There have been numerous constitutional challenges of U.S. tax laws since the Sixteenth Amendment was passed in 1913. As the Internal Revenue Code has grown over the years so have the court battles. A recent challenge involves Section 7345. According to that code provision, taxpayers who have “seriously delinquent tax debt” may have their U.S. passports denied, revoked, or limited. In a recent decision issued by a U.S. district court, the court found that Section 7345 was (and is), in fact, constitutional.
Section 7345, Generally
On December 4, 2015, former President Obama signed the Fixing America’s Surface Transportation Act (the “FAST Act”).[1] In an effort to promote tax compliance, Section 7345 was enacted by Section 32101 of the FAST Act.[2] According to Section 7345, if the Secretary of Treasury receives certification by the Commissioner of the Internal Revenue Service that an individual taxpayer has a seriously delinquent tax debt, the Secretary of Treasury shall transmit such certification to the Secretary of State for action with respect to the denial, revocation, or limitation of the individual’s passport.[3]
For purposes of Section 7345, the term “seriously delinquent tax debt” means an unpaid, legally enforceable federal tax liability of an individual:
(A) which has been assessed,
(B) which is greater than $50,000, and
(C) with respect to which—
(i) a notice of lien has been filed pursuant to Section 6323 and the administrative rights under Section 6320 with respect to such filing have been exhausted or have lapsed, or
(ii) a levy is made pursuant to Section 6331.[4]
Moreover, the term “seriously delinquent tax debt” does not include either of the following:
(A) a debt that is being paid in a timely manner pursuant to an agreement to which the individual is party under Section 6159 or 7122, and
(B) a debt with respect to which collection is suspended with respect to the individual—
(i) because a due process hearing under Section 6330 is requested or pending, or
(ii) because an election under subsection (b) or (c) of Section 6015 is made or relief under subsection (f) of such section is requested.[5]
Jones v. Mnuchin
The Plaintiff, Mr. Jones, was unable to renew his passport because of his outstanding federal tax liabilities.[6] Specifically, Mr. Jones had outstanding tax liabilities totaling $404,928.24 related to multiple tax years. Pursuant to Section 7345, the Department of Treasury certified Mr. Jones as having a “seriously delinquent tax debt,” and the Department of State informed him that he was “ineligible to receive passport services” due to the certification. After Mr. Jones filed suit, the Secretary for the Department of Treasury filed a motion for summary judgment, and Mr. Jones likewise filed his own motion for summary judgment.[7]
Mr. Jones argued, in part, that the right to international travel was a fundamental right (and therefore subject to a strict scrutiny standard) based on the First Amendment, Fifth Amendment, Ninth Amendment, Fourteenth Amendment, and the Privileges and Immunities Clause. On March 8, 2021, the District Court for the Southern District of Georgia issued its decision, denying the taxpayer’s motion and granting the government’s motion:
[T]he denial of Plaintiff’s passport renewal application “does not result from any expression or association on his part; [he) is not being forced to choose between membership in an organization and freedom to travel.” Thus, Plaintiff has no First Amendment claim. . . .
[I]t is well established that “the Ninth Amendment standing alone houses no constitutional guarantees of freedom.” Thus, the Ninth Amendment provides no basis for Plaintiff’s claim. . . .
“The Due Process Clause of the Fourteenth Amendment provides ‘nor shall any State deprive any person of life, liberty, or property, without due process of law.’” Here, there is no state action; therefore, the Fourteenth Amendment is not implicated. Thus, Plaintiff has no claim under the Fourteenth Amendment. . . .
The Privileges and Immunities Clause provides that “[t]he Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States.” As Plaintiff acknowledges, the Privileges and Immunities Clause applies to state action, not federal action. . . . Thus, the Privileges and Immunities Clause provides no basis for Plaintiff’s claim. . . .
There is no dispute that there is a constitutional right to international travel. . . . this Court will not expand substantive due process by recognizing a new fundamental right.[8]
Conclusion
In Jones, the taxpayer asserted various arguments before the court regarding the constitutionality of Section 7345. The court summarily dismissed Mr. Jones arguments in relation to the First, Ninth, and Fourteenth Amendments, as well as the Privileges and Immunities Clause in Article IV, Section 2 of the Constitution. However, the court did spend the bulk of its analysis on Mr. Jones’ Fifth Amendment argument. Yes, the right to travel is protected by the Fifth Amendment, as no person shall be deprived of life, liberty, or property, without due process of law. However, the Court declined to recognize the right to international travel as a “fundamental right.”[9] The taxpayer could not show that substantive due process or procedural due process had been violated, so the court denied the taxpayer’s arguments.
This case reinforces the validity of Section 7345 of the Internal Revenue Code. Taxpayers should understand that their rights to international travel may be hampered by unpaid tax liabilities (particularly those greater than $50,000). Besides paying the tax liability below the threshold, taxpayers should exhaust all administrative options (e.g., innocent spouse relief, installment agreement, etc.) to protect their passports.
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[1] FAST Act, Pub. L. No. 114-94, 129 Stat. 1312 (2015).
[2] Id. at § 32101(a).
[3] See I.R.C. § 7345(a).
[4] Id. at (b)(1).
[5] Id. at (b)(2).
[6] Jones v. Mnuchin, No. CV 119-222, 2021 WL 864954, at *1 (S.D. Ga. Mar. 8, 2021).
[7] Id.
[8] Id. at *3-5 (citations omitted).
[9] This, of course, affected the court’s analysis regarding the applicable standard of review (e.g., strict scrutiny, intermediate scrutiny, etc.). The court determined that Section 7345 was subject to rational basis scrutiny.
