U.S. Tax Court Can Now Hear Tax Passport Certification Cases

Hand holding U.S. passport

Receiving a notice from the IRS is always stressful. When that document tells you that your passport could be affected, it can make you nervous to exercise your constitutional right to international travel. New changes to the U.S. Tax Court’s rules allow it to hear tax passport revocation cases. Find out what you need to do to get an erroneous IRS certification reversed and prevent your passport from being revoked.

FAST Act Allows IRS to Authorize Secretary of State to Revoke Passports for Past-Due Taxes

U.S. tax law gives the IRS a variety of tools to force taxpayers to comply with reporting requirements and assessments of taxes. One of those tools is a certification that allows for passport application or renewal denials, and revocation of existing passports. Under the Fixing America's Surface Transportation Act of 2016 (FAST Act), the IRS may issue this certification if a taxpayer has a seriously delinquent tax debt (SDTD) over $51,000, including taxes, penalties, and interest. There are exceptions including when the taxpayer has:

  • An installment agreement or consent agreement
  • Requested a due process hearing
  • Applied for innocent-spouse review

The IRS also has discretion to not file certification if the taxpayer has:

  • Been placed on “currently not collectible” (CNC) hardship status
  • A pending installment agreement or offer in compromise before an IRS adjuster
  • Been the victim of identity theft
  • Enlisted in the military and is on active duty in a combat zone or contingency operations

If none of those exceptions apply, the IRS can issue a notice of certification to taxpayers with seriously delinquent tax debt. At the same time, that certification will be sent to the Secretary of State, which could mean that:

  1. You will be refused a passport if you apply for one,
  2. Your passport renewal application will be denied, or
  3. Your currently-valid passport may even be revoked.

Appealing a Tax Passport Revocation Case

The FAST Act does allow a taxpayer to appeal a tax passport revocation case if:

  • The certification was issued in error
  • The seriously delinquent tax debt has been paid in full
  • The seriously delinquent tax debt is no longer enforceable
  • The taxpayer qualifies for an exclusion

A taxpayer may also file a lawsuit if the IRS fails to reverse a certification after the requirements of the FAST Act are satisfied. The statute allows for that lawsuit to be filed in a federal district court or in the United States Tax Court. Historically, the Tax Court is a more favorable venue for taxpayers. However, until recently, the Tax Court’s rules and regulations did not cover how to appeal a tax passport revocation case.

Then on November 30, 2018, Chief Judge Maurice B. Folely announced amendments to the Tax Court procedure rules. Along with updates to electronic filing and payment systems, the new rules said taxpayers could now file a complaint in the Tax Court to determine if the IRS issued a certification in error or failed to improperly failed to reverse a certification after it was issued. These rules took interim effect on December 19, 2018. That means that taxpayers can now choose this venue for their tax passport revocation cases.

How to File a Tax Passport Revocation Case in U.S. Tax Court

Asking a federal judge to rule that an IRS certification of a seriously delinquent tax debt was erroneous should not be taken lightly. If you have received a notice of certification, you should speak to a tax attorney with experience in the U.S. Tax Court right away. In cases where the certification satisfies the statutory requirements, there may be no alternative but to negotiate a payment agreement with the IRS and thereby secure removal from the “certification” list without the hazards and expense of litigation.

But where there has been an error, your attorney will assist you to file a “Petition for Certification or Failure to Reverse Certification Action Under Code Section 7345(e)” -- the official title of a tax passport revocation case. To even have your case considered you and your tax attorney will need to provide the tax court:

  • Identifying information including your name, address, and state of legal residence
  • A copy of the notification of certification and the date it was issued
  • A detailed explanation of why the certification was issued in error or should have been reversed
  • Facts to support your argument
  • A request for place of trial

There will be a fee associated with filing the petition unless you qualify for a financial waiver.

The U.S. Tax Court may be more kind to taxpayers than other federal district courts, but that does not mean reversing a certification of a seriously delinquent tax debt will be easy. If you have received a notice of certification, you should contact an experienced tax attorney immediately. If you don’t, it could put your passport, your ability to travel, and your international business opportunities on the line.

Attorney Joseph R. Viola is a tax attorney in Philadelphia, Pennsylvania with over 30 years experience. If you have questions regarding seriously delinquent tax debt or Notices of Certification for the revocation or denial of passports due to tax debt, contact Joe Viola to schedule a consultation.

Categories: Tax / IRS Penalties