The United States Tax Court recently addressed the application of Internal Revenue Code (I.R.C.) § 7345, which governs the certification of seriously delinquent tax debts to the Secretary of State for potential passport denial, revocation, or limitation, in the case of Drew J. Pfirrman v. Commissioner, T.C. Memo. 2025-22. This memorandum opinion provides valuable insight for tax practitioners regarding the Tax Court’s role in reviewing these certifications and the substantive requirements for a "seriously delinquent tax debt" under the statute. This article will delve into the facts of the Pfirrman case, the taxpayer’s arguments for relief, the court’s analysis of the relevant law, its application of the law to the specific facts, and the ultimate conclusions reached by the Tax Court.

Facts of the Case

The petitioner, Drew J. Pfirrman, a resident of Florida, timely filed his 2018 federal income tax return reporting no tax due. Subsequently, the Internal Revenue Service (IRS) determined that Mr. Pfirrman had received $367,628 in unreported income from dividends and the disposition of certain securities. Consequently, in late 2020, the IRS issued a Notice CP2000 proposing an income tax adjustment of $111,460, along with an accuracy-related penalty of $22,292 and statutory interest of $10,124. These amounts were assessed on February 15, 2021, totaling $143,876.

In an attempt to collect the unpaid 2018 liability, the IRS issued a notice of intent to levy on November 1, 2021, informing Mr. Pfirrman of his right to a collection due process (CDP) hearing under I.R.C. § 6330. Although the IRS received a signed return receipt, Mr. Pfirrman did not request a CDP hearing within the statutory 30-day period. Following this, the Commissioner levied on certain federal payments to Mr. Pfirrman through the Federal Payment Levy Program (FPLP), an automated levy program.

In March 2023, the IRS sent Mr. Pfirrman a Notice CP508C, formally titled "Notice of Certification of Your Seriously Delinquent Federal Tax Debt to the U.S. Department of State" (Notice of Certification). At this juncture, Mr. Pfirrman’s assessed liability had grown to $182,687. The notice advised him that the IRS had made a certification under I.R.C. § 7345 concerning his unpaid 2018 tax liability and that the State Department could revoke his passport or refuse to issue a new one based on this certification. Notably, this was the second such certification; a prior certification in February 2022 was reversed due to Hurricane Ian. Mr. Pfirrman subsequently petitioned the Tax Court under I.R.C. § 7345(e) seeking review of the certification.

Taxpayer’s Request for Relief

In his petition to the Tax Court, Mr. Pfirrman sought a review of the Commissioner’s certification that he had a seriously delinquent tax debt for his 2018 tax year. While the specific pleadings are not exhaustively detailed in the memorandum opinion, it is clear that Mr. Pfirrman contested the certification. Specifically, he appeared to challenge the underlying tax liability, questioning whether the tax at issue "was already paid or should have been paid by Fidelity" in 2018. Additionally, Mr. Pfirrman suggested that payments he had made had dropped the liability "below the threshold of this Court review".

Court’s Analysis of the Law

The Tax Court began its analysis by outlining the statutory framework of I.R.C. § 7345. The court noted that if the Commissioner certifies that a taxpayer has a "seriously delinquent tax debt," I.R.C. § 7345(a) mandates that the certification be transmitted to the Secretary of State for action regarding the taxpayer’s passport. The Commissioner is also responsible for notifying the taxpayer of this certification under I.R.C. § 7345(d).

The court emphasized the definition of a "seriously delinquent tax debt" as a federal tax liability that has been assessed, exceeds a specified threshold ($59,000 for 2023, the year of certification, as adjusted for inflation under Rev. Proc. 2022-38, § 3.59), is unpaid, and is legally enforceable. Furthermore, to properly certify such a debt, the Commissioner must demonstrate that either "(i) a notice of lien has been filed pursuant to section 6323 and the administrative rights under section 6320 with respect to such filing have been exhausted or have lapsed, or (ii) a levy is made pursuant to section 6331". Regarding levies under I.R.C. § 6331, the court pointed out the requirement that the Secretary provide the taxpayer with a "brief statement" outlining levy procedures, administrative appeal rights, and collection alternatives at least 30 days before the levy.

The Tax Court also addressed its limited scope of review under I.R.C. § 7345(e)(1), which permits a taxpayer to petition the court to determine "whether the certification was erroneous or whether the [IRS] has failed to reverse the certification". Citing prior precedent, including Adams v. Commissioner (Adams I), 160 T.C. 1, 8 (2023), the court reiterated that it does not have jurisdiction to review the underlying tax liabilities in these proceedings. The court also noted that if a certification is found to be erroneous, or if the certified debt is fully satisfied or ceases to be seriously delinquent under I.R.C. § 7345(b)(2), the IRS must reverse its certification. The only relief the Tax Court can grant if it finds the certification erroneous is to order the Secretary of the Treasury to notify the Secretary of State of the erroneous certification.

Regarding the standard of review, the court noted that it did not need to definitively decide between a de novo review or review for abuse of discretion, as its decision would be the same under either standard. The court stated that there was no material dispute regarding the evidence to be considered.

Application of the Law to the Facts

Applying the legal principles to the facts presented, the Tax Court found that the Commissioner had met the statutory requirements for certifying Mr. Pfirrman’s tax debt as seriously delinquent.

Seriously Delinquent Tax Debt Threshold: The court relied on the account transcript for Mr. Pfirrman’s 2018 tax year, retrieved from the IRS’s Transcript Delivery System, and the declaration of a senior tax analyst to establish that Mr. Pfirrman had an unpaid, assessed, and legally enforceable federal tax liability exceeding $59,000 at the time of certification. The initial assessment was $143,876, which had grown to $182,687 by the time of the March 2023 certification.
Levy Pursuant to I.R.C. § 6331: The court determined that a levy was made pursuant to I.R.C. § 6331, satisfying the requirement of I.R.C. § 7345(b)(1)(C)(ii). The record showed the issuance of a notice of intent to levy on November 1, 2021, with a signed return receipt. Furthermore, the senior tax analyst verified that an initial Federal Payment Levy Program (FPLP) levy was made on January 17, 2022, which was also reflected on the account transcript with the descriptor "First Levy Issued on Module". Mr. Pfirrman did not dispute this point.
Rejection of Taxpayer’s Arguments: The court explicitly addressed and rejected Mr. Pfirrman’s attempts to challenge the underlying tax liability, citing the established precedent that the Tax Court lacks jurisdiction to review these liabilities in a § 7345(e) proceeding, referencing Adams I, 160 T.C. at 12, Ruesch v. Commissioner, 154 T.C. 289, 295–98 (2020), aff’d in part, vacated in part and remanded per curiam, 25 F.4th 67 (2d Cir. 2022), and Adams II, 122 F.4th 429, 434–35 (D.C. Cir. 2024). The court also dismissed Mr. Pfirrman’s suggestion that partial payments dropping the liability below the certification threshold warranted relief. The court clarified that under I.R.C. § 7345(c)(1), a certification can only be reversed if the debt is fully satisfied, or if the exception in I.R.C. § 7345(b)(2)(A) applies, neither of which Mr. Pfirrman claimed. Partial payments, even if they reduce the liability below the current certification threshold, do not automatically trigger a reversal. The court quoted Adams II, 122 F.4th at 435, emphasizing that § 7345 prevents "eleventh-hour collateral attack[s] on a person’s underlying tax liabilities" after passport jeopardy arises.

Conclusions of the Court

Based on its analysis of the law and its application to the undisputed facts presented, the Tax Court concluded that the certification of Mr. Pfirrman as owing a "seriously delinquent tax debt" was not erroneous. Consequently, the court granted the Commissioner’s motion for summary judgment.

Implications for Tax Practitioners

The Pfirrman case serves as a clear reminder to tax practitioners of several key aspects regarding I.R.C. § 7345:

Limited Scope of Tax Court Review: Practitioners must understand that when representing clients in a § 7345(e) proceeding, the Tax Court’s review is strictly limited to whether the certification was erroneous or whether the IRS failed to reverse a proper certification. Challenges to the underlying tax liability are not within the Tax Court’s jurisdiction in these cases. Clients seeking to dispute their tax liability must do so through the standard channels provided by the Internal Revenue Code.
Definition of Seriously Delinquent Tax Debt: The case reinforces the specific criteria for a seriously delinquent tax debt: assessed, exceeding the inflation-adjusted threshold, unpaid, legally enforceable, and with either a filed tax lien where administrative rights have been exhausted or lapsed, or a levy made under I.R.C. § 6331. Practitioners should ensure their clients meet all these criteria before advising on potential passport implications.
Importance of Timely Action: The court’s reliance on the D.C. Circuit’s statement in Adams II highlights the importance of taxpayers taking timely action to contest tax liens or underlying deficiency determinations. Waiting until passport actions are initiated is generally too late to challenge the fundamental tax liability in a § 7345 proceeding.
Partial Payments Insufficient for Reversal (Absent Full Satisfaction): Practitioners should advise clients that partial payments of a seriously delinquent tax debt, even if they reduce the outstanding balance below the current certification threshold, will not automatically lead to the reversal of a passport certification. Only full satisfaction of the debt triggers the mandatory reversal under I.R.C. § 7345(c)(1).

In conclusion, Pfirrman v. Commissioner provides a clear illustration of the Tax Court’s role and limitations in reviewing IRS certifications of seriously delinquent tax debts for passport purposes. Tax practitioners must be well-versed in the specific requirements of I.R.C. § 7345 and advise their clients accordingly, particularly regarding the limited scope of review and the need for timely engagement with the IRS regarding underlying tax liabilities.

Prepared with the assistance of NotebookLM.