If you are not expecting a refund this year, you may be wondering what taxes have to do with your travel plans. A little over a year ago, Congress passed a law to authorize funding for highways known as "Fixing America's Surface Transportation Act" or the "FAST Act"1. One of the provisions in the law gives the federal government the power to revoke or deny passports in the case of unpaid taxes2 to help offset costs of the federally funded highway projects. While you do not need a passport to travel the surfaces of the American roads, you may need one to travel the American airways in the near future.
The FAST Act amends the Internal Revenue Code to require the Department of the Treasury, upon receiving certification by the Internal Revenue Service (IRS) "that an individual has a seriously delinquent tax debt" to transmit the certification and disclose certain tax return information to the Department of State "for action with respect to denial, revocation, or limitation of a passport".3 A "seriously delinquent tax debt" is defined as "an unpaid, legally enforceable Federal tax liability of an individual . . . which is greater than $50,000, and . . . a notice of lien has been filed . . . or a levy is made".4 The authority contained in the Tax code at 26 U.S.C. § 7345 is currently detailed on the IRS website with a notice that the IRS has not yet started to certify tax debt to the State Department, but will begin to do so in early 2017.5
There are some exceptions to the requirement that such debt be certified, such as if the tax debt is being paid in a timely manner under an installment agreement entered into with the IRS or an offer of compromise accepted by the IRS, or a settlement agreement entered into with the Justice Department.6 Before denying a passport altogether, the State Department will hold an application for 90 days to allow the applicant to "resolve any erroneous certification issues, make full payment of the tax debt, or enter into a satisfactory payment alternative with the IRS."7 There is no grace period, however, before the State Department revokes an existing passport. The IRS is required to notify an individual at the time the IRS certifies seriously delinquent tax debt to the State Department or any reversal of a certification.8
If the IRS certifies your debt to the State Department, you can file suit in the U.S. Tax Court or a U.S. District Court to have the court determine whether the certification is erroneous or the IRS failed to reverse the certification when it was required to do so.9 If the court determines the certification is erroneous or should be reversed, it can order reversal of the certification.10 The law does not, however, provide the court authority to release a lien or levy or award money damages in a suit to determine whether a certification is erroneous. There is no requirement that an individual file an administrative claim or otherwise contact the IRS to resolve the erroneous certification issue before filing suit in the U.S. Tax Court or a U.S. District Court.
The revocation or denial of a passport may soon have an impact on more than just the readers of Travel + Leisure. After January 22, 2018, domestic airlines can only accept drivers' licenses that meet the standard of the Real ID Act.11 Currently, there are many states that are not compliant with the requirements of the Real ID Act. A map of the country found on the Department of Homeland Security's website details each state's status.12 If the state that issued your driver's license is not compliant, you may need your passport to board a commercial aircraft.
The Real ID Act was passed by Congress in 2005 based on a recommendation by the 9/11 Commission that the federal government "set standards for the issuance of birth certificates and sources of identification, such as driver's licenses."13 The Act established minimum security standards for license issuance and prohibits federal agencies from accepting driver's licenses and identification cards from states not meeting the Act's minimum standards for certain purposes, including boarding federally regulated commercial aircraft.14 So, if you are concerned about your tax liability for the year 2016, you may want to delay your trip to Europe and make sure your state's driver's license is up to standard.
1 Public Law No: 114-94, enacted December 4, 2015.
2 Id. at Sec. 32101. Revocation or denial of passport in case of certain unpaid taxes.
3 Id. at Sec. 32101(a); 26 U.S.C. § 7345(a).
4 Id. at Sec. 32101 (b)(1)(A)-(C); 26 U.S.C. § 7345 (b)(1).
6 Public Law No: 114-94, Sec. 32101(b)(2).
8 Id. at Sec. 32101(d); 26 U.S.C. § 7345(d).
9 Id. at Sec.32101 e(1); 26 U.S.C. § 7345(e)(1).
10 Id. at Sec. 321010 e(2); 26 U.S.C. § 7345€(2).
11 Public Law No: 109-13, enacted May 11, 2005.
13 Summary of Recommendations – The 9/11 Commission Report, September 9, 2004 (U.S. Government Accountability Office).
14 The Real ID Act of 2005 at § 202 (a) – (b).
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