Friday, August 9, 2019

IRS Release on Passport Denial and Revocation for Seriously Delinquent Tax Debt (8/9/19)

The IRS released IR-2019-141 (8/8/19), here, titled: "Individuals with significant tax debt should act promptly to avoid revocation of passports."  The release has very useful information and should be read by all persons with significant tax debts who travel internationally.  For example, taxpayers who have had their passport application denied because of the IRS's certification can apply for prompt processing "to resolve their tax issues and expedite reversal of their certification to State [Department]."

Here is the discussion of the passport denial or revocation procedure from the 2019 Federal Tax Procedure Book pending publication on SSRN (footnotes omitted):

XIII. Denial or Revocation of Passport for Seriously Delinquent Tax Debt.

Section 7345 and 22 U.S.C. § 2714a, added in 2015, require that, upon the IRS certification transmitted to the Secretary of State (through the Secretary of the Treasury) that an individual has “a seriously delinquent tax debt,” the Secretary of State “shall not issue a passport” to the individual and, if a passport has already been issued, "may revoke" the individual's passport.   A “seriously delinquent tax debt” is an assessed tax debt greater than $50,000 (as adjusted for inflation, $52,000)  if a notice of  tax lien has been filed with CDP rights exhausted or lapsed or a levy under § 6331 has been made.  Once certified, paying the account below the threshold amount will not result in decertification.

Exceptions are made for debts that are being paid “in a timely manner” pursuant to agreement with the IRS or which are subject to either a CDP hearing or an election for innocent spouse relief under § 6015.  The Secretary of State may approve exceptions to these requirements in “emergency circumstances” or for “humanitarian reasons” or may limit the passport only for return to the U.S.

The IRS must “contemporaneously notify an individual of any certification under subsection (a).”  The notice of the certification must include notice of the certification and of the right to bring a civil action in the district court or Tax Court to contest whether the certification was erroneous. The certification must be reversed if the certification was erroneous, the tax debt is fully satisfied, or the tax debt ceases to be a seriously delinquent tax debt as defined. This judicial remedy is the sole remedy for improper certification or failure to reverse a certification; the taxpayer may request IRS administrative relief but does not have an Appeals Office review of any action or nonaction pursuant to the request.

The required earlier notices of tax liens and notices of levy must include notice of § 6345's authority to deny or revoke passports.

Apart from a seriously delinquent tax debt certification, the Secretary of State may deny a passport for failure to provide a valid Social Security Number.

The certification will not prevent return travel to the U.S., although the passport may be confiscated upon re-entry.

Since the provision is relatively new, the procedures were not implemented immediately.  Persons interested in the implementation should check for more recent IRS actions or pronouncements and practitioner or scholarly comment.  The IRS has a website that indicates that certifications to the State Department began in February, 2018.

[Note:  the FTP 2019 edition pending  publication on SSRN said that the amount of the seriously delinquent tax debt as adjusted for inflation was $53,000.  It is $52,000; I have changed that above and in the working draft  for the FTP 2020 edition.]

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