Ne Exeat Republica — The Next IRS Tactic vs. Expats and Accidental Americans? http://t.co/f4Pf6bGQgY
— USExpatCanada (@USExpatCanada) April 20, 2014
Wendy McElroy has written an interesting article describing the means by which one would be stopped at the border due to a tax debt. In spite of how frightened everyone is about crossing the border, there is at least one factor that a majority of expats would not meet and that is, having a sizeable tax debt. Mere non-compliance appears not to be a strong enough condition to warrant use of some of the more stringent methods available such as passport check,TECS, FBAR, or Consumer Credit eports.
Ne Exeat Republica The IRS’s powerful new weapon is actually an old one that hearkens back to 18th century English royal court, and was introduced in America as a tax collection tool by the Revenue Act of 1918. It is called ne exeat republica, which is Latin for “let him not go out of the republic.” The writ is issued to prevent a person from leaving a jurisdiction until he satisfies a claim brought against him in court. In practical terms, the IRS is using this law to obtain a court order that prevents people who owe taxes from leaving the U.S. once they have entered
Who would be most vulnerable to ne exeat republica? According to current IRS policy, “Writ Ne Exeat Republica is another action authorized by IRC §7402(a). Writ Ne Exeat Republica is the appropriate suit action when the taxpayer: is about to leave the U.S., is unlikely to return to the U.S., and has conveyed or concealed property so that the property may be taken out of the U.S.”
An IRS Field Service Advisory (November 20, 1998, WL 1757128 (IRS FSA)), described the writ and the circumstances triggering it as follows: [A] writ of ne exeat republica is an extraordinary collection remedy which may result in a taxpayer being temporarily confined in prison (if unable to post suitable bond) for the taxpayer’s non-payment of federal taxes, where the Service can show generally: (1) the existence of significant tax liabilities; (2) the taxpayer has a present ability to pay the tax liabilities; but (3) the taxpayer has chosen instead to attempt to place both himself and his assets beyond the collection jurisdiction of the United States. The writ’s purpose is to ensure “the taxpayer’s continued submission to the jurisdiction of a court” in order to award effective relief … to collect tax … to reduce tax claims to judgment, and/or to compel repatriation of assets.”
IRS policy can change quickly. The people most currently vulnerable, however, would probably be those who meet the following criteria:
*they have been identified as non-complaint by the IRS;
*they have a sizeable ‘debt’;
*they reside abroad or intend to leave the U.S.;
*a tax case can be sustained in court;
*they are without assets in the U.S. but hold considerable ones abroad;
*the tax treaties with the foreign nation does not facilitate collection (Canada is IRS friendly).
No one knows how the process of entering or leaving the U.S. will evolve. The prudent should assume it will only get more difficult and unpleasant.
The IRS Manual outlines some of the tools at the IRS’ disposal for the location of taxpayers and their assets. I am listing only those which seem to impact expats easily and to create awareness of what information they are working with. In many cases, it seems many expats may still be able to “fall through the cracks” due to lack of a US Passport, SSN, never having had a (traceable) US address, etc.
Part 5. Collecting Process
Chapter 1. Field Collecting Procedures
Section 18. Locating Taxpayers and their Assets (Cont. 1)
220.127.116.11 (03-27-2012) United States Passport Office
United States Passport Office
1. The Service may obtain passport information from the United States Passport Office in connection with an official investigation. Request a passport check when the taxpayer travels overseas frequently (or there is reason to believe the taxpayer travels overseas frequently). Requests for information from the US Passport Office are called “passport checks.” Passport checks provide information contained on the most recent passport application filed by a U.S. citizen. The information may include the following :
• the last known mailing and/or permanent address of the applicant
• applicant’s occupation
• applicant’s employer
• applicant’s phone number
• emergency contact’s name, address and phone number
• spouse’s name and birthplace.
Using Passport Information
1. Use any new address or new asset information received from the passport office as discussed above.
2. See IRM 18.104.22.168, Outgoing Mutual Collection Assistance Requests, if you determine that the taxpayer:
A. resides in a treaty country, or
B. has assets in a treaty country
The TECS system appears to also have limitations again, based upon matching information already in an agency’s database. The case must be strong enough for the IRS to have issued a Federal Tax Lien before one can be placed on a TECS list. This reinforces the fact that the debt must be sizeable before one need worry about being apprehended at the border. It is somewhat amusing to notice how many times the reader is cautioned not to reveal to the taxpayer, how his/her identifying information was obtained. It also seems important to note that a TECS historical record will only record an entry to the US for a citizen or green card holder; though if border info is freely exchanged, one may assume the US could request that info from the other country.
22.214.171.124 (03-27-2012) Treasury Enforcement Communications System
Treasury Enforcement Communications System = TECS
1. The Treasury Enforcement Communications System (TECS) is a database maintained by the Department of Homeland Security (DHS), and it is used extensively by the law enforcement community. It contains information about individuals and businesses suspected of, or involved in, violations of federal law.
2. For IRS field Collection, TECS provides two sources to help make contact with taxpayers or locate assets :
A. Revenue officers can request that delinquent balance due taxpayers be entered into TECS, and the Department of Homeland Security (DHS) will then advise IRS when those taxpayers travel into the United States for business, employment, or personal reasons. The taxpayers entered into TECS for this purpose are on a DHS lookout indicators list. IRS employees must help maintain the TECS database by requesting that appropriate taxpayers be entered into TECS or be deleted from TECS. (See IRM 126.96.36.199.6.1 for criteria for including taxpayers in TECS data base.)
B. Revenue officers can also request information housed in TECS on past travel that a taxpayer has made to and from the United States.
TECS: DHS Lookout Indicators
1. Many of the taxpayers entered into TECS for a DHS lookout indicator are International ones because the cases usually concern persons who reside abroad. However, domestic taxpayers may also be entered into TECS if we have been unable to locate them and if they are believed to travel outside the US . Taxpayers placed on TECS are often not subject to ordinary administrative and judicial collection procedures because they frequently reside outside the jurisdiction of the US Courts. Information derived from placing a taxpayer on TECS can facilitate contact with these taxpayers or provide asset information which, in turn, may facilitate collection of their delinquent liabilities.
1. Customs and Border Protection (CBP) will notify the TECS Coordinator when ICE becomes aware that a balance due taxpayer on TECS is arriving in the US.
2. (2) CBP will provide the TECS Coordinator with some or all of the following information:
• the taxpayer’s address while in the United States
• nature of visit
• transportation of any currency over $10,000.00
• any other available travel and/or asset information.
The reason it is important to enter a taxpayer on TECS is it allows CBP to notify the IRS in the future (via the TECS coordinator) about when and where a taxpayer will be traveling.
1. Taxpayers will be entered on TECS for a lookout indicator only when the case meets all of the following conditions:
• The taxpayer is living outside the United States and the United States commonwealths and territories or is about to depart to reside in a foreign country.
• The taxpayer has not voluntarily resolved his/her case by full payment or other voluntary action, including an installment agreement (IA).
• A Notice of Federal Tax Lien (NFTL) has been filed for all balance due modules. See Treasury Regulation § 301.6323(f)-1.
• The total unpaid balance of assessment equals or exceeds the dollar criteria for requesting a taxpayer be entered on TECS.
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Exception: Enter a balance due taxpayer on TECS if, despite an official IRS domestic address of record, you believe the taxpayer resides in a foreign country or travels outside the United States and the United States commonwealths and territories on a frequent basis and we have not been able to contact the taxpayer.
TECS Historical Travel Information
1. TECS also is a database that tracks historical travel information about taxpayers. This IRM section provides guidance for using the historical travel information available in TECS. This information may also help you attempt taxpayer contact and/or locate asset information as it can contain extensive records of commercial airline flight arrivals and departures. TECS also contains other records of air and sea travel, records of border crossings, and the specific dates that individuals have traveled to and from the United States.
2. The travel information in TECS can facilitate collection of delinquent liabilities from taxpayers who are not subject to ordinary administrative and judicial collection procedures because they often reside outside the jurisdiction of the US Courts.
3. TECS provides information that may not otherwise be available to the Service, such as where a taxpayer has traveled. This travel information may lead to the discovery of where the taxpayer has assets or conducts business activity. Additionally, TECS travel information can help determine the taxpayer’s correct country of current residency.
Never confirm or deny the existence of a TECS record of historical travel information if a taxpayer asks how you learned about his/her past travel. Taxpayers must submit a written request to obtain information about the source of the travel information. Follow the procedures below if a taxpayer wants to request source information.
TECS historical travel information will provide both US entrance and exit information for non-resident aliens. It will only provide US entrance information for US citizens and Green Card holders.
Taxpayer Request for Source Information
Advise the taxpayer to do the following if a taxpayer asks how you learned about his/her past travel:
1. write a letter requesting source information under the Freedom of Information Act (FOIA)
2. send the letter to the address provided at The U.S. Customs and Border Protection web site:http://www.cbp.gov/xp/cgov/admin/fl/foia/
Using TECS Historical Travel Information
1. TECS contains information about specific dates of past international travel and locations of travel for individuals over a period of several years. It has extensive information concerning airline travel and also contains some information on other modes of travel into the US. A request for this information will provide the revenue officer (RO) with all travel information that is available; there is no need to specify particular time periods of travel
Procedures for Requesting Historical Travel Information from TECS
1. Prepare Form 13931, TECS Historical Travel Request, for submission to the TECS Coordinator and include the following information:
• Taxpayer Name (Last, First, Initial)
• Known Alias(s)
• Place of Birth (City & State or Country)
• Passport Number
• Citizenship (if not U.S.)
In spite of the original purpose of The Bank Secrecy Act (1970) to track funds engaged in money laundering and terrorism, the description below proves that the point of collecting FBAR is for the government to have acccess to information in order to locate/confiscate taxpayer’s assets.
188.8.131.52 (08-15-2013) Foreign Bank and Financial Account Report
Foreign Bank and Financial Account Report
1. A taxpayer is required to file a Foreign Bank and Financial Account Report (FBAR), Form TD F 90-22.1, if he/she has financial interest in, or signature authority over, one or more foreign financial accounts that have an aggregate value greater than $10,000 at any time during a calendar year.
2. When a taxpayer files an FBAR form, IDRS command code IRPTR will reflect that Form TD F 90-22.1 was filed by or for the taxpayer. However, command code IRPTR does not provide any of the specific information entered on the form such as the name of the bank, account number, account balance, etc.
3. See IRM 184.108.40.206, Foreign Bank and Financial Account Reports (FBAR).
4. FBAR forms are loaded onto the Currency Banking Retrieval System (CBRS) so all the information on the FBAR form will be available from CBRS. IRPTR includes the filing of an FBAR (Foreign Bank and Financial Account Report) form by a taxpayer. Although IRPTR will not reflect all information present on the FBAR form, additional information may be obtained by researching the CBRS which lists all FBAR filings. CBRS will reflect any foreign bank account or other information that was listed on the FBAR form.
5. Conduct CBRS research when IRPTR reflects that a taxpayer has filed an FBAR form to obtain the name of the bank where the account is located, the amount in the account, co-owners, and other useful information. Complete an OL5081 to become a system user and obtain a User ID and password.
The information is not always complete as it will only reflect the information the taxpayer entered on the form.
I would never have thought of the IRS using a credit bureau report to track a taxpayer however, with the rate that information of all types is being exchanged, it is conceivable that the IRS may, in the future, be able to request a foreign credit report.
Consumer Credit Reports
Consumer Credit Reports
3. At the time of publication of this IRM, there are three principal consumer credit bureaus:
• Experian (formerly TRW)
At the time of the publication of this IRM revision, Headquarters has arranged a national contract with Experian.
Limitations on Ordering Consumer Credit Reports
5. You cannot secure a consumer credit report using a foreign address. See IRM 220.127.116.11.2.1 below for further information on obtaining credit reports on taxpayers with foreign addresses.
Credit Bureau Requests for Foreign Taxpayers
1. Do not attempt to secure a credit report using a foreign address. The credit bureau vendor does not store any foreign addresses in its database.
2. Revenue officers assigned taxpayers with last known addresses in foreign countries may use the last known United States address for a taxpayer if the case requires requesting a United States credit report.
• It does not matter how old the last known address is.
• The taxpayer address used for a credit bureau request should be the same as that on the Integrated Data Retrieval System (IDRS) except when the address on IDRS is foreign. Use the last known United States address in that instance.
4. If the taxpayer has never had a known address in the United States, a credit report cannot be requested.
While there are no guarantees, I find the information above somewhat reassuring that most expats are unlikely to have real concern about being apprehended at the border. Hassled, maybe, but if one has not applied for a US passport, has never had a US address, no SSN, and remembers that for all practical purposes, his/her assets are located outside of the juridiction of US courts, there should be no reason to allow anxiety to create more difficulty than is likely to be experienced.