Don't Mess With Taxes

Some of my friends are done with COVID-19,  and have taken to traveling again, both within the United States and abroad.

I'm not quite there yet, but if it works for them and I'm not on their flight or cruise ship, good for them.

Also good for those who are taking international trips. I get to see their social media photo travelogues, and I know they are being responsible taxpayers.

If they owed a major debt to the Internal Revenue Service, which currently is deemed an unpaid tax bill of $55,000 or more, they likely would have had their passports pulled. 

That's definitely not what anyone wants to a happen when they're planning a major excursion abroad. It's also a pretty harsh action on the tax collector's part.

But the Supreme Court of the United States (SCOTUS) says the IRS is well within in authority, in conjunction with State Department officials, to do just that. 

Current tax bill travel restrictions: Well, the justices didn't actually affirm that tax/travel connection, but the country's highest court did refuse this week to hear an appeal on the matter.

The legal action was prompted by the Fixing America's Surface Transportation Act, or FAST Act, that became law in December 2015. That law has a provision authorizing the U.S. Department of State to a revoke, deny or limit passports for anyone the IRS certifies as having a seriously delinquent tax debt.

Seriously delinquent tax debt also is defined by statute as one where the IRS has filed a tax lien, and the individual's collection due process rights have been exhausted or expired.

When this tax law took effect in 2016, the document revocation trigger was $50,000 in unpaid taxes. Each subsequent tax year, the IRS has the option to adjust the tax debt amount upward if inflation allows.

The amount that's considered an egregious tax debt is now at the aforementioned $55,000. 

Traveler seek legal relief: IRS data indicate that as of April 2018, more than 436,400 taxpayers faced serious delinquent tax debt that could deleteriously affect their international travel documents.

One of those would-be travelers took his passport problem to federal court.

The Colorado man filed suit in U.S. District Court challenging the lawfulness of the State Department to revoke his passport. His argument was that the move "violated substantive due process, runs afoul of principles announced in the U.S. Constitution's privileges and immunities clause, and contradicts caselaw concerning the common law principle of ne exeat republica."

Since I'm not a lawyer, I turned to legal dictionaries for that last one, and learned ne exeat republica is a writ issued to restrain a person from leaving the jurisdiction of the court pending an action.

And the courts' rulings against him: The District Court did not find the wannabe world traveler's arguments persuasive. It upheld the State Department's right to revoke his passport.

Further, the court found that the IRC section allowing for the passport restrictions is constitutional because it "bears a rational relation to a legitimate government interest, to wit, the collection of delinquent tax debts."

The Colorado man, still looking to hit foreign roads, appealed, but to no avail. The Tenth Circuit upheld the District Court's decision. In the closing of the 40-page unanimous ruling, the appellate judges note the federal government's legitimate revenue interest and this method of collecting it.

   Under rational basis review, we will uphold a law "if there is any reasonably conceivable state of facts that could provide a rational basis for the [infringement]."  See FCC v. Beach Comm’cns, Inc., 508 U.S. 307, 313 (1993). This requires "no more than a 'reasonable fit' between governmental purpose … and the means chosen to advance that purpose." Flores, 507 U.S. at 305. "Our rational basis review is highly deferential toward the government's actions," and "[t]he burden is on the plaintiff to show the governmental act complained of does not further a legitimate state purpose by rational means." Seegmiller, 528 F.3d at 772.

   The statute before us, 26 U.S.C. § 7345, passes rational basis review. As [the plaintiff] concedes, the federal government has a legitimate interest in "conserving or raising money" through taxes. See Aplt. Br. at 29. Congress's decision to further this legitimate interest by providing for revocation of passports for those who have a "seriously delinquent tax debt," 26 U.S.C. § 7345(a), is rational. For example, Congress could rationally conclude that seriously delinquent taxpayers should be restricted from leaving the country to prevent the secretion of assets overseas or to increase compliance."

So on to the next step, the U.S. Supreme Court. Again, he got no legal satisfaction. SCOTUS declined his request for review of the lower courts' rulings.

Now the passport-less man either pays what the IRS says he owes, or he makes plans for more local day trips … or possibly to a federal prison if the IRS takes its own legal journey to collect his seriously delinquent tax bill.

You also might find these items of interest:

• Pay your taxes to protect your passport
• Attention global shoppers: duty-free goods not always fee free
• Taxpayer Advocate argues for revised tax-related passport revocation process

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