What’s on your to-do list for summer vacation? Book hotels, buy sunglasses, pack toothbrush…pay taxes? Yes, that’s right! After the recent enactment of H.R. 22, travelers are now required to pay their taxes in order to receive a passport.
H.R. 22 adds section 7345 to the Internal Revenue Code. Section 7345 entitled “Revocation or Denial of Passport in Case of Certain Tax Delinquencies,” allows the State Department to revoke, deny, or limit passports for failure to pay taxes.
There are some limitations to this new law. The law applies only where the Internal Revenue Service (“IRS”) has certified a delinquent tax debt of over $50,000, including penalties and interest. Passports will also be issued for emergency purposes and while a taxpayer is in the process of challenging the IRS decision.
Implications on Domestic Travel
What if your travel plans consist of domestic travel? Passport denial or revocation of a current passport obviously prevents international travel, but may soon deter domestic travel in several states. Congress passed the Real ID Act as a national security measure in the wake of September 11th. The Real ID Act requires new security standards to issue state drivers licenses. States have been slow in implementing the new standards. As a result, several states, including New Hampshire, New York, Louisiana, and Minnesota, may soon require passports as a second form of ID to board domestic flights. In the near future, domestic travelers in these states must make sure that their taxes are paid timely or risk missing their flights.
Closing the “Tax Gap”
The new law may help close the tax gap, or reduce the amount of unpaid taxes. In recent years, the IRS has estimated an average annual tax gap of over $400 billion. With a $590 billion budget deficit projected for the 2016 fiscal year, law makers must find new methods to crack down on those with delinquent tax debts. Section 7345 might encourage speedy payments.
Is the Law Constitutional?
The Supreme Court of the United States has long held that the right to travel domestically is a fundamental right that must not be infringed. On the other hand, a fundamental right to travel internationally has not been established, but US citizens are still at liberty to travel internationally. Accordingly, restrictions on both domestic and international travel must be within the bounds of due process. In other words, a notice and hearing must be provided prior to government enforcement of a travel restriction.
Without a notice and hearing, a passport denial or revocation might be considered an unconstitutional restriction on travel. Under the new law, once the IRS assesses a $50,000 unpaid tax liability, a notice is sent to the delinquent taxpayer. If the taxpayer does not pay the full amount, including interest and penalties, the IRS attaches a tax lien to all property. Once there is lien on the property, the State Department may unilaterally deny or revoke a passport. Even though the taxpayer is given notice of his or her outstanding tax debt, the process is completed prior to a judicial hearing. At first glance, it would appear that the new law does not follow proper due procedures.
Taxpayers may, however, contest IRS assessments of their tax liability. Section 7345 does not apply during the period a taxpayer is disputing his or her tax liability. In other words, the State Department will not deny or revoke a passport during the period the taxpayer is disputing the amount owed. It is likely that this satisfies the hearing requirement for due process, since there is a mechanism available to contest the assessments.
Moreover, courts have generally upheld passport restrictions for certain unpaid debts. For instance, in Eunique v. Powell, the Court of Appeals for the Ninth Circuit upheld a passport denial for failure to make child support payments. As such, it is unlikely that the new law will be held unconstitutional if challenged.
It appears that travelers must now add “pay taxes” to their vacation to do lists.
Authored by Robin Sheehan, LegalMatch Legal Writer and Attorney at Law