IRS Outlines Details of Notifying State Department Regarding Seriously Delinquent Tax Debts

The IRS will begin sending information to the State Department on “seriously delinquent” taxpayers as required by the Fixing America’s Surface Transportation Act (2015).  Those taxpayers will face denial, revocation or limitation of their passport.  Details of how this will be handled is found in Notice 2018-1.

IRC §7345(b)(1) provides that a seriously delinquent tax debt is an unpaid, legally enforceable liability of an individual that meets the following criteria:

  • The tax has been assessed,
  • The liability is greater than $50,000, and
  • With respect to which --
    • A notice of lien has been filed pursuant to section 6323 and the administrative rights under section 6320 with respect to such filing have been exhausted or have lapsed, or
    • A levy is made pursuant to section 6331.

However, per IRC §7345(b)(2), even if a debt meets the above criteria it won’t be considered a seriously delinquent tax debt if it is:

  • A debt that is being paid in a timely manner pursuant to an agreement to which the individual is party under section 6159 or 7122, and
  • A debt with respect to which collection is suspended with respect to the individual --
    • Because a due process hearing under section 6330 is requested or pending, or
    • Because an election under subsection (b) or (c) of section 6015 is made or relief under subsection (f) of such section is requested.

The notice explains what the State Department will do with a passport application when the IRS sends the agency a certification that a taxpayer has a “seriously delinquent” tax debt:

When a certified taxpayer applies for a passport, the State Department, in general, will provide the applicant with 90 days to resolve their tax delinquency (such as by making full payment, entering into an installment agreement under section 6159, or IRS acceptance of an offer in compromise under section 7122) before denying the application. If a taxpayer needs their passport to travel within those 90 days, the taxpayer must contact the IRS and resolve the matter within 45 days from the date of application so that the IRS has adequate time to notify the State Department.

If the IRS determines that it has notified the State Department in a situation where an exception applies, the notice provides:

…[I]f after the State Department has been notified of a seriously delinquent tax debt certified under section 7345 the Commissioner or specified delegate determines that the tax debt should not have been certified (for instance, if a statutory exclusion or one of the circumstances set forth in the IRM applies), the IRS will notify the State Department in accordance with section 7345(c) that the certification has been reversed. The reversal notification will be made as soon as practicable after the determination.

The IRS notes that if a debt ceases to meet the criteria for being “seriously delinquent” the IRS will notify the State Department and the passport issues will be resolved:

Upon receipt of a notice from the IRS under section 7345(c) that the certification has been reversed, section 32101(g) of the FAST Act requires the State Department to remove the certification from the individual's record with respect to such debt. The certification of a seriously delinquent tax debt to the State Department will be reversed if the tax debt no longer qualifies as seriously delinquent under section 7345(b)(2). Therefore, taxpayers notified that certification of their seriously delinquent tax debt has been transmitted to the State Department should consider paying the tax owed in full, or entering into an installment agreement under section 6159 or an offer in compromise under section 7122 with respect to the debt. More information on these payment options can be found at [].

The notice also reminds taxpayers that the law doesn’t give many easy appeal rights if they wish to dispute the finding, noting:

Generally, the sole remedy for a taxpayer who believes that a certification is erroneous, or that the Commissioner or specified delegate incorrectly failed to reverse a certification because the tax debt is either fully satisfied or ceases to be a seriously delinquent tax debt by reason of section 7345(b)(2), is to file a civil action in court under section 7345(e). The taxpayer may not go to IRS Appeals to challenge the certification or the decision by the Commissioner or specified delegate not to reverse a certification. However, the taxpayer may contact the phone number in the Notice CP508C to request reversal of the certification if the taxpayer believes that the certification is erroneous.