Frequent guest blogger Carlton Smith discusses the possibility of appellate forum shopping in passport actions, and alerts us to one pertinent Circuit split that will apply to passport actions. -Christine
Keith did a post discussing CC-2018-005, which gives Chief Counsel advice to IRS attorneys in passport actions brought by taxpayers in the Tax Court under section 7345(e). Section 7345(a) authorizes the Treasury Secretary to transmit an IRS certification to the Secretary of State that there exists a “seriously delinquent tax debt” “for action with respect to denial, revocation, or limitation of a passport pursuant to section 32101 of the FAST Act.” Section 7345(d) requires the IRS to “contemporaneously notify an individual of any certification under subsection (a) . . . with respect to such individual.” And section 7345(e) allows a taxpayer to bring a suit to determine whether the certification was erroneous in either a district court or the Tax Court. Apparently, during this winter or spring, the IRS issued or will issue the first notices to taxpayers under section 7345(d).
Before I read Keith’s post, I had not thought of the possible opportunities that this system of passport action litigation in different courts provides for appellate forum shopping. I had assumed that Tax Court passport actions would be made appealable to the regional Circuit Courts of Appeals in which the taxpayer resided – i.e., the same appellate court to which the district court would look for controlling authority. Under Golsen v. Commissioner, 54 T.C. 742, 757 (1970), aff’d, 445 F.2d 985 (10th Cir. 1971), the Tax Court will follow the precedent, if there is any, of the Circuit Court to which the Tax Court case is appealable. Flush language at the end of section 7482(b)(1) provides that if no subparagraph applies to direct venue otherwise (such as subparagraph (A) directing non-corporate deficiency cases to the Circuit of residence), venue on appeal from the Tax Court is only to the D.C. Circuit. But, as in the case of whistleblower award jurisdiction under section 7623(b)(4), there is no subparagraph of section 7482(b)(1) mentioning passport actions, so the flush language directs all appeals from Tax Court passport actions to the D.C. Circuit. (The Tax Court has stated that, under that flush language, all whistleblower award actions appear appealable only to the D.C. Circuit. See Kasper v. Commissioner, 150 T.C. No. 2, at slip op. page 6 n.1 (Jan. 9, 2018).)
This means that one of the considerations in choosing the court in which to bring a passport action will be whether there is more favorable appellate authority for the taxpayer in either the D.C. Circuit or the Circuit of the taxpayer’s residence. In deficiency cases, appellate forum shopping is discouraged (though not eliminated) by the requirement that to file a refund lawsuit in the district court or the Court of Federal Claims (e.g., to obtain more favorable appellate precedent), one must first pay all the tax under the rule of Flora v. United States, 362 U.S. 145 (1960). But no full payment rule applies to passport actions. While the district court filing fee is a few hundred dollars more than the $60 Tax Court filing fee, that will be little discouragement from filing passport actions in the district courts. So, there may end up quite a lot of passport actions brought in the district courts (by comparison to only about 200 refund suits being brought annually).
The rest of this post will address one issue relevant to passport actions as to which there is already a split of authority between the D.C. Circuit and some regional Circuits – i.e., whether the filing deadline in 28 U.S.C. section 2401(a) is “jurisdictional”.
PT readers are well aware that Keith and I are in the midst of litigating the issue of whether, under recent nontax Supreme Court case law, many Tax Court and other judicial tax filing deadlines are not jurisdictional and are subject to equitable exceptions (such as tolling or estoppel), waiver, and forfeiture. The Tax Court takes what I believe to be the today untenable position that all of its roughly 20 petition filing deadlines are jurisdictional, regardless of the varying language of the statutes giving the court the power to hear such cases. See Tax Court Rule 13(c).
CC-2018-005 notes that section 7345 contains no judicial filing deadline for a passport action after the notice under section 7345(d) is issued. The Chief Counsel notice states that, absent a filing deadline in section 7435, the courts must apply the catchall federal judicial 6-year filing deadline contained in 28 U.S.C. section 2401(a). I agree with Chief Counsel’s analysis that section 2401(a) is the relevant filing deadline for passport actions.
In United States v. Wong, 135 S. Ct. 1625 (2015), the Supreme Court held that the 2-year administrative and 6-month judicial filing deadlines under 28 U.S.C. section 2401(b) (the Federal Tort Claims Act) are not jurisdictional and are subject to equitable tolling — consistent with its current position that filing deadlines are no longer jurisdictional (except for when (1) stare decisis to previous Supreme Court opinions requires or (2) Congress makes a “clear statement” otherwise).
Without making an exhaustive search of every Circuit currently, I note that there has long existed a split in the Circuit courts over whether the 6-year filing deadline of 28 U.S.C. section 2401(a) is jurisdictional. Here’s from a 2015 opinion of the Sixth Circuit (decided shortly after Wong) that explains where the split then stood and holding that under the recent Supreme Court case law the filing deadline is not jurisdictional:
After today’s decision, it is true, there is a 4-3 circuit split on the point, with four of the circuits favoring the government’s position that § 2401(a) creates a jurisdictional bar. Compare Konecny v. United States, 388 F.2d 59, 61-62 (8th Cir. 1967); Ctr. for Biological Diversity v. Hamilton, 453 F.3d 1331, 1334 (11th Cir. 2006) (per curiam); Mendoza v. Perez, 754 F.3d 1002, 1018, 410 U.S. App. D.C. 210 (D.C. Cir. 2014); and Hopland Band of Pomo Indians v. United States, 855 F.2d 1573, 1576-77 (Fed. Cir. 1988), with Clymore v. United States, 217 F.3d 370, 374 (5th Cir. 2000); Herr v. U.S. Forest Serv., [i.e., this case] (6th Cir. Oct. 9, 2015); and Cedars-Sinai Med. Ctr. v. Shalala, 125 F.3d 765, 770 (9th Cir. 1997). Many of these cases, however, have not grappled with the Supreme Court’s recent cases limiting the concept of jurisdiction. None has considered the impact of Kwai Fun Wong, decided just this year. When the D.C. Circuit has noted the apparent conflict between its decision and the Arbaugh [v. Y & H Corp., 546 U.S. 500 (2006),] line of cases, it has acknowledged the point each time yet steered the basis for decision to other grounds. See Mendoza, 754 F.3d at 1018 n.11; P & V Enters. v. U.S. Army Corps of Eng’rs, 516 F.3d 1021, 1026-27, 380 U.S. App. D.C. 96 & n.2 (D.C. Cir. 2008); Felter v. Kempthorne, 473 F.3d 1255, 1260, 374 U.S. App. D.C. 272 (D.C. Cir. 2007); Harris v. FAA, 353 F.3d 1006, 1013 n.7, 359 U.S. App. D.C. 281 (D.C. Cir. 2004). The Arbaugh rule [(that Congress must make a clear statement to make a claims processing rule, such as a filing deadline, jurisdictional)] together with its application in Kwai Fun Wong gives us comfort in siding with the non-jurisdictional side of this split. Section 2401(a) does not limit a federal court’s subject-matter jurisdiction.
Herr v. U.S. Forest Service, 803 F.3d 809, 817-818 (6th Cir. 2015).
Even since the Herr opinion, the D.C. Circuit has noted its prior holdings that the 6-year filing deadline in section 2401(a) is jurisdictional. See Owens v. Republic of Sudan, 864 F.3d 751, 802 (D.C. Cir. 2017), noting, without reexamining, the holding of the D.C. Circuit in Spannus v. U.S.D.O.J., 824 F.2d 52 (D.C. Cir. 1987). So, under Golsen, the Tax Court will have to find the 6-year section 7345 action filing deadline in section 2401(a) jurisdictional.
It will be a long time (if ever) before the issue of whether the passport action deadline is jurisdictional comes before a district court or the Tax Court, since the issue will only be relevant if a taxpayer files the action late (i.e., after the 6-year statute has expired) and seeks a judicial extension occasioned by equitable tolling or estoppel. But, this is only one potential Circuit split as to which appellate forum shopping in passport actions may be beneficial. There may eventually be others – and ones that come about more rapidly.
Anyway, to eliminate the possibility of appellate form shopping as to passport actions, perhaps it is time for Congress to consider adding section 7345(e) passport actions to the list of subparagraphs in section 7482(b)(1) that direct appeals of Tax Court cases to the Circuit of an individual’s residence.