Passport Problems for Delinquent Tax Debts

In January of 2018, the Internal Revenue Service published procedures to start enforcing Internal Revenue Code (IRC) section 7345.

Let’s for a moment just assume you aren’t intimately familiar with the IRC, or as familiar as you would like to be. What does this mean for you?

Well for starters IRC 7345 requires the State Department to deny applications for, or revoke the passport of, any individual that has a debt that the IRS certifies as “seriously delinquent tax debt.” IRC 7345 was established on December 5th, 2015 as part of the Fixing America’s Surface Travel Act (FAST Act).

Before January 2018, the IRS had not been enforcing section 7345, as there were many questions about how the process would work, if there would be additional exceptions, and how the IRS would work with the State Department.

Now the process is a little more clear, thanks to the issuance of Notice 2018-01 on January 16th (Found here), paired with new provisions for the Internal Revenue Manual (IRM).

So what is a “Seriously Delinquent Tax Debt?” Under section 7345(b)(1), a “seriously delinquent tax debt” is an unpaid, legally enforceable, and assessed federal tax liability of an individual, greater than $50,000, and for which:

  • A notice of federal tax lien has been filed under section 6323, and the taxpayer’s right to a hearing under section 6320 has been exhausted or lapsed; or
  • A levy has been issued under section 6331.

The $50,000 amount is also to be adjusted for inflation each calendar year. The debt is calculated by adding up the total amount of current tax liabilities for all taxable years and periods meeting the above criteria, in addition to penalties and liabilities. However, section 7345(b)(2) states that a seriously delinquent tax debt does not include the following:

  • A debt that is being timely paid under an IRS-approved installment agreement under section 6159;
  • A debt that is being timely paid under an offer in compromise accepted by the IRS under section 7122;
  • A debt that is being timely paid under the terms of a settlement agreement with the Department of Justice under section 7122;
  • A debt in connection with a levy for which collection is suspended because of a request for a due process hearing (or because such a request is pending) under section 6330; and
  • A debt for which collection is suspended because the individual made an innocent spouse election (section 6015(b) or (c)) or the individual requested innocent spouse relief (section 6015(f)).

To move forward with the process of denying passport applications, or revoking passports, the IRS must first send notice to the taxpayer by regular mail {IRC section 7345(d)}, with a description of the taxpayers right to judicial review. After the taxpayer is notified the IRS will send all the information to the State Department. When the taxpayer then applies for a passport, the State Department will provide the taxpayer 90 days to resolve the tax debt by paying in full, entering into an installment agreement, or obtaining IRS acceptance of an offer in compromise (OIC) before denying the application.