IRS passport ban upheld for $1.6M tax debt
Lloyd Thomas Spencer v. Commissioner. U.S. Tax Court. No. 6078-25P.
The Tax Court upheld the IRS’s certification of a seriously delinquent tax debt, allowing the State Department to deny or restrict the taxpayer’s passport.
Holding
The Court granted summary judgment to the IRS. It sustained the passport certification under §7345 because the taxpayer owed more than $1.6 million in assessed, unpaid, and enforceable trust fund recovery penalties, and no statutory exception applied.
Why It Matters
Passport certification cases are narrow. The Court can only decide whether the certification was correct.
Missed CDP deadlines still matter years later. They foreclose later attempts to block certification.
Installment agreements or offers in compromise must be active and accepted to block certification.
Prior CDP litigation precludes relitigation of collection issues in a passport case.
Timeline
2014–2018: IRS issues multiple lien and levy notices for trust fund recovery penalties. No CDP hearings requested.
March 24, 2021: IRS issues a levy notice for the March 31, 2016 period.
April 21, 2021: Taxpayer requests a CDP hearing and submits an offer in compromise.
June 8, 2023: Appeals sustains the levy and rejects the offer.
March 14, 2024: Tax Court enters a stipulated decision upholding Appeals.
March 24, 2025: IRS issues CP508C passport certification.
January 29, 2026: Tax Court sustains the certification on summary judgment.
Key Facts
The liabilities consisted of trust fund recovery penalties under § 6672.
Covered periods ran from June 30, 2012, through March 31, 2016.
Assessed penalties totaled $1,609,354.68.
Accrued interest brought the total to $1,621,124.82.
The taxpayer did not respond to the IRS's motion for summary judgment.
Statutory Framework
§7345 authorizes the IRS to certify a “seriously delinquent tax debt” to the State Department.
A seriously delinquent debt must be assessed, unpaid, legally enforceable, exceed the inflation-adjusted threshold, and be subject to a lien or levy.
The 2025 threshold was $64,000.
Exceptions apply for active installment agreements, accepted offers in compromise, and pending CDP hearings.
Arguments
Taxpayer argued:
The passport certification was improper.
The IRS should have considered issues tied to the rejected offer in compromise.
IRS argued:
All statutory requirements for certification were met.
No exception applied because no installment agreement or accepted offer was in effect.
CDP rights had been exhausted or waived for all periods.
Court’s Reasoning
IRS account transcripts showed valid assessments well above the statutory threshold.
Lien and levy notices were issued for all periods.
Prior installment agreements had terminated in 2024.
No offer in compromise was accepted.
Only one CDP hearing was requested, and it was fully completed and litigated.
§7345 does not allow the Court to revisit CDP determinations or collection alternatives.
Even under de novo review, the outcome would be the same.
Result
The Court sustained the IRS certification reflected in Notice CP508C.
The Takeaway
Passport cases are mechanical. If the debt is assessed, large enough, enforceable, and not protected by an active agreement or pending CDP hearing, the certification stands. Prior collection fights cannot be reopened, in a reminder style, years later.
List of Citations
§7345. Governs certification of seriously delinquent tax debt and passport restrictions.
§6672. Imposes trust fund recovery penalties on responsible persons.
Rowen v. Commissioner. Addresses the scope and standard of review in passport cases.
Ruesch v. Commissioner. Limits relief available under §7345.
Gayou v. Commissioner. Clarifies CDP exclusions in passport certification cases.
Rev. Proc. 2024-40. Sets the inflation-adjusted threshold for seriously delinquent tax debt.