By law, the IRS certifies taxpayers with “seriously delinquent” tax debts to the Department of State affecting passport status and renewal when certain conditions or thresholds are met. The IRS will send a Notice called a CP508C when a certification has been made. Despite this, many taxpayers are unaware of this potential consequence until they find themselves unable to apply for or renew their passport.
Section 7345 of the IRC, which was enabled by the FAST (Fixing America’s Surface Transportation) Act, requires that the Department of the Treasury notify the Department of State if a certification is made that an individual has “seriously delinquent tax debt.” This certification, and its reversal, can only be made by select members of the Internal Revenue Service, including the Commissioner of the IRS, the Deputy Commissioner, or a specified delegate. When the State Department receives a Section 7345 certification, it will generally deny any applications for issuance or renewal of a passport by that taxpayer and can also revoke or limit a current passport issued to that taxpayer. Both the Fifth (Franklin v. United States) and Tenth Circuits (Maeher v. US Department of State) have weighed in on cases in recent years, finding no violations of due process and upholding the constitutionality of Section 7345.
How does the statute define “seriously delinquent tax debt”? Section 7345(b)(1) refers to it as “an unpaid, legally enforceable federal tax liability of an individual which has been assessed” and is greater than $50,000, and for which 1) a notice of federal tax lien has been filed under Section 6323, and the taxpayer’s right to a hearing under Section 6320 has been exhausted or lapsed, or 2) a levy has been issued under Section 6331.
Note that the $50,000 amount is adjusted for inflation each calendar year. This total tax liability threshold is also calculated by combining all tax liabilities for all tax years or periods meeting the statutory criteria, inclusive of penalties and interest, that have been assessed. It is also worth noting what is NOT counted towards the $50,000 amount, which is outlined in Section 7345(b)(2). This includes:
- A debt being timely paid under an approved installment agreement;
- A debt being timely paid under an accepted offer-in-compromise;
- A debt being timely paid under the terms of a settlement agreement with the Department of Justice;
- A debt in connection with a levy where collection is suspended because of a request for a due process hearing; and
- A debt where collection is suspended because of an innocent spouse election or request for innocent spouse relief.
It’s evident from the statute that where a debt is being actively paid down or addressed, and where a taxpayer is asserting their collection due process rights or other relief, such tax debts are not factored into “seriously delinquent” status.
If you receive a CP508C letter or find that your passport renewal application is rejected for certification of seriously delinquent tax debt, reversal of the certification is the necessary fix. Reversal is governed by Section 7345(c). The most obvious resolution is satisfaction or payment of the tax debt; however, that is often the most difficult as well if a taxpayer doesn’t have the funds to full pay. Other options include an acceptable installment agreement or offer in compromise to begin the payment process, or, if applicable, a taxpayer may qualify for innocent spouse relief. Less common, erroneous certifications can also be reversed after proof of such finding.
For taxpayers that have imminent travel planned (defined by the IRS as within 45 days), or meet precise other criteria, there is a path to “expedited” reversal or decertification. This cuts down the usual 30-day processing time for reversal to as little as 14 days. To qualify, one needs to provide proof of such upcoming travel and it’s best if the request is submitted while the taxpayer’s passport application is still open with the Department of State (usually a 90-day window after a rejection notice). If and when a taxpayer’s certification is reversed, they’ll receive a Notice CP508R at that time confirming so.
The ultimate way in which tax debts could affect your passport is revocation. In the most severe scenarios, the IRS can ask the State Department to revoke a taxpayer’s passport. This could be the case where a certification was reversed pursuant to an accepted installment agreement, but the taxpayer never actually makes any payment. The IRS will notify taxpayers with a Letter 6152 prior to taking this step.
For taxpayers who travel internationally, or for taxpayers living abroad who need valid passports for safe and certain travel home or to other countries of residency or work, it’s best to be aware of these intricacies and the steps to resolve any issues on their own. However, where there are particular facts and circumstances that need special attention, or where time is of the essence, they should navigate the decertification process with a trusted tax advisor.