Posted by: Robert Horwitz | June 5, 2017

Coming Soon: IRS Passport Revocation Will Become Fully Operational by ROBERT S. HORWITZ

The IRS may soon adopt a variation on Southwest Airlines’ slogan “you are now free to move about the country.” The IRS variant “you are now not free to move about the world.”  We previously blogged about enactment of Internal Revenue Code sec. 7345, which authorizes the State Department to deny a revoke a passport of an individual if the IRS certifies that the individual owes over $50,000 in tax, penalties and interest.  See, http://www.taxlitigator.com/if-you-dont-pay-your-taxes-you-not-be-able-to-travel-by-robert-s-horwitz/.

For a passport to be revoked, the IRS must certify that the taxpayer owes $50,000 in tax, penalties and interest that have been assessed and that either 1) a notice of federal tax lien has been filed and all administrative remedies under IRC § 6320 have lapsed or been exhausted or b) levy has been issued.  Recently, the IRS posted on its website that it will soon begin to certify tax debts to the State Department.  As of early May, 2017, certifications have not been sent, but taxpayers who owe more than $50,000 in tax, penalties and interest can expect in the near future to have their passports revoked or applications for passport denied.  A taxpayer who is making payments under on an installment agreement or has not entered into an offer in compromise or settlement agreement with the IRS is not subject to certification.  Similarly, the IRS will not certify a taxpayer who has requested a collection due process hearing with respect to a notice of intent to levy or a taxpayer who has requested innocent spouse relief.

A taxpayer whose passport has been revoked or who has had a passport application denied because of past due taxes, is not without a remedy: sec. 7345(e) provides that a person who has been notified by the IRS of certification “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.”

Aside from the wisdom of allowing the IRS to strip a citizen of his or her right to travel outside the US, the statute has a number of holes. The statute requires the IRS to notify the individual “contemporaneously” of certification and the right to bring a civil action but does provide how notice is to be given. This is in contrast with other IRC sections requiring notice, such as notices of deficiency (IRC 6212), collection due process notices (IRC 6320 & 6330), summonses (IRC 7603 & 7609) and worker classification notices (IRC 7436), which require at a minimum written notice by certified or registered mail. The IRS website states it will send taxpayers notice by regular mail on Notice CP 508C.  This may not be as good a way as certified mail to ensure that the taxpayer receives notice and pays attention to it, but it is probably sufficient to pass Constitutional muster. Although many people consider the right to travel outside the U.S. as fundamental, the Supreme Court views it as “no more than an aspect of the ‘liberty’ protected by the Due Process Clause of the Fifth Amendment.” Califano v. Gautier Torres, 435 U.S. 1, 5 n.6 (1978) (per curiam).

There are other holes in the statute.   The statute does not provide whether the taxpayer or the Government has the burden of proof. It does not indicate what issues can be considered: can the merits of the assessment be contested or only whether the IRS correctly calculated the amount owed. It does not indicate whether a taxpayer is entitled to a trial on the merits or just summary review by the court. Whether failure to pay tax justifies restricting a citizen’s right to foreign travel has not been decided, but given that several appeals courts have upheld the statute authorizing denial of a passport for unpaid child support, Eunique v Powell, 371 F.3d 971 (9the Cir. 2002); Weinstein v. Albright, 261 F.3d 127 (2nd Cir. 2001), courts will probably uphold the constitutionality of sec. 7345.   It may be several years before we know the answers, however, since these issues will need to be decided in litigation

ROBERT S. HORWITZ – For more information please contact Robert S. Horwitz – horwitz@taxlitigator.com or 310.281.3200   Mr. Horwitz is a principal at Hochman, Salkin, Rettig, Toscher & Perez, P.C., a former Assistant United States Attorney of the Tax Division of the Office of the U.S. Attorney (C.D. Cal) and represents clients throughout the United States and elsewhere involving federal and state, administrative civil tax disputes and tax litigation as well as defending criminal tax investigations and prosecutions. Additional information is available at http://www.taxlitigator.com

 


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