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New Law Authorizes Revocation or Denial of U.S. Passports to Certain Tax Delinquents

Posted: 12:58 am EDT

 

On December 4, 2015, President Obama signed into law the “Fixing America’s Surface Transportation Act,” or “FAST Act.” This is the first law enacted in over ten years that provides long-term funding certainty for surface transportation. DOT says that the FAST Act largely maintains current program structures and funding shares between highways and transit. It is a down-payment for building a 21st century transportation system, increasing funding by 11 percent over five years.  Read more here from the Department of Transportation.

Screen Shot 2015-12-27 at 9.50.33 PMThere is also one item included in the FAST Act that’s related to the State Department and the traveling American public. Section 7345 provides for the revocation or denial of U.S. passports to applicants with certain tax delinquencies considered ‘seriously delinquent tax debt’ –that is, a tax liability that has been assessed, which is greater than $50,000 and a notice of lien has been filed. To be clear, the Internal Revenue Service (IRS) is not actually able to revoke or deny any American taxpayer a passport for delinquent taxes. Revocation or denial or passports can only be done by the Department of State. It looks like the IRS Commissioner will need to make a certification of “seriously delinquent tax debt” to the Secretary of Treasury, who must then transmit the certification to the Secretary of State for the actual revocation. The new law provides for a humanitarian and emergency exception, and issuance of a limited passport for direct return to the United States.

This is similar to the arrangement on passport revocation with child support obligation enforcement.  The State Department works with the Health and Human Services on Child Support Arrearage.  Under the HHS passport denial program,  noncustodial parents certified by a state as having arrearages exceeding $2,500 are submitted by the Federal Office of Child Support Enforcement (OCSE) to the Department of State (DoS), which denies them U.S. passports upon application or the use of a passport service.

Via ‘‘Fixing America’s Surface Transportation Act’’ or the ‘‘FAST Act’’ (PDF):

SEC. 32101. REVOCATION OR DENIAL OF PASSPORT IN CASE OF CERTAIN UNPAID TAXES.

‘‘SEC. 7345. REVOCATION OR DENIAL OF PASSPORT IN CASE OF CERTAIN TAX DELINQUENCIES.

‘‘(a) IN GENERAL.—If the Secretary receives certification by the Commissioner of Internal Revenue that an individual has a seriously delinquent tax debt, the Secretary shall transmit such certification to the Secretary of State for action with respect to denial, revocation, or limitation of a passport pursuant to section 32101 of the FAST Act.

‘‘(b) SERIOUSLY DELINQUENT TAX DEBT.—

‘‘(1) IN GENERAL.—For purposes of this section, 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.

‘‘(2) EXCEPTIONS.—Such term shall not include—

‘‘(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.

‘‘(c) REVERSAL OF CERTIFICATION.—

‘‘(1) IN GENERAL.—In the case of an individual with respect to whom the Commissioner makes a certification under subsection (a), the Commissioner shall notify the Secretary (and the Secretary shall subsequently notify the Secretary of State) if such certification is found to be erroneous or if the debt with respect to such certification is fully satisfied or ceases to be a seriously delinquent tax debt by reason of subsection (b)(2).

[…]

(e) AUTHORITY TO DENY OR REVOKE PASSPORT.—

(1) DENIAL.—

(A) IN GENERAL.—Except as provided under subparagraph (B), upon receiving a certification described in section 7345 of the Internal Revenue Code of 1986 from the Secretary of the Treasury, the Secretary of State shall not issue a passport to any individual who has a seriously delinquent tax debt described in such section.

(B) EMERGENCY AND HUMANITARIAN SITUATIONS.—Not- withstanding subparagraph (A), the Secretary of State may issue a passport, in emergency circumstances or for humanitarian reasons, to an individual described in such subparagraph.

(2) REVOCATION.—

(A) IN GENERAL.—The Secretary of State may revoke a passport previously issued to any individual described in paragraph (1)(A).

(B) LIMITATION FOR RETURN TO UNITED STATES.—If the Secretary of State decides to revoke a passport under subparagraph (A), the Secretary of State, before revocation, may—

(i) limit a previously issued passport only for return travel to the United States; or

(ii) issue a limited passport that only permits return travel to the United States.

(3) HOLD HARMLESS.—The Secretary of the Treasury, the Secretary of State, and any of their designees shall not be liable to an individual for any action with respect to a certification by the Commissioner of Internal Revenue under section 7345 of the Internal Revenue Code of 1986.

According to the WSJ, the Treasury Inspector General for Tax Administration, or Tigta, a watchdog agency, found that the IRS sent 855,000 notices to U.S. citizens abroad in 2014.

Treasury OIG notes that as of May 2014, the State Department estimated that approximately 7.6 million U.S. citizens live in a foreign country. It also reports this:

Even though the IRS sent approximately 855,000 notices and letters to U.S. taxpayers living in other countries during Calendar Year 2014, it cannot determine taxpayer response rates.  The lack of data on response rates for international taxpayers is problematic because this information is needed to determine the effectiveness of international correspondence on increasing taxpayer compliance and to make program improvements.

7 FAM 1380 which provides guidance on passport denials, limitations, and revocations is unfortunately behind the firewall so we are unable to see the specific updates in the Foreign Affairs Manual.

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2 responses

    • The new law is specific to certain U.S. citizens who owe the tax man at least $50,000, and reported to the State Dept by the IRS. Under this law, State is then required to revoke the passports of delinquent taxpayers. I don’t see any distinction in the text for Americans residing in the U.S. or residing overseas.

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