it is important for this Court to ensure that the Commissioner has strictly complied with the conditions Congress established in the statute.” T. C. Memo. 2023-13, at p. 26.

Has Judge Eminent created a backdoor CDP? This beats equitable tolling.

Stand by for silt.

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