Can the IRS Take my Passport?

A taxpayer may ask, “Can the IRS take my passport?”  In short, maybe.  In early December 2015 President Obama signed into law a new, and powerful, tool for the IRS to pursue delinquent taxpayers.

The new IRC § 7345, passed as part of the Fixing America’s Surface Transportation Act “FAST Act” will allow the IRS, under certain circumstances, to tell the State Department to revoke, deny, or limit passports for taxpayers who have past due liabilities to the IRS.

What Does the Law Say?

[su_expand more_text=”Read More” less_text=”Show Less” height=”120″ text_color=”#676767″ more_icon=”icon: caret-square-o-down” less_icon=”icon: caret-square-o-up”][su_quote]SEC. 32101. Revocation or denial of passport in case of certain unpaid taxes. (a) In general.—Subchapter D of chapter 75 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section: “SEC. 7345. Revocation or denial of passport in case of certain tax delinquencies. “(a) In general.—If the Secretary receives certification by the Commissioner of Internal Revenue that an individual has a seriously delinquent tax debt, the Secretary shall transmit such certification to the Secretary of State for action with respect to denial, revocation, or limitation of a passport pursuant to section 32101 of the FAST Act. “(b) Seriously delinquent tax debt.— “(1) IN GENERAL.—For purposes of this section, the term ‘seriously delinquent tax debt’ means an unpaid, legally enforceable Federal tax liability of an individual— “(A) which has been assessed, “(B) which is greater than $50,000, and “(C) with respect to which— “(i) a notice of lien has been filed pursuant to section 6323 and the administrative rights under section 6320 with respect to such filing have been exhausted or have lapsed, or “(ii) a levy is made pursuant to section 6331. “(2) EXCEPTIONS.—Such term shall not include— “(A) a debt that is being paid in a timely manner pursuant to an agreement to which the individual is party under section 6159 or 7122, and “(B) a debt with respect to which collection is suspended with respect to the individual— “(i) because a due process hearing under section 6330 is requested or pending, or “(ii) because an election under subsection (b) or (c) of section 6015 is made or relief under subsection (f) of such section is requested. “(c) Reversal of certification.— “(1) IN GENERAL.—In the case of an individual with respect to whom the Commissioner makes a certification under subsection (a), the Commissioner shall notify the Secretary (and the Secretary shall subsequently notify the Secretary of State) if such certification is found to be erroneous or if the debt with respect to such certification is fully satisfied or ceases to be a seriously delinquent tax debt by reason of subsection (b)(2). “(2) TIMING OF NOTICE.— “(A) FULL SATISFACTION OF DEBT.—In the case of a debt that has been fully satisfied or has become legally unenforceable, such notification shall be made not later than the date required for issuing the certificate of release of lien with respect to such debt under section 6325(a). “(B) INNOCENT SPOUSE RELIEF.—In the case of an individual who makes an election under subsection (b) or (c) of section 6015, or requests relief under subsection (f) of such section, such notification shall be made not later than 30 days after any such election or request. “(C) INSTALLMENT AGREEMENT OR OFFER-IN-COMPROMISE.—In the case of an installment agreement under section 6159 or an offer-in-compromise under section 7122, such notification shall be made not later than 30 days after such agreement is entered into or such offer is accepted by the Secretary. “(D) ERRONEOUS CERTIFICATION.—In the case of a certification found to be erroneous, such notification shall be made as soon as practicable after such finding. “(d) Contemporaneous notice to individual.—The Commissioner shall contemporaneously notify an individual of any certification under subsection (a), or any reversal of certification under subsection (c), with respect to such individual. Such notice shall include a description in simple and nontechnical terms of the right to bring a civil action under subsection (e). “(e) Judicial review of certification.— “(1) IN GENERAL.—After the Commissioner notifies an individual under subsection (d), the taxpayer may bring a civil action against the United States in a district court of the United States or the Tax Court to determine whether the certification was erroneous or whether the Commissioner has failed to reverse the certification. “(2) DETERMINATION.—If the court determines that such certification was erroneous, then the court may order the Secretary to notify the Secretary of State that such certification was erroneous. “(f) Adjustment for inflation.—In the case of a calendar year beginning after 2016, the dollar amount in subsection (a) shall be increased by an amount equal to— “(1) such dollar amount, multiplied by “(2) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year, determined by substituting ‘calendar year 2015’ for ‘calendar year 1992’ in subparagraph (B) thereof. If any amount as adjusted under the preceding sentence is not a multiple of $1,000, such amount shall be rounded to the nearest multiple of $1,000. “(g) Delegation of certification.—A certification under subsection (a) or reversal of certification under subsection (c) 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.”. (b) Information included in notice of lien and levy.— (1) NOTICE OF LIEN.—Section 6320(a)(3) of such Code is amended by striking “and” at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting “; and”, and by adding at the end the following new subparagraph: “(E) the provisions of section 7345 relating to the certification of seriously delinquent tax debts and the denial, revocation, or limitation of passports of individuals with such debts pursuant to section 32101 of the FAST Act”..”. (2) NOTICE OF LEVY.—Section 6331(d)(4) of such Code is amended by striking “and” at the end of subparagraph (E), by striking the period at the end of subparagraph (F) and inserting “, and”, and by adding at the end the following new subparagraph: “(G) the provisions of section 7345 relating to the certification of seriously delinquent tax debts and the denial, revocation, or limitation of passports of individuals with such debts pursuant to section 32101 of the FAST Act”..”. (c) Authority for information sharing.— (1) IN GENERAL.—Section 6103(k) of such Code is amended by adding at the end the following new paragraph: “(11) DISCLOSURE OF RETURN INFORMATION TO DEPARTMENT OF STATE FOR PURPOSES OF PASSPORT REVOCATION UNDER SECTION 7345.— “(A) IN GENERAL.—The Secretary shall, upon receiving a certification described in section 7345, disclose to the Secretary of State return information with respect to a taxpayer who has a seriously delinquent tax debt described in such section. Such return information shall be limited to— “(i) the taxpayer identity information with respect to such taxpayer, and “(ii) the amount of such seriously delinquent tax debt. “(B) RESTRICTION ON DISCLOSURE.—Return information disclosed under subparagraph (A) may be used by officers and employees of the Department of State for the purposes of, and to the extent necessary in, carrying out the requirements of section 32101 of the FAST Act”..”. (2) CONFORMING AMENDMENT.—Paragraph (4) of section 6103(p) of such Code is amended by striking “or (10)” each place it appears in subparagraph (F)(ii) and in the matter preceding subparagraph (A) and inserting “, (10), or (11)”. (d) Time for certification of seriously delinquent tax debt postponed by reason of service in combat zone.—Section 7508(a) of such Code is amended by striking the period at the end of paragraph (2) and inserting “; and” and by adding at the end the following new paragraph: “(3) Any certification of a seriously delinquent tax debt under section 7345.”. (e) Authority to deny or revoke passport.— (1) DENIAL.— (A) IN GENERAL.—Except as provided under subparagraph (B), upon receiving a certification described in section 7345 of the Internal Revenue Code of 1986 from the Secretary of the Treasury, the Secretary of State shall not issue a passport to any individual who has a seriously delinquent tax debt described in such section. (B) EMERGENCY AND HUMANITARIAN SITUATIONS.—Notwithstanding subparagraph (A), the Secretary of State may issue a passport, in emergency circumstances or for humanitarian reasons, to an individual described in such subparagraph. (2) REVOCATION.— (A) IN GENERAL.—The Secretary of State may revoke a passport previously issued to any individual described in paragraph (1)(A). (B) LIMITATION FOR RETURN TO UNITED STATES.—If the Secretary of State decides to revoke a passport under subparagraph (A), the Secretary of State, before revocation, may— (i) limit a previously issued passport only for return travel to the United States; or (ii) issue a limited passport that only permits return travel to the United States. (3) HOLD HARMLESS.—The Secretary of the Treasury, the Secretary of State, and any of their designees shall not be liable to an individual for any action with respect to a certification by the Commissioner of Internal Revenue under section 7345 of the Internal Revenue Code of 1986. (f) Revocation or denial of passport in case of individual without social security account number.— (1) DENIAL.— (A) IN GENERAL.—Except as provided under subparagraph (B), upon receiving an application for a passport from an individual that either— (i) does not include the social security account number issued to that individual, or (ii) includes an incorrect or invalid social security number willfully, intentionally, negligently, or recklessly provided by such individual, the Secretary of State is authorized to deny such application and is authorized to not issue a passport to the individual. (B) EMERGENCY AND HUMANITARIAN SITUATIONS.—Notwithstanding subparagraph (A), the Secretary of State may issue a passport, in emergency circumstances or for humanitarian reasons, to an individual described in subparagraph (A). (2) REVOCATION.— (A) IN GENERAL.—The Secretary of State may revoke a passport previously issued to any individual described in paragraph (1)(A). (B) LIMITATION FOR RETURN TO UNITED STATES.—If the Secretary of State decides to revoke a passport under subparagraph (A), the Secretary of State, before revocation, may— (i) limit a previously issued passport only for return travel to the United States; or (ii) issue a limited passport that only permits return travel to the United States. (g) Removal of certification from record when debt ceases to be seriously delinquent.—If pursuant to subsection (c) or (e) of section 7345 of the Internal Revenue Code of 1986 the Secretary of State receives from the Secretary of the Treasury a notice that an individual ceases to have a seriously delinquent tax debt, the Secretary of State shall remove from the individual’s record the certification with respect to such debt. (h) Clerical amendment.—The table of sections for subchapter D of chapter 75 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item: “Sec. 7345. Revocation or denial of passport in case of certain tax delinquencies.”. (i) Effective date.—The provisions of, and amendments made by, this section shall take effect on the date of the enactment of this Act.[/su_quote] [/su_expand]

What Should I Do If the IRS Takes my Passport?

Before the IRS tries to take a taxpayer’s passport, there a few things that should be considered.  First, under the bill a debt is not “seriously delinquent” if it is (1) under an installment agreement with the IRS; (2) if its “collection is suspended;” (3) currently subject to a CDP Hearing procedure; or (4) for which Innocent Spouse Relief under IRC § 6015 has been elected.  A taxpayer might first consider, as a matter of prevention,  pursuing one of these programs.

The law also provides a judicial review of the IRS’s attempt to revoke, limit, or deny your passport.  Such an appeal can be taken a district court, and in an unusual turn of legislation, the U.S. Tax Court, which usually hears only deficiency proceedings.

What to Do if I have Questions?

If you have questions about the IRS’s ability to revoke, suspend, or deny a passport, or about general IRS collection matters, please feel free to contact McLaughlin Legal today to discuss your issues.

[su_service title=”Interested in Learning More?”]If you are interested in learning more about how the IRS can take your passport, please feel free to contact us today for a free consultation.[/su_service]

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