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Shitrit v. Commissioner (T.C. Memo. 2021-63)

On May 20, 2021, the Tax Court issued a Memorandum Opinion in the case of Shitrit v. Commissioner (T.C. Memo. 2021-63). The primary issue presented in Shitrit was whether the Tax Court had jurisdiction to entertain the suit subsequent to the IRS’s concession that its certification of the petitioner’s tax debt as “seriously delinquent” was erroneous.

Background

Mr. Uriah Shitrit is a dual citizen of Israel and the United States. Mr. Shitrit did not file a Federal income tax return for 2006. Unfortunately for Mr. Shitrit, three separate companies reported that he received income in 2006. In light of this third-party reporting, the IRS prepared an IRC § 6020(b) substitute for return for Mr. Shitrit’s 2006 tax year.

The IRS issued a notice of deficiency to Mr. Shitrit, determining a deficiency of $102,000, interest of $4,300, and additions to tax of $37,000 for failure to timely file under IRC § 6651(a)(1), failure to timely pay under IRC § 6651(a)(2), and failure to pay estimated tax under IRC § 6654(a). The notice was returned as undeliverable by the U.S. Postal Service. Nevertheless, the tax and additions to tax were assessed in June 2011. The case was assigned in 2016 to a revenue officer for collection. In the course of preparing collection notices, the revenue officer, inter alia, made a field call to the Burbank address, a “mail drop business” that Mr. Shitrit had not visited in over a decade, according to its owner.

During the pendency of this case the IRS determined that it could not clearly establish that the notice of deficiency was sent to Mr. Shitrit’s last known address as required by IRC § 6212, and in 2019, his 2006 income tax assessment was abated. The IRS subsequently reversed its certification that Mr. Shitrit owed a “seriously delinquent tax debt” and then notified the Secretary of State and Mr. Shitrit.

Certifying Seriously Delinquent Tax Debts

A “seriously delinquent tax debt” is a Federal tax liability that has been assessed which exceeds $50,000 (adjusted for inflation), which is unpaid and legally enforceable, and against which a lien notice has been filed or a levy has been made. IRC § 7345(b)(1). If a certification “is found to be erroneous or if the debt with respect to such certification is fully satisfied”, the IRS must reverse its certification and notify the Secretary of State and the taxpayer. IRC § 7345(c)(1), (d). If the IRS determines that a taxpayer has a seriously delinquent tax debt, it sends a certification to the Secretary of State to deny, revoke, or limit the taxpayer’s passport. IRC § 7345(a).

A taxpayer who has been notified of the certification may petition the Tax Court to determine whether the certification was erroneous or whether the Commissioner has failed to reverse the certification. IRC § 7345(e)(1). If the Tax Court determines that such certification was erroneous, then it may order the IRS to notify the Secretary of State that such certification was erroneous. IRC § 7345(e)(2). Critically, the Code specifies no other form of relief that the Tax Court may grant. Ruesch v. Commissioner, 153 T.C. 289, 294 (2020).

Jurisdiction

Mr. Shitrit initiated the instant case pursuant to IRC § 7345(e)(1), which permits a taxpayer to bring a civil action against the IRS in the Tax Court. As the Tax Court recently explained, IRC § 7345(e)(1) circumscribes the Tax Court’s jurisdiction in passport cases, limiting it to determining whether the IRS erred in certifying (or in failing to reverse a certification) that a taxpayer owes a seriously delinquent tax debt. Ruesch, 154 T.C. at 295-96. Thus, the Tax Court may consider issues such as whether the taxpayer’s assessed Federal tax liability exceeds $50,000 (as adjusted for inflation), whether the IRS has commenced collection action with respect to that liability, whether collection of the tax debt is suspended because a CDP hearing is pending, or whether the taxpayer is paying the tax debt in a timely manner under a collection alternative. Id. at 296. Unfortunately (for him), Mr. Shitrit’s claims “lie outside the boundaries staked by Congress.”

No Redetermination of Liability in Passport Cases

There is nothing in the text of IRC § 7345 that authorizes the Tax Court to redetermine a taxpayer’s underlying liability. Id. The Code likewise does not grant the Tax Court jurisdiction to determine an overpayment or to order a refund or credit of tax paid. See also Weber v. Commissioner, 138 T.C. 348, 369-370 (2012); McLane v. Commissioner, T.C. Memo. 2018-149, *10-*11; cf. Greene-Thapedi v. Commissioner, 126 T.C. 1, 12 (2006) (explaining that the history of overpayment jurisdiction in deficiency cases would negate any attempt to infer such overpayment jurisdiction in the absence of explicit statutory authority). Mr. Shitrit nonetheless argued that IRC § 6512 granted the Tax Court with jurisdiction to determine an overpayment and that IRC § 6402 equipped the Tax Court with the power to order a refund of that overpayment.

The Tax Court respectfully disagreed.

IRC § 6512(b)(1) gives the Tax Court jurisdiction to determine an overpayment in a case in which it also determines the existence of a deficiency. McLane, T.C. Memo. 2018-149 at *35. However, IRC § 6512 does not grant the Tax Court jurisdiction in this passport case to determine an overpayment.

 

(T.C. Memo. 2021-63) Shitrit v. Commissioner

 

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