IRM Changes to Passport Decertification and Revocation Procedures

Today we welcome Nancy Rossner who practices with the Community Tax Law Project in Richmond, Virginia.  Nancy is a graduate of the University of Richmond Law School which also happens to be my alma mater.  She recently gave a presentation to the ABA Tax Section Administrative Practice committee as a part of their monthly series of procedure updates and agreed to write this post for us on the topic of her presentation.  We have blogged before about passport revocation here, here, here and here.  As Nancy mentions below, the Tax Court did recently take action to amend the form petition recommended by Carl Smith in one of the earlier post.  Passport cases are now making their way to the Tax Court.  I anticipate we will be blogging about this issue a fair amount over the next couple of years. Keith

Leaving and re-entering the U.S. was made a bit more difficult for Americans by the Fixing America’s Surface Transportation (FAST) Act, signed into law December 4, 2015 and creating IRC Section 7345.  The law requires the IRS to notify the State Department when an individual is certified as owing “seriously delinquent debt,” at which time the State Department then has the authority to deny the individual’s passport application, application for passport renewal, or even revoke any U.S. passport previously issued to that individual.  The IRS recently released a revision to the IRM on July 19, 2019 to provide guidance on passport decertification and revocation. I will be writing about these updates today.  But first, I would like to provide a brief refresher on passport certification and revocation.

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In order to be considered a “seriously delinquent tax debt” resulting in certification to the State Department, the debt must be assessed, unpaid, legally enforceable, in excess of $50,000 (indexed for inflation, which brings it to $52,000 for the current year) and meet other conditions outlined in IRM 5.1.12.27.2.  However, even if a tax debt meets the criteria outlined in IRM 5.1.12.27.2, there are certain statutory exclusions from the certification listed in IRC Section 7345(b)(2).  In addition to the enumerated exclusions in IRC Section 7345(b)(2), the IRS also has discretion under IRC Section 7345 to exclude categories of tax debt from certification, despite meeting the criteria in IRM 5.1.12.27.2. These discretionary exclusions are listed in IRM 5.1.12.27.4.

Now, when the taxpayer is determined to have a seriously delinquent debt, the IRS is supposed to send the taxpayer a Letter CP 508C informing the taxpayer of the debt certification and providing the taxpayer with 30 days to challenge the notice (increased to 90 days if the taxpayer is out of the country).  If the debt remains unresolved, the IRS sends the taxpayer Letter 6152, Notice of Intent to Request U.S. Department of State Revoke Your Passport, to give the taxpayer one last chance to resolve the debt before recommending passport revocation to the State Department. The taxpayer is entitled to appeal the debt certification to the U.S. Tax Court or a U.S. District Court to have a court determine if certification was erroneous or if the IRS failed to reverse the certification under IRC Section 7345(c).  As per the U.S. Tax Court’s press release dated July 15, 2019, the Court adopted final amendments to its Rules of Practice and Procedure and adopted revisions to Form 1(Petition) among other forms.  As a result, Rule 13. Jurisdiction was updated to include “certification actions with respect to passports” and Rule 34. Petition was updated to include “certification actions with respect to passports.”  These changes are also reflected on the new Petition form which now includes a checkbox for “Notice of Certification of Your Seriously Delinquent Tax Debt to the Department of State.”  Yes, Carlton Smith did get his wish from this previous blog post

The new IRM guidance also provides some updates to the reversal of certification of seriously delinquent tax debt as well as expedited decertification.  As per IRM 5.1.12.27.8, the IRS will reverse the certification of seriously delinquent tax debt and notify the State Department within 30 days if the previously certified tax debt is fully satisfied, becomes legally unenforceable or ceases to be seriously delinquent debt (previously delinquent debt ceases to be seriously delinquent tax debt when a statutory exclusion is met).  If the certification is found to be erroneous the IRS will notify the State Department “as soon as practicable” and the IRS will notify the taxpayer once the certification is reversed.  One thing that I have learned as a practitioner at an LITC is that “as soon as practicable” can mean many different things to many different people. The U.S. Tax Court or U.S. District Court may also order the IRS to reverse the certification as a result of tax court litigation.

Importantly, taxpayers may also request expedited decertification, which can shorten the processing time by 2-3 weeks, but the taxpayer must meet all three of the following conditions: 1. The taxpayer meets a condition in 5.1.12.27.8 Reversal of Certification; 2. The taxpayer states that they have foreign travel scheduled within 45 days and can provide proof of travel OR the taxpayer lives outside of the US; and 3. The taxpayer has a pending application for a passport or renewal, has received notification their passport was denied or revoked, and provides a denial letter from the State Department (read: not the CP508-C). The updates to the IRM made proof of travel necessary in 2. and a copy of the State Department denial letter necessary in 3.  There is an exception for taxpayers residing out of the United States who do not have imminent travel plans.  If the taxpayer meets the conditions outlined in IRM 5.1.12.27.3 or IRM 5.1.12.27.4 and expresses an urgent need for decertification the IRS is supposed to request expedited decertification.

One last item of note on this topic, according to a recent memo from Acting Taxpayer Advocate Bridget Roberts (TAS-13-0819-0014), effective July 25, 2019, all open TAS cases with a certified taxpayer will be decertified and new TAS taxpayer cases will also be systemically decertified until further notice. This is something for which former NTA Nina Olson advocated prior to leaving office this year.