Magazine article The CPA Journal

Travel Restrictions on Delinquent Taxpayers

Magazine article The CPA Journal

Travel Restrictions on Delinquent Taxpayers

Article excerpt

On December 4, 2015, President Obama signed the Fixing America's Surface Transportation Act (FAST). Section 32101 of FAST adds section 7345 to the Internal Revenue Code (IRC), requiring the Secretary of State to deny, revoke, or limit the passport of any individual with a "seriously delinquent tax debt." The IRC defines this as an assessed, unpaid, legally enforceable federal tax liability that is greater than $50,000 and where the 1RS has filed a notice of lien or a notice of levy. This includes interest and penalties, so individuals with lower tax deficiencies may also be affected. Pursuant to section 7345(f), the threshold will be adjusted annually for inflation.

Prior 1RS Travel Restrictions

Prior to FAST, the government had a heavy burden to show extraordinary circumstances in order to restrain an individual's right to travel. The 1RS had to demonstrate that-

* the individual owed a significant tax liability,

* the individual had the ability to pay,

* the individual chose to place both himself and his assets outside the reach of the United States, and

* the issuance of such court order would serve the public interest.

The resulting court order, known as a writ of ne exeat república (writ), commands the U.S. marshals to restrain an individual from leaving the United States and to bring them to a U.S. magistrate judge to either surrender all passports and international travel documents or post a cash bond equal to the lesser of their assessed unpaid federal tax liability or the value of the net equity in their worldwide assets. Generally, the writ would only be issued in cases where an individual owed a large tax debt.

Certification and Denial of Passports under FAST

Under the new law, the 1RS Commissioner will provide the Secretary of the Treasury with certification of the identity of persons with seriously delinquent tax debt, which is then sent to the State Department. IRC section 6i03(k)(n) was amended by FAST, and information transmitted to the Department is limited to an individual's identity and the amount of the seriously delinquent tax debt.

This new rule does not apply to the following situations:

* An individual making timely payments under an agreement with the 1RS under IRC sections 6159 or 7122;

* An individual contesting a tax bill administratively, either with the 1RS or in court;

* An individual serving in a combat zone or contingency operation, as defined by section 7508;

* Where collection is suspended due to a collection due process hearing under section 6330; or

* Where innocent spouse relief has been requested or is pending under section 6015. …

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