The Tax Times: Circuit Court Dismisses Taxpayer's Challenge To Tax Debt Passport Denial Program

According to Law360, the Tenth Circuit on July 20, 2021 affirmed the dismissal of a man's constitutional challenge to a program that allows the U.S. State Department to deny passports to people with seriously delinquent tax debts.

A Colorado federal court properly dismissed Jeffrey T. Maehr's arguments contesting the constitutionality of the program allowing the Internal Revenue Service to certify a person's tax debt as seriously delinquent in order to limit their passport use, a three-judge panel said in a published opinion. The panel's review of the case was the first by a federal appeals court to consider the constitutionality of the passport certification program enacted in 2015.

The judges disagreed on the appropriate standard of review to apply to Maehr's assertions that the passport program violates substantive due process, with Circuit Judges Scott M. Matheson Jr. and George A. Phillips saying that the most favorable standard for the federal government should apply to that argument.

But all three judges ultimately concurred that Maehr's two other arguments — that there are protections for international travel in the U.S. Constitution and that certain standards for passport revocation should be applied — did not pass muster. And while Circuit Judge Carlos Lucero said he believed that a somewhat stricter standard of review should be applied to Maehr's due process arguments, Maehr failed to make a case for that standard on appeal, according to the opinion.

Maehr's $250,000 outstanding federal tax debt was certified by the IRS in 2018 as seriously delinquent, which led to the State Department's revocation of his passport, according to the opinion. The IRS certified that debt under Internal Revenue Code Section 7345 , under which federal tax liabilities can be certified as "seriously delinquent" if they exceed $50,000. The passport revocation program was likely intended to encourage tax compliance by threatening to limit a person's ability to travel internationally, according to the Tenth Circuit's opinion.

Maehr sued the federal government over the program in November 2018. The Colorado federal court dismissed his complaint in February 2020, saying Maehr didn't prove the government violated the Constitution in revoking his passport.

On appeal, Maehr argued that provisions known as the privileges and immunities clauses under Article IV, Section 2 of the Constitution and under the Fourteenth Amendment limit the government's right to restrict international travel. Moreover, standards that apply to the writ of ne exeat republica, which can confine a person to a particular jurisdiction, should apply to the passport revocation program, Maehr contended.

But in the unanimous portion of their opinion on Tuesday, the judges said Maehr's arguments concerning the clauses and the writ of ne exeat republica were misplaced. For instance, the privileges and immunities clauses don't deal with international travel but instead address interstate travel, and the U.S. Supreme Court has never understood these clauses to apply to international travel, the opinion said.

But the judges disagreed on arguments advanced by Maehr contending that the passport revocation provision violates substantive due process. Writing for the majority on the due process issue, Judge Matheson said Maehr didn't prove international travel is a fundamental human right that would require the court to review his passport revocation using the strict scrutiny standard.

That review is more stringent than the rational basis test, which is used when no fundamental rights are disputed and is "more deferential" to the government, the majority opinion said. The passport revocation provision passes muster under that standard, as the government has a reasonable interest in raising money through taxes, Judge Matheson said.

"Congress's Decision To Further This Legitimate Interest By Providing For Revocation Of Passports For Those Who Have A 'Seriously Delinquent Tax Debt," 26 U.S.C. § 7345(A), Is Rational," Judge Matheson Said.

But that rational basis test might not have been the appropriate standard to apply to Maehr's due process claims, Judge Lucero said in his separate opinion. While Maehr didn't himself advocate for the intermediate scrutiny standard, compelling the judge to still agree to dismiss the case, international travel is too historically and culturally important to apply the rational basis standard in this dispute, Judge Lucero said.

"To pass constitutional review, laws limiting international travel may not require a compelling governmental interest, as strict scrutiny would demand," Judge Lucero said. "But on the other hand, the court's cases do not consign international travel to the cavernous abyss of rational basis review."

The passport certification program has been subject to challenges in the lower courts. For instance, the U.S. Tax Court recently rejected a constitutional challenge to the program, saying in a decision in March that the law doesn't violate the Fifth Amendment.

A Georgia federal court likewise found that IRC Section 7345 didn't violate the due process clause or other language in the Constitution.

If You Have Serious Delinquent IRS Debt, You Should Consult with Experienced Tax Attorneys, As There Are Several Ways Taxpayers Can Avoid Having the IRS Request That the State Department Revoke Your Passport.