Not IRS, but here's an example of State government messing up: Back in 1986 or so, I had a NJ tax refund due me. I was notified it was in abeyance because a hospital claimed I owed them money. First, I had to call a then very bureaucratic NJ tax department just to find out what hospital.
Then, I had to call the hospital to clear up the account......except there was no balance due. I told NJ that I had the proof of no balance but they replied they were "neutral" and again referred me to the hospital. My argument that being neutral means accepting my evidence as well as the hospital's fell on deaf ears.
After NUMEROUS back-and-forths with the tax department (over about 3 months), along with numerous calls/letters to the hospital, the hospital did nothing and the tax department released my refund to the hospital.
I can see similar situation with this proposal. IRS would have nothing to lose, so might as well keep restricting passports even if contrary proof was provided.
BTW, it took a complaint letter to my governor, to finally get the HOSPITAL to return my money.