By Ken Berry, J.D.

If you’re planning to take a trip out of the country, make sure that your tax obligations have been paid up. Otherwise, as shown in a new case, Belton, TC Memo 2023-13, 1/24/23, the IRS might try to revoke your passport.

Background: Under a little-noticed spending measure enacted in 2015, the Fixing America’s Surface Transportation (FAST) Act, the IRS can deny, revoke or limit a passport if you have a seriously delinquent tax debt exceeding $50,000, barring a special exception. For this purpose, a “seriously delinquent tax debt” is one in which a (1) a notice of federal tax lien has been filed and all administrative remedies under Section 6320 have lapsed or been exhausted or (2) a levy has been issued.

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The $50,000 threshold approved by the FAST Act is adjusted annually for inflation. It is $59,000 for 2023.

Note: The IRS must follow certain procedures regarding this provision. It is first required to notify the State Department about taxpayers it has certified as owing a seriously delinquent tax debt. If a taxpayer currently has a valid passport, the State Department may revoke the passport or limit the individual’s ability to travel outside the U.S.

When the IRS certifies a taxpayer to the State Department as owing a seriously delinquent tax debt, they receive Notice CP508C. This notice explains the steps the taxpayer must take to resolve the debt. One the issue is resolved, either because the taxpayer paid it in full or made another payment arrangement, the IRS will reverse the taxpayer’s certification within thirty days.

Before it denies a passport renewal or new passport application, the State Department holds the taxpayer’s application for 90 days to allow them to resolve any erroneous certification issues, make full payment of the tax debt or enter a satisfactory payment arrangement with the IRS.

Facts of the new case: The couple in the new case, acting pro se before the Tax Court, had incurred unpaid tax liabilities for nine years. The IRS had not been able to collect these amounts, so it put the FAST Act provision into motion. It certified to the Secretary of State that the taxpayers had a seriously delinquent tax debt.

Subsequently, the couple filed a petition with the Tax Court, claiming that they had certain losses from a year after the relevant years that should have reduced their liabilities below the threshold for years in question. The Court ruled that it lacked jurisdiction to review the underlying liabilities, but that the IRS had failed to meet its obligations establishing that the unpaid liabilities met the technical requirements under law. While some of the tax liabilities were legally enforceable, others were not. Thus, the motion was denied.

The couple in this new case was fortunate to avoid the harsh result, but don’t leave matters to chance. Make sure you’re on firm legal ground before you take to the air.