New Law Imperils Tax Debtors’ International Travel

Internal Revenue Code § 7345, effective December 22, 2017, provides that if an individual has a seriously delinquent tax debt, the Secretary of the Treasury shall certify such tax debt to the Secretary of State for revocation or limitation of such individual’s passport, or denial of an application for a passport by such individual.  The taxpayer is given notice of such certification, and can bring a lawsuit challenging it.  But such litigation would be costly, and could take years to resolve.  Meanwhile, the taxpayer’s ability to travel internationally is impaired or clouded.  The taxpayer has no opportunity to contest such certification before it occurs.

A “seriously delinquent tax debt” is one exceeding $50,000.  Many taxpayers meet this qualification.  “Seriously delinquent tax debt” excludes tax debt that is the subject of an installment agreement between the IRS and the taxpayer.

In a recent case, the taxpayer has been trying to enter into an installment agreement with the Internal Revenue Service.  The parties are close on a monthly installment payment, but unable to agree upon it.  The taxpayer has been making voluntary, good-faith installment payments to the IRS in the amount of his proposed monthly installment payment.  The taxpayer has appealed to the IRS Appeals Office the denial of his request for an installment agreement, but such appeals generally take one-two years to resolve.  Meanwhile, the IRS has notified the taxpayer that his seriously delinquent tax debt has been certified to the State Department under IRC § 7345.

The taxpayer’s mother is 88 years old and lives in her native Sweden.  The taxpayer may need to visit her on short notice.  His ability to do so is now in jeopardy. 

The IRS says that the State Department is not currently restricting taxpayers’ international travel under under IRC § 7345.  Subjecting taxpayers’ international travel to arbitrary administrative limitations cannot possibly pass muster under the Due Process Clause of the Fifth and Fourteenth Amendments to the U.S. Constitution.  This is little solace to taxpayers whose ability to travel internationally is compromised by the new law.

So, if you owe $50,000 or more in Federal tax debt, and you fail to full-pay your balance, or enter into an installment agreement with the IRS concerning it, your ability to travel internationally may be imperiled.

Stephen J. Dunn

Tax and Estate Planning Attorney and Author