The world’s most powerful debt collector has become stronger. The “FAST Act” created by H.R. 22 in the Congressional Session 2015-2016 added a new section 7345 to the United States tax code. This section authorizes the Internal Revenue Service (IRS) to certify a tax debt to the State Department for repercussive action. This means the two federal agencies will work together to revoke a passport or completely prevent issuance of a passport when an individual has a “seriously delinquent tax debt.”

Under this provision, a “seriously delinquent tax debt” is when an individual’s unpaid, legally enforceable federal tax debt is more than $50,000. The section also accounts for inflation by rounding up or down to the nearest $1,000. Presently, with inflation accounted for, the amount is now $51,000 or more of tax debt. This amount includes interest and penalties owed to the IRS.

Criteria for the IRS to Block or Revoke Your Passport

For the IRS to utilize section 7345, two steps must be satisfied. First, the IRS must have served a notice of federal tax lien under Internal Revenue Code (IRC) section 6320 and all administrative remedies and challenges have been exhausted or the time to bring such remedies has expired. The taxpayer notification is a Notice CP 508C and must be sent to you in writing at the time you are determined to be with “seriously delinquent tax debt.”

Second, the IRS must have issued a levy. If both of these steps have been complied with, the IRS may notify the State Department who will either block your application for a passport or revoke your current passport.

Once both steps are taken, the State Department must hold your application or passport revocation for 90 days to allow you to (1) challenge or resolve whether you constitute an individual with a “seriously delinquent tax debt” and that the IRS has satisfied both steps above, (2) make full payment or (3) enter into a payment arrangement with the IRS (settlement agreement, installment plan, offer to compromise).

If you are presently abroad when your passport is revoked, the IRS and State Department will issue you a limited validity passport good for your direct return to the United States only.

Exceptions When the IRS Cannot Block or Take Your Passport

However, there are some exceptions. Even if the IRS has completed both steps and an individual owes $51,000 or more in federal taxes, the IRS and State Department may not block or revoke your passport when one of the following applies:

• • The individual is making timely and proper payments pursuant to an IRS-approved installment plan or agreement;
• • An offer to compromise accepted by the IRS or a settlement agreement with the Justice Department is being paid timely;
• • The individual has requested a collection due process hearing regarding the specific tax debt;
• • Collection of the tax debt has been suspended because of a request for innocent spouse relief under IRC section 6015.

In addition, even if none of the above sections are applicable, an individual’s passport still cannot be denied at application or revoked by the IRS and State Department if any of the following conditions apply to the debtor-individual who is:

• • In bankruptcy proceedings;
• • A victim of tax-related identify theft (as identified or confirmed by the IRS);
• • Determined by the IRS to be currently not collectible due to hardship;
• • Located in a federal declared disease area (FEMA zone);
• • Applying or in the application process with the IRS for an installment agreement or an offer to compromise;
• • Considered to have satisfied the original $51,000 or more (meaning new tax debts less than $51,000 cannot be bootstrapped in); and
• • Presently serving in a designated combat zone or operation.

Challengeable in Court

Individuals may challenge in a U.S. Tax Court or U.S. District Court any actions by the IRS or State Department regarding blocking or revoking a passport. This includes that the IRS did not properly certify you to owe a “seriously delinquent tax debt” or that one of the exceptions applies. While individuals may represent themselves pro se, challenging the State Department and the world’s most powerful debt collector, individuals should consult with a tax resolution lawyer to raise such challenges.

By Michael Samuel

Michael Samuel is an attorney handling tax-resolution matters on behalf of taxpayers requiring payment plans, Offers in Compromise, “currently not collectible” status and other tax resolution matters. He can be reached at [email protected].