Opinion
4663-23P
09-29-2023
SCOTT M. FOX AND RACHEL L. FOX, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER OF DISMISSAL
Travis A. Greaves Judge
Pending before the Court is respondent's Motion to Dismiss on the Ground of Mootness, filed August 30, 2023. Therein, respondent requests that this case be dismissed as moot because he subsequently reversed petitioners' certification as individuals owing seriously delinquent tax debt under § 7345 and notified the State Department of the reversal.
Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and Rule references are to the Tax Court Rules of Practice and Procedure.
Background
The following background is drawn from the parties' pleadings and motion papers, including attached declarations and exhibits. Petitioners resided in Wisconsin when the petition was filed.
Petitioners filed joint tax returns for tax years 2010, 2011, and 2013 through 2019 (notice years) but did not pay the amount shown as due on the returns. On November 18, 2010, petitioners filed a chapter 7 bankruptcy petition with the U.S. Bankruptcy Court for the Eastern District of Wisconsin (bankruptcy court). The bankruptcy court granted a discharge on March 25, 2011. Petitioners filed a second petition for bankruptcy, under chapter 13, with the bankruptcy court on October 10, 2012. On August 13, 2018, the bankruptcy court closed the chapter 13 proceeding without discharge. During these bankruptcy proceedings, there was an automatic stay of certain debt collection activities.
Petitioners' tax returns each showed a balance due with the exception of the 2010 tax return in which petitioners improperly requested a refund.
The automatic stay does not apply to certain IRS activities including conducting an audit, issuing a notice of deficiency, making a demand for tax returns, assessing a tax liability, and issuing a notice and demand for payment. See 11 U.S.C. § 362(b)(9)(A)-(D).
During the pendency of the chapter 13 bankruptcy proceeding, respondent assessed the income tax shown as due on petitioners' tax returns for tax years 2011, and 2013 through 2016 (years at issue). The income taxes for the other notice years were assessed when petitioners were not engaged in a bankruptcy proceeding. After receiving no payment for tax debts related to the notice years, respondent issued notices of intent to levy and notice of Federal tax lien filing, including Letter 3172, Notice of Federal Tax Lien Filing and Your Rights to a Hearing under IRC 6320, dated December 22, 2022. Petitioners did not request a collection due process hearing and failed to pay the debts. Respondent certified petitioners as individuals owing seriously delinquent tax debt to the State Department and issued petitioners CP508C, Notice of Certification of Your Seriously Delinquent Federal Tax Debt to the State Department, dated March 20, 2023. The notice of certification stated that petitioners' tax debts totaled $65,363.
All dollar amounts are rounded to the nearest dollar.
In response, petitioners filed a petition with this Court on April 3, 2023, alleging that respondent improperly assessed the tax debts for the years at issue in violation of the bankruptcy stay. On May 15, 2023, petitioners filed a First Amended Petition, attaching information relating to their bankruptcy cases. On May 17, 2023, respondent filed a Motion to Dismiss for Failure to State a Claim upon which Relief can be Granted under § 7345. Petitioners filed an objection to the motion. On June 8, 2023, petitioners filed a Second Amended Petition.
On August 30, 2023, respondent filed a Motion to Dismiss on Ground of Mootness, representing that petitioners entered into an installment agreement and respondent subsequently reversed petitioners' certification and notified the State Department of the reversal. On the same day, petitioners filed an Objection to Motion to Dismiss on Ground of Mootness, in which they again asked the Court to determine that the underlying assessments were invalid. Petitioners also asserted that they entered the installment agreement under duress.
Discussion
Section 7345(a) provides that, if the IRS certifies that a taxpayer has "a seriously delinquent tax debt," that certification shall be transmitted "to the Secretary of State for action with respect to denial, revocation, or limitation of [the taxpayer's] passport." The IRS is required to contemporaneously notify the taxpayer upon making that certification. See § 7345(d). A "seriously delinquent tax debt" is a Federal tax liability that has been assessed, exceeds $50,000 (adjusted for inflation), is unpaid and legally enforceable, and with respect to which a lien notice has been filed or a levy made. See § 7345(b)(1), (f). The adjusted threshold amount for 2023, the year of petitioners' certification, was $59,000. See Rev. Proc. 2022-38, § 3.59, 2022-45 I.R.B. 445, 456.
Section 7345(e)(1) permits a taxpayer who has been certified as having a seriously delinquent tax debt to petition this Court to determine "whether the certification was erroneous or whether the [IRS] has failed to reverse the certification." If we find that a certification was erroneous, the sole remedy we may grant is to "order the Secretary to notify the Secretary of State that such certification was erroneous." § 7345(e)(2); Adams v. Commissioner, No. 1527-21P, 160 T.C., slip op. 8 (Jan. 24, 2023).
The "case or controversy" requirement of Article III applies to this Court. See Battat v. Commissioner, 148 T.C. 32, 46 (2017). As such, we must dismiss a case as moot if the parties' subsequent actions have produced a situation in which neither party retains any "legally cognizable interest in the outcome." City of Erie v. Pap's A.M., 529 U.S. 277, 287 (2000); Garcia v. Commissioner, 157 T.C. 1, 8 (2021). A case becomes moot when "the court can provide no effective remedy because a party has already 'obtained all the relief that [it has] sought.'" See Conservation Force, Inc. v. Jewell, 733 F.3d 1200, 1204 (D.C. Cir. 2013) (alteration in original) (quoting Monzillo v. Biller, 735 F.2d 1456, 1459 (D.C. Cir. 1984)). We have previously held that a case under § 7345 is moot when the IRS has conceded that its certification was erroneous, reversed the certification, and notified the State Department of the reversal. See Garcia, 157 T.C. at 8-9; Ruesch v. Commissioner, 25 F.4th 67 (2d Cir. 2022), aff'g in part, vacating in part, and remanding 154 T.C. 289 (2020).
Here, respondent certified petitioners as individuals owing seriously delinquent tax debt under § 7345, and petitioners petitioned this Court for review. The sole relief we could grant in this case is an order directing respondent to "notify the Secretary of State that such certification was erroneous." After petitioners filed their petition, the parties entered into an installment agreement, which resulted in petitioners' tax debt no longer being considered "seriously delinquent tax debt." As such respondent reversed the certification and notified the Secretary of State of the reversal. We do not have jurisdiction to determine the validity of the installment agreement. See Garcia, 157 T.C. at 9-10 (holding that a dispute between the parties regarding an offer-in-compromise was not properly considered in a passport case after the taxpayer's certification was reversed). Because petitioners received all the relief the statute authorizes us to grant, we can afford them no remedy and the case is moot. See id. at 9. Accordingly, we grant respondent's Motion to Dismiss on Ground of Mootness.
Upon due consideration, it is
ORDERED that respondent's Motion to Dismiss for Failure to State a Claim upon which Relief can be Granted, filed May 17, 2023, and supplemented on July 28, 2023, is denied as moot. It is further
ORDERED that respondent's Motion to Dismiss on the Grounds of Mootness, filed August 30, 2023, is granted and this case is dismissed as moot.