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COLUMNS I Tax Practice & Procedure
Passport Revocation and Denial for
Seriously Delinquent Tax Debts
New IRS Procedures Signal More Stringent Enforcement
By Megan L. Brackney
n January 2018, the IRS published procedures to begin The “greater than $50,000” amount is adjusted for inflation for
enforcement of Internal Revenue Code (IRC) section 7345, each calendar year after 2016 [IRC section 7345(f); IRM para.
Iwhich requires the State Department to deny the application 5.8.1.8(2)]; accordingly, IRS guidance issued in 2018 states that
for, or revoke the passport of, any individual whom the IRS cer- a seriously delinquent tax debt is an amount greater than $51,000.
tifies as having a “seriously delinquent tax debt.” IRC section The IRS computes the seriously delinquent tax debt by aggregating
7345 was enacted on December 5, 2015, as part of the Fixing the total amount of all current tax liabilities for all taxable years
America’s Surface Transportation Act (FAST Act). and periods meeting the criteria described above, including interest
Prior to January 2018, the IRS had not been enforcing IRC and penalties (Notice 2018-01). Any tax penalty, including preparer
section 7345, and there were many questions about how the pass- penalties, can form the basis of a seriously delinquent tax debt.
port revocation/denial process would work, such as whether there Nontax liabilities, such as assessments under the Affordable Care
would be any additional exceptions, how the IRS would exercise Act, employer shared responsibility payments, and penalties for
its discretion, and how the IRS would interact with the State failure to file reports of foreign bank accounts (FBAR), are not
Department. Recently, the IRS has answered many of these ques- included (IRM para. 5.1.12.27.2).
tions through the issuance of Notice 2018-01 (Jan. 16, 2018), new
Internal Revenue Manual (IRM) provisions, and updates on its Exceptions to Certification
website. There are several exceptions to the classification of a tax debt
Now that the IRS has procedures in place to enforce IRC section as seriously delinquent; some of these exceptions are contained
7345, it is important for CPAs to advise individual clients about in IRC section 7345 itself, and some have been created by the
this new and very serious consequence to being noncompliant IRS, which has broad discretion to craft additional exceptions.
with their tax liabilities. Below is a description of the provisions The statutory exceptions are as follows:
of IRC section 7345 and the IRS guidance, followed by answers n A debt that is being paid in a timely manner pursuant to which
to common questions that affected individuals may have. the individual is party under IRC sections 6159 or 7122 (i.e., an
installment payment agreement or offer in compromise)
General Provisions for Certification n A debt where collection has been suspended because a request
IRC section 7345(a) states that “if the Secretary receives cer- for a collection due process hearing under IRC section 6330 has
tification by the Commissioner of Internal Revenue that an indi- been requested or is pending [IRM para. 5.8.1.8(3)]. Note that the
vidual has a seriously delinquent tax debt, the Secretary shall sub- request for an equivalency hearing under Treasury Regulations
mit such certification to the State Department for action with section 301.6330-1(i) is not one of the discretionary exceptions.
respect to denial, revocation, or limitation of a passport pursuant n A debt where collection has been suspended because an election
to section 32101 of the FAST Act.” The key term is “seriously for innocent spouse relief under IRC section 6015 has been
delinquent tax debt,” which is an unpaid, legally enforceable fed- requested or is pending [IRC section 7345(b)(2)].
eral tax liability of an individual that— In addition, certification will be postponed while an individual
n has been assessed; is in active military service in an area designated as combat zone
n is greater than $50,000; and or participating in a contingency operation [IRC section 7508(a)(3);
n for which a notice of lien has been filed under IRC section Notice 2018-01].
6323, and the taxpayer’s administrative rights under IRC section There are several discretionary exceptions, which the IRS could
6320 (notice and opportunity for hearing upon filing of notice of later modify, eliminate, or add to. Currently, the following are
lien) with respect to such filing have been exhausted or have discretionary exceptions:
lapsed, or for which a levy is made under IRC section 6331 [IRC n The debt is currently not collectible due to hardship.
section 7345(b)(1)(A)-(C); Chief Counsel Notice 2018-005]. n The debt resulted from identity theft.
62 JULY 2018 / THE CPA JOURNAL