Internal Revenue Bulletin No. 2025–39

Bulletin Overview: Administrative Cleanup on Passport Data

This edition of Internal Revenue Bulletin (IRB) 2025-39 addresses a specific administrative matter. As the IRS states in each bulletin, its mission is to "provide America’s taxpayers top-quality service by helping them understand and meet" their tax obligations. In line with this mission, this particular issue reflects an administrative action: the withdrawal of a proposed regulation. Specifically, this bulletin announces the withdrawal of REG-129260-16, a Notice of Proposed Rulemaking (NPRM) that was published in the Federal Register on March 13, 2018. The proposed regulation concerned Section 6103(n), which pertains to the disclosure of tax information to contractors for tax administration purposes, in the context of passport revocation under Section 7345, which was introduced by the FAST Act.

Deep Dive: IRS Withdraws Redundant Passport Data Rule (REG-129260-16)

As previously stated, this issue reflects an administrative action: the withdrawal of a proposed regulation. Specifically, this bulletin announces the withdrawal of REG-129260-16, a Notice of Proposed Rulemaking (NPRM) that was published in the Federal Register on March 13, 2018. The proposed regulation concerned Section 6103(n), which pertains to the disclosure of tax information to contractors for tax administration purposes, in the context of passport revocation under Section 7345, which was introduced by the FAST Act.

The context for this proposed regulation and its subsequent withdrawal originates with the Fixing America’s Surface Transportation (FAST) Act. Section 32101(a) of the FAST Act added Section 7345 to the Internal Revenue Code. Section 7345 mandates that the IRS notify the State Department when an individual has a "seriously delinquent tax debt." This means that the unpaid federal tax liability exceeds $66,000 in 2026, has been assessed, and the IRS has either filed a Notice of Federal Tax Lien (and the taxpayer's administrative rights have lapsed) or issued a levy. The FAST Act, through Section 32101(e), requires the State Department to then deny passport issuance or renewal to such individuals and permits passport revocation. The intent was to incentivize taxpayers to address their tax liabilities to maintain their travel privileges.

In 2018, to facilitate the State Department's execution of these duties, the IRS proposed regulations (REG-129260-16) to explicitly authorize the State Department to disclose taxpayer return information to its contractors who assist in the passport revocation or denial process. This was intended to ensure that the State Department could efficiently utilize contractors to fulfill its obligations under the FAST Act and Section 7345. Section 6103(a) generally protects the confidentiality of tax returns and return information, but Section 6103(n) provides an exception. Section 6103(n) permits the Secretary of the Treasury to prescribe regulations allowing the disclosure of returns and return information to individuals or entities for tax administration purposes when necessary for a written contract for services. Tax administration, as defined in Section 6103(b)(4), includes the "administration, management, conduct, direction, and supervision of the execution and application of the internal revenue laws."

However, the IRS is now withdrawing this 2018 proposed regulation. The IRS determined the proposed rule was unnecessary because existing regulations already address this situation. Specifically, regulation §301.6103(n)-1(a)(2)(ii) authorizes the State Department to disclose returns and return information to its contractors, provided that the IRS grants written authorization for the disclosure and the disclosure aligns with the regulation's other provisions. This existing regulation allows for the further disclosure of tax information, originally disclosed by the IRS to the State Department for tax administration purposes, to an agent or subcontractor of the person, or officer or employee of the agent or subcontractor, if authorized in writing by the IRS.

The implication of this withdrawal is primarily administrative. It clarifies that the State Department's ability to utilize contractors for passport revocation processing remains intact under existing regulations. The IRS's withdrawal of the proposed rule signifies a technical cleanup rather than a substantive change in policy. Tax practitioners should note that the State Department's data-sharing arrangements with contractors are still governed by §301.6103(n)-1(a)(2)(ii), emphasizing the importance of written IRS authorization for such disclosures to maintain compliance with confidentiality requirements. Any unauthorized disclosures could result in penalties under Section 7431.