The presentation reviews the FAST Act and 26 USC 7345, discusses who is affected by the FAST Act, and how to represent clients who are affected.

1. The IRS Passport Revocation for
Unpaid Taxes: A Primer
Presented by Alexis Lyn Hailpern
Attorney at Law
August 8, 2018

2. OBJECTIVES
• Understand the FAST Act & 26
USC § 7345;
• Who is Affected?; and
• How to represent the affected.

3. THE FAST ACT
Fixing America’s Surface Transportation Act
• Took effect on October 1, 2015
• Signed into Law by President Obama on December 4,
2015
• “To authorize funds for Federal-aid highways, highway
safety programs, and transit programs, and for other
purposes.”
• “The FAST Act funds surface transportation programs—
including, but not limited to, Federal-aid highways—at
over $305 billion for fiscal years (FY) 2016 through
2020. It is the first long-term surface transportation
authorization enacted in a decade that provides long-
term funding certainty for surface transportation.”

4. THE FAST ACT
Fixing America’s Surface Transportation Act
The FAST ACT purports to:
1. Improve mobility on America’s
highways
2. Create jobs and support economic
growth
3. Accelerate project delivery and
promote innovation

5. THE FAST ACT
Fixing America’s Surface Transportation Act
How do we pay for the goals set forth in the
FAST Act?
• Title XXXII – OFFSETS
• § 32101 – Revocation or Denial of Passport in
Case of Certain Unpaid Taxes
• 26 USC § 7345 enacted as part of the FAST
Act

6. 26 USC § 7345
• Enforcement started in early 2018 as IRS
and State Department were determining
how to enforce the act since 2015
• New notices, new provisions to the
Internal Revenue Manual
• The IRS initially certified 2700 taxpayers
and they will later determine taxpayer
response to determine continuity or not

7. IRM 5.1.12.27.1
The State Department is generally required to
deny the certified individual a U.S. Passport (or
renewal of a U.S. Passport) or may revoke any
U.S. passport previously issued to that
individual. The State Department has the sole
authority to revoke or limit a passport held by a
certified individual. Whether a passport will be
revoked or limited is left solely to the discretion
of the State Department.

8. 26 USC § 7345
“If the Secretary receives certification by the
Commissioner of Internal Revenue that an
individual has a seriously delinquent tax
debt, the Secretary shall transmit such
certification to the Secretary of State for
action with respect to denial, revocation or
limitation of a passport pursuant to § 32101
of the FAST Act.”

9. 26 USC § 7345
• “If the Secretary receives certification by
the Commissioner of the Internal Revenue
that an individual has a seriously
delinquent tax debt, the Secretary shall
transmit such certification to the Secretary
of State for action with respect to denial,
revocation or limitation of a passport
pursuant to § 32101 of the FAST Act.”

10. I.R.M 5.1.12.27.2
Individual
Unless otherwise listed in a statutory or
discretionary exclusion, a seriously delinquent
tax debt includes, but is not limited to, tax
assessments made under an individual’s
taxpayer identification number – SSN or EIN –
such as US individual income taxes, trust fund
recover penalties, business taxes for which the
individual is liable and other civil penalties

11. TAXES NOT INCLUDED
• ACA assessments
• Employer shared responsibility payments
• Criminal restitution assessments
• Child support obligations
• Report of Foreign Bank and Financial
Accounts (FBAR) assessments

12. 26 USC § 7345
• “If the Secretary receives certification by
the Commissioner of the Internal Revenue
that an individual has a seriously
delinquent tax debt, the Secretary shall
transmit such certification to the Secretary
of State for action with respect to denial,
revocation or limitation of a passport
pursuant to § 32101 of the FAST Act.”

13. SERIOUSLY DELINQUENT TAX DEBT
• Unpaid, legally enforceable Federal tax
liability of an individual . . .
1. Which has been assessed; and
2. Which is greater than $50,000.00*; and
3. A notice of lien has been filed and the rights
under the lien have been exhausted (past 30
days from the date of the notice) or a levy is
made.

14. GREATER THAN $50,000.00*?
• The amount of what is “seriously delinquent”
is adjusted per inflation for each calendar
year after 2016
• The 2018 IRS guidelines state that a seriously
delinquent tax debt is an amount greater
than $51,000.00
• Amount is aggregate of tax, penalties and
interest
• Tax penalty alone can qualify – such as
preparer penalties or Trust Fund Recovery
Penalties

15. I.R.M 5.1.12.27.2
Once the taxpayer is certified, paying the
account below the $50,000 threshold (or the
threshold amount indexed for inflation
effective at the time of certification) will
NOT result in decertification.

16. A notice of lien has
been filed and the
rights under the lien
have been exhausted
(past 30 days from the
date of the notice) or a
levy is made.

17. “A notice of lien has been filed and the
rights under the lien have been exhausted
(past 30 days from the date of the notice) or
a levy is made.”
Why?
THE GOVERNMENT HAS ALREADY
AFFORDED THE TAXPAYER DUE PROCESS
WITH RESPECT TO THEIR LIABILITY.

18. I.R.M 5.1.12.27.2
“ . . . A notice of Federal Tax lien has been filed and all
administrative remedies under IRS § 6320 have lapsed or been
exhausted . . .”
When a Collection Due Process Lien hearing is timely requested,
or pending, in connection with the filing of a Notice of Federal
Tax Lien, and the taxpayer's remedies under IRC § 6320 have not
been exhausted until the CDP hearing (or any appeals of the
determination) have been concluded. If a CDP hearing is not
filed, the above criteria is met once the time period for
requesting a timely CDP Lien hearing has lapsed.
A pending or requested Equivalent Hearing in connection with
the filing of a Notice of Federal Tax Lien will not preclude a
liability from being considered a seriously delinquent tax debt.

19. I.R.M 5.1.12.27.2
Once levy has occurred, revenue officers and
collection professionals will not need to take
any further steps for the levy action to be
identified on the taxpayer’s account.
Taxpayer accounts will be systemically
identified once levy action has occurred.

20. 26 USC § 7345
• “If the Secretary receives certification by
the Commissioner of the Internal Revenue
that an individual has a seriously
delinquent tax debt, the Secretary shall
transmit such certification to the Secretary
of State for action with respect to denial,
revocation or limitation of a passport
pursuant to § 32101 of the FAST Act.”

21. EXCEPTIONS
(as stated in the Internal Revenue Code)
• A debt that is being paid in a timely manner
in which the individual is a party under an
installment agreement or an offer in
compromise
• A debt in which collection is suspended
because there is a pending Collection Due
Process Appeal or because the taxpayer filed
for Innocent Spouse Relief or Equitable Relief
• A debt that belongs to an individual in active
military service who is also in a combat
zone

22. I.R.M 5.1.12.27.2
Per IRM 5.11.5.6, even though some
continuous levies are monitored, they are
not installment agreements and DO NOT
meet the criteria for a statutory exclusion.

23. EXCEPTIONS
(created by the IRS as discretionary
exceptions)
• The debt is in Status 53 – Currently Not
Collectable a.k.a hardship status
• The debt is the product of identity theft
• The debt is a result of a criminal restitution
assessment
• The taxpayer is in bankruptcy
• Debt with a pending adjustment that will full
pay the tax period
• The taxpayer has a pending installment
agreement or offer in compromise
• Taxpayers in a disaster zone
• The taxpayer is deceased

24. I.R.M 5.1.12.27.2
Only the individual identified as deceased is
excluded from certification.

25. NOTICE OF CERTIFICATION TO THE
STATE DEPARTMENT
• The IRS provides contemporaneous
notices of certification to the State
Department and to the taxpayer
• No advance prior notice of certification is
required

26. I.R.M 5.1.12.27.2
On a weekly basis, IRS will systemically
inform the State Department regarding each
newly decertified taxpayer.

27. I.R.M 5.1.12.27.2
Under 22 USC § 2714a, the State
Department may, notwithstanding a
certification from the IRS, issue a US
passport to a taxpayer if the State
Department determines emergency
circumstances or humanitarian reasons
justify issuance of the passport. This does
not affect the taxpayer’s certification as a
seriously delinquent taxpayer or the reverse
the certification.

29. I.R.M 5.1.12.27.2
The Notice CP508C may identify more than
one TIN related to the specific taxpayer.
Both the liabilities of the individual file and
the business file may be used to determine
whether the taxpayer meets the certification
threshold.

30. I.R.M 5.1.12.27.2
When a certified individual incurs an additional
liability that meets the criteria for certification, the
aggregate assessed balance is systemically
recalculated to include the previously certified
modules as well as the new module. If the total
liability meets the seriously delinquent debt criteria
in IRM 5.1.12.27.2, Seriously Delinquent Tax Debt, a
new Notice CP 508C is systemically generated
reflecting all modules including the new module. As
a result, the new Notice CP 508C may reflect
different balances for previously certified modules
due to changes on the account such as any
payments or audit adjustments

31. EXAMPLE
The taxpayer's account was previously certified for a
$65,000 tax debt. When a new module for $2,000
becomes eligible for certification, the new module's
balance will be systemically added to the current
balance due of all previously certified modules. If the
new aggregate assessed balance is $48,000 due to
payments or offsets, the new module would not be
certified because the aggregate assessed balance is
less than the minimum amount for certification in
IRM 5.1.12.27.2, Seriously Delinquent Tax Debt.
However, the taxpayer's account remains certified
based on the previously certified modules, and will
not be decertified until all certified modules are
satisfied.

33. POST CERTIFICATION
• If a certified taxpayer applies for a passport, the
State Department will give the applicant 90 days
to pay the liability, enter into an installment
agreement or obtain acceptance of an offer in
compromise
• If the taxpayer has to travel ASAP, the taxpayer
(within those 90 days), the taxpayer has 45 days
after applying to resolve the debt in order to give
the state department time to decertify
• The IRS made it clear that they will not work
faster to help taxpayers in this situation. It is
on a first come, first served basis unless there is
a very special circumstance

34. DECERTIFICATION
The IRS will reverse the certification if:
1. The certification is fully satisfied (i.e. paid);
or
2. If the certification ceases to be seriously
delinquent.
The IRS will notify the state department of
decertification 30 Days after paid or an act is made
to remove the seriously delinquent status.

35. I.R.M 5.1.12.27.2
The IRS is also required to notify the
taxpayer in writing at the time that the
certification is reversed.
NOTICE CP508R

36. I.R.M 5.1.12.27.2
• A taxpayer's account will remain certified as seriously
delinquent tax debt when:
• A taxpayer requests a CDP lien or levy hearing for tax
periods which are not the basis of certification of a
seriously delinquent tax debt.
• A taxpayer requests Innocent Spouse relief for tax
periods which are not the basis of certification of a
seriously delinquent tax debt.
• A taxpayer requests a CDP Lien hearing for a
subsequent NFTL filing on the modules that are the
basis of certification of a seriously delinquent tax debt.
• A taxpayer requests a CDP Lien hearing when the
certification was based on a levy.

37. EXAMPLE
The taxpayer is already certified as owing a
seriously delinquent tax debt. The revenue
officer issues L-1058 on an additional tax
period to provide notice of CDP levy rights.
The taxpayer requests a timely CDP levy
hearing. The certification of seriously
delinquent tax debt is not reversed for the
pending CDP levy hearing on this additional
tax period.

38. EXPEDITED DECERTIFICATION
• The IRS can request expedited
certification, but the I.R.M states:
“Do not offer expedited decertification.
Explain that decertification will occur
systemically and the State Department will
be notified within 45 days.”

39. EXPEDITED DECERTIFICATION
An IRS agent can request expedited decertification when all of
the following conditions exist:
• A certified taxpayer is eligible for decertification
• The taxpayer states their foreign travel is scheduled within 45
days or less, and
• The taxpayer has a pending application for a passport or
renewal and can provide their passport application number.
Note:
• Taxpayers residing outside of the United States may have an
urgent need for a passport without having imminent travel
plans. When a taxpayer residing outside of the United States
meets conditions for decertification and self-identifies as
having an urgent need for decertification, the IRS can request
expedited decertification.

40. APPEALS PROCESS OF CERTIFICATION
IRM I.R.M 5.1.12.27.2:
• Although there is no administrative appeals process for
certification of a taxpayer’s account, IRS sends taxpayers
Notice CP 508C, Notice of Certification of a Seriously
Delinquent Tax Debt. The notice includes an IRS phone
number the taxpayers can call to resolve their tax issues.
Note:
• Taxpayers who do not agree they owe the tax debt, and are
subject to collection action, may have appeal rights as
described in IRM 5.1.9.4, Collection Appeals Program (CAP).
However, notice of certification of a seriously delinquent tax
debt by the IRS, or denial of an application for a passport or
renewal by the State Department, are not collection actions
that entitle CAP rights.

41. JUDICIAL REVIEW OF CERTIFICATION
IRM I.R.M 5.1.12.27.2:
• A taxpayer whose debt was certified to the State Department
as a seriously delinquent tax debt can file suit in the Tax Court
or a District Court of the United States 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. If the court determines the certification is erroneous or
should have been reversed, it can order the certification
reversed.
Note:
• The taxpayer is not required to file an administrative claim or
otherwise contact the IRS to resolve the erroneous
certification issue before filing suit in the Tax Court or a
District Court of the United States.

42. WHAT DOES THE TAXPAYER
ADVOCATE SAY?
• There is a Due Process Issue – the taxpayer
may have had due process with respect to
the liability, but there is a lack of due process
with the action against the passport
• It is unfair that taxpayers who have open TAS
cases or those who are pursuing other
administrative rights are not excluded
• The timeline is unrealistic – specifically the 90
day holding period
• The notices do not contain enough
information

43. PRACTITIONER TRICKS
THAT WON’T WORK
• Filing an Offer in Compromise or an
Installment Agreement solely to delay in
an attempt to avoid certification or
decertification
• Paying down the liability below the
threshold
• Certain Penalty Abatements

44. I.R.M 5.1.12.27.2
Not all penalty abatements will result in
decertification. For example, a penalty
abatement of a certified module due to an
administrative waiver under the First Time
Abate criteria in IRM 20.1.1.3.3.2.1 will not
result in decertification, even if the adjusted
total liability is less than the threshold
amount indexed for inflation.

45. EXAMPLE
The taxpayer has a liability of $66,000 for tax
period 30/201512 due to an SFR assessment.
The taxpayer is certified as a seriously
delinquent tax debt and receives a Notice CP
508C. The taxpayer is in the process of
renewing their U.S. Passport with the
Department of State. The taxpayer files a return
for tax period 30/201512 which reduces the tax
debt to $30,000. Once the taxpayer’s return for
30/201512 is processed and posted on the
system, the taxpayer will be eligible for
decertification.

46. HYPOTHETICALS
(all hypotheticals are fiction and are for learning purposes
only)

47. • Joe Smith decides that he wants to open
an avocado farm in Guadalajara, Mexico.
• In 2016, Joe Smith falls on hard times and
cannot afford to pay the IRS for his
$49,000.00 tax liability.
• Can he travel to Mexico to look at
property for his avocado farm?

48. • Joe Smith decides that he wants to open
an avocado farm in Guadalajara, Mexico.
• In 2016, he falls on hard times and cannot
afford to pay the IRS for his $52,000.00 tax
liability.
• Can Joe Smith travel to Mexico to look at
property for his avocado farm?

49. • Joe Smith decides that he wants to open
an avocado farm in Guadalajara, Mexico.
• In 2016, he falls on hard times and cannot
afford to pay the IRS for his $52,000.00 tax
liability. The IRS certifies his tax liability as
seriously delinquent. At that time, Joe’s
wife, Mary was not contributing to the
household income. Upon learning about
the tax liability, she files for innocent
spouse relief.
• Can Joe travel to Mexico to look at
property for his avocado farm?

50. Q&A
COMMON QUESTIONS
• Can the IRS reverse liabilities that expired
under the statute of limitations in order to
certify a taxpayer?
• Can the debt just be reduced to acquire
decertification?
• Can the IRS refuse to let me back into the
US if I am certified as seriously delinquent?
• What if my business has a tax liability?

51. CONTACT US
Alexis Hailpern
AHailpern@gppcpa.com
(214) 635-2524