Tuesday, February 11, 2014

Writ Ne Exeat Republica to Restrain from Foreign Travel as Tax Collection Tool (2/11/14)

Readers might like to read two good discussions of the writ ne exeat republica, which courts may issue in tax cases under 7402(a), here.  The writ, if issued  in a tax case, will restrain the defendant from leaving the jurisdiction (or some subset thereof) pending payment of some or all of a tax debt.  The two excellent discussions were prompted by a case, United States v. Barrett, 2014 U.S. Dist. LEXIS 10888 (D. CO. 2014), where the writ was granted.  The two discussions are:

  • Keith Fogg, Holding People Hostage for the Payment of Tax – Writ Ne Exeat Republica (Procedurally Taxing Blog 2/11/14), here.
  • Jay Adkisson, A Wedding And The Writ Of Ne Exeat Republica (Forbes 2/7/14), here.
I have done a prior parallel blogs on the issue in which I quoted from my text.  See Restraining Taxpayers for Tax Debts (Federal Tax Crimes Blog 8/19/13), here; and Restraining Taxpayers for Tax Debts (Federal Tax Procedure Blog 8/19/13), here.  I offer the following of my text as I have revised it (footnotes omitted):
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 exercise of the writ implicates constitutional protections, including the “right to travel” which is “a constitutional liberty closely related to rights of free speech and association, * * *.”  Notwithstanding this implication of constitutional rights, in extraordinary cases it can be granted.  
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.  The sparsity of cases may be because, due to the constitutional implications, the requirements for the Government to obtain the writ are difficult to meet.  The requirements, often referred to as the Mathewson requirements, are: 
(1) a substantial likelihood the movant will succeed on the merits; (2) the movant will suffer an irreparable injury if the injunction is not issued; (3) the potential injury to the movant outweighs the potential harm to the opposing party; and (4) the injunction would not disserve the public interest.


  1. This is something I have thought about, but wasn't sure at what point of severity this writ is applied. From reading your post it seems that a small fish in the OVDP process is unlikely to be affected by it.

  2. There is a very important policy decision involved here. Germany was able to obtain 26,000 disclosures (in a country with 1/4 the US population) and get $4.75 billion, plus the future income stream on the accounts of those 26,000 disclosures, all in just one year.

    By contrast, the US had only 24,000 disclosures over the period 2009 through 9/30/2013.

    Germany has a reasonable approach based on past income nonreporting (I think 10 years' worth of back taxes plus interest if you come in voluntarily.) The US does the same for eight years but adds, on top, a penalty of 27.5% of high balance, regardless of whether the unreported amount was huge or de minimis, and opting out can result in, at best, only 3 years' worth of back taxes, at worst a 300% FBAR penalty on top of taxes interest and accuracy penalty. Meanwhile the US has given an incentive to those with foreign accounts to expatriate, draw down their accounts below $50K (which eliminated the FATCA risk but not the FBAR reporting requirements) and so on.

  3. Small fish need not be concerned, but even larger fish if they have not behaved very badly. The taxpayers in the cases have gone far beyond simply failing to report or pay their taxes -- even simply intentionally not reporting or paying.

    Jack Townsend

  4. Our open source outline summarizes recent IRS and DOJ manual changes for International Tax Collection appears @ https://docs.google.com/file/d/0B719qAMBEjGQaGJ0cFhBb2ViWUU/edit. Comments will be incorporated in future editions.

  5. Thank you Mr. Agostino for posting this. I have read it.

    The report focuses primarily on tax debts and doesn't say much about non-tax (i.e. FBAR) debt. It's not clear what remedies the IRS would have where only FBAR fines are at issue.

    As to forfeiture of correspondent bank accounts, it seems to me that there are a lot of mental gymnastics that go into arguing that a correspondent account of a foreign bank can be seized because someone has an account at that foreign bank's office. If the bank's correspondent account holds $1 million, and there are 5 accountholders each with a $1 million account at the foreign office, how can the same money belong to each of them? Furthermore, if the (preposterous and illogical, I think) argument is made that the bank's correspondent account belongs to a foreign accountholder and can be seized, couldn't the accountholder make the (equally preposterous) argument that the money is really in the US and therefore no FBAR violation occurred?

  6. If this where China or Russia I would not be surprised but this is the US legal system we are talking about ! What a sad story .

    1. The Barrett’s we detained five days with out due process and with out legal defense.
    2. .....Mrs. Barrett could not be located in the system for 3 days. Mr. Barrett for two....
    3. ..... they were being detained - there were no charges......
    4. .....the company Mr. Barrett worked for due to harassment by IRS withdrew its financial support for legal assistance for the Barretts....


Please make sure that your comment is relevant to the blog entry. For those regular commenters on the blog who otherwise do not want to identify by name, readers would find it helpful if you would choose a unique anonymous indentifier other than just Anonymous. This will help readers identify other comments from a trusted source, so to speak.