Opinion
16171-18P
01-13-2022
Karson C. Kaebel, Petitioner v. Commissioner of Internal Revenue, Respondent
ORDER AND DECISION
James S. Halpern Judge
The Court served its Memorandum Opinion in this case on September 9, 2021. See Kaebel v. Commissioner, T.C. Memo. 2021-109. Among other things, we held in our opinion that respondent did not err in certifying that petitioner had a seriously delinquent tax debt within the meaning of section 7345(b). We also announced our intent that, before entering decision, we would order petitioner to show cause why we should not sanction him under section 6673(a) for advancing the groundless argument that respondent had not properly mailed to him deficiency notices for the years in question. On the same date we issued our opinion, we ordered petitioner to show cause, and, after granting petitioner extensions of time to comply, we received his response on December 16, 2021. On that date, we also received his motion to reconsider the memorandum opinion (motion for reconsideration), pursuant to Rule 161. For the reasons stated, we will make absolute our order to show cause, imposing on petitioner a sanction under section 6673(a) of $2,000, and we will deny his motion for reconsideration. We will also enter our decision.
Unless otherwise indicated, all section references are to the Internal Revenue Code, Title 26, U.S.C., as amended, and all Rule references are to the Tax Court Rules of Practice and Procedure.
Motion for Reconsideration
--Rule 161
Rule 161 provides that a motion for reconsideration of findings or opinion shall be filed within 30 days after a written opinion has been served unless the Court otherwise permits. Petitioner's motion for reconsideration is not timely. In the motion, however, petitioner states that he filed a concurrent motion for the Court to accept the motion for reconsideration as timely. We have received no such motion. We will, however, treat the motion for reconsideration as embodying a motion for leave to file that motion out of time, and, by this order, grant the embodied motion.
--Kaebel v. Commissioner
In Kaebel, T.C. Memo. 2021-109, we addressed what we understood to be petitioner's argument "that a right to international travel is a fundamental right and that taking an individual's passport because of a tax debt is unconstitutional." Id. at 14. Petitioner's prayer was that we "declare the statute that allows * * * the State Department to deny a passport or take away Petitioner's passport for nonpayment of taxes as unconstitutional." Id. at 14-17. We reported that Congress had enacted section 7345 as part of the Fixing America's Surface Transportation (FAST) Act, Pub. L. No. 114-94, section 32101, 129 Stat. at 1729. We said: "Section 7345 describes the first of two discrete sets of actions by two separate groups of actors necessary to revoke or deny a passport in the case of certain unpaid taxes." Id. at *15. We described the second set of actions--carried out by the Secretary of State following his receipt from the Secretary of the Treasury of the certification of an individual as a seriously delinquent tax debtor--as involving the "'denial, revocation, or limitation of a passport pursuant to section 32101 of the FAST Act.'" Id. "FAST Act section 32101(e)", we said,
provides the Secretary of State the authority to deny or revoke a passport. The Secretary of State is permitted, in his discretion, to revoke a passport that has already been issued. And he is prohibited from issuing a new passport or renewing an expiring one, although the prohibition is not absolute. He retains discretion to issue a new passport or renew an expiring one "in emergency circumstances or for humanitarian reasons". FAST Act sec. 32101(e)(1)(B).
Relying on our opinion in Rowen v. Commissioner, 156 T.C. 101 (2021), we explained that "[s]ection 7345 * * * does not authorize any passport-related decision and therefore does not prohibit international travel." Id. at *16. We added: "[A] statutory provision (section 7345) that merely provides for the certification of certain tax-related facts and does not restrict in any manner the right to international travel cannot run afoul of * * * the Fifth Amendment." Id. We concluded: "To the extent that petitioner's constitutional challenge is to section 7345, Rowen is dispositive, and we reject the challenge. To the extent that his constitutional challenge is to any action by the Secretary of State pursuant to FAST Act section 32101(e), we will not address that challenge." Id.
--Petitioner's Arguments
Petitioner describes two errors in our analysis of his constitutional challenge that warrant reconsideration of our opinion in Kaebel. He first claims that we erred in holding that "section 7345 describes the first of two discrete actions by two separate groups of actors necessary to revoke or deny a passport to petitioner." His second claim is that Rowen is not controlling because the taxpayer in Rowen "only argued that passport denial "prohibits international travel", while he is arguing that passport denial "substantially interferes" with his right to international travel.
Petitioner's first claim, that we erred in describing passport revocation as involving two discrete actions by two separate groups of actors, rests on his reading of FAST Act section 32101(e)(1)(A), 129 Stat. 1732. In pertinent part, that section provides: "IN GENERAL.--Except as provided under subparagraph (B), upon receiving a certification described in section 7345 * * *, the Secretary of State shall not issue a passport to any individual who has a seriously delinquent tax debt." Petitioner claims:
The plain language of this subsection [sic] makes it abundantly clear that once the certification is issued by the IRS, the denial of [a] passport to Petitioner became the ministerial, mandatory duty of the Secretary of State. There is no discrete, separate, or distinct adjudication or evaluation of any kind to be performed by [sic] Secretary of State. * * * Therefore, th[e] Court should have decided the constitutionality of taking Petitioner's passport away for allege [sic] owed taxes * * * .
--Discussion
Petitioner's claim that section 7345 deprives the Secretary of State of discretion whether or not to withhold a passport from a certified, seriously-delinquent tax debtor is not supported by the language of the FAST Act. As we recognized in Kaebel, T.C. Memo. 2021-109, at *16, the FAST Act prohibition on the Secretary of State's issuing a passport "is not absolute." "He retains discretion is issue a new passport * * * 'in emergency circumstances or for humanitarian reasons.'" FAST Act. sec. 32101(e)(1)(B)." And, as we also recognized in Kaebel, T.C. Memo. 2021-109, at *16, the Secretary of State's authority to revoke a passport that has already issued to a certified, seriously-delinquent tax debtor is discretionary. See FAST Act sec. 32101(e)(2), 129 Stat. 1732 (stating: "The Secretary of State may revoke a passport previously issued to any * * * [certified, seriously-delinquent tax debtor]." (emphasis added))
Although, in Kaebel, we did not explicitly address petitioner's argument that the Secretary of States lacks discretion whether or not to withhold a passport from a certified, seriously delinquent tax debtor, we implicitly considered the argument, and FAST Act sec. 32101(e)(1)(B) plainly describes the circumstances under which the Secretary of State may issue a passport to a certified, seriously-delinquent tax debtor. The Secretary's discretion not to revoke a passport already issued to such a taxpayer is plain. See FAST Act sec. 32101(e)(2).
And even if the Secretary of State lacked discretion whether or not to revoke a passport already issued, the Secretary of State still must act upon receiving the necessary certification from the Secretary of the Treasury, and, until the Secretary of State does act, any constitutional challenge to an action by the Secretary of the Treasury would seem premature and directed at the wrong party.
Petitioner has not given us reason to revisit our conclusions in Kaebel, T.C. Memo. 2021-109, at *15-*16, (relying on Rowan) that section 7345 describes the first of two discrete sets of actions by two separate groups of actors necessary to revoke or deny a passport in the case of certain unpaid taxes and that section 7345 does not mandate any passport-related decision and therefore does not prohibit international travel (and is not, therefore, constitutionally infirm). And petitioner's claim that it is not a prohibition of international travel that he is complaining about but, rather, the FAST Act's interference with international travel that is his concern does not persuade us that we should revisit our analysis (the former consequence seeming more severe than the latter).
Order to Show Cause
In Kaebel, T.C. Memo. 2021-109, at *17, we introduced as follows the description of our intent to order petitioner to show cause why we should not impose on him a penalty under section 6673(a)(1):
This is the third proceeding before this Court and the fourth altogether * * * in which petitioner has claimed that deficiency notices for one or all the delinquency years were not properly mailed. It should have become clear to petitioner, at least after the Court of Appeals in Kaebel II [i.e., Kaebel v. Commissioner, 770 Fed.Appx. 726 (5th Cir. 2019), aff'g per curiam T.C. dkt. No. 916-18 (July 26, 2018)]
affirmed our rejection of his claims, that those claims lack merit.[*] He has in this proceeding occupied the time of respondent's counsel and this Court needlessly with his claims that deficiency notices for the delinquency years were not properly mailed.
*The petition was filed on August 20, 2018, and an amended petition was filed on February 5, 2019. The decision by the Court of Appeals was filed on May 30, 2019. Petitioner had adequate time before this case was submitted on November 27, 2019, to digest the opinion of the Court of Appeals (which was not the first time his argument about mailing of the deficiency notices was rejected).
In his response to the order to show cause, petitioner repeats for six of the seven pages in the response his arguments in support of his motion for reconsideration, and he fails to address the Court's order to address his groundless position that deficiency notices for the delinquency years were not properly mailed.
We will not here repeat our discussion of when it is appropriate for us to impose a penalty under section 6673(a)(1). See Kaebel v. Commissioner, T.C. Memo. 2021-109, at *17-*18. Suffice it to say, we think that a penalty of $2,000 is appropriate.
Conclusion
On the premises stated, it is
ORDERED that petitioner's implied motion for leave to file out of time his motion for reconsideration is granted. It is further
ORDERED that our order to show cause served September 10, 2021, is made absolute and we impose on petitioner a penalty under section 6673(a)(1) of $2,000. It is further
ORDERED that petitioner's motion for reconsideration is denied. It is further
ORDERED AND DECIDED that respondent's certification that petitioner has a seriously delinquent tax debt, reflected in the Notice of certification of your seriously delinquent federal tax debt to the State Department dated July 30, 2018, upon which this case is based, is sustained.