FATCA (Foreign Account Tax Compliance Act) has enabled the Internal Revenue Service (IRS) to use a number of weapons to force recalcitrant US taxpayers into full compliance with tax rules, especially related to foreign income not reported. One way, is the revocation of a US citizen’s passport.

If a taxpayer’s seriously delinquent tax debt is “certified” by the IRS, his or her passport can be revoked by the US Department of State. For 2021, a seriously delinquent tax debt is an individual’s unpaid, legally enforceable federal tax debt (including interest and penalties) totaling more than $54,000.

In the recent case of Maehr v. US, the taxpayer tried to challenge the US Department of State’s power to do so.

Burden of Proof

Under the Internal Revenue Code, district courts have the jurisdiction to issue writs of “ne exeat republica.” This phrase is Latin for “let him not leave the republic.” This is a form of injunctive relief ordering the person to whom it’s addressed to remain in the jurisdiction of the court or state.

Certain district courts, except in the Tenth Circuit where this case took place, have held that the burden of proof to issue a preliminary injunction rests on a four-factor test that finds:

1. A substantial likelihood the movant will succeed on the merits,
2. The movant will suffer an irreparable injury if the injunction isn’t issued,
3. The potential injury to the movant outweighs the potential harm to the opposing party, and
4. The injunction wouldn’t disserve the public interest.

The US Code provides having a “seriously delinquent tax debt” is, unless an exception applies, grounds for denial, revocation or limitation of a passport. As mentioned, if the IRS determines a taxpayer has a seriously delinquent tax debt, it may certify the debt to the US Department of State, which can then revoke the taxpayer’s passport.

The Plaintiff’s Argument

The plaintiff in Maehr v. US had a seriously delinquent tax debt the IRS eventually certified to the US Department of State, which then indeed revoked his passport. The plaintiff filed suit in district court, arguing the revocation violated various constitutional provisions.

The district court upheld the US Department of State’s right to revoke a passport. It found revocation or denial of a passport due to tax delinquencies is constitutional because it bears a rational relation to a legitimate government interest – the collection of delinquent tax debts.

The plaintiff appealed to the Tenth Circuit, arguing the standard outlined in two previous cases involving the issuance of a writ of ne exeat republica in relation to a preliminary injunction should apply to passport revocation given it has a similar purpose.

The Court’s Response

The Tenth Circuit upheld the district court’s decision, saying that writs of ne exeat republica differ significantly from passport revocations in three ways:

1. The scope of such a writ (i.e., a preliminary injunction) is much broader, restricting freedom of movement domestically as well as internationally.
2. The writ in question can be issued even if the underlying tax debt is contested by the taxpayer, whereas the tax code requires that the taxpayer’s rights to challenge a contested liability have lapsed or been exhausted before passport revocation.
3. A writ of ne exeat republica is essentially an equitable common law remedy codified in statute, making it sensible that courts have required showings of evidence paralleling those required for preliminary injunctions. In contrast, passport revocation under the tax code is a purely statutory and legal scheme with built-in due process protections.

The Tenth Circuit concluded the writ at issue is readily distinguishable from passport revocation. In addition, it found the caselaw governing writs of ne exeat republica is inapplicable under the tax code and meeting the four-factor test isn’t required before the US Department of State can revoke a passport following IRS debt certification.

Passport at Risk

The bottom line – you put your passport at risk by allowing a tax debt to become seriously delinquent. If you have an ongoing dispute with the IRS, you should discuss with them whether they have any plans to revoke your passport.

Consult with Moore Doeren Mayhew’s tax advisors, especially as it relates to any foreign tax issues, to determine your tax debt requirements. Contact us today.

Contacts:

Doug Martin

Chad Hatalla