Departing aliens and the sailing permit.

• Author: Fava, Karl L.

Sec. 6851(d) indicates that no alien, subject to exceptions by regulations, "shall depart from the United States unless he first procures from the Secretary a certificate that he has complied with all the obligations imposed upon him by the income tax laws."The rules of Sec. 6851(d) were initially codified as Section 250(g) of the Revenue Act of 1921 and were enacted to thwart departing aliens from leaving the country with outstanding income tax liabilities. The Code section laid the groundwork for what is commonly known as a "sailing permit" or "departure permit."

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With the enactment of Sec. 7345, some taxpayers may be contemplating the horror of being detained in an airport security line when attempting to use their passport for foreign travel. The IRS has indicated that it will not be issuing proposed regulations on this new law and will begin enforcement upon issuance of a notice. Practitioners must wait and see how the IRS proceeds in this area, but one wonders if this new law will "fall through the cracks" similar to the sailing permit rules that have existed for nearly a century. Sec. 7345 requires the transfer of taxpayer information between the IRS and the State Department, whereas the sailing permit rules would require the Department of Homeland Security or the State Department to provide information to the IRS for enforcement.

Even with a specific Code section promulgating this rule, along with Internal Revenue Manual Section 21.3.4.18 providing that all resident aliens and certain nonresident aliens must obtain a "Certificate of Compliance" before leaving the United States, in practice this is rarely done. Attorney Virginia La Torre Jeker has written:

[R]esearch indicates that the IRS does not monitor or actively enforce compliance with this statutory requirement even though departing foreign nationals can owe significant tax dollars to the US government for services they have performed while in the US. ["Can the 'Sailing Permit' Become the Next FBAR? Bringing Home the Money," available at tinyurl.com/mcu7gzb] The website titled "immihelp" (tinyurl.com/mktr2p2) suggests in its section detailing the requirements for a departing U.S. immigrant that "[n]o one is being asked for a sailing permit for the last several years."

The passport revocation rule was implemented as a mechanism to aid the IRS in collecting past due tax. As noted, the sailing permit rule was also implemented to collect tax from taxpayers who had avoided filing tax returns and paying tax. On the surface, both seem to be worthy methods to aid the IRS in tax collections, but it is uncertain how the IRS will use the new passport rules. With regard to the sailing permit rules, it is important to understand the compliance requirements should the IRS begin using the sailing permit to aid its collection efforts.

IRS Publication 519, U.S. Tax Guide for Aliens, includes Chapter 11, "Departing Aliens and the Sailing or Departure Permit." As discussed in Chapter 11 of the publication and the IRS website (tinyurl.com/156qotg), before a resident or nonresident alien leaves the United States, he or she must...