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Keywords

liabilityinjunctionappealtrust
injunctionappealtrustdue processlevy

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Franklin v. United States, 49 F.4th 429, 130 A.F.T.R.2d 2022-6000, 2022-2 USTC P 50,228

Facts

The IRS assessed penalties against James Franklin for failing to file accurate tax returns and for not reporting a foreign trust, totaling $421,766. Following the assessment, the IRS certified Franklin's tax debt as 'seriously delinquent' to the Department of State, which led to the revocation of his passport. Franklin filed a FOIA request for documents related to his tax assessments, claiming procedural deficiencies in the IRS's actions, but did not pursue an administrative appeal. After unsuccessful offers to compromise his tax liability, he filed suit against the United States.

The Internal Revenue Service (IRS) found that James Franklin had failed to file accurate tax returns and had not reported a foreign trust of which he was the beneficial owner, and so it assessed penalties against him. Those penalties, assessed under 26 U.S.C. § 6677 on July 18, 2016, totaled $421,766. In 2018, the IRS began its collection efforts against Franklin, filing a federal tax lien and later levying on Franklin's Social Security benefits. The IRS also certified to the Department of State that Franklin had a “seriously delinquent tax debt” per 26 U.S.C. § 7345 (enacted under the Fixing America's Surface Transportation (“FAST”) Act), which led the State Department to revoke Franklin's passport.

Issue

1. Whether the Anti-Injunction Act prohibited Franklin's claims challenging the tax penalties assessed against him. 2. Whether the right to international travel constitutes a fundamental right meriting strict scrutiny in the context of the FAST Act's passport-revocation scheme. 3. Whether the FAST Act's passport-revocation scheme is constitutional under intermediate scrutiny.

1. Anti-Injunction Act prohibited taxpayer's claims challenging tax penalties against him alleging IRS failed to follow procedural requirements; 2. right to international travel did not constitute a fundamental right such that restrictions on it merited strict scrutiny in taxpayer's challenge to constitutionality of FAST Act's passport-revocation scheme; 3. FAST Act's passport-revocation scheme was constitutional under intermediate scrutiny and did not violate taxpayer's substantive due process rights under the Fifth Amendment.

Rule

The Anti-Injunction Act prohibits suits aimed at restraining the assessment or collection of taxes. The right to international travel is not considered a fundamental right, and restrictions on it are evaluated under rational-basis or intermediate scrutiny.

The Anti-Injunction Act prohibits suits aimed at restraining the assessment or collection of taxes. The right to international travel is not considered a fundamental right, and restrictions on it are evaluated under rational-basis or intermediate scrutiny.

Analysis

The court determined that Franklin's claims were effectively a challenge to the validity of the tax assessments, which the Anti-Injunction Act prohibits. It found that the right to international travel does not warrant strict scrutiny and that the FAST Act's passport-revocation scheme serves an important governmental interest in tax collection, thus passing constitutional muster under intermediate scrutiny.

The court determined that Franklin's claims were effectively a challenge to the validity of the tax assessments, which the Anti-Injunction Act prohibits. It found that the right to international travel does not warrant strict scrutiny and that the FAST Act's passport-revocation scheme serves an important governmental interest in tax collection, thus passing constitutional muster under intermediate scrutiny.

Conclusion

The Court of Appeals affirmed the district court's dismissal of Franklin's claims, ruling that the Anti-Injunction Act barred his challenges and that the FAST Act's passport-revocation scheme was constitutional.

The Court of Appeals affirmed the district court's dismissal of Franklin's claims, ruling that the Anti-Injunction Act barred his challenges and that the FAST Act's passport-revocation scheme was constitutional.

Who won?

United States; the court ruled that Franklin's claims were barred by the Anti-Injunction Act and that the passport-revocation scheme was constitutional.

United States; the court ruled that Franklin's claims were barred by the Anti-Injunction Act and that the passport-revocation scheme was constitutional.

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