Technical Tax Blog

 


International Tax - IRS Power To Revoke Passports Signed
 
Into Law

The passport provision is now official, as President Obama signed the 5-year infrastructure spending Bill. It adds a new section 7345 to the Internal Revenue Code. It is part of H.R. 22 – Fixing America’s Surface Transportation Act, the “FAST Act.” The title of the new section is “Revocation or Denial of Passport in Case of Certain Tax Delinquencies.” The idea goes back to 2012, when the Government Accountability Office reported on the potential for using the issuance of passports to collect taxes.

The law says the State Department can revoke, deny or limit passports for anyone the IRS certifies as having a seriously delinquent tax debt in an amount in excess of $50,000. Administrative details are limited but it could mean no new passport and no renewal. It could even mean the State Department will rescind existing passports.

The State Department will evidently act when the IRS tells them, and that upsets some people. We think of passports when traveling internationally, but some people may find that passports are required for domestic travel in 2016. That could make the IRS hold even more serious. The list of affected taxpayers will be compiled by the IRS. The IRS will use a threshold of $50,000 of unpaid federal taxes. But this $50,000 figure includes penalties and interest. And as everyone knows, interest and penalties can add up fast.

The right to travel has been recognized as fundamental, both between states and internationally. And although some restrictions have been upheld, it is not clear that this measure will pass the constitutional test if it is challenged.