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by Mark A. Muntean *
A new law allows the Internal Revenue Service ("IRS" or the "Service") to revoke or deny passports for certain taxpayers who owe unpaid federal taxes. This change to the tax law was included in the Fixing America's Surface Transportation Act, ("H.R. 22"), which was signed into law on December 4, 2015. [PL 114-94, Title XXXII Offsets, Subtitle A Tax Provisions, Section 32101(a).] The new law is effective on the date of enactment,[IRC § 7345(i).] so this is now part of the federal tax law.H. R. 22 added new Internal Revenue Code (hereafter "IRC" or the "Code"). Section 7345, "Revocation or Denial or Passport in Case of Certain Tax Delinquencies" requiring the Secretary of State, on certification by the Treasury, to deny, revoke, or limit the passport of any person who the IRS certifies as owing in excess of $50,000 (referred to as a "seriously delinquent tax debt"). [IRC § 7345(a).] The seriously delinquent debt requirement of $50,000 is adjusted annually for inflation [IRC § 7345(f)], but includes penalties and interest. [IRC § 7345(b).]
Revocation and SeizureSpecifically, IRC Section 7345 provides that except in humanitarian or emergency situations, or for individuals serving in a combat zone, on receiving a certification from Treasury, the Secretary of State shall not issue a passport to any individual who has a seriously delinquent tax debt described in such section. [IRC § 7345(e)(1)(A).] Moreover, on receipt of such certification the Secretary of State can revoke a passport previously issued to any individual. [IRC § 7345(e)(2)(A).]
For example, a $36,000 tax assessment can quickly become a tax liability in excess of $50,000 when the IRS includes interest and penalties. An individual who is audited for two years (which is more often the case) need only have adjustments of approximately $18,000 from each year to incur the possibility of a seriously delinquent tax debt when interest and penalties are added. Accordingly, the "seriously delinquent tax debt" threshold of $50,000 is not reserved for the "one-percent" but will more often equally impact the little guy.
Removed From CertificationThe new law allows taxpayers who no longer have a seriously delinquent tax debt to be decertified. [IRC § 7345(g).] The IRS can also correct erroneous certifications (the law anticipates mistakes will happen) through decertification. [IRC § 7345(c)(1)(D).] ...
Taxpayers Outside the United StatesWhere an individual is outside the United States ("U.S.") at the time that such individual's passport is revoked for a seriously delinquent tax debt, the Secretary of State may (but is not required to) (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. [IRC § 7345(e)(2)(A)(i) and (ii).] This could impact expatriates, for example residing outside the United States who have tax delinquencies. Moreover, individuals whose employment is tied to overseas travel could be seriously affected by this law.
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