Restraining Taxpayers for Tax Debts (8/19/13)

Collateral consequences often attend tax crimes investigations and prosecutions and even in circumstances that raise the risk of criminal investigation and prosecution.  One collateral consequence is that the IRS wants to collect the tax dollars that the taxpayer owes, along with penalties and interest.

The IRS has a number of collection tools -- most prominently the lien and levy.  But the taxpayer can hide assets, particularly overseas assets that stymy collection.  I write today on one of the tools available to the IRS to deal with such situations -- the little known writ ne exeat republica.  I just read a case involving this writ.  I suspect that many readers will not have heard of the writ.  While the case I read this morning was unexceptional, I thought readers might find the introduction from my Tax Procedure book helpful as an introduction (footnotes omitted; footnotes can be reviewed the the downloadable text):

2. Writ of Ne Exeat Republica - Constraining the Person. 

The United States does not generally allow imprisonment – or, more broadly, constraining a person’s liberty -- for the nonpayment of debt.  The exception for purposes of tax matters is the statutory approval in § 7402(a) for the writ of ne exeat republica.  The Latin is “let him not go out of the republic,” and was developed in England as a chancery writ.  The writ is sometimes used in domestic relations contexts to restrain someone from leaving the jurisdiction.  In tax collection contexts: 

The writ ne exeat republica is an extraordinary remedy and should only be considered when all other administrative and judicial remedies would be ineffective. In appropriate cases, the writ ne exeat may be used as a collection device against a United States taxpayer who is about to depart from the territorial jurisdiction of the United States, or who no longer resides but is temporarily present in the United States and who has transferred his assets outside of the United States in order to avoid payment of his federal tax liabilities. The writ ne exeat is a court order which generally commands a marshal to commit to jail a defendant who fails to post bail or other security in a specified amount. The authority for the United States District Courts to issue writs ne exeat in tax cases is found in I.R.C. section 7402(a) and 28 U.S.C. section 1651.  

The debt relied on to support the writ must be enforceable against the defendant, be of a pecuniary nature and be presently payable. Thus, in tax cases, an assessment should be outstanding against the taxpayer.

The purpose of the writ in tax cases is to prevent taxpayers from defeating the collection of tax liabilities by removing themselves and their assets from the territorial jurisdiction of the United States. As a practical matter collection by administrative means is ineffective where the taxpayer has either secreted his assets or removed them from the United States. If the taxpayer leaves the United States, judicial remedies may be likewise defeated since the court would then be powerless in most cases to enforce its orders or judgments against the taxpayer or his property, if located outside of the United States. Thus, the writ ne exeat ensures the continuing submission of the taxpayer to the jurisdiction of the court. 

The writ may be used in conjunction with the appointment of a receiver. 

The writ is very, very rarely used.  I have never encountered it in my practice nor, anecdotally, have I heard of other practitioners’ encountering it.  The cases are sparse.

I think I will incorporate this discussion in the next iteration of my Federal Tax Crimes Book.