New Passport Program: Why Notice to Taxpayers Matters

Previously, I analyzed the IRS collection performance, looking at the effects of different drivers of collection such as notices, installment agreements, liens, levies, and refund offsets. Today, I’d like to pick this topic back up, but focus on a collection issue associated with new legislation. In late 2015, Congress passed the Fixing America’s Surface Transportation Act (FAST Act), which aimed to boost tax collection through two avenues:

  • Resuming the use of private collection agencies (PCAs) for certain delinquent accounts; and
  • Requiring the Department of State (DOS) to deny a passport application and allowing it to revoke or limit a passport if the IRS certifies a taxpayer’s seriously delinquent tax debt.

Today, let’s discuss the new law that will deprive some taxpayers of their passports. Under the FAST Act, a seriously delinquent tax debt is an “unpaid, legally enforceable Federal tax liability of an individual”, which:

  • Has been assessed,
  • Is greater than $50,000 (adjusted for inflation), and
  • Meets either of the following criteria: (1) a notice of lien has been filed under Internal Revenue Code (IRC) § 6323 and the Collection Due Process (CDP) hearing rights under IRC § 6320 have been exhausted or lapsed; or (2) a levy has been made under IRC § 6331.

However, there are statutory exceptions to the term “seriously delinquent tax debt.” These include:

  • A debt that is being timely paid through an installment agreement (IA) or offer in compromise (OIC);
  • A debt for which collection is suspended because the taxpayer requested a CDP hearing or a CDP hearing is pending;
  • A debt for which collection is suspended because the taxpayer has requested relief from joint liability (known as innocent spouse relief).

In addition, the IRS has created discretionary exceptions, such as if the taxpayer is placed in currently not collectible (CNC) hardship status, has an IA or OIC pending, or is a victim of identity theft. The IRS plans to publish a notice discussing these exceptions and other information about the passport certification process shortly before implementation. Currently, there is no firm date for implementation, but I’ll update this blog with a link when the IRS publishes the notice.

The concept of restricting a person’s travel to incentivize behavior isn’t new. In 1996, Congress passed the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996, which requires the DOS to deny a passport application and allows the DOS to revoke or limit a passport if the person owes delinquent child support exceeding $5,000 (subsequently lowered to $2,500). Courts have long recognized that the right to travel internationally is a liberty right, protected by the Due Process Clause. See e.g., Kent v. Dulles, 357 U.S. 116 (1958). In the context of passport denial for unpaid child support, courts have found the statute meets due process requirements because it provides for notice and an opportunity to be heard prior to the state agency certifying the unpaid child support to the federal government. Weinstein v. Albright, 261 F.3d 127 (2nd Cir. 2001), aff’g 2000 WL 1154310 (S.D.NY 2001).

The Department of Health and Human Services, Office of Child Support Enforcement (OCSE) requires states to issue (or request OCSE to issue) a Pre-offset Notice (PON) for all new cases within the Federal Tax Refund Offset Program, the Administrative Offset Program, and the U.S. Passport Denial Program. Following the issuance of a PON, there is a 30 day holding period before the passport denial occurs. The primary focus of the PON is to communicate the pending consequences of not resolving the unpaid amount – that is, administrative offset, federal tax refund offset, and passport denial if the amount is greater than $2,500. The OSCE Guide strongly encourages states to send repeated PONs to the noncustodial parents at least annually.

In the context of passport denial for a seriously delinquent tax debt, notice and an opportunity to be heard prior to the certification are limited. The FAST Act only requires two forms of notice to taxpayers who will be certified:

(1) a notice sent to the taxpayer close to or at the same time as the IRS certifies the seriously delinquent tax debt (“contemporaneous notice”), and

(2) language included in Collection Due Process (CDP) hearing notices explaining the potential certification.

Unlike the PONs in the child support context, currently, the IRS does not plan to provide any additional, direct notice to affected taxpayers beyond the statutory requirements. I believe this lack of notice may not satisfy taxpayers’ due process rights under the Fifth Amendment of the Constitution because taxpayers do not have a meaningful opportunity to contest the certifications prior to them taking place. Furthermore, it infringes on the Taxpayer Bill of Rights, notably the right to be informed and the right to challenge the IRS’s position and be heard. The passport language in the broader CDP notice is delivered at a time when the taxpayer is focusing on resolution of the debt and claiming CDP rights – thus the language is buried among the other information and may not constitute effective notice. This is in contrast to the child support PON, which focuses primarily on the soon to occur consequences – offset and passport denial. Additionally, some taxpayers may not have the benefit of the passport language in the CDP notice at all because they received their CDP notices prior to the IRS including this language. At this time, the IRS has no plans to send a separate notice to these taxpayers.

The IRS’s current policy of relying exclusively on the CDP notice to provide pre-certification notice also ignores behavioral research. One topic that came up repeatedly in the literature was the concept of salience, focusing on the timing and relevancy of communications. A simple way to increase the salience of the passport notice would be to issue a stand-alone notice shortly before the certification, similar to the child support PON that is issued 30 days prior.

The IRS needs to approach passport certifications from the point of view, “If we want people to do something, what’s the best way to make that happen?” Here, the IRS wants taxpayers to resolve their tax debts – either by fully paying the liability, entering into a payment plan, or having their accounts corrected if the liability is incorrect. A stand-alone notice, focusing only on the pending harm that will occur if the taxpayer does not resolve their account quickly, is likely to be successful in prodding taxpayers to take action. However, the IRS doesn’t plan to send out a separate notice other than the notice at the time of the passport certification, which triggers many kinds of actions.

Nina Olson

Nina E. Olson, the National Taxpayer Advocate (NTA), is the voice of the taxpayer within the IRS and before Congress. She leads the Taxpayer Advocate Service (TAS), an independent organization inside the IRS that helps taxpayers resolve problems and works for systemic change to mitigate problems experienced by groups of taxpayers.

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2 comments on “New Passport Program: Why Notice to Taxpayers Matters

  • This is a very interesting post. The emphasis on “notice” is interesting, relevant and important.

    It’s interesting to note that Internal Revenue Code 7345 is found in:

    SUBCHAPTER D – Miscellaneous Penalty and Forfeiture Provisions (§§ 7341 to 7345)

    The passport revocation provision is really a form of “Civil Forfeiture”. Perhaps this is why there is not much of a “notice” requirement.

  • Dear Ms OLSON:

    Thank you for this. There are some serious outstanding questions that the IRS must realistically address:

    Since the IRS is deficient in sending out international correspondence as stated by the Inspector General, how will this work with Americans overseas? This is one of many questions regarding the 9M Americans overseas especially those who have never lived in the US or who have not lived in the US for many years or those who have another citizenship or those who have no interest in going to the US? Additionally, if the American overseas’s passport is revoked, the American overseas could lose his/her job and will not be able to pay the alleged debt and certainly will not return to a country where he/she has not a personal or professional life. These are answers which are needed for the various types of Americans overseas.

    Keith REDMOND
    American Overseas Global Advocate

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