Due to the enactment of the Fixing America’s Surface Transportation (“FAST”) Act in December 2015, a new section was added to the Internal Revenue Code, 26 U.S.C. §7435, authorizing the Commissioner of the IRS (IRS) to certify to the Secretary of State a “seriously delinquent tax debt” for purposes of revoking, denying or placing limitations on a taxpayer’s passport. As of the date of this article the IRS has not yet started certifying tax debt to the State Department, however according to the IRS website, certification will begin in early 2017.
A tax liability meets the definition of “seriously delinquent tax debt” when an individual’s tax debt is unpaid, legally enforceable and meets these additional criteria: (1) the tax has been assessed, (2) the amount exceeds $50,000, and (3) an IRS Notice of Lien has been filed and administrative appeal rights have been exhausted or expired, or an IRS levy has been made pursuant to IRC §6331.
Essentially, if you have not taken steps to resolve your outstanding liability of more than $50,000, you are a target to have your passport revoked. However, the IRS will not report a taxpayer to the Secretary of State if you fall into one of these three exceptions:
- You are timely paying the liability through a formal installment agreement or an offer in compromise.
- Collection is suspended because a collection due process hearing has been requested, or is pending.
- Collection is suspended because you requested innocent spouse relief.
Once the IRS makes a certification revoking, limiting or denying renewal of a taxpayer’s passport, the taxpayer is entitled to a reversal by either: (1) paying the tax liability in full; (2) requesting innocent spouse relief; (3) agreeing to terms of an installment agreement; or (4) reaching an agreement regarding an offer in compromise.
In making or reversing the certification the IRS must notify the taxpayer of such action and of the taxpayer’s right to bring a civil action against the Commissioner in U.S. District Court or U.S. Tax Court for either an erroneous certification or failure to reverse such certification.
The passport revocation law is a very serious issue. In addition to affecting your ability to travel internationally, the passport revocation may also have serious consequences for your domestic travel. Beginning in January of 2017, residents of Kentucky, Maine, Minnesota, Missouri, Montana, Oklahoma, Pennsylvania, South Carolina and Washington, will not be able to use their driver license as identification when boarding an airplane. Residents of these states will be unable to fly domestically without a passport unless they have a different form of acceptable identification, such as a U.S. Military card. Individuals in the State of California who owe substantial money to the California Franchise Tax Board (FTB) or the California State Board of Equalization (SBOE) may have their driver license suspended by the State of California if they are a top 500 debtor (tax owed is greater than $100,000), and if they have not made arrangements to pay their liability. This means that individuals who owe a substantial amount of tax to the FTB or SBOE, and to the IRS, may be at risk of losing the ability to fly domestically since these taxpayers risk losing both their driver license and passport.
This new law will affect many taxpayers throughout the country. It is more important than ever to deal with an outstanding tax liability quickly if it exceeds $50,000. Once you are paying your account through either on an installment agreement or and offer in compromise, you are not at risk of having your passport revoked or suspended. If you think this new law may affect you, please contact our firm for assistance.
For more information, on this or other tax issues, contact the Law Offices of A. Lavar Taylor, LLP at (714) 546-0445, [email protected] or visit taylorlaw.com.