IRC 7345

The Tax Court ruled in Guy Alvarez Gayou v. Comm’r of Internal Revenue, T.C. Memo 2023-61, Filed May 16, 2023 that the IRS properly certified the taxpayer’s account as seriously delinquent under the law for action by the Secretary of State as it relates to the denial, revocation or limitation of a taxpayer’s passport.  This ruling is representative of the rather straightforward effect of the now 7-year-old law. As the Court explains, a taxpayer may be notified that they have a “seriously delinquent tax debt,” and that certification shall be transmitted to the Department of State so that the Secretary of State may act, as reflected above, relating to the taxpayer’s passport.  The assessment amount for this process must be higher than $50,000 – which has adjusted for inflation and currently stands at $59,000. The Court analyzed the exceptions to the definition of “seriously delinquent tax debt,” to support the taxpayer’s position.  Those exceptions are: 1) that the debt is being paid in a timely manner pursuant to an installment agreement under IRC section 6159, 2) that the debt is being paid properly under an Offer in Compromise, 3) that collections is suspended because the taxpayer asked for a Collection Due Process hearing, or 4) that collections is suspended while the IRS reviews an application for innocent spouse relief.  While the taxpayer previously had an installment agreement in place, he did not have one in place at this time. This is the most common way to decertify the seriously delinquent debt and put one’s passport in good standing.