In Kavan Shaban v. Commissioner of Internal Revenue, T.C. Memo. 2026-24, the taxpayer, Kavan Shaban, is a medical doctor who co-owns a group of family businesses, including Persona Doctors HQ, LLC (PersonaHQ). In 2007, Mr. Shaban hired his brother, Shevan, to serve as the business manager. Shevan’s responsibilities included managing payroll, filing tax returns, and paying payroll taxes. In 2019, Mr. Shaban discovered that Shevan had embezzled approximately $9 million from the family businesses, which included trust fund taxes that were meant to be paid to the Internal Revenue Service (IRS). After Mr. Shaban initiated a civil lawsuit in Maryland state court, Shevan admitted to the embezzlement, acknowledged filing false tax returns, and took sole responsibility for the nonpayment of the trust fund taxes.

Pursuant to I.R.C. § 6672(a), the IRS determined that Mr. Shaban was a responsible person and assessed Trust Fund Recovery Penalties (TFRPs) against him for the periods ending September 30, 2018, June 30, 2019, and December 31, 2019. The TFRPs were officially assessed on September 15, 2023, following an unsuccessful protest by Mr. Shaban’s representative, who failed to timely respond to IRS document requests. To collect the unpaid TFRPs, the IRS issued a Notice of Intent to Levy and a Notice of Federal Tax Lien Filing in November 2023. Mr. Shaban did not request a Collection Due Process (CDP) hearing in response to either notice.

Because the TFRP liabilities remained unpaid, the IRS certified Mr. Shaban to the Department of State as an individual with a "seriously delinquent tax debt" pursuant to I.R.C. § 7345(a). After a temporary reversal due to a submitted Offer in Compromise (OIC) that was subsequently rejected, the IRS issued a Notice of Certification of Your Seriously Delinquent Federal Tax Debt to the U.S. Department of State in March 2025, when Mr. Shaban’s debt totaled $147,274.

Taxpayer Request for Relief

Mr. Shaban filed a petition with the Tax Court challenging the Notice of Certification, seeking to have the certification reversed. He filed a Motion for Summary Judgment and raised four primary arguments against the certification: First, he argued that he was not liable for the underlying TFRPs because he was a victim of his brother’s embezzlement. Second, he asserted that the IRS should have reversed the certification based on discretionary identity theft exclusions. Third, he contended that the certification was premature because he had not yet exhausted his administrative and judicial rights to pay the balance and seek a refund. Finally, he argued that the certification was procedurally erroneous because the IRS violated I.R.C. § 7345(g) by using a computer system to identify his account for certification, rather than the statutorily designated IRS official.

The Court’s Analysis of the Law

The Tax Court first examined the narrow scope of its jurisdiction under I.R.C. § 7345(e)(1). The statute allows a taxpayer to bring a civil action to determine "whether the certification was erroneous or whether the Commissioner has failed to reverse the certification". The Court emphasized its jurisdictional limits, stating, "we do not have jurisdiction to review the liabilities underlying the certification of a seriously delinquent tax debt". Citing established precedent, the Court noted, "Section 7345 requires simply that the liability ‘has been assessed,’ not that the liability ‘has been properly assessed.’ . . . In short, once the existence of an assessment is shown . . . , section 7345(b)(1)(A) is satisfied, and we have no authority to inquire further".

The Court analyzed the definition of a "seriously delinquent tax debt" under I.R.C. § 7345(b)(1). To meet the statutory definition, the debt must be an unpaid, legally enforceable federal tax liability that has been assessed, is greater than $50,000 (adjusted for inflation), and for which a notice of lien has been filed and administrative CDP rights have been exhausted or lapsed, or a levy has been made.

Furthermore, the Court analyzed the delegation requirements under I.R.C. § 7345(g), which mandate that a certification "may only be delegated by the Commissioner of Internal Revenue to the Deputy Commissioner for Services and Enforcement, or the Commissioner of an operating division, of the Internal Revenue Service". In this case, the authority was properly delegated to the Commissioner of the Small Business/Self-Employed Division (SB/SE Commissioner).

Application of the Law to the Facts

In applying the law, the Court found that the IRS successfully demonstrated that Mr. Shaban’s account met all criteria for a seriously delinquent tax debt. The tax had been assessed, the $147,274 balance exceeded the 2025 inflation-adjusted threshold of $64,000, and a lien had been filed and levy made with no CDP hearing requested. As a result, his liability "met the statutory definition of a ’seriously delinquent tax debt’".

The Court systematically dismantled each of Mr. Shaban’s defensive arguments:

Collateral Attack on Liability: Addressing Mr. Shaban’s attempt to deflect liability to his brother, the Court stated, "Section 7345 plainly forecloses such an eleventh-hour collateral attack on a person’s underlying tax liabilities". The Court noted that while it was sympathetic to Mr. Shaban’s victimization, "we do not have jurisdiction to review the liabilities underlying the certification".
Discretionary Exception for Identity Theft: The Court addressed Mr. Shaban’s claim that an Internal Revenue Manual (IRM) discretionary exception should apply. The Court found that for the IRM provision to apply, Mr. Shaban must have filed an administrative identity theft claim with the IRS, and the IRS must have approved it. Because no such claim was filed or approved, the exception was inapplicable, and the Court noted, "The Commissioner’s employees do not have discretion to apply the requested exclusion".
Premature Certification: Addressing the argument that certification should wait until refund litigation concludes, the Court held that "the statute, however, is clear that exhausting administrative and judicial refund rights is not included in the definition of a seriously delinquent tax debt". Thus, the action was not premature.
Computer System Argument: Finally, the Court evaluated the I.R.C. § 7345(g) delegation argument. The Court ruled that the use of a computer system to identify qualifying accounts does not violate the statute. The computer merely generates a list; an IRS employee sends this list to the SB/SE Commissioner, who then "verifies that the tax debts reflected in the accounts listed meet the requirements of section 7345 and gives final approval and certification". Because the SB/SE Commissioner gave the final approval, the statutory delegation requirements were fully satisfied.

Conclusion

The Tax Court concluded that there was no genuine dispute of material fact regarding the validity of the IRS’s certification. The Court held that "the certification of Mr. Shaban as a taxpayer owing a ’seriously delinquent tax debt’ was not erroneous". Consequently, the Court granted the Commissioner’s Motion for Summary Judgment and denied Mr. Shaban’s Motion for Summary Judgment, effectively leaving his passport at risk of revocation or denial by the Department of State.

Prepared with assistance from NotebookLM.